Ladies and gentlemen, good day and welcome to Vaibhav Global Limited Q1 FY2026 earnings conference call. As a reminder, all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. I now hand over the conference to Ms. Nishita Bhat from Adfactors PR. Thank you, and over to you, ma'am.
Good morning, everyone, and thank you for joining us on Vaibhav Global Limited's earnings conference call for the first quarter ended 30th June 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 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 morning, everyone. Thank you for joining VGL's Q1 FY2026 Earnings Conference Call. Hope you have reviewed the results and investor presentation. The June quarter played out against a mixed global backdrop, with consumer sentiments fluctuating across our key markets. However, we did see some improvement towards the end of the quarter gone by. We reported revenue of INR 840 crore in Q1, registering 8% year-over-year growth. Our gross margin held steady at 63.8%, which is reassuring given the macro volatilities. We continue to operate comfortably within our target margin range of 60% +, thanks to our vertically integrated global supply chain. This setup helps us stay cost-competitive and responsive while maintaining industry-leading margins. On the digital front, we are seeing steady momentum as digital now contributes to 43% of our B2C sales. We now remain on track to reach a 50% digital revenue share by FY2027.
Let me now walk you through region-wide performance. In the U.S., revenue grew by 1.3% compared to the same period last year. Consumer confidence dipped in April, partially improved later, but towards the end of June, the U.S. strike on Iran subdued the sentiments. Overall, it remains below last year's levels. With household savings challenged, resulting discretionary spending continues to stay under pressure. As you may be aware, the U.S. has recently imposed a 25% tariff on all imports from India. While this development has created a level of uncertainty across the industry, we are fairly well positioned to navigate the impact. Unlike our peers, we operate a fully vertically integrated business model with in-house design and manufacturing, globally spread in-house sourcing base. This gives us control over our supply chain and cost structure.
Leveraging this model, we have proactively shipped advanced inventory ahead of the tariff announcements, ensuring that we are fairly well stocked for the coming few months. We remain optimistic about a potential reduction or rationalization of tariffs in the future. The U.K. retail industry continues to face a challenging environment, with growth held back by economic uncertainty and cautious consumer spending. In the U.K., revenue grew by 2.3% year-over-year, supported by Ideal World business. The core TJC business had an impact on both internal and external factors. Consumer confidence had fallen sharply in April before recovering in June. TJC also went through recent leadership transition, which caused some initial disruption. We are now seeing early signs of improvement in TJC performance, while Ideal World continues to be a bit profitable in Q1 also. Germany delivered 7.2% year-over-year revenue growth during the quarter.
Consumer demand was affected by macro challenges, including weaker sentiment early in the quarter. While tax and interest rate cuts supported spending to some extent, these tailwinds were not sufficient to fully offset the broader pressure on discretionary demand. As a result, this quarter Germany incurred losses due to operating deleverage. Our Germany business saw improved year-over-year performance in Q1, and we are encouraged to see even stronger traction showing in Q2. With this momentum, we remain confident of achieving a bit of profitability for the full financial year in 2025. On the product front, our focus on innovation and responding to evolving consumer demand continues to yield results. We are pleased with the successful scale-up of our lab-grown diamond jewelry portfolio, which contributes to 11% of group's overall sales in Q1, up from 1% in the same quarter last year. This strong traction reflects growing consumer acceptance.
We are curating our offering and optimizing both airtime and digital platforms to cater to this rising demand. We continue to focus on four pillars of our growth: widening reach, new customer registration and acquisition, customer retention, and repeat purchases. In Q1, our TV network reached 127 million households. As of 30th June 2025, our unique customer base stands at 713,000, which is up 12% year-over-year and the highest ever for VGL Group. New customer acquisition stands at 400,000 in Q1, while retention rate improved to 42%. On a TTM basis, customers purchased on an average of 22 pieces from us in the last one year. Sustainability continues to be the core of our business. I am pleased that VGL has been assigned a combined ESG rating score of 72, which is a strong ESG rating from ICRA. This recognition reinforces our position as a responsible corporate citizen.
