Please note that this conference is being recorded. I now hand over the conference to Ms. Nishita Bhatt from Adfactors PR. Thank you, and over to you.
Good evening, everyone, and thank you for joining us on Vaibhav Global Limited's earnings conference call for the third quarter and nine months ended 31st December 2024. Today, we have with us Mr. Sunil Agrawal, Managing Director, Mr. Nitin Panwad, Group CFO, and Mr. Prashant Saraswat, Head of Investor Relations. We will begin the call with the opening remarks by Mr. Sunil Agrawal on the business operations, key initiatives, and a broad outlook, followed by discussion on the financial performance by Mr. Nitin Panwad, after which the management will open the forum for the Q&A session. Before we get started, I would like to point out that some statements made or discussed on today's call may be forward-looking in nature and must be viewed in conjunction with the risks and uncertainties that we face.
A detailed statement and explanation of these risks is included in the earnings presentation, which has been shared with you all earlier. The company does not undertake to update these forward-looking statements publicly. I would now like to invite Mr. Sunil Agrawal to make his opening remarks. Over to you, sir.
Thank you, Nishita. Good evening, everyone, and thank you for joining our Quarter 3, FY 2025 earnings call. I hope you would have reviewed the quarterly results and investor deck. Before diving into quarterly updates, I'm happy to share that our Germany operations have broken even at the EBITDA level. In Ideal World, the new business that we have acquired has turned profitable in Q3, as expected. Now, let me start on the quarterly updates. I'm pleased to share that we achieved our highest-ever quarterly sales of INR 977 crores, showing a 10% YOY growth. Owing to a surge in demand of high-end jewelry, gross margin came in at 61.3%, which is 110 basis points lower YOY. EBITDA margin improved to 11.5% this quarter, which is 40 basis points higher than last year.
Lower gross margins were offset by savings in shipping costs, operating leverage, Germany reaching break-even levels, and our ongoing cost optimization drive. Before I cover territory-wise performance, I would like to update on lab-grown diamonds. Owing to the consumer demand towards lab-grown diamonds, we have successfully scaled our offering, which contributes to 8.9% of quarterly sales versus 0.2% a year ago. We are leveraging our in-house sourcing, extensive jewelry design bank, and in-house jewelry manufacturing to stay ahead of our peers in this emerging segment. Now, let me take you through our key retail markets. In the U.S., revenue grew by 3.6% YOY, boosted by strong festive season and improving consumer confidence. In the U.K., revenue was up 6.5%, with Ideal World making a significant contribution. Germany continued its robust performance, boosting a 30.7% YOY revenue growth.
With operations achieving break-even this quarter, we are confident about maintaining this momentum in Q4 as well. We further expect Germany to start contributing to our bottom line from FY 2026 onwards. Our 4R strategy, that is, widening reach, new customer registration and acquisition, strengthening customer retention, and repeat purchases, continues to deliver strong results. Our TV networks now reach 127 million households, and our unique customer base has grown by 30% YOY to approximately 698,000. Excluding acquisitions, our customer base grew by 6% YOY. Customer retention remains strong at 43%, with an average of 22 pieces purchased by customer annually. I would like to update you on Ideal World and Mindful Souls. Ideal World showed impressive YOY growth of 95% and achieved full cost profitability in Q3. Mindful Souls also performed well, maintaining PBT margin of 7% this quarter.
With over 102,000 unique customers, we are getting visible benefits of leveraging VGL supply chain and are regularly launching new products as well. At VGL, community give-back is our area of focus. We recently achieved milestones of serving 97 million meals to school children through our Your Purchase Feeds one-for-one meal initiative. With 69,000 meals donated every school day, our long-term goal is to provide 1 million meals per school day by FY 2040. On the sustainability front, we generated 1.1 million kilowatt-hours of solar energy this quarter, entirely powering two of our manufacturing units in India. This aligns with our long-term goal of achieving carbon neutrality for Scope 1 and Scope 2 greenhouse gas emission by 2031. During the quarter, we received the IGJ Award for gem and jewellery from the Gem and Jewellery Export Promotion Council for being the highest exporter of satin-polished colored gemstones from India.
This reflects our operational capabilities and commitment to contributing to India's leadership in gemstones and fashion jewelry industry. As we aim to balance growth, reinvestments, and shareholder returns, the board has declared an interim dividend of INR 1.50 per share for this quarter, representing 39% payout. This reflects upon robust cash generation ability of our business and a strong growth outlook. Looking ahead, we remain mindful of macroeconomic trends, particularly the muted consumer sentiments in the U.K. and Europe. We expect 12% revenue growth for FY 2025, reflecting these conditions while maintaining operating leverage. From FY 2026 onwards, we anticipate early teen revenue growth with a continued focus on operating efficiencies and leverage. I will now hand over the call to Nitin to discuss our financial performance in detail. Over to you, Nitin.
