Vaibhav Global ~ Vertically integrated value e-tailer of Jewellery and Lifestyle Products

Vaibhav Global AR Notes FY23

Business

• Key Details
  • Sells jewellery and other fashion related stuff in US, UK, Germany and Canada
  • Sourcing from India & China
  • Uses silver, gold, platinum, steel, brass, copper and bronze
  • Machines used for precision and polishing on jewellery
• Sells on TV channels in US and UK, D2C website, marketplaces like Amazon, OTT platforms like Fire TV, Roku etc, Social media platforms like FB, Instagram
• FY23 review
  • Vertically integrated supply chain combined with strong sourcing enabled them to maintain gross margins at 61%
  • EBITDA margins were lower at 8.4% because –
    • Short term impact of investments on digital capabilities
    • Losses in Germany
  • Macro slowdown in UK
  • Cyber attack in Q3 caused disruption
  • Market share improved despite poor industry performance
• Segment Mix
  • Jewellery
    • 2% growth over FY22
    • 1914 Cr
  • Non-Jewellery
    • -13% over FY22
    • 696 Cr
• Geography Mix
  • US
    • 68% revenue mix
    • -11% over FY22
  • UK
    • 27% revenue mix
    • -8% over FY22
  • Germany
    • 38M households
    • 3500+ pieces in a day
    • Monthly revenue run rate = 1.4M Euros
• Facts
  • 141 M households reach in US, UK & Germany
  • Repeat 23 pieces per customer p.a.
  • 38% retention rate
  • Volumes (FY23 vs FY22)
    • TV – 5.3M vs 6.9M
    • Digital – 4.4M vs 5.4M
  • ASPs (FY23 vs FY22)
    • TV – 38$ vs 32$
    • Digital 27$ vs 24$
• Channel Mix
  • TV – 1633 Cr
  • Web – 977 Cr
• Management commentary
  • Remain well.poised for long-term sustainable growth with our unique value proposition, which holds huge growth potential.
  • Cost optimization programmes saved $4.2M = 35 Cr
  • New customers on TV increased by 8% in UK
  • With 31 brands in the portfolio, the focus remains on enhancing their performance. Currently, revenue from branded products contributes approximately 29% to the overall B2C revenue mix, while the target is to increase this share to around 50% by FY27.
  • Focus on customer retention and repeats
  • Aim to increase share of digital to 50% by FY28
  • Aim to increase share of Lifestyle category to 50% by FY28
  • During the year FY24, management expects to deliver revenue growth within the 8% to 10% range. However, the mid-term outlook remains intact, and we expect to deliver mid-teens revenue growth in subsequent periods with operating leverage
• New Initiatives
  • Expanded product portfolio under $10-$20 with increased airtime
  • Started Live TV for live video commerce
  • Invested in Salesforce Commerce, Shopify, Salesforce Marketing, Salesforce Cloud
  • Robotic Automation at US & UK warehouses
  • Partnered with North beam and Triple Whale in UK to track customer journeys to optimise marketing spends
  • Added hollow jewellery gold jewellery line (bar pendant, bar ring and bar earring) in 9, 10, 18 and 22KT and platinum
  • Added ultrasonic stone cutting machine for precise cutting
  • Push for innovation with monetary reward for 1% of sales for game changing ideas. 6% of revenue comes from innovation programmes of past
  • Collaborated with Rangeme platform for onboarding new brands on the channel
  • Partnering with engineering and design institutes for talent and skills
  • With Design Thinking Approach, they always keep our customers at the centre of every innovation. Conducts ethnographic interviews directly with the customers to understand their pain points before coming out with a solution, apart from that, we do conduct Focus Group meetings with customers to discuss products, processes, and engagements.
  • Improvised warehouse management process for significant increase in the productivity in picking, from 500 per person per day, to 750 per person per day.
  • Acquired Encase Packaging in FY22 that reduced packaging cost

Risks

• Cybersecurity risk
• Regulatory risk in different geographies
• Channel concentration risk
• Geography risk (US&UK mostly)
• Commodity prices risk
• Demand risk
• Currency risk
• Inventory write-off risk
• Brand risk
• Consumer preferences change risk

Capital Allocation

• CFO = 127 Cr
• Capex = 36 Cr = 28%
• FCF = 91 Cr
• Dividend payout = 94%
• ROCE = 11%
• Moderate increase in borrowings ~ 25 Cr