Good day and welcome to the Vaibhav Global Limited Q4 and FY25 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Nishita Bhatt from AdFactors PR. Thank you, and over to you, ma'am.
Good evening, everyone, and thank you for joining us on Vaibhav Global Limited's earnings conference call for the fourth quarter and full year ended 31st March 2025. 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 the discussion on the financial performance by Mr. Nitin Panwad, after which the management will open the forum for Q&A sessions. 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.
Okay, Nishita. Good evening, everyone. Thank you for joining VGL's Q4 FY2025 earnings conference call. Hope you have reviewed the results and the investor presentation. Before we discuss the financial performance, I would like to briefly touch upon some broader macro developments in recent weeks that have influenced our operations in the U.S. and U.K. First, the tariff issue. In anticipation of this, we had already shipped advanced inventory to the U.S., assuring we are well stocked for the next few months. However, policy fluidity causes uncertainty and consumer confidence erosion. We are hopeful for a trade agreement between India and the U.S. in the near future, which would benefit vertically integrated retailers like us. Among our peers, we are uniquely positioned with our in-house manufacturing and a global sourcing base, which gives us agility and flexibility to respond quickly.
Two days back, the much-awaited India-U.K. FTA got signed, which is a timely development and could open opportunities for our industry and Vaibhav Global Limited. In addition, the U.S.-China tariff discussion is encouraging, especially as our U.S. group companies procure lifestyle products from China. These micro developments offer opportunities that we believe lead to improved consumer sentiment and market share gain for Vaibhav Global Limited. Let me now take you through financial performance. Revenue for quarter four stood at INR 850 crores, reflecting a 7.7% YoY growth. For the full year, revenue reached INR 3,380 crores, up 11.1% from INR 3,041 crores in the previous year. Our gross margin for the quarter remained robust at 62.1%, with a cumulative margin of 63.1% for the full year. We continue to see strong gross margins in our target range, 62% plus, backed by global supply chain.
This integrated setup allows us to offer competitive prices with quicker turnaround times while enjoying industry-leading margins. Today, the digital business is contributing 41% to overall sales, registering a five-year CAGR of 15%. We are on path to achieve a 50% sales mix from digital businesses by FY2027. Let me now walk you through the performance across key retail markets. In the U.S., retail demand was subdued in January due to economic uncertainty and tariff concerns. February and March showed a big sign of improvement, particularly in e-commerce. Our 1% growth in the U.S., while modest, reflects market share gain amid a challenging environment. The U.K. retail industry is continuing to face a challenging environment, with growth held back by economic uncertainty and cautious consumer spending. While this affected TJC, Ideal World continued to show strong growth and helped support U.K. performance.
We actively manage airtime and product mix to align with evolving customer preferences. Germany continued to gain market share, maintaining EBITDA break-even for this current quarter as well. We are confident about achieving EBITDA profitability in FY 2026. Notably, this has been a much faster turnaround than we experienced in the U.S. and U.K. when we launched there originally, thanks to our past retail learnings. In local currency terms, Q4 growth in the U.K. and Germany stood at 2% and 18.7%, respectively. We expect Ideal World to start contributing meaningfully to the group's profitability in the coming quarters. Mindful Source continued its steady performance, delivering a 7% PBT margin in Q4. With over 107,000 unique customers, we see tangible benefits from VGL's supply chain and ongoing product expansion to get wallet share of these consumers.
We continue to focus on four pillars of our growth, that is, widening reach, new customer registration and acquisition, customer retention, and repeat purchase. In Q4, our TV network reached 127 million households. As of 31st March 2025, our unique customer base stands at 710,000, which is up 21% YoY and the highest ever for VGL Group. Even excluding acquisitions, unique customers grew 7% YoY. New customer acquisitions stand at 410,000 in Q4, while we sustained retention rate at 43%. On a trailing 12-month basis, customers purchased an average of 22 pieces from us. Sustainability continues to be the core of our business, and we are strengthening our ESG initiatives to drive long-term value. I am pleased to share that VGL has been assigned a combined ESG rating score of 72, that is strong from ICRA ESG Rating Limited. This reinforces our position as a responsible corporate citizen.
Vaibhav Global Limited, community give-back is integral to our business model, where every unit sold results in a meal for a school-going child. We are pleased to share that this quarter, we served the 100 millionth meal to a school child since the inception of our midday meal program called Your Purchase Feeds. Currently, we serve 57,000 meals every school day. On the clean energy front, we generated 1.1 million kilowatt-hours of solar energy this quarter, meeting 100% of our power needs of our manufacturing units. In addition, two US sites and one site each in the U.K. and Germany also operate 100% on renewable energy. These steps bring us closer to our target of achieving carbon neutrality and Scope 1 and 2 emissions by 2031. From the governance standpoint, our subsidiaries in India, the US, U.K., Germany, and China are certified as great places to work.