Thank you, Sunil. Good evening, everyone. I will take you through our financial performance for the December quarter. We are pleased to report that this quarter, we recorded our highest-ever quarterly revenue of INR 977 crores, up from INR 880 crores in Q3 of FY 2024, which is 10% year-over-year growth. Our gross margin was 61.3%, suggesting the impact of product mix tweaking to match the consumer demand. EBITDA margin improved by 40 basis points to 11.5%. This was primarily driven by Germany achieving EBITDA break-even, Ideal World achieving full cost profitability, operating leverage, part of which we reinvested in digital expansion in the U.S. Profit after tax for the quarter stood at INR 64 crores, a 36% year-over-year growth, reflecting the degree of operational leverage of our unique business model. In terms of regional performance, U.S. revenue grew by 3.6%, supported by a strong holiday season and improving macros.
The U.K. posted a 6.5% revenue increase, driven largely by Ideal World. Germany recorded a strong 30.7% YOY growth, with operations achieving break-even this quarter. As Sunil also mentioned earlier, this progress strengthened our confidence in Germany's ability to contribute to the bottom line from FY 2026 onwards. For Q3, TV revenue reached INR 547 crores, while digital revenue totaled INR 380 crores. TV revenue grew by 6% year-over-year, and digital revenue grew by 12% year-over-year. Digital sales is contributing 40% of total B2C revenue. Our BudgetPay EMI options accounted for 38% of B2C revenue, highlighting its convincing for our customers, highlighting its convenience for our customers. Ideal World's full cost profitability this quarter is a significant milestone, and we are focused on scaling the business further. Mindful Souls also contributes to perform well, with cross-learning from its digital operations, benefiting our existing business in the U.S., U.K., and Germany.
Our balance sheet remains strong, with a net cash position approximately $12 million U.S. dollars, that is INR 106 crores. Free cash flow and operating cash flow is due at INR 58 crores and INR 78 crores, respectively. Quarterly cash flow generation was slightly impacted by our receivables due to increased inventory and prepayments to suppliers. Our ROC improved to 18% and ROE to 11%, reflecting steady progress. We are pleased to announce a third interim dividend of INR 1.5 per equity share, representing 39% of quarterly and 63% of YTD payouts. As we look ahead, we remain cautious about broader market conditions, especially in the U.K. and Europe. Factoring in these challenges for FY 2025, we now expect 12% revenue growth while maintaining operating leverage. From FY 2026 onwards, we aim for double-digit revenue growth along with operating leverage. Back to you, Moderator.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Rushabh Shah from BugleRock Capital. Please go ahead.
Yeah, I'm sorry.
I'm sorry, Rushabh, to interrupt you there, but your audio is not clear.
Yeah, I'm audible now. Hello?
If you can, please use your handset.
Yeah, I'm audible now. Hello?
Yes, please go ahead.
Yeah, hi. Hello. Am I audible?
Please go ahead, Rushabh.
Yes, sir. Yeah. Yeah. So in the last call, you mentioned that our current market share is 4% compared to the QVC and ShopHQ, and their market share has grown less than 2%, which is good for us. So as we grow our revenue per household, which we are at $3-$3.5, and the leaders are sitting at $60, so what steps are we taking to reach towards the leaders? I know the journey would be really long. What and what would how much time would it take the management, and does the management have that vision to reach nearer to $60?
Yeah, Rushabh, thank you for the question. Good question. So we focus on our 4Rs, expanding our reach on television footprint as well as our e-com reach through social, Google, and affiliates.
Then we expand additional registration to get more customers coming and register or join us, then retention and repeat. So for these, we have action registers for each of these drivers of our business. We also have guardrails in place. The gross margin is a guardrail, ROC is the guardrail, and the profit leverage is a guardrail. So with these guardrails, we function and invest into these 4Rs continuously. Okay. As we have demonstrated over the years, we will continue to grow our market share for many years to come. Our business model is very, I would say, unique and very difficult to assimilate. So our moats are strong because being vertical from India and Asia and very agile to the market. So we'll continue to see gaining the market share in these advanced economies of the world.
So sir, just a follow-up on that one.
You said your moats are strong because you are a vertically integrated business. What else separates you from the competitors? Is it the SKUs, or what else separates you?
So vertical being low cost, so we can afford to undercut a competitor if there should a competitor come. And agility for any new idea coming in. Other people are working through middlemen, so it takes time for people to respond to any new opportunity that comes. We being vertical, we can turn around an idea within two weeks, from idea to product on air within two weeks. Pretty much like Zara, that they have perfected the model from concept to showrooms within four weeks. Since our product is mostly shipped by air, so we can...