I am also pleased to share that Vaibhav Global i s now certified by the Responsible Jewellry Council, that is RJC, a globally recognized standard for ethical and sustained business practices in jewelry industries. This places us amongst a select group of certified manufacturers worldwide and reflects our commitment to responsible sourcing, governance, and environmental stewardship. Further, Germany has received the Great Place to Work certification, and with this, VGL is now globally a Great Place to Work certified group. We are grateful to our employees for their honest feedback and remain committed for an inclusive and collaborative work environment. At Vaibhav Global Limited, community giveback is integral in 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 a 100 millionth meal to a school-going child since the inception of our midday meal program called Your Purchase Feeds. Currently, we are serving approximately 57,000 meals every school day, and we are on our journey to donate 1 million meals every school day by FY2040. On the clean energy front, we generated 1.4 million kWh hours of solar energy this quarter, meeting 100% of power needs of our manufacturing units. These steps bring us closer to our target of achieving carbon neutrality in Scope 1 and 2 emission by 2031. In addition, we have built rainwater harvesting tanks of 4,000 kL in and around our manufacturing locations, taking our total capacity to 10,000 kL. This is another step towards achieving water stewardship. We believe in long-term value creation for our stakeholders.
The board has recommended a first interim dividend of INR 1.5 per equity share, which implies a 56% payout ratio. Looking ahead, our focus remains on driving innovation, leveraging advanced technologies, including AI, and driving operational efficiency. Current macroeconomic environment and recent tariff development present near-term challenges, especially in consumer sentiments. In light of this, we are taking a cautious approach and guiding to achieve revenue growth of 7% - 9% for FY2026. We believe that the short-term disruptions give way to long-term growth, especially for an agile company like VGL . That said, we remain optimistic that the tariff situation and weaker macros will resolve over time and will unlock potential for growth beyond our current guidance. For the periods further ahead, we continue to project mid-teens revenue growth, supported by strong operating leverage and our investment into digital marketing.
Despite macro risks, our low-cost, vertically integrated model and high agility positions us well to navigate the evolving landscape. I will now hand over the call to Nitin to discuss the financial performance. Over to you, Nitin.
Thank you, Sunil. Good morning, everyone, and thank you for joining Q1 FY2026 Earnings Call. I will take you through the key financial highlights for Q1. As Sunil mentioned earlier, we continue to closely monitor market dynamics and proactively manage our operations. Consumer sentiments remain delicate across our key markets, influenced by changing spending patterns and external factors like tariffs and geopolitical tensions. In Q1 FY2026, we delivered revenue of INR 814 crore, up 8% year-over-year from INR 756 crore. This growth came despite the challenging external environments. In the U.S., revenue remains steady, supported by omnichannel reach, and we believe digital native and vertically integrated businesses like ours are well positioned for long-term market share gains. In the U.K., muted consumer sentiments and internal leadership changes affect our core performance, which is more of a transition nature, but strong traction at Ideal World helps balance the growth.
Germany continues its upward trajectory, growing well ahead of the market. Macro pressure and operating deleverage led to quarterly loss. We remain confident in our strategy and expect Germany to achieve EBITDA profitability in the full financial year of FY2026. In local currency terms, U.S., U.K., and Germany grew by 1.3%, 2.3%, and 7.2% respectively. Looking at a channel mix perspective, TV revenue grew by 1% year-over-year to INR 444 crore, while digital revenue grew strongly by 14% to INR 329 crore. This momentum reflects our continued investment in strengthening omnichannel capabilities. Digital now contributes 43% of overall revenue, and we remain firmly on the course of reaching 50% by FY2027. Lifestyle products continue to scale well, now forming 36% with a medium-term goal of reaching 50%. Our budgetary options remain popular, accounting for 39% of our total retail revenue.
Gross margin for the quarter was healthy at 63.8%, reflecting the advantage of our vertically integrated business model. EBITDA margin improved by 50 basis points year-over-year to 9.2%. The improvement was driven by saving in employee costs through headcount rationalization, improvement in efficiencies. Shipping costs benefited from improved logistic efficiencies and successful rate negotiations. Additionally, we saved airtime costs due to operating leverage. Profit after tax stood at INR 38 crore, a 37% year-over-year growth. Both our recent acquisitions continue to contribute meaningfully. Ideal World sustains its growth momentum while Mindful Souls remains a high-margin business and is expanding its product portfolio and customer base. These platforms are also generating valuable cross-business learning and synergies that support long-term efficiency and innovation. On the cash flow front, our model remains highly cash-generative.