We are grateful to our employees for their honest feedback and are committed to an imbalanced, inclusive, collaborative workplace environment across the group. We believe in creating long-term value for our stakeholders. The board has recommended a final dividend of INR 1.5 per equity share, subject to shareholder approval. Including the three interim dividends already paid, our total dividend payout for FY 2025 stands at 64% of earnings. We remain focused on profitable growth. For FY 2026, we expect to achieve revenue growth of 8%-12% with operating leverage. While macro risks persist, we are well-positioned to navigate them thanks to our low-cost, vertically integrated model and high agility. For subsequent periods, we project revenue growth in the mid-teens range with operating leverage. I will now hand over the call to Nitin to discuss the financial performance. Over to you, Nitin.
Thank you, Sunil. Good evening, everyone, and thank you for joining Q4 FY25 earnings call. Let me walk you through the key highlights of our financial performance for the fourth quarter and full year ended March 31, 2025. As Sunil mentioned earlier, we continued to closely monitor market dynamics and proactively manage our operations. In anticipation of tariff destruction in April, we strategically shipped additional inventory ahead of time, giving us a distinct advantage over many competitors. Additionally, positive developments like India-U.K. free trade agreement and U.S.-China trade deal are promising and can unlock long-term opportunities for business growth. Turning to our financial performance, revenue for Q4 FY25 grew by 7.7% year over year, reaching INR 850 crores compared to INR 789 crores of Q4 FY24. For full fiscal year, our group recorded revenue of INR 3,380 crores, up 11.1% from last year, marking double-digit revenue growth. Geographically, the U.S. market demonstrated resilience.
Though growth momentarily paused due to tariff uncertainties, we remain confident that the digital-first retailer like us will benefit significantly in the long run. In the U.K., consumer sentiment remained subdued, with weak discretionary spending. However, Ideal World robust growth helped offset softness in our TJC core operation. Germany stood out by significantly outpacing the market, achieving EBITDA break-even once again in this quarter. In local currency terms, growth in the U.S., U.K., and Germany was 1%, 2%, and 19%, respectively. In terms of sales, TV revenue was INR 456 crores, showing a modest growth of 1% year over year, while digital revenue reached INR 350 crores, demonstrating strong growth of 15%. Our digital expansion is driven by strategic investment into enhancing our omnichannel capabilities. Digital now represents 41% of total revenue, and we are confidently on track to reach our goal of 50% digital revenue by FY2027.
Lifestyle products now comprise 33% of total sales compared to just 12% in FY2018, and we aim to raise this further to 50% in the medium term. Additionally, our Budget Pay option, which allows customers to purchase on EMI, contributed notably to 39% of retail revenue in FY2025. Our gross margin remained healthy at 62.1% in Q4, reflecting the strength of our vertically integrated business model. EBITDA margin stood at 8.3%, slightly impacted by ongoing investment in digital growth and challenges in U.K. profitability, though partially offset by operational efficiencies and lower shipping costs. For the full year, EBITDA margin was 9.4%, slightly down from 9.7% of FY2024. Profit after tax for Q4 was INR 34 crores, up an impressive growth of 62% year over year. Annually, our profit after tax reaches INR 153 crores, making a solid growth of 21% year over year. Both of our acquisitions continue to perform well.
Ideal World maintains strong growth momentum, while Mindful Source remains a high-growth margin business and is actively expanding its product offering and customer base. The cross-learning opportunities from these acquisitions are delivering tangible benefits across the group. Our business model continues to generate healthy cash flows, with free cash flow at INR 127 crores and operating cash flow at INR 162 crores. With regular dividend distribution, our net cash position remains robust at INR 170 crores. Our return ratio, ROCE, is 19%, and ROE at 12% continues to strengthen. We remain firmly committed to delivering consistent value to our shareholders. The board has recommended a final dividend of INR 1.5 per equity share, subject to shareholder approval. Our total dividend payout for FY 2025 stands at 65% of our earnings. Looking forward, while we remain optimistic about growth trajectory, ongoing macroeconomic uncertainties prompt a cautious approach.
For FY2026, we expect revenue growth in a range of 8%-12% with operating leverage. Over subsequent years, we anticipate revenue growth in the mid-teens with operating leverage. Thank you, and I now turn the call to moderator for Q&A.
Thank you very much, sir. 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 withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to all participants, if you wish to ask any questions, you may press star and one. We have a first question from Rupesh Tatya from IntelliSense Capital. Please go ahead.