Any idea how much time does a competitor put an idea into a product? Because you say you take two weeks.
So they take much longer, months. I do not have exact number for each of the competitors. But they have multi-layers in between, so the concept has to travel and then has to translate into the product and has to be sampled, has to be approved, and then product has to be shipped. So much longer lead time. So I can tell you from my experience, we used to supply to QVCs or HSNs or other Walmarts of the world, so they used to give us three months of lead time. So we took a long time to make and then ship to them, and the concept used to be six months in advance. So it used to be a much longer period when we were vendors to them.
My next question is, in the Budget Pay, if a customer defaults on one product and he orders another product from our website, so how do you maintain a list of people who have defaulted? And do we offer a new product to him via Budget Pay?
Hi, Rushabh. Nitin, yes. Let me take this question. So we assign the limit based on customer profile, customer payment pattern, and customer default or failure history. So as soon as a new customer comes, we don't assign a full limit to them. We give, for example, Budget Pay available over there. If customer default at the first place, then customer will no longer be able to take Budget Pay while they can check out via full payment through card. As soon as customer repay via that, then customer will be eligible from the assigned limit, respectively, based on our internal management system.
Okay. Okay. That's great. And so in the last call, you mentioned that when a customer comes to you, you want to retain the customer and move him to the other platforms, that the lifetime value goes up. So how many of the customers have been able to convert in the past three to four years?
So that actually how we monitor is based on our total customer portfolio, so we monitor as a three categorizing our customers. One is an omnichannel customer, one is TV consumer, and one is buying only on web consumer. Though there are different subsections also in between. But omnichannel customers roughly contribute in counts is around 12% of our business, which contributes roughly around 70%-80% of business sales, while TV and web are different numbers, so that is why we promote the customers for having omnichannel experience so we can increase the customer lifetime value, and we maintain this ratio and try to increase that customer count ratio of 12%-13% I mentioned to you to higher levels to achieve higher revenue per customer.
Okay. So last question is, what is your vision for Vaibhav Global? Where do you see Vaibhav Global going next five years?
So our mission is to reach one million meals by FY 2040. And we evaluate ourselves against that goal. It is a stretch goal, though, from currently 68,000 meals per school day, two million meals. And for that, we have an internal tracker of how we are doing against that. So that counts into number of pieces, revenue, and we continue profitability deliveries in short to midterm.
Okay. Thank you so much. Thank you.
Thank you.
Thank you, Rushabh.
Ladies and gentlemen, in lieu of time, we will restrict to two questions per participant, and you can rejoin the queue for further questions, and we take the next question from the line of Anushka Chitnis from Arihant Capital. Please go ahead. Anushka, if you can please unmute your line from your end and ask your question.
Okay. Sorry about that. Congratulations on a good set of numbers, and thank you for the opportunity. I have a couple of questions regarding material costs. They seem to be substantially higher this quarter. So any particular reason for that? And also, I would like to know about how you see your lab-grown diamond business shaping up in the future because it was quite a large contributor to top line this quarter. So can you just talk about that a bit?
Let me talk about lab-grown diamond first, and then Nitin will take the first question, so lab-grown diamond is a strong trend right now, promoted by most retailers, particularly Swarovski and Pandora, so these are large retailers, and they are trendsetters, and we believe that our value proposition in lab-grown diamond is pretty strong because of our direct costing, direct sourcing, and our in-house jewelry manufacturing and designing, so that's why it has taken a large portion of our sales, and for foreseeable future, I see this ratio to continue. It may go up a little bit, we don't know. We are very agile in addressing consumer demand, so we expect it to be double-digit for about 10%-12% for foreseeable future.
And about your question of material cost, so our gross margins remain strong, what we earlier guiding over 60%, though the margin is lower than the last year because of the mix in product portfolio and the higher number of clearance days that we have done in this quarter. And we expect that our gross margin will continue to above 60% in upcoming quarters and years.
Okay. Thank you. I'll get back in the queue.
Thank you. The next question comes from the line of Aditya Singh from RoboCapital. Please go ahead.
Hi. Thank you for the opportunity. Sir, I'd like to understand more on the TV revenue and the volume growth because it is kind of flattish. So is there some kind of risk that we need to know in the TV segment?
So I'll take that. So thanks for the question, Aditya. TV segment for us still is a lot of untapped opportunity within the U.S. Although there is a cord cutting happening on the cable front, OTA continues to grow year over year. And we expect a single-digit growth continued into television space, which could be low to mid-single-digit growth year over year. Now, some quarters may fluctuate a bit, some quarters may not, but overall, we expect it to continue to grow. On the other hand, digital, we expect to grow faster than TV. Therefore, overall growth will continue in early teens for the future year.