We reported INR 22 crore in operating cash flow and INR 15 crore in free cash flow, with a net cash position of INR 174 crore and consistent dividend payouts. Our balance sheet remains strong and resilient. Further, the recent upgrading in both short and long-term credit rating by ICRA reflects our consistent performance, strong liquidity, and prudent capital management. Return metrics remain healthier, ROCE 19% and ROE 12%. We remain firmly committed to delivering consistent value to our shareholders. The Board has recommended a first interim dividend of INR 1.5 per equity share, implying a 66% payout. While we remain confident in our long-term growth outlook, the current macroeconomic environment calls for a measured approach. Accordingly, we are revising FY2026 revenue guidance to 7% - 9%, supported by operating leverage.
We remain optimistic that issues like the tariff situation and weaker macros will be resolved over time and could unlock the potential of growth beyond the guidance. Over the medium term, we continue to target mid-teen revenue growth with sustained margin expansion driven by scale and cost efficiencies. Thank you. Over to you, moderator.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove 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. The first question is from the line of Sandy, an individual investor. Please go ahead.
Hello, sir. Congratulations on good numbers. I had two questions. First, in your press release, you've given a growth guidance of 7% - 9% considering the current macro environment and U.S. tariff regulations. However, in the call right now, you've given a guidance of revenue for early teens, and in the previous con call also, you've given a guidance of 8% - 12%. Are we reducing our guidance for the current year given the current economic situation?
Hello, Tanvi. This is Sunil. Yes, given the current macro environment, especially the consumer sentiment that we see in the U.S., we are revising the guidance to 7% - 9% for the current financial year. There is a potential for upside to that if the macro situation improves, but the current guidance is 7% - 9%. Mid-teens is for next financial year onwards, assuming that the macro environment goes to a steady state.
Okay, got it.
Sir, one more follow-up question. You mentioned that you had a lot of pre-shipped inventory before the U.S. tariff regulation was imposed. That also helped in a way to get us to achieve better EBITDA margins. How do you see that going forward in the coming quarters now that the inventory levels will also deplete and we will have the revised pricing? How do you look at the EBITDA levels or this revised price inventory?
Yeah, good question, Tanvi. The inventory that you sent recently to the U.S. will help us moderate the consumer sentiments because other retailers will also have inventory, and other retailers will slowly increase their prices, reflecting the tariff addition. We will also have this cushion to get to that consumer acceptance of higher prices. We are a multi-country sourcing organization, so we will be able to source products from countries, especially for the U.S., which are most suitable. For example, we have Thailand, China, Indonesia, and India for our own sourcing, and then third-party sourcing from Europe, Turkey, or even the U.K., or Middle East. Many different countries we can source, and we will source from most suitable countries for our U.S. market. Our own manufacturing will redirect towards the U.K. and Germany.
We are very agile and we'll be able to navigate it, I believe, better than pretty much anybody else. The main reason for guidance was the consumer sentiment.
Okay.
Okay. Just so, how much this tariff, it will be 25% across all our goods that are sent to the U.S.?
Yes, so 25% is on the top of existing tariffs for a different category. For example, jewelry was 5.7% + 25%, which will become 32.7% from India. From Indonesia, it is 19% + 5.7%. Thailand is 20% + 5.7%. There are different countries that have different tariffs. Europe will be 15% + 5.7%.
In a way, those countries will be cheaper than India in terms of, I mean, sending goods to the U.S.?
Yeah, what we will do is to not send goods from India to China. India will delegate for U.K. and Germany businesses, and the U.S. will be for these, and then other countries can be dedicated to the U.S. We are very agile in that sense, and we can, in between the countries, decide what is the best for us.
Okay, got it. Just one last follow-up question. Will this thing impact or will we face more competition from the local players in the U.S. given a 25% increase in our prices? I know the other export-oriented customers will increase their price, but how do we see the competition from the local players there in America, in the States?
Yeah, so jewelry manufacturing is extremely limited in the U.S., or even the accessories, handbags, and also they are pretty much non-existent in the U.S. Maybe down the road, if there is no resolution in the medium term, then we can set up the small units in the U.S. The CapEx is not meaningful there. It's not difficult if the labor arbitrage is sufficient to do that.