Hello, hello, sir. Thank you for the opportunity. My first question is for FY2026. Can you give some idea about the content broadcasting budget? I think the number was INR 650 crore for FY2025. What kind of spend are we looking for in FY2026? Hello.
Hello. Hello.
Yes, Nitin.
Yeah. Am I audible?
Yes, yes.
Should I repeat my question?
Hello, Nitin.
I just connected the call. Sorry, maybe I missed your question. I just connected the call. If you can repeat, that will be helpful.
My question, sorry, the content broadcasting budget for FY 2025 was INR 650 crore. What would be the budget? What kind of spend are we looking for in FY 2026?
The content broadcasting cost right now is roughly around 18%-18.5% of our business. We expect that we expand based on the company's performance, but respectively, we will increase this budget if we see the momentum increase in our margins. We are monitoring both of the costs in line with our gross margin improvement. If our content broadcasting goes up by 1%, we are expecting the additional gross margin will achieve by 1%.
Okay. I mean, sir, that is a little bit difficult to make. I don't know what to make of that answer, sir. I mean, will it remain at 18%? Even if the gross margin goes up, so gross, let's say hypothetically, gross margin goes up by 3%-4%, the content and broadcasting cost will also go up by 3%-4% as a percentage of revenue?
Yeah. Let me brief about the bifurcation of this content broadcasting cost. Roughly around 11.5% is our TV broadcasting cost included in this content broadcasting cost number, and remaining 7%-8% cost is our digital marketing. Major cost increase happened year over year in digital marketing cost. We are continuously investing year over year to see the momentum and acquiring a higher number of customers, as you may have seen in our investor presentation also. We will not try to invest further to get more customer acquisition so we can convert those customers in our omnichannel platforms. Right now, it is difficult to guide this number that will remain at 18%, but definitely, this number will not be below, for the next financial year, below 18%. Either it will be 18%-19%, I can give the range for the next year.
It will be the content broadcasting cost. We will not see the operating leverage in particular this line item as a P&L perspective.
Okay, okay. That is clear, sir. Thank you. The second question, sir, is, I mean, can you give some idea about how would Germany's revenue and EBITDA look like in FY2026 and same for Ideal World? Because these two are not contributing to EBITDA, and between, I think, two of them is roughly, I think, INR 400 crore kind of revenue. So if you can give some idea about these two components, businesses, that would be very helpful.
Yeah. Last two quarters were Germany and Ideal World. They both performed well. For the second half, both of the units have done EBITDA break-even. First half of the year, both of the units have done losses. That will convert it to the profitability. The full financial year, we expect that the EBITDA margin from Germany operation will be in positive territory, which is right now in around, let me just see, is around, so around INR 2 million to INR 3 million losses that we have seen in the Germany operation in full financial year. That will be resulted in our profitability in Germany per se. Also from the Ideal World perspective, Ideal World from the second half has done well and a growth of over 40% we have seen from the Ideal World operation.
The recent improvement in our airtime cost negotiations and the productivity improvement in different areas of the warehouse, we expect that Ideal World will improve the profitability margin by 1% in total terms.
To summarize, sir, Germany will grow at, let's say, 20%-25%, and there will be at least 2%-3% EBITDA margin. Is that a fair assumption for Germany?
Yeah. EBITDA margin specifically is hard to guide from the Germany, but last year, we had losses, so losses will not be reflected in the Germany operation. Slight profitable, not 2%, 3%, but slight profitable from Germany.
Okay, okay. And then Ideal World, you are saying GBP 21 million it was, and it had 40% growth. Maybe, I don't know if we can repeat that kind of number, but maybe 20% growth. So GBP 25 million and 1%-2% EBITDA margin.
Yeah. Growth that I mentioned was the previous quarter that Ideal World had the operation. We expect that Ideal World will grow to 20% growth rate year over year, specifically. It will be the similar kind of EBITDA margin, around 8%, from Ideal World operation. Same as that.
When do you see both these components coming to company average, sorry, 8%-9% margin? Is that possible in FY2027?
Yeah. So if both businesses continue to grow with the pace of 20% and above, in the next two years, similar kind of margins that what we are seeing in the US can be achieved.
Okay. So FY2027, they will be significantly closer to company average.
Let me just clarify just for me. Ideal World should be there in FY2027. Germany is still new. To give a guidance of 8%-10% kind of EBITDA in FY2027 is too premature. What I can say is there will be EBITDA positive in FY2026, which we were negative almost $3 million. That will help the group profitability by, I believe, 1.5-2 percentage points average. There will be EBITDA positive. In FY2027, there will be EBITDA positive for Germany. To what extent I cannot state at this time. It is too early.