Now, the volume is also a factor of average price point. With lab-grown diamond taking up a lot of revenue share, our ASP increased last quarter. Therefore, the volume you might be seeing a little bit subdued. But in the long run, we see the steady state at around similar price points and will continue to grow on unit numbers overall.
All right. And with respect to Germany, Ideal World, and Mindful, do we see any potential revenue or target market share that we might be targeting to achieve in their respective geographies?
Yeah. So Ideal World, we include within the same demographic and TV demographic. Mindful Souls is a completely B2C digital business, and we see this to be a critical for the group from top line and bottom line both ways. And also, we are learning from this pure B2C business, transferring that learning to our group for TV channel brands. And we've seen benefit of that. Our digital spend has gone up, digital efficiencies have gone up. They're still not at the level of Mindful Souls, but we expect the learnings to inculcate more and more in coming years, and our TV business will become as efficient as Mindful Souls in media spend, the digital media spend that we do.
Thank you. The next question comes from the line of Anushka Chitnis from Arihant Capital. Please go ahead.
Thank you for the opportunity again. So I have again a couple of questions. I want to know about the U.K. and U.S. growth that has happened [inaudible].
Anushka, I can't hear you.
Anushka, are you there? Apologies, Anushka. If you can hear me, we are not able to hear you. Since there is no response, we move on to our next question, which is from the line of Shubham Biswal from Convergence Capital. Please go ahead.
Yeah. Hi, sir. Am I audible?
Yes, you are. Please go ahead.
Yeah. So in one of our slides, we are mentioning how we are making several B2C brands, right, of our own. So these brands necessarily have higher retention rates. Have you observed this, or have you observed this with bigger companies having their own brands? What's their flavor? So what's your thought process here on our own brands? And that's my first question.
Yep. Thank you, Shubham. It's a good question. We track our own brand's performance against the benchmarks we have from industry. So we create the benchmark against each vertical of digital marketing, that is the organic social, paid social, organic SEO, paid Google affiliates through email retargeting, and other properties retargeting through display ads and all that. And through that, we constantly review and we try to improve each of our brands. To your point, yes, we track not only B2C brands, but our legacy brands as well against those practices.
Right. Right. Thanks, Sunil. So the next question is, we have been trying to expand our digital media. I mean, I think it's a significant portion of our revenues now. But what I've been trying to understand is our majority of our modes, right? In a way, it has been because we have been catering to a very old population who primarily watch TV, right? But now, once we have transitioned to digital, the customer base changes, right? Now, there's a much younger population. So what I want to understand is, is this digital transition kind of an omnichannel approach that you're following, or will there be higher A&P spend going forward? Because there's a completely different higher competition as well in this segment. So how are you looking at this with digital transition? So yeah, that's my question.
Yeah. Thanks, Shubham. So even in digital space, we target customer 40-plus only. So that's why we go on Facebook and Google for our customers, not on TikTok or Snapchat or other younger demographic platforms. The reason of targeting this customer is because this customer is more affluent. This demographic is increasing every year as the population is aging. So this demographic increases, and they have more disposable income. So our web customer is just about five years younger than our TV demographic, but still is same. And our product offering is also addressed towards this demographic, 40- to 70-year-old, mostly white Caucasian females. We also have some Hispanics, some Asians as well, but largely white Caucasian females, and seen in Germany and U.K. as well. So our ecosystem is largely driven towards this audience.
Right. Right. That answers my question. Thank you, and all the best for that.
Thank you, Shubham.
Thank you. The next question comes from the line of Vitesh Chheda from Lucky Investment Managers. Please go ahead.
Hello. Sir, I wanted to know for the nine months, what would be the margin % or loss % number in Germany operations, and what will be the profitability or loss % number in the Ideal World?
Yeah. So hi, Vitesh. So Germany in the first nine months, roughly around 2% margin was consumed by Germany losses. Ideal World was very small. I don't have the exact number, but I would expect roughly 0.5% Ideal World was in first nine months.
So you're saying Ideal World will be 0.5% of the Ideal World revenue, right?
No. Not 0.5%. It's a group as a group percentage if I talk about it.
Okay. So basically, both these operations put together consume 2.5% of the group's revenue as the adjusted.
Right.
Adjusted for that, if your nine-month whatever was your nine-month margin, we have to add 2.5% to it.
Right. Yeah. Yeah.
Okay. Okay. Thank you very much.
Thank you. We take the next question from the line of Anushka Chitnis from Arihant Capital. Please go ahead.