Okay. Thank you, sir. That actually answers all my questions. Oh,
thank you so much.
Y es,
thank you. The next question is from the line of Dipali Kumari from Arihant Capital Markets Ltd. Please go ahead.
Yeah, hello. Yeah, thank you for the opportunity. Germany saw 7.2% growth compared to last year, but the business is still running at a loss. You said breakeven was reached in July. What helped you make this turnaround? I project a higher sale for changing how the business is run?
Yeah, this is Sunil. Thank you, Dipali. Germany, we are seeing better performance even from July. July is still a bit of loss, but very marginally. As we go towards season, we expect the H2 to be sufficiently a bit positive to cover the deficit of H1, or at least Q1. We're fairly confident of Germany achieving a bit of profitability for the full financial year.
Okay, so like I think, Dipali and Nitin, here I also adding to Sunil's point, Germany, we have changed our product mix and offering and planning strategy in presentation that helped to the gross margin improvement from earlier level to 63% - 68% in Germany. You may see the lower growth comparatively to the previous year, but a substantial improvement in gross margin itself from Germany business helping to improve the profitability. Gross margin improvement is double digit and higher, while revenue is 7.2%, but gross margin is much higher in Germany now on board. Achieving an EBITDA profitability at a much lower sales point.
Okay, sir. Do you believe like for FY2026, the Germany market will be profitable?
Yes, yeah.
Okay. Sir, we have one follow-up question. What is the planned CapEx for FY2026 and 2027? Any big surges you are coming, you are acquiring, or after acquiring Mindful Souls and Ideal World, are you looking at more acquisitions or any other product category?
In CapEx terms perspective, FY2026, we haven't planned any major CapEx. It is a routine major CapEx upgradation of our softwares and the tangible goods, which is around $3 million- $5 million. FY2027 may be slightly higher as we are consolidating our U.K. operation in one place, around $2 million - $3 million higher in FY2027. FY2027, we expect $5 million- $7 million CapEx overall in the business. This year is around $3 million- $5 million.
Okay. Sir, like any new product category you are interested in for Ideal World?
Yeah, so category-wise, obviously, the lab-grown, as Sunil mentioned, is working very well for us. It is within a year of span of time, it is contributing more than double digit. It's almost 11% in our sales ratio for a group from lab-grown. We continue to see performing well in terms of gross margin improvement and lesser returns from lab-grown. We see a lot of potential with that category. Apart from that, our business model is more for launching new varieties of products with different gemstones. Every single day with our supply chain vertically integrated factories, launching around 100 different new products to the consumers. The launching-wise, innovation-wise, it is many new products we keep launching to give a newness to the TV and web consumers so they can keep on repeat buying and increase the retention rate from the same consumer.
Okay, sir, got it. Thank you.
Dipali, to your question about the Mindful Souls and Ideal World and acquisition, we are happy with both acquisitions, and we don't have any other active target that we are looking at right now. We are always open for possibility. If there's any opportunity that comes, we'll look at it. We have to look at the balance between the existing portfolio, doing well and growing, and then adding to the portfolio.
Okay, sir.
Thank you.
Okay, sir.
The next question is from the line of Naveen Baid from Novama Asset Management. Please go ahead.
Thank you for the opportunity. I had a housekeeping question. In your segmental reporting, Europe showed a net profit of INR 8 crore, whereas in your presentation, you are still speaking of losses in the European segment. Can you help me reconcile the numbers, please?
Hi Naveen. Can you refer to which line you are quoting with the segmental green bill? The profit before interest and taxes of INR 8 crore is what you've reported for the quarter. Sorry. Sorry, INR 12.8 crore is what you have reported.
INR 12.8 crore in the Europe business, yeah. The effects in the segmental reporting, there is a larger movement in Europe and GBP. That currency movement led to a larger forex gain in both of the countries. However, that gain is not translating in consolidation level as it does all the gains for intercompany loan is going to other comprehensive income. While segmental reporting is showing profitability, that gain is largely contributing to the intercompany loan Forex change gain of intercompany loans.
Okay. At the EBITDA level for the European operations, where are we for the quarter?
Yeah, sorry, your voice is a little bit challenging.
EBITDA level, where are we?
Sorry, sorry.
For European operations, at the EBITDA level, where were we in the quarter?