Okay. Yeah. That is clear, sir. And sir, I think we were expecting a better gross margin due to Ideal World, due to LGV and all of that. It has not kind of come through in Q3, Q4. If you can give some color around that.
Yeah. This is for me. One thing is the macro environment still is a bit challenging because the consumer sentiment is weak. To push through price increase at this time is difficult. Second thing is our B2B sales had a bit of increase last quarter, and B2B had lower margin. Therefore, you do not see that flow through into the overall margin. These two factors.
I mean, I don't think the macro scenario has improved. It would be similar. It's fair to assume similar gross margin for this year as well.
Yes. At the guidance level, we want to give between 62%-63% gross margin guidance for this current financial year, FY2026. There will be operating leverage coming from our HR, SG&A line items because we are seeing a lot of optimization happening in the HR area with AI, with talent density initiatives that we have across the whole organization.
Okay, okay. And then sir, my final question is for the full year.
Sorry to interrupt. May we please request you to rejoin the queue?
Okay.
Thank you. We have a next question from Gaurav Nigam from Tunga Investment. Please go ahead.
Yeah. Thank you, sir, for taking my question. Sir, two questions. One is, I wanted to understand what is the PBT drag of Germany in Q4 and all of FY25?
Yeah. Hi, Gaurav. PBT level in Germany is still in losses as the depreciation and the interest of intercompany is still there. At EBITDA level, it is break-even.
Got it. What about Q4? At the PBT level, was it still in losses?
PBT level is still losses because interest cost is high for the intercompany loan. Though that it is eliminated in the console level because the loan given by US subsidiary company to Germany, but on the EBITDA level. The specifically depreciation, which is a couple of hundred grand per quarter.
Understood. Understood. Excluding the interest, would it be fair to say that at PBT level, there is a break-even in Q4, or there is also?
Very close to break-even. Not a break-even, but very close to break-even.
Understood. Understood. Nitin, sir, I just wanted to get a sense from you on, sir, USA sentiment with the tariffs and everything. I think things are still, I mean, not very clear. How is the consumer sentiment, and is there any improvement? I think already two months have passed since the quarter has ended. I mean, how are you seeing things on the ground?
Yeah. Consumer sentiment still is a bit challenging. We are faring better than many others. For example, Target just declared yesterday their negative comps after a very long time. We are reading about negative comps, but our business is currently about mid-single-digit growth level for the first one and a half months so far. We are seeing about mid-single-digit growth for US business this year for us, or this quarter for us. For the year, it's too early to give the guidance right now. Our guidance stays true for the whole year, 8%-12%. That accounts for uncertainty in the environment. If the sentiments become positive because of, say, India, US GDP, or US GDP with, say, 10, 12 different countries before the expiry of 90 days, that may bring a lot of positivity.
If they can circulate to China also, that will also bring a lot of positivity. If the tailwind continues and the tariff again kicks in, that may bring in negativity. It is very early for us to define how the sentiment will shape up. That is why we have given very wide guidance this time.
Very interesting, sir. Sir, one more point, you mentioned about the operating leverage on the HR and SG&A line item. It would be great if you can help understand what are the initiatives that we are taking which will drive this operating leverage.
Yeah. Good question. From HR point of view, we started driving about 8-10 months ago, sir, talent density across the whole organization. This was based on a book by Reid Hastings called No Rules Rules. That we read all across the whole organization, and we started that initiative. That created good results for us across the whole organization. Just to give you an example, in our US and Germany warehouse, we hired talent with higher pay than our average pay. That led to much higher output per person and reduced our warehouse costs, both in Germany and US, substantially. We had fewer people with higher output. Similar initiative, we drove across the entire business in back office operation, into factories, into call centers, into management team, mid-management team, everywhere.
That is the initiative that is helping us across the group. AI has helped as well. We have eliminated a lot of repetitive functions which we were able to automate. HR, as you might have seen in the numbers, HR costs are down year over year for us. Now, SG&A includes the shipping costs where we are able to consolidate some and also automate many functions to reduce the SG&A costs across the organization.
Very interesting, sir. And sir, just a final question to understand the overall dynamics, sir. One, I was observing that the digital revenue for us is growing faster. And as my understanding is that digital revenue comes at a higher cost. And because of the nature of the customer, it also has a lower repeat rate. And I can see that the gross margin that we are earning right now has not gone up in line with the digital revenue increase. I mean, when you're thinking about, let's say, a year, two years down the line, I was thinking about the profitability because I think you expect the digital revenue to go up. But if the profitability of a digital business is relatively lower, how should we think about the blended profitability going forward?