Thank you for the opportunity. I have a couple of questions. I would like to know about your U.S. and U.K. growth, ex the Ideal World and Mindful Souls acquisitions. And the second question is, how do you see your medium-term margin outlook shaping up, and how will the German business be contributing towards the margins and the bottom line going ahead in, say, the next three to five years?
Yeah. So this is Sunil. I'll take the second part, and first part, Nitin will answer. So we expect the U.S. economy is relatively better. So we expect the U.S. to continue to give us a growth of high single-digit in the coming quarters and coming years. And TJC and in the U.K., TJC and Ideal World are sort of combined operations. They are combined legal entities, and they have a lot of common staff, and the operations are also quite common. So we prefer to give the guidance together with the U.K. And so together, the U.K. will give us low double-digit revenue growth in coming quarters and years. Now, did you ask does it answer your question, or you had other question to get?
I wanted to know about the, I mean, ex the two businesses, what kind of growth?
Yeah. Let me take, Anushka, the question that you asked initially. So U.K. in the first nine months, if we exclude the acquisition of Ideal World, U.K. standalone TJC de-grew by 2%, while Ideal World grew significantly. In the first nine months, U.K. grew by 12.3% year over year, including Ideal World.
Okay. That is helpful. Thank you. And regarding the medium-term margin outlook also, if you can see anything, and the German business as well?
Yeah. From gross margin point of view, we expect the gross margin to be in the region of around 62%, 62% or up in medium term. And Germany continues to grow. As you saw, we had 30% growth rate in Germany last quarter. So we'll see good growth in 20% or 30% kind of growth in coming quarters as well.
Thank you, sir. I also have one more question if I can squeeze it in. I noticed that your B2B revenue is up substantially compared to the B2C revenue in terms of growth. So why is this? And also, do you have any plans to significantly enhance your retail presence?
Yeah. So I'll take that. The B2B revenue is more a reflection of our operational excellence from India. A lot of customers are approaching us from Europe, USA, Japan, probably because of China Plus One, and also seeing our operational efficiencies and values that we offer to them. So long time ago, we used to have our own B2B operation in the U.S. that we discontinued quite a long time ago. So whatever is done from India, and we also make sure that these operations give us at least 18%-20% ROIC and also learning from those markets. Because we are in these markets, Europe, U.S., and we do hope to go to Japan. So those learnings are valuable to us.
Thank you. The next question comes from the line of Saurabh Kumar from Scientific Investing. Please go ahead.
Hello. Sir, I have a question. So our target audience is basically 45-plus and women. And TV has been historically a key revenue driver, and we are trying to grow this to 50%. But my question is, this whole internet in U.S. and Europe, it caught up in post-1995. So ideally, if we look at the age band people who are at a young age after 95, 97, they are the ones who are hitting 45 years of age band. Do you see some major disruption coming in the next three, four years? Because now the next generation of 45-year-plus people you will see in the next five years, they will be the people who have grown on internet. So I know your digital is growing, and you want to take it to 50%.
But do you see any major disruption in the consumer behavior coming in the TV segment because of this risk? And if yes, how are you planning to mitigate? Is 50% good enough, or we need to have a higher aim for digital?
Good question, Saurabh. Thank you. So we expect the digital to continue to grow as a ratio of sales, and TV to continue to grow in absolute numbers for the foreseeable future because we still have some footprints that we can still acquire on television. We are not fully covered. But the main phenomenon that we look ourselves at, that we are a live programming company, we broadcast our signal right now through television, through cable, satellite, telcos. But more and more, our web stream revenue share is going up as a percentage of revenue. Now, web stream would be consumed by these consumers through OTT platforms, say, Netflix or Fire TV, Amazon Fire TV, Roku, Hulu, and AT&T Now of the world. And those platforms will become a bigger and bigger ratio of our sales.
Our USP is live programming with engaging content now and here, kind of entertainment, education, and companionship to these audiences that we have. 40- to 75-year-old, they are mostly single. They're living alone. Single in the sense the children have gone. They are at home. They have time on their hands, and they want the companionship, education, and entertainment. Whether the signal goes through cable, satellite, telco, or OTT or OTA that is over the air that they don't pay, or through their desktop or tablets or iPhones. We see that as our strength, and that will continue to grow, as you might have seen. I'm not sure. The web stream business in China is substantially large, and that phenomenon is coming in the U.S. as well, more and more.
Those streaming advantages that we have over many years will continue to help us in the long term to come. The medium may change.
Okay. Sorry, I have an added question there. When it comes to competing in digital, what kind of market share we have and who are our key competitors? That is one. Second is a bookkeeping question. I think out of nine years, of only two years, we have gone free cash flow negative. Else we have already had a lot of good free cash flows. Given now we don't have any major CapEx for the next two, three years, can we expect an increase in dividend in the years to come for the next two, three years? These are the two questions.