Yeah, EBITDA level was roughly around a EUR 700,000 loss that we have in Germany at EBITDA level.
EUR 700,000.
Euros, yeah.
Okay. Got it. Thank you. Thanks, sir.
Thank you. The next question is from the line of Kumar Saurabh from Scientific Investing. Please go ahead.
Hello. Am I audible?
Yes, yes.
Yes, sir. Yeah. Sir, I had a question regarding the U.K. business. The last two years have not been that great given the challenges, you know, in the European and U.K. market. Given this FTA agreement, do you see our growth being higher than how it has been in the past two years for the U.K. market?
Kumar, this is Sunil. Thank you for your question. The FTA agreement will definitely help. The U.K. was, to some extent, our internal challenge more than external. External consumer sentiment was challenging, but our leadership that we had put in the U.K. didn't work out. We made those changes in February, March of this year, and we are seeing that it's already making a difference. The FTA will help, and the leadership change, as well as the internal team restructuring, will also help us in sustaining the momentum going forward.
We already have seen our legacy U.K. business, TJC, getting back to growth in the last two months. June and July were positive for TJC. Ideal World is giving double-digit growth to us year over year. We see good momentum for the U.K. going forward. Kumar, certainly, the FTA will definitely help. Right now, currently, jewelry we import from India is contributing 3%- 5% duty, and the lifestyle product 7% - 15% duty. Maybe around mid of the next year, it will reflect in terms of the duty charging to zero. Those purchasing will definitely help to improve our margin lines and the consumer demand.
Okay. I think already we have a good dividend policy, but if you can highlight for the next two, three years, given like we will be growing around 8% - 9%, my understanding is we will not require a lot of CapEx. Is the dividend policy going to be on the similar lines, or could there be some increased dividend coming?
Yeah, we are always in favor of sharing the earnings or wealth with shareholders. We can look at either dividend or potential acquisition or potential buyback if there's sufficient cash for doing that. As we have seen in our track record, we always are looking for opportunities to share with the shareholders.
Okay. Sir, last question. I think in the last four or five years, we have done two acquisitions. One question is, what is your experience with these acquisitions? Are you happy the way these acquisitions have shaped up, or do you think what you targeted has not been achieved? The reason I am asking is, you know, when there are no good times, companies who sit on very good cash flows, you know, they have money to go and acquire companies which are weaker. In the next one, I'm not asking for something immediate, but based on your history of execution of acquisitions and the opportunities available in the market, do you see any high probability of another potential acquisition in the next one or two years?
Yeah, so the first point is, how do we feel about the acquisition? We are very happy with both acquisitions. With Mindful Souls, we integrated a lot of their native digital learning into our group, and that is helping, as you saw, in our digital numbers accelerating. A lot of those learnings have been incorporated in other five group retail brands. I'm very happy with that. Mindful Souls itself is having some revenue degrowth, mainly owing to the supply chain movement away from China to India. That led to some degrowth, and we expect that growth to come back in later quarters of this financial year. I'm pretty happy with that. For Ideal World, we got it for very low money, as you rightly said. It was a distressed asset, and we got it for a pretty low price. I'm pretty happy with that acquisition.
It was doing good growth, already a bit profitable in the second year, great return on investment. Yes, to your point, if there's any other opportunity, we have a very strong balance sheet through a cash generation machine in VGL. If there's an opportunity, we'll definitely look at it. As I mentioned earlier to Dipali's question, we don't have any active acquisition target as of now.
Got it. Thank you, sir, and wish you all the best, sir.
Thank you, Kumar.
Thank you. The next question is from the line of M.S. Reddy, an individual investor. Please go ahead.
Opportunity, sir. Congratulations on a very good set of numbers. It is gratifying that you got a Great Place to Work tag for our European operation. My question is, sir, regarding our entry into the Indian retail market. Our jewelry retailers here are doing very good. We have a very good domain knowledge of the western retailers. Why can't we, I think it is definitely time for us to explore the Indian market? That is my view, sir. What are your thoughts on this?
