Vaibhav Global : Back from the dead


(Akshay) #21

@mg108 Prices have incorporated such high expectation of performance from a lot of companies now - that any business not living up to them is going to witness significant corrections. Look at Cera/ Symphony etc.

Eventually, prices will need to reflect earnings rather than expectation of earnings.

Disc: not invested.


(Sunil) #22

Why is tax rate low for this company?


(Rajendra Badoni) #23

Did any body analyzed the latest results? Sale volume did not grow. No growth in EPS etc. Overall a very mediocre kind of performance. Only good thing is reduction in debt but overall business performance is poor. Improving American economy also not supporting the growth in this company. Or I am totally off, not able to understand.
I am invested in this company.


(Ishank) #24

Ask prof sanjay bakshi or tweet him @Sanjay_Bakshi. He is the latest one to get into vaibhav global at higher levels. He even visited its US warehouse last month. He had done a lecture by vaibhav global ceo in his class a couple of months back.
discl: not invested


(jainaj) #25

My first message on the forum dear fellows. I am invested in vainhav for last 6 months. I am sharing my views. Firstly, they are facing competition from JTV and it is only other retailer apart from vaibhav in discount retailer category. JTV is bleeding heavily and remains to be seen how long it can be in business. Secondly, this quarter they paid 30% taxes after long while. My study show this year will go on to consolidation rather than growth. But request you to keep following this counter because it has got great potential. Not many companies earn selling on internet with never say die, humble promoter who don’t want to compromise on margins just to increase sales.


(Varadharajan Ragunathan) #26

I have been invested since 550 levels and I am now starting to read customer reviews of their channels - liquidationchannel.com and jewellerychannel.tv

google and read all the reviews - the reviews are really really bad - not one of them is good - with a no return policy, it looks like the company is doing sub standard merchanise/delivery. Unlike in India, the USA is a very very customer service sensitive market and to compete against the likes of their competitors, I am surprised that the company is adopting standard indian jugaad tactics.

I thought this was an occasional issue but lookign at the way numbers are stacking up, falling volumes and increasing competition, it seems a fairly large enemy is within the company itself - its’ culture. Both employee and customer reviews are uniformly bad.

I do hold the stock but am not able to find any reassuring answers as yet.


(sri krishna bhutra) #27

Hi Varadharajan,

The sales number has grown in b2c (both tv an web, though the growth is in single digit) as per the presentation. The numbers are down in b2b segment.
Also, the bad reviews are at a gap of few months. IMHO, when people are happy with the product they have chances to publish reviews on liquidation channel site rather than on other pages. Assumption might be wrong.
Discl: not invested , will look to enter at lower levels.


(jainaj) #28

Dear Varadharajan
No return policy on goods below $200 due to the fact that they sell low value items. Their avg. selling price is $22-23. Also review on various websites are far and few between. Though on facebook around 95% posts speaks very highly of them.


(jainaj) #29

Promoters bought a good 3 lac shares from open market last time in november somewhere around 550-620 last time share fell evident through disclosures and share holding pattern. Dear fellows request you to look deep in to it for a conspicuous reason company has established itself ; regulary shipping 26000+ items on daily basis, low cost model established through recession, debt free, high roe, pulak prasad in board, sanjay bakshi as investor, humble promoter. in mdi gurgaon when one student asked about operating leverage coming handy: sunil aggarwal denied saying that they are venturing into other products and building scale will take 2-3 years. Also in my previous post i said i found this year going into consolidation for two reasons: 1. their financial presentation says that new ventures will take another 2-3 quarters to be meaningful. 2. Tax now paid @30% will means profits down on yoy basis.


(Shan) #30

A good company and a good promoter is not enough, the price has to be right too!

Retailing is extremely hard anywhere in the world,and especially in the U.S., which is the world’s largest market and everyone is focused on it. Good supply of cheap products is good for this company but marketing in the U.S. is not an easy game to play. The costs are high.

Fashion trends are fickle in the products (trinkets, really). Besides, margin erosion is a possibility. They are already discounting heavily so if the fashion trend reverses how will they make sales?

Finally, cloning Sanjay Bakshi seems like a good idea but we do not know 1.what price he bought 2. What is his portfolio allocation and 3. Whether he’s still holding it.

All said and done, the stock can still go up and I might be completely wrong but I see no margin of safety (yet) and considering that retail is generally “a business with a reputation for bad economics”, I’d steer clear of it.

Disc: not invested but looked hard in the past and passed


(Varadharajan Ragunathan) #31

Good point - I think the promoter has turned over a new leaf but I am not sure of how good a business this is - showing a product’s price at $ 80 and bringing it down to $ 4 looks more like a half scam scheme on the likes of herbalife, amway. Add to that fickle fashion trends, an eroding audience base (moving over to the TV) and 20x does not seem a great multiple. However, if they do get it right, like a newspaper biz, this can be a great value creator.

Disc : invested, but avoiding endowment bias


(Aman Vij) #32

For me there are 3 major risks with the business model:-

  1. Fashion trend keeps changing and there is a fair chance of inventory getting obsolete
  2. No brand recall and Tough competition
  3. Industry is ever changing and mode of selling is Technology dependent

Even after going through number of articles and videos, I am still worried about a business where technology (internet/TV) is a main mode of selling

Disc: Keeping track for few months but still uncomfortable with above 3 risks with business model.


(jainaj) #33

Last two quarter in conference calls, management is alleging high competition intensity which is apparently JTV which is bleeding financially but giving all kind of sops viz. free shipping etc. Anyone can point out if this can go for sizeable period of time or not but management doesn’t consider it to be lasting long as evident from concalls.