Yeah. I'll take the first one, the digital market share. Now, we are right now counting against the relative TV/e-com companies. Now, we do not compare ourselves against Amazon or all the D2C companies so far because our pure D2C is a very small portion. As we learn the D2C to that level of being pure D2C, then we will start to measure that market. But we are not there yet. So I don't want to even hazard a guess how big is the market, what is our market share in that space yet. But we are confident that we are learning rapidly and getting more and more efficiencies in our digital spend and getting those customers and hopefully transitioning those customers to live stream that goes through web or OTT, thus increasing the lifetime value of that customer that other D2C players cannot because they don't have that experience.
Saurabh, can you repeat your second question?
Yeah. So let me take Saurabh's second question about the free cash flow. Our business model is very unique where we get the payment early from the customer, and we generate pretty high cash. There's a low, very asset-light model. Apart from a year that we had, as you mentioned, negative cash flow, but in all other years we had a good amount of cash flow. We reward that through dividend payments, and we constantly look for our future opportunities to get more market share via digital or TV mediums. But if we don't find a suitable opportunity which gives 20% or above ROIC, then definitely we may think of rewarding to shareholders.
Thank you. The next question comes from the line of Gaurav Nigam from Tunga Investments. Please go ahead.
Yeah. Thank you for taking my question. My first question was on Mindful Souls. And Sunil, I just wanted to get your view. Since the acquisition, in your view, how has the business performed? What has worked favorably and what has not? And a related question which I wanted to just ascertain whether I'm looking at the right numbers. In Mindful Souls, I think the last quarter, the TT and TBT margin disclosed was 10%, which is right now 7% in the presentation. Is this number right? And the growth numbers are also looking almost similar. So just wanted to check if the numbers are printed correctly and if you can help understand on Mindful Souls, what's your view, what has worked, and what has not.
Sure. Sure. Yeah. Let me take first part within here. So for the Mindful Souls, the last some months, we moved our warehouse facility to our own in-house. And also, supply chain started using from our own in-house, Vaibhav Global, rather than using from third-party China. So that required air shipments that resulted in lower gross margins, what we initially had with the Mindful Souls. But now, as the leveraging of the supply chain will be fully completed in February onwards, that will convert it in higher gross margins. So the numbers you are looking at are right. As a current PBT margin is 7%, but with the leveraging full supply chain from India after having sea shipments started that will come from this quarter onwards, we will see the higher gross margins. And Sunil, you can take the other part here.
Yeah. So the other part about the revenue growth, we transitioned the business to us. In that process, we are also learning and implementing new strategies. For example, when Mindful Souls was doing its own business, it was separate. It was not our company. They were only focused on subscription. And now we started adding single-item sales as well. The hope is to get the single-item customer to move into subscription. And to acquire a single-item customer is much lower cost and easier than a subscription customer. So that is paying off. So our customer acquisition is now higher year over year, every month, now every week now. And we are hoping to transition that and having those email flow, text flows, and retargeting flows to convert them into subscription.
So we are very happy with the business that we acquired from ROIC point of view and from learning point of view for other parts of the business. So this is one of the best things that we've done.
Very interesting. Thank you, sir. Sir, another question was on Ideal World. So when we said it is full cost profitable, are we talking about it at the EBITDA level or at the PBT level? Just wanted to clarify this point.
Yeah. Yeah. It is PBT level.
Thank you.
Yeah. There's not much depreciation cost involved in Ideal World. So it is PBT level.
We take the next question from the line of Nirvana Laha from Badrinath Holdings. Please go ahead.
Hi sir. Thank you for the opportunity. Sir, to hit the early teens' revenue growth that you're targeting now, can you please break down the volume growth, the ASP growth, and any kind of INR depreciation that you're factoring in in this 13% growth, 13% or 14%, the early teens' growth number? The reason I ask is because the volume growth in this quarter, I think it's the first full quarter with Mindful Souls and Ideal World in the base, is only 1.7%. So what are the levers that you have to take it up to your target volume growth number? And what is that target volume growth number to achieve the target revenue number?
Yeah. I'll take that question. So thank you, Nirvana. So for us, we are a very agile company. For example, lab-grown diamonds came as a trend. Last year, we had almost zero revenue share of lab-grown, and this year is almost touching 10%. So we take opportunity of the trend and address and cater to that market. So in that process, our ASP went up. And because we gave more airtime to higher ASP, our lower price point product was not given sufficient airtime. So overall volume came down. But for going forward, we see about similar ASP for the foreseeable future. So you must assume in your model similar early teams' volume growth and therefore similar operational expenses at similar volume. And from revenue coming up at early teams, the leverage coming down from our other expenses, HR expenses, logistics expenses, and some of the distribution expenses.