Thank you for your question, Mr. Reddy, and thanks for your comments and compliments. Appreciate it. The Indian market is definitely promising, but for digital retail, it is still in a discovery phase. A lot of investment is being made by Amazon or Walmart into expanding digital presence. We believe that we are not the first mover kind of company. We are a low-cost vertical model, very agile, but always coming later in the market when the market matures so that we can come to profitability pretty quickly. As you saw with our experience in Germany, we will become profitable in four years of entry, whereas Amazon, it has taken much, much longer and still profitability is nowhere in sight. We want to wait a little longer before India matures for digital marketing.
We have no plan to come on television or become notarized in India because that is not our business model.
Okay, sir. Thank you.
Thank you, Sunil.
Thank you. The next question is from the line of Gopinanda Reddy from PNR. Please go ahead.
Sir, what percentage of our sales is into lab-grown diamond jewelry, sir?
Lab-grown diamond jewelry right now is contributing 11% of our total sales.
Given the change in the certification by GIA, is there any impact on our sales or how is it going to work, sir? Any impacts?
Yeah, GIA specification is available for India. I think the world, we haven't seen the impact yet in terms of sales perspective. Quarter by quarter, lab-grown shares keep on growing.
We use IGI certification. We don't use GIA. All of our products that we have sourced are IGI certified. Not all, pretty much a large portion of bigger stones are IGI certified. They have not changed the policy from the consumer point of view.
When it comes to consumers, IGI certification is very much applicable to the consumers.
Yeah, the decision hasn't gone to consumers because they haven't publicized it on public television or public media. It's all a business decision, business news. Consumers don't know and they don't care. As long as they are getting the right information, logical information, they are still buying quite a lot. We're still seeing continued momentum growth.
Are we procuring lab-grown Diamonds from India or are we, ourselves, making? Any idea?
Yeah, we're procuring from the growers in India and China.
Are we seeing the pricing to be stabilized or are we looking at maybe if we are going to go down? Can you repeat something, sir, on this?
We are seeing, you know, although the decline is quite slowed down, we're still seeing continued softness in prices because the production is still there. I would say production is continuing to grow faster than the demand. Demand is growing fast, but the production is growing faster.
Okay, that's it from my side. Thank you.
Thank you, Mr. Reddy.
Thank you. The next question is from the line of Harsh Mehta from Perpetual Capital Advisors. Please go ahead.
Hi, sir. Can you hear me?
Yes, go ahead, Harsh.
Yeah, sure. You had previously mentioned that because of the tariff situation for the U.S. market, you will source from different geographies, right? As you diversify your sourcing, should this still affect your margins in the near term, or are you confident of maintaining the existing margin levels for this transition also?
Yeah, thanks for the question, Harsh. As I mentioned earlier, the extra inventory that we sent to the U.S. will tide us over for the few months till the consumer starts to accept these increased prices. The other retailers will also be forced to increase the prices, and we believe, rather, we are confident that our margin guidance of 60% + will sustain for the foreseeable future because the tariff situation has been there for some time, and we've been able to maintain the margin, as you saw, last quarter is 63.8%. Even in July, our margin continues to be in the region.
Okay.
But.
Right. Okay, got it. Sir, I wanted to understand if there are any plans or considerations to consolidate your U.K. operation with the recently acquired Ideal World business.
Yeah, we already consolidated that business. The support services, the finance, share of finance, HR, IT, are support services to the new as well as the existing business, whereas the front end, the sales team is separate. Merchants and sales teams are separate. Leadership is one. There are a lot of synergies there from the operational support point of view as well as the group supply chain point of view. The front end teams are separate.
Okay. Got it. Sir, with the India-U.K. FTA in place, the benefits from it, like you said, are the rates were around 3% - 5% before the FTA, which will now go down to 0%. Will this benefit entirely be taken by the company, or will it be shared with the consumers to some extent? I think the U.K. demand was also a bit sluggish. Will this help build the demand also?
Yeah, good question. We look at customer pull constantly. If the customer pull is there, we are able to increase our margins. We will strive to keep that for our bottom line. If the consumer pull is subdued, we may offer part of this. We are dynamic in that sense. Actually, we are dynamic every hour, every day. Our pricing model is pretty agile in that sense. If there's an opportunity, we take higher margin. If there's a challenge, we go a little lower. That is because we offer 100 million products every day. We have the ability. If we had only a few products and consistent products, then we could be as flexible as we are able to be.