Yeah. It's a good question, Gaurav. Now, digital, when we started investing into digital almost a year ago, we were not profitable in first purchase. And we still are not. Over the last one year, we have come to the stage that we are profitable between 90-180 days in the customer that we have.
Sorry, Sunil sir. Sorry to interrupt. Your voice is getting a bit muffled.
Okay. That's because of the speakerphone. Is it better now?
Now it's clear. Yeah, it's clear.
Last, since within a year when we started investing in digital, we've learned quite a bit to make the customer profitable within three months to six months of acquiring that customer. We are learning that to make it shorter and shorter period. As we go forward, if we can bring that profitability to, say, two months instead of currently three to six months, we have six brands, and some brands are profitable within two months, and some take about six to eight months. If we can bring that forward to two to three months for all the brands, our profitability goes up. It is not the factor of, say, understanding Meta or understanding Google. We have about 12 or 13 customer acquisition funnels.
We are driving each funnel through talent density of increasing the customer or employee talent density in each funnel and then reducing the time to profitability for each funnel. It is pretty complicated. E-com is much more complicated than television. We have learned quite a bit from the Mindful Source that we acquired and from our own participation on e-com masterminds and forums where I personally participate and all my senior team participates, and our middle-level team members also participate. That has brought in tremendous learning, and the investment is getting better and better for us.
Got it, sir. Thank you. Thank you for answering my question. Thank you.
Thanks, Gaurav.
Thank you. We have a next question from Apurva from Whitestone Financial Advisors. Please go ahead.
Yes.
Hi, sir. Thanks for the opportunity. Sir, a few questions. First is on the receivables. Sir, I'm just thinking that the complete business is online, right? Online sales. So then why do we have such high receivables around skin and clothes?
Yeah. Hi, Apurva. Let me take this question to you. Receivable mainly in line with our financing option to the end consumer, EMI option, which we call as Budget Pay, where customer can pay in two to five different installments if customer opts for this option. That outstanding is related to the Budget Pay EMI option, which contributes right now 39% of total B2C sales. This is roughly around 33 days outstanding period in terms of receivable number of days.
Okay. The line which we have, not the receivables, is because of this EMI only, is it? Is it right?
Yes, yeah. It is. Yeah.
Okay. My next question is on Budget Pay only. Sir, the risk is on us or some other company takes the risk of this EMI?
Risk is on us, but we have a robust procedure internally to check the customer payment pattern and the customer buying history before giving finance to the consumer. Effectively, our budget is within the range of 1%-1.5% of our Budget Pay sales. Over the period, it is similar. We have not seen any kind of disruption like anomalies in this trend.
Okay. Okay. Thank you. Thank you, sir.
Thank you. We have a next question from Lino, Sunil, an individual investor. Please go ahead.
Hello, sir. Sir, I just have one question. Earlier in the beginning of FY2025, you had recommended a growth of 12%-15%, and we've achieved roughly around 11%. Even after we had two acquisitions of Mindful Souls and Ideal World during the year, now you've even lowered your revenue guidance for FY2026 as compared to 8%-12%. Why is that still happening?
Let me answer this. Thanks for the question, Sunil. It is true that we did guide 12%-15%, and then we had this uncertainty in the market, economic environment impacted. We were expecting when we guided that the economic environment would improve and go to the steady state after the war and inflation and the consumer sentiments. It did not happen. It actually was further deaccelerated. Actually, after the new administration came in, the policies or the fluidity of the policy and uncertainty was further deterioration. That is the reason, as I mentioned earlier, we are giving a guidance of 8%-12% now, which is much higher than we've given in the past. Plus, sentiment, we do not know how they will shape up, and that is why we are giving this guidance.
If the consumer sentiments go up, then we will be at the higher end. Still, it may take time, and this is a guidance for the full year. It may not be the sentiment may not hold the full year where the guidance stands.
Okay. So I just have a follow-up question here. Just two things. First, out of the 11% growth that you've done in last year, how much was due to acquisitions of Mindful Souls and Ideal World? And second, if you could split up. If you talk about growth, you said that in the US, growth was flat. So was in Germany. The entire growth, is it coming only due to acquisitions last year?
Yeah. Hi, Sunil. Let me take this question. Excluding Mindful Souls and Ideal World, we have a growth of roughly around 4.5% in rupee terms. Sorry, what was your other question?
Okay. I just wanted to know this only. What was the growth excluding these acquisitions? And what is the projection of growth excluding these two, Ideal World and Mindful Souls, for the next year?
Yeah. Projection is combined, actually. So now in comparable numbers, Ideal World and Mindful Souls, both are included. So it is all in combined projection 8%-12%.