The digital spend will go up because we see that as a future leverage potential. So that may go up. So content and distribution may stay constant as a percentage of revenue, but there will be leverage coming in from other areas.
Got it, sir. Next question is strategic on the TV piece, sir. So if we look at our reach, it's 127 million households, but our unique customers are only 0.7 million, which is like a 0.5% penetration, right? And when I compare this with Qurate, Qurate reaches not many more households, only about 200 million, but their penetration, their unique customers is very high. It's 14.5 million. It's almost like a 7%-8% kind of penetration compared to our 0.5%. So my question is, sir, out of the budget that we say that out of the 18% that we spend, 11% goes towards TV.
My question is, out of this 11%, how much are we spending in tying up the broadcast deals with the carriers, which just carry our channel to their households, versus how much are we spending to actually market our channel to the viewers so that they actually tune into our channel? So if you can help in understanding how the spend is split between the two and what we are doing to get our penetration number high, because I think our household reach is already very good.
Yeah. Thanks, Nirvana. So household reach has two factors. One is the footprint, how many homes we are in. And second is what is the channel position in respective home that we have? So Qurate has been able to get very low channel positions, a prime position, and multiple channels in each home. So Qurate has three or four channels in most of the homes, and we have 1.2 or 1.3 channels per home. I don't have the exact number, but it is substantially lower than them. And the channel position also is not as high as them. So highness is not as prime as them. It's a factor of how much we pay to those airtime companies. Now, our effort is to continue to improve the channel position and number of channels each home that we broadcast in based on the ROI that we expect from these markets.
We are very tight in managing that expense where it can run away very quickly. We have a good analytics team, so we evaluate that continuously. Every week, these deals are offered to us, and we evaluate them, and we go with that open eye. If it doesn't work, we are able to get out of these deals within, say, 90 days or so. We'll continue to evaluate those opportunities and try to get better and better channel positions or more footprints in time to come. The biggest opportunity for us coming time, Nirvana, is the streaming channel position. For example, YouTube TV is about 11 or 12 million homes, and we are not there at all. Roku TV, we are not in that. There's a couple of million homes. We are not into that OTT, say, OTT online linear stream space yet.
It's a huge potential market for us. But as we go deeper and deeper into the understanding of this OTT, that will add bottom-line revenue or top-line and bottom-line revenue to us. So there's a lot of potential in TV space to grow per household revenue, but better channel position, but larger footprint, better channel position, and more channels within each market. But we are frugal in analyzing each of these opportunities.
Thank you. The next question comes from the line of Gopinadha Reddy from PNR Investments. Please go ahead.
Hello, sir. So my question is, why are we not entering the Indian market? We have shown our channels, web channels to some of the women here, and they are very much liking the models, as well as they are very much fine with the pricing also. And I wonder why we are not entering, given that we are also entering into lab-grown diamonds now, which is a good market in India.
Yeah. Thank you for a good question, Mr. Gopinadha. So we evaluated the Indian market a few times. We couldn't make the model work, even in the three, four-year timeline that we make our Western companies profitable. The Indian market didn't have the visibility for a few factors. Number one, the airtime costs in India are higher than Western world as a proportion of sales. Number two, the shipping cost is all on us. Consumers don't pay shipping costs in India, whereas in Western world, we charge shipping costs. And shipping costs contribute about 6% of our revenue. So that doesn't come in here. The third thing in India, when we looked at numbers of some of the target companies we were thinking of acquiring in India, the 30% of the customers don't release the parcel and the parcel reaches them on a COD basis.
So those 30% packages come back. Whereas in the U.S., U.K., Germany, this ratio is less than 0.2%. So the economics of India's TV space doesn't work. Now, India is a potential market for complete D2C in the future, but it still is in discovery mode. So the majority of the D2C companies in India are still loss-making. So we will come into India a market down the road, but we believe that it is still in discovery mode and doesn't fit well for our business model.
Okay. That's it from my side. Thank you.
Thank you. The next question comes from the line of Manan Vandur from Wallfort PMS. Please go ahead.
Yes. Thank you so much for the opportunity. So one of the participants had asked about excluding Germany, like how much cost Germany took and so that number you said 2.5%. So that 2.5%, I add in the PAT or in the EBITDA?
Yeah. It's a margin, Manan. The initial first six months, we had losses in Germany for this year. And though we have achieved our breakeven in quarter three, but six months in terms of our margin side, roughly around 2% of our margins were lower due to Germany. So I meant to say that excluding Germany and Ideal World, both, if I exclude that, I could have achieved 2.5% higher EBITDA margin in this quarter or in these nine months.