Right. Okay. Sir, last two questions. Prior to the German business starting, the working capital cycle for your business was around 60 days. Based on the FY2027, the latest numbers that you posted, the working capital cycle is extended to 80 days. With the German business ramping up again in the next two to three years.
Yeah. In terms of working capital cycles, major investment is done through our inventory. With the recently added-up inventory in the U.S., it increased the working capital days cycle. Also, in recent days, the customer demands towards the budget-based programming financing option is more prominent to the consumer as the geopolitical tension and worldwide customer is looking for more financing option. However, we do take care based on customer history and their payment terms before giving financing to the consumer. Part of the working capital is bound to our details and part is in the inventory that led to increasing total working capital days. Now, coming back to your question about Germany, Germany has the major working capital deployment only in the inventory. As the CapEx amount is very low and the data is not significant in Germany, the majority of the sales comes through invoicing payment method.
Germany will definitely continue to improve and contribute to the bottom line. Right now, as we have seen, based on the current transient nature challenges, we have increased our inventory strategically and the budget-based financing option as the customer demand is higher towards this option.
Okay, understood. You should expect this to remain around 80 days only for the near future?
Yeah, we expect that to slow down to improve the customer, to improve the cash in the business, but not significantly as we have seen in March 2021 was 40, 50 days. It will not bring it down to that level, but lower than the current level.
Right. Okay. Sir, last question. On the other income side, in this quarter, there has been a 51% increase in other income. Could you elaborate on what are the key drivers behind this growth? Also, the normalized tax rate, what should we consider as a normalized tax rate for the business on a full-year basis, excluding any one-time or geographical annuities?
Sure. We are a business who is generating money in the U.S. dollar, GBP, and euro, and most of the spending is in rupee terms, which generates a lot of foreign exchange gain in our business. You may have seen a history of the business and the other income normally is all pretty much all of it contributing to the foreign exchange gains. We expect that this will remain coming, maybe some 10% - 15% up and down, but forex gain will come in the business continuously. Your other question is about the tax rate. The tax rate is getting benefited by lower losses in Germany. Also, the previous losses are now coming with the business coming profitability that the tax asset is now recognizing. The normal state of tax rate we expect in this financial year is roughly around 21% - 22%.
Right. Got it. Thank you very much. That's it from my side.
Thank you.
Thank you. Ladies and gentlemen, please limit your questions to two questions per participant and come back for the question in the queue. The next question is from the line of Shreyansh Jain from Swan Investments. Please go ahead.
Hello.
Hi, Shreyansh.
Hi. My first question is, again, on the bookkeeping. Germany, we're saying we were doing some losses in this quarter. If I look at the U.K. business, U.K. business also our EBIT is about INR 10 crore. If I was going to understand that there's a lot of dividend that sits in this EBIT. Excess dividend, even the U.K. entity is doing losses, is it?
Excess dividend, U.K. is positive. EBIT is roughly around EUR 600,000 in the U.K., excess dividend.
Okay. Sir, the other question is, last quarter we were guiding for 8% - 12%, and now we are seeing 7% - 9%. This tariff thing, I think, was fairly known to us. I'm just trying to understand what has led to this downward revised guidance. The second part to this question is, sir, given this uncertain scenario and you also lowered your guidance, how do you see spends on content and broadcasting? We broadly spend about INR 600 crore -INR 700 crore on this line item. Do you want to maintain spending on this expense, or do you think this also should go down with the guidance on revenues?
Yeah, Shreyansh, this is Sunil. From the guidance point of view, we are seeing a lipstick effect already in the U.S. What do I mean by that? We have lower price point. Swatchy jewelry is selling more right now. We see higher traction on our under $10, under $50. Can you hear me? There's a disturbance on the line.
Yes, I can, sir.
Sir, can you go mute, please, so that there's an echo coming back?
Yeah.
Thank you. We are seeing that lower price point is gaining traction, and that tells us the consumer sentiment is currently challenging in the U.S. We didn't see that sentiment last quarter, and we started seeing the sentiment in the last few weeks. Since the June end, when the U.S. had action in Iran, and from there onward, when the tariff disturbance came and the consumer sentiment continued to deteriorate over there. That is also reflected recently in the job reports, where earlier months' job reports were severely downrated. The current month, last month's job report was pretty low. Those three months' job reports and our own internal lipstick effect that we are seeing led us to assess the consumer sentiment to be challenged in the U.S. We are seeing, although our sales are growing in the U.S., we're seeing people downtrading to the lower price point.