Okay. Okay. Thank you.
Thank you. We have a next question from Pallavi Deshpande from Sameeksha Capital. Please go ahead.
Yes, sir. Thank you for taking my question. It was related to initially you mentioned about the content cost. In terms of the air, taking to air, the broadcasting fees were increased by the broadcasting company. What was the percentage increase that took? And when did that come? Which quarter?
That increase that we have done throughout the year, that is why you may have seen this cost has jumped year over year. Earlier, it was 16.5%. Now it is 18.8%. That has increased because we started doing investment in March 2024 onwards.
Right. I'm not talking about the digital part, which is 7-8%. I'm talking about not the investment part. What was the increase taken by the broadcasters? It's the percentage I was looking for, which is you've given the split 11.5%. What was the increase percentage by the broadcasters?
Yeah. That increase is related to Ideal World that recently that we have launched. Obviously, whenever the new channel launched, the cost-to-sales ratio is higher. Predominantly, airtime is fixed in nature. Once revenue built up, that cost goes down. Also, the airtime cost, we have done some investment in the U.S., some OTA households, and some cable households with the lower channel positioning that we have taken. That resulted in increment in airtime cost.
Right. Second, sir, was on this QVC has done a tie-up with TikTok. I just wanted to understand how does that impact the competitive dynamics? Are we, I mean, looking for something similar to do for your digital marketing side?
I'll take that. We believe that TikTok has been there, and we've been on TikTok, but at a small level. We are doing the organic as well as paid TikTok, but it is a small expense. Still to be seen how it will shape up for QVC. I hope they are very successful. I hope it shapes up well. If it does, we can replicate that in a way which we are not doing. Yet to be seen how they will take up. Having said that, many B2C brands are doing well on TikTok, and some have done exceptionally well. They are mostly mid to small-sized brands. At QVC level, how much they will move, difficult to say.
Right. And these small brands, any idea of what kind of growth they are seeing, the B2C small brands, because of the current environment? Are they at a competitive edge?
It's different. Companies which are China-exposed are having a difficult time. From my interaction with a lot of B2C players, through the mastermind that I and other team members are a member of, those China-centric brands are having a difficult time. Brands which are not China-exposed seem to be doing okay, not as robust as they were last year, but they are doing better than those exposed to China.
Right. Right. Last few would be the DHL tie-up on any developments there for the small packages? You are doing the same thing?
Okay. One more question, please.
Yes.
It is under discussion and going from the Indian Post. Indian Post is recently launching single-packet services from SSID unit that we have. Expecting that they will start the service from June. We have done a cost-benefit analysis based on the shipping what we'll do. We'll start from the small parcel, yet to be seen in June how fast we will implement and how rapidly we'll respond. It will definitely be helped, not only in terms of the freight and shipping cost, but also we can enjoy the benefit of the DNAMS, which is a duty-free goods in the US.
Right. Sir, my last question was on the current assets. We've seen a notable increase in the others from INR 2.7 crores to INR 43 crores. We just wanted to understand what does that pertain to?
Yeah. Current assets increase mainly related to the balance line with the payment gateways. That has been increased. Last couple of days, this time compared to previous years, that was increased. Last three-day balance was there, but earlier it was not. That is realized in first and second April of this financial year.
Am I clear? We have the participant disconnected. Oh. We'll move on to the next participant from LINO. Rupesh Tatya from Intelsense Capital. Please go ahead.
Hello, sir. Thank you for the follow-up. My question is for FY 2025, can you give what was our financial provision for impairment because of what percentage of sales perform financing and the corresponding impairment? It would be great if you can give the same number for FY 2024 as well.
Impairment, you mean which was stated in standalone accounts only?
Three, four percent provision we do, right, sir, when we do financial credit loss?
Yeah. So that was related to our budget provisioning that we do for the Budget Pay offering. For the particularly Budget Pay sales, as I mentioned to previous caller also, it is 1.5% of our total Budget Pay sales, and it will remain same for the upcoming years.
Was this number the same in FY 2024 as well?
Yeah. Pretty much similar. Yeah.
What is the Budget Pay proportion, sir? I couldn't find it in the presentation.
9% of total sales.
9% of total sales or Budget Pay?
39% of total B2C sales.
Okay. Okay. And this number was in FY 2024?
It was similar. The budget rate for the year is very much similar.
Okay. Okay. Thank you. That was my only question. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to take questions from all participants in the conference, please restrict yourself to only two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. We have our next question from the line of Ashish Shah from Business Match. Please go ahead.
Hi. Good evening, sir. Sir, just some thoughts on this whole tariff thing and how it's impacting our business, and have you taken, are there any price hikes to offset or some thoughts there?