Okay. So you are saying that at the EBITDA level, if we exclude the cost, sorry, the losses of Germany and Ideal World, both on the EBITDA level, then we would have had 2.5% more, right?
More. Yeah. Yeah. Right.
Okay. Understood. And so second question is that, could you please tell us what were the Germany revenue, okay, in INR for quarter three and for full nine months 2025 in INR?
INR, I'm not sure, but we reported that number in one of the slides. I think EUR 7.5 million in quarter three we have done and EUR 19.4 million in first nine months we have done.
Thank you. The next question comes from the line of Pradeep from RGI Private Limited. Please go ahead.
Hello? Hello.
Yes, Pradeep. Please go ahead.
Yeah. Thanks for giving me the opportunity. My first question is, why are companies calling off the merger between Vaibhav Vistar Limited and Vaibhav Lifestyle Limited by selling the Vaibhav Vistar Limited? What is the reason?
Yeah. So both these companies are not in operational nature. So the merger was just to that the Vaibhav Vistar is not in operational. It was just sitting with the asset of a land in that company. So to optimize our working capital, we have sold that asset. So that is not needed for our operational perspective in India side. We already have six different buildings in India, which has a capacity of even 30%-40% higher production in the current capacity. So that is why we have sold that, and we called off the merger of Vaibhav Vistar and Vaibhav Lifestyle Limited.
Okay. And my second question is, what is the gross margin for lab-grown diamonds? That you said that it's the 10% of our top line, total top line. Can you comment on that?
Yeah. It's slightly better than our overall margin, a couple of percentage points better.
That means our actual gross margin now, this current quarter, is 61.5% approximately. That means higher than that.
Yes. Correct.
Okay. Thank you. The next question comes from the line of Pratik Dedhia, an investor. Please go ahead.
Hello?
Yes, Pratik. Please go ahead.
Yeah. My questions have been answered. Thank you.
Thank you. The next question comes from the line of Ketan Chheda, an investor. Please go ahead.
Yeah. Hi. Thank you for the opportunity and congratulations and good results. Sir, what I'd like to ask is, in terms of our digital platforms, of the various mediums, like the digital websites, the mobile app, social, OTT, or the third-party marketplaces, which contributes higher amongst the digital options in terms of revenues? Sorry, can you repeat, please? Yeah. Sure. My question is that, of all the various digital avenues that we have, like the mobile application, the website, the social media, the OTT platforms, of all these different avenues, which avenue generates maximum revenue in the digital platform space for us currently?
Yes. So, digital, our main medium is our own proprietary website where we do our live streaming of our live telly shopping, live running video commerce, and also the other selling medium for fixed-price catalog, rising options, and clearance. Apart from that, we have another medium of marketplaces and selling through smart TVs. But our majority of almost around 80% of sales is coming through our own proprietary website. But sorry, actually, let me correct this. The digital medium also includes the mobile apps. So mobile, if my total digital sales is 100, then mobile app itself is contributing roughly around 30% of total digital sales and around 50% roughly contributing our proprietary website to desktop. And the rest is our other different mediums of marketplaces and smart TVs, OTTs.
Yeah. Thank you. That was very helpful. So again, a quick question. So in terms of the spends, if we were to, for the nine months FY 2025, if we were to divide the spends between digital and TV, could you give a breakup, either in absolute numbers or in percentages, however?
So, in percentage terms, absolute, I don't have, but percentage terms is the cost is roughly around 18% of our content broadcasting. And out of this 18%, 11% is our TV-related broadcasting cost, and 7% is our related to digital medium cost, which is primarily in Meta and Google.
Okay. So does it mean that we are spending less on the digital right now, even though the growth rate of digital revenue is increasing and the share of revenue also is increasing digitally?
Yeah. So digital, we have a good amount of sales coming through live shopping medium. That is also part of the broadcasting. Some of the customers who watch our show in live streaming platform on our website, they also are watching from television. So that digital 100% cost, we cannot attribute that our all digital sales is coming through our native digital platform. That is why you may see that the lower amount of spend generating higher revenue in digital.
Thank you. Ladies and gentlemen, that was the last question. And that concludes our question and answer session. I now hand the conference over to Mr. Sunil Agrawal for his closing comments.
Thank you, Anand. I want to thank all the participants for your time and great questions. If you have any further questions, feel free to reach out to Prashant Saraswat at VGL or Amit Sharma at Adfactors PR India, and we'll be happy to answer your questions. Thank you once again.
Thank you. On behalf of Vaibhav Global Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.