That is the reason we gave this guidance, 7% - 9%. As consumer sentiment rebounds, there's upside potential for our performance to go beyond 7% - 9% as well. We have made the comment in my commentary that there's a potential to go up if the consumer sentiments go back to earlier than we saw last quarter. You had one more question. I missed that second part of the question. Can you repeat that, sir?
Yeah, I was saying, given the uncertain scenario that we're looking at, we spend about INR 600 crore -INR 700 crore on content and broadcasting. I'm just trying to understand, with this uncertain scenario, do you plan to reduce these spends, or would you want to continue spending INR 600 crore, INR 700 crore on content and broadcasting? One more addition to this is, because you're now saying digital will increase going forward, and it will actually be 50% of our revenues in the medium to long term. Sir, how much of this content and broadcasting spend do we actually require to do every year? That's the question, sir.
Yeah, thank you for the question. Great questions. We look at content and broadcasting. There are two portions of that. One is the TV content, the TV license fee we pay to the television network in all the four channels. There's also digital spend that we do. There are two segments within that. The TV spend on a like-for-like basis, we reduce in Germany, reduce in the U.K., but the U.S. has increased because we found some new opportunities, and we have taken them. The content and broadcasting may not go down meaningfully. The digital spend, we will continue to spend if we see the productivity of that customer that we are acquiring digitally to be there. Our major productivity is that the customer we acquire should become profitable within three months. As long as we see that customer acquiring a certain scale, spend scale, then we continue to spend.
You can foresee that content and broadcasting as a percentage of sale not going down. Not only at absolute dollar value or rupee value, but as a percentage of sale, as we are giving the idea of 7% - 9% growth, that spend will grow 7% - 9% in coming quarters. We are seeing leverage coming in HR cost, SG&A, and shipping. All three areas will see leverage for us because HR cost, we're finding efficiencies in our warehouse operations, and AI is giving us many opportunity areas in back office functions to reduce the costs. HR is there. Shipping, we are finding some ability to negotiate at our scale to lower the costs. In SG&A also, we're finding some AI benefits and some other abilities to reduce the cost throughout talent density measurements. Just to give an example of that, in Asia, our call center, we have 180 employees.
We are paying a little over market, and also we are giving career paths to those talents within other parts of business. That has increased our efficiencies about 20% because our attrition went down from 15% a month to 1% a month. We are finding efficiencies in HR and SG&A by way of incorporating many different policies, AI, talent density principles, and many other optimization models.
Okay. Sir, my last question is, sir.
Oh, I'm sorry, Shreyansh.
Just in addition to the same question, ma'am.
Oh, I'm sorry, Shreyansh. We may request you to come back in the queue for a follow-up. Ladies and gentlemen, okay, Shreyansh, you can go ahead.
Just last question. If I were to look at the U.K. business, we did about INR 900 crore of revenues last year, and I'm assuming INR 200 crore out of that would have been Ideal World. Can you just help me with the profitability in the standalone U.K. entity, say, out of INR 700 crore of revenues, what would be our EBIT or EBITDA if you can help me for last year, sir, except the dividend income?
Yeah, last year overall profit is roughly around £2 million overall basis. While Ideal World was loss-making in the first year, TJC was a profitable business, but overall was EUR 2 million.
Except dividend income, this is.
Yeah, last year, last full year, except dividend income, total profit.
Last year, okay.
If you are referring the quarter four to quarter one improvements, quarter four that we made losses in GBP, but quarter one we are seeing already profitability, as I just mentioned, £600,000 in quarter one, and the same improvement that we are doing, we are seeing in July and August itself also.
Do you expect this to sustain for the year?
Yes, certainly the changes with what we are seeing and the demand of the customers, which are also moving, we are seeing that it is more sustainable because the weekly improvement is not a one-off. It is coming week over week throughout in the last two, three months.
Okay, thank you so much, sir, and all the best.
Thank you, Prashant.
Thank you. Ladies and gentlemen, that was the last question for today due to the time constraints. I now hand the conference over to Mr. Sunil Agrawal for closing comments.
Thank you, everyone. 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 all 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 line.