(Karan Maroo) #34

Hi Varadha,

I’d point you towards this link : http://www.customerservicescoreboard.com/QVC

You’d see that QVC (The leading player in this segment) also has pretty poor reviews on this website, but has a 90% retention rate. Clearly, its the disgruntled customers who post reviews more than the satisfied one.

As an example, when you order something from Flipkart, how often do you post reviews? Rarely, I’d venture and say. I suppose its similar with products ordered over TV. I would rather say look at the company’s retention rates and repeat orders.


(M S S Murthy) #35

Mr Karanmaroo
This is a good point .However when viewd in conjunction with declining volumes it ( bad reviews ) could turn a big negative too . I will watch for a few more quarters to observe trends in sales and margins before venturing ( if the price is right ) to add to my existing holding of this company .


(Karan Maroo) #36

I think we need to put the tepid volume growth in a bit of context. If you go through the previous con-calls, you’d find that volume growth has been impacted due to:

  1. Transition to an outsourced call center :- Let me produce here verbatim from the con-call:

Sunil Jain: How it has impacted the sale if you can explain a bit.

Sunil Agrawal: Sure. There are two components, one was technical component. It was outsourced
and it was through VPN. We were seeing little bit of lag between when the call center was in-house versus when it is outsourced and our software as the software was not made for the outsourced call center. So the software had to be upgraded to integrate the lag and then we also put in dedicated pipes which we had not expected to put. The telephone company has taken a little longer to put those dedicated pipes. We have put multiple pipes now and the software has also been upgraded on the technical site.

The other reason were the new agents in comparison to our own inhouse agents who had worked with us for many years, five-seven years and who knew about our product, about our processes and everything. So it took us longer than expected to train all those new agents. Further, the deal with the new call center was done on the bureau system i.e any of the 500 agents they have in the bureau can take the call. Now to train such a large population proves to be very-very uphill task. So what we have reconfigured with them is to have one hybrid system, whereas certain dedicated agents and certain overflow will be transferred over to the bureau. So we are thoroughly training those dedicated agents and overflows.

  1. The competition from JTV- however, we don’t know if this competition will be sustainable as this company has been bleeding

The effect of 1 should be seen in the next few quarters, when the transitioning becomes a little more smooth. The period of effect of 2 needs to be seen.


(Prash) #37

Hi All,
I am new to ValuePicr and find good to be here on this forum. I am an investor in Vaibhav Global and had thought I had done research quiet, well until this quarter results came out. My pick for Vaibhav Global is based on following factors

  1. The company is in great market with market size >100X its current size. The company is in the early stage of growth and if executed efficiently, can give a run for competitors.
  2. The company is insulated from fashion trends as it is not at the front end and it is a fast follower like Zara. There is no risk of fashion trend missing
  3. The company is in discount sales. Brand recall is not much of an issue compared to quality of product, delivery and operationally being efficient.

If we take a look at Business-Management- Valualtion, I think the question is all about Management. Business is great and Valuation not bad. But can the management really delivers in this cut throat market. I believe they can do. They have done a turnaround once, but retail is not for the faint hearted people and challenges keep coming and seems VG is going through the same. But based on past performance and also advantage of operation efficiency and moat of low cost these guys have I would like to wait for more time before writing off.


(jainaj) #38

@karanmaroo- In financial presentation it is written that they will do capital restructuring for the purpose of delcaration of dividend in FY16. Can u throw light on how will that be done.


(Karan Maroo) #39

I was going through the Q4 con call transcript and here are the salient points:

  1. JTV has really started to punch holes into VGL’s growth story as it has introduced “stretch pay” or an EMI kind of mechanism. VGL did not believe this was sustainable; however, it is now looking to introduce stretch pay itself in the next 4 months to counter competition. However, its clear that sales will stay tepid even in H1 of this year; how customers take to stretch pay on low value items needs to be seen. The promoter, however, is confident that it will not stretch the liquidity position of the company.

(My personal take is that stretch pay might not allow VGL to regain growth or lost volumes as its initial pay point will not be compared to a much lower value for competitors)

  1. The next growth point for VGL is entry into other segments like home textiles, beauty products etc. The company expects to continue maintaining the current gross margins for these products as well.

  2. Mobile app, stretch pay, other segments should ensure robust growth for H2 FY16.

  3. @jainaj - To answer your question, I quote from the concall:

Around 12th of May, Rajya Sabha passed an amendment which is yet to be gazetted that unless you adjust your brought forward losses and depreciation not in accordance with the Companies Act with your current year profits, you cannot declare dividend. Earlier, the provision was that brought forward losses or depreciation whichever is less has to be adjusted. Now the entire losses have to be adjusted. So given that we have brought forward losses of around 250 crore plus, we were not in a position to declare dividend. However, we will undertake a capital restructuring exercise and adjust around 600 crore lying in share premium account, with the brought forward losses with the approval of High Court and once this is done, we intend to pay dividend going forward.

All in all, its a tough phase which the company is going through. Interesting to see how the market takes to stretch pay as well its new product segments.

Disc - Invested


(jainaj) #40

I also went though concall this morning. One thing I want to highlight is as their selling price is a lot lower compared to competitiors and they are introducing stretch pay. It might be feasible for them to increase the selling price so as to cover the cost of shipping or financing. Simple logic is america is a country of consumption and that’s why they love stretch pay unlike us. And as such marking up of prices may not pinch customers too much. Though I dont know whether Mr. sunil has this in mind.
Secondly as I am also invested in it, we must go in detail whether one should continue remain invested here. Because lack of growth in first half coupled with higher taxes will mean tepid FY16. I don’t take management count of better second half as managements are always wrong by quarter or two.
Your thoughts please