Yeah. I'll take that call. We shipped extra inventory to the US before the tariff hike because of the announcements that Mr. Trump had made. We have inventory for at least three to four months during these negotiations that are happening. We are hopeful that negotiation that happens, India will get a favorable treaty coming maybe 30-45 days, and we should be fine. Just in case there is no favorable treaty for India, India is still placed at equal to most of the countries, and we should be able to compete with anybody else. Since many of the companies depend largely on China, we will be competitively better placed than those companies. All in all, we will be equal or better than most of the competitors.
Sir, in a scenario assuming a status quo, then there could be, while relatively we'll be better off, there could be yet some meaningful price hikes, right, in that scenario to offset some base case tariffs as well, right?
My worry is not so much for the price hike because our gross margins are pretty high, so the price hike does not look as high. It is more about the consumer sentiments. If the consumer sentiments stay low or subdued, that could impact our business. That is why we give 8%-12% of guidance. If the consumer sentiment stays low, then it will be more like 8%. If consumer sentiments are positive, then we will go towards 12%.
Okay, sir. Thank you very much, sir.
Thank you. We have our next question from LINO. Pradeep Maidi from RBI PET Limited. Please go ahead.
Hello. Am I audible?
Yes.
Hello. Am I audible, sir?
Yes, we can hear you.
Yes.
Yes.
Yeah. My question is part and to material consumed cost. So sir, are you expect the material consumed cost will increase in FY 2026 or it will remain in line with the FY 2025 in full year basis?
Yeah. Margin will remain in improvement trajectory as we are getting a higher digital share and the optimization in terms of pricing. Also, the recent India-UK FTA will help us to improve the margin. COGS will be lower comparatively to previous years. With that, in guidance terms, the margin will be 62%. Metal consumed will be 38%. Predominantly that number year over year.
Oh, that means metal consumed cost will not increase in upcoming years.
Yes.
Right?
Yeah. Right. Yeah.
Okay. Nothing else. Thank you.
Thank you. We have our next question from LINO, Tanvi, an individual investor. Please go ahead.
Just one quick two questions on your margins. First, sir, in the last phone call, you had mentioned that if we exclude the loss from Germany and Ideal World, then our EBITDA would have been greater than by 2.5%. Assuming that, as you said, for FY2026, there won't be any losses from Germany and Ideal World, can we assume on a full year basis that our margins will improve by this 2.5%? As earlier you said, it will improve by 1% overall. For the nine-month data, you had said that numbers will be 2.5%. What numbers shall we take?
Yeah. So definitely, there is an improvement in overall margin through Germany operations. Earlier in FY2024, when we were having full year losses in Germany, the gap between the EBITDA margin excluding and including Germany was 2.5%. That is getting better in this year, and next year also that will be better. The last couple of quarters, we have seen the softness in the UK. TJC UK profitability. That resulted in the margin improvement not being in line with the 2.5% that you mentioned earlier. Based on the initiatives that we have in the UK, that will improve the margin in the upcoming period as you might have seen. The excluding Germany operation was 2.5%, and that may be resulted in coming years.
However, that 2.5% was the, if we exclude full Germany operation, that means that this operation is in a similar pace as US operation. That will take another couple of years to, in line with the, to catch up the US operation pace to achieve the 2.5% improvement in EBITDA margin. You can assume that it will gradually improve up to the level in the next couple of years to achieve 2.5% improvement from Germany operation.
As of now, we can assume a % increase due to these EBITDA losses being wiped off in Germany and Ideal World, as you mentioned earlier.
Yes.
Okay. Also, just a question regarding margins only. Two things. First, you said just wanted to know, sir, had there not been any inventory piled up for the next three to four months due to weak consumer sentiment in the US, how much better would we have been on an inventory level because change in inventory is also accounted for in the P&L? Second, sir, what is your stance on lab-grown diamonds? In the last quarter, we have talked a lot about lab-grown diamonds, that they have been showing double-digit growth and also improving the overall gross margin and the customer sentiment. What are your thoughts about lab-grown diamonds for this quarter? Also about these two questions. Yeah. That's it.
I'll take the lab-grown numbers, but Sunil will talk about the performance side, what we are anticipating for lab-grown. Lab-grown is continuously improving, and the lab-grown category itself has reached a double-digit share of overall business sales in all of the three geographies, US, UK, and Germany. We are seeing pretty good response from the consumer side in terms of lab-grown products. In terms of inventory pile, mainly we have done in US, that is for the three-month inventory that we have over there. I would pass on the call to Sunil for what we are anticipating for the lab-grown performance for the coming period.
Yeah. As Betty mentioned, it is doing well for us, double-digit sales. We continue to see this to continue for the next two quarters at least. Unless the price goes further down, consumer trust needs to stay with this. It depends a lot on consumer trust on what they're buying. If we see price continue to go down, then they may not buy as much. Or they still may buy. Who knows? Still to be seen. We are continuing to look at this business in a positive way while keeping the inventory low because we know the inventory price may go further down.
Okay. Sir, about the first question, the earlier question that I had asked, had you not maintained an inventory pile-up in the US, how much your EBITDA margin would have been better for this quarter?
There's no impact with the EBITDA margin with inventory pile-up because it is recorded at the cost of purchase price. So there's no impact in EBITDA margin with the inventory pile-up. That will be benefiting at least for some period to not to pass on the increased price with the tariff increment.
Okay. Okay. Thank you.
Thank you. We have our next question from Harsh Mehra from Perpetual Capital Advisors. Please go ahead.
Hi, sir. Can you hear me?
Yes.
Yes, sir. We can hear you.
Yes, sir. My first question is around why are the tax rates lower for the quarter? If you see at the percentage of PBT, your tax rates have most of the time been around 25%, but this time it's only 17% or something of your PBT.
Yeah. Hi, Harsh. Thanks for the question. As I think previously also we guided that tax will continue to be lower as the German operation become breakeven and profitable, as that the losses are not accounted for. That will be beneficial in terms of reduced tax rate. Also, we have seen the lower profitability in the U.K. this year, which is coming up eventually, lower tax rate. We anticipate over the period in coming quarters, the ATR will remain at around 22%.
Okay. All right. 22% for the whole year, right?
Yes. Yeah.
Yes. Okay. Could you share the volumes for the whole year for all the three businesses, like Germany, US, and UK?
I think it was in our investor presentation. Yeah.
Okay. Just for you. Thank you so much. That's it from my side.
Thank you. We have our next question from Pallavi Deshpande from Suniksa Capital. Please go ahead.
Yes. I just wanted to understand on the auctions. Did we do more of the online auctions given the slowdown in the U.K. this year?
Pallavi, can you repeat the question? You're talking about the online?
Yes. Online auctions. I wanted to know what was the percentage ratio? Was it higher? As you mentioned, UK was slower, so you have this TJC online auction.
You're looking for just the UK online auction ratio as a total % of sale of UK or?
Yeah. Total. Actually, total. Yeah.
Okay. Bethan, do you have the data?
Yes. U.K. TV sales online, I mean, the TV sales is lower than the last year, while digital is flattish. I mean, the online auction sales is lower than the last year.
Can you quantify the number?
I'll quantify Prashant's share. I don't have it right now, but Prashant shared the number.
Pallavi is looking for overall auction revenue this year versus the year before.
I'll give you that just in my commentary that TV sales grew by 1% year over year for the group, and digital was 15% growth year over year. Online auction is the TV sales. It's a 1% growth year over year, including US, UK.
No, no. She's looking online auction, I believe. Yeah. Maybe Prashant can share that with Pallavi later.
Yes.
That's my question.
Yeah. I just wanted to know because of the slowdown, this should have gone up, right? Everything is down.
I'm not seeing so from the intuitive information that I take from the daily report or weekly report. I'm not seeing much change in that the revenue going up significantly or meaningfully. I wouldn't be surprised the number is about similar for US, UK put together because we don't have auction in Germany, UC, and sub-ICU. Overall revenue would be about flattish year over year on the auction part. The digital revenue that has gone up has gone up largely with the catalog as well as the web TV. The mobile app sales have gone up quite substantially. Within those, auction hasn't gone up much.
Okay. Okay. One more was on the initial amounts you mentioned about the reach at 127 million, the number. I remember it was 130 or so. There has not been an increase in the reach. Is that a fair assessment?
Do we have data? The TV household reaches in FY2025 versus 2024?
It remains the same. $127 million, sorry, total $127 million. Yeah. $60 million U.S., GBP 27 million in UK, and EUR 40 million in Germany.
No, so there's no increase, right?
Yeah. There is no increase in the household. Like UK and Germany, they both are pretty much covered in terms of reaching all the household. US has a potential to increase, but UK and Germany, they both are covered.
Yes. Thank you so much.
Thank you. Ladies and gentlemen, that would be the last question for today. I now hand the conference over to the management for closing comments.
Thank you, everybody. I want to thank you all. Thank all the participants for your time and great questions. If you have any further question, feel free to reach out to Prashant Saraswat at VGL or Amit Sharma at Ad Factors PR India. We will be happy to answer your questions. Thank you once again.
Thank you, sir. On behalf of Vaibhav Global Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.