Vaibhav Global : Back from the dead


(Varadharajan Ragunathan) #41

I echo the thoughts here - only I continue to hold. Looking at the videos of VGL and his thought process, I think SA comes across a well intentioned, clean man.

He has just got on board pulak prasad of nalanda and vikram kaushik of tata sky and he is doing all the right things - given this, I think he will be able to fix these problems over a year or so.

I continue to hold - I have a huge respect for people who have come out of CDR, repaid banks and have learnt some lessons along the way. Given that and the type of people on board and the people who are backing it, I will give it some time.

every business goes through tough times - they never, never last.


(Karan Maroo) #42

I agree with your views Varadha. Your point about coming out of CDR is pertinent - in fact, Sunil Agrawal decided to pay the entire principal amounts clearing it. This should hold him in good stead when it comes to liquidity management, and he was at pains to stress on the point that the company would not have to rely on additional borrowings for stretch pay.

Disc - Invested


(Varadharajan Ragunathan) #43

See the video of sanjay bakshi’s lecture - remember that a lot of stars of today symphony, hawkins, TTK all went through near death before they became 100 baggers from there.

The one thing that stands out is vgl is focussed on free cash flows - no company that focusses on that ever gets into lasting trouble - usually companies go bankrupt because of debt and liquidity.

Of course, there could be margin pressures in the medium term and I will revise my view of the economics of the business accordingly. I continue to hold and will see how it performs after two quarters at least.

It’s a consolidated industry and all other players earn ROCE of 20 % unlike ecom in India - so this cannot sustain for a long time, except of course, if vaibhav is reading it all wrong and it’s a product gap rather than an irrational competition issue.


(jainaj) #44

as investors we have to give it one year. if growth still lags in 1st quarter of fy17 then perhaps it will need some serious consideration. varadharajan- request you to update any material information you found about business in time. i am invested for last one year and follow every detail minutely.


(Augustine Jos) #45

Looks like VGL has begun testing (or this maybe even final version) of stretch pay service for TJC uk site. ‘Pay interest free’ option is now available for their luxury brands like ‘Iliana’, ‘RHAPSODY’ where products are priced above £200. Stretch pay service for premium products may help VGL to sell more premium products and compete with premium players.

Also, newly revamped TJC site and app looks nice and easy to use. Site is now updated with accessories like home decor, fashion accessories, watches etc. Branded watches like timex, FCUK, POLICE etc are also avaible on the site and prices are almost similar or cheaper compared to amazon UK - not sure if VGL can make money by this.

Personally impressed by the new TJC site and product range; however, i dint quite like LC even though LC site is also revamped recently.


(jainaj) #46

Don’t know what Mr. sunil aggarwal has in mind. One month since the new website is launched and customers are facing grave problems placing order and repeatedly whinning of the same. Facebook posts section is filled of such complaints since makeover


(Varadharajan Ragunathan) #47

@jainaj - where did u find thes e? some how the big worry about VGL is the horrible feedback on their channels everywhere. I am tempted to think it is sampling bias - but given teh fact thaat they are strugglign to keep pace with competition, scoring low and customer satisfaction and service is a double edged sword.

I hope sunil agarwal is listening and fixes this.


(jainaj) #48

On their facebook page in posts section. For last one year more than 95% reactions there were very good but for last one month - people are complaning of difficulty in surfing website, placing orders, orders not showing in cart. I don’t think it should be a big deal to solve these issues but close to one month now and same thing continues. This is amateurish. I think this quarter will be a complete wash out.
Varadharajan - I have spent a lot of time analysing their business and am invested. I think Mr. sunil deserves to be given some time but at this point of time, I am completely baffled because they will post such horrific results. Your views please.


(Augustine Jos) #49

For reviews and ratings TJC is partnering with reevoo and reviews are publicly available. In past 6 months, over 17k+ verified buyers have rated TJC @ reevoo with over 98% satisfaction. Around 400+ customers are dissatisfied but this is kinda OK numbers for a discounted retailer. These dissatisfied customers reviews would have spilled over to other mediums whereas happy customers would have just rated only on reevoo.
However, for LC this rating system is unavailable. But I remember Sunil Agarwal mentioning during the call that the review and rating system will be introduced once new HYBRIS platform goes live on LC.
while checking LC facebook page I could find couple of post in last one month mentioning website issue, looks like they have resolved old issues and seems they are working on latest ones like missing info.
here is TJC rating page on reevoo -
https://mark.reevoo.com/reevoomark/en-GB/retailer_reviews/TJC


(M S S Murthy) #50

The repeat purchase pattern of Vaibhav global (17.5 times ,average purchase of 26 pieces , 40% sales from repeat purchases ) gives an indication of the customer satisfaction of their products . Can any body explain this paradox against the stagnant sales for two previous quarters ? Source: business Standard 21.06.2015 .Vaibhav Global : India’s successful e- tail model - Mudar Patherya .


(Augustine Jos) #51

Hello Guys,

I have been working to update template for Vaibhav global, and this is the first look.

@karanmaroo, @varadharajanr @Sambath and anyone intrested - would love if you guys could help in refining this.

Also, I’m not very sure of calculating ROIC, EPA etc myself… it would be great if someone help me with thaat as well

VGL VP-Business-Quality-Ver3 (1).xlsx (95.9 KB)


(Ashish Pandey) #52

Haven’t gone deep but 2-3 things stand out

  1. They conveniently do write off for one subsidiary and write back for another, in the same year; not sure what to make of it.
  2. Of course, they keep Cash Flow Statement unaffected by the above and hence if we focus on CFO etc it looks better than it really is i guess.
  3. Not sure what different they r doing. I guess anyone who manufactures jewellery can buy/invest in some channel and start selling thru it, naaptol etc are doing the same so what different they r doing?
  4. There is a gap of 300 crore in balance sheet of FY14; as per auditor some subsidiaries have -ve net worth and write off should have been higher by above amount.

Any inputs on above?


(Aksh) #53

@varadharajanr

Kindly look at Indo Count, It’s a great turnaorund story, Company has just come out of CDR well ahead of the schedule and market has reacted very positively…

Disc: I hold from lower levels


(Augustine Jos) #54

@ashish620 - pls find answers inline

  1. They conveniently do write off for one subsidiary and write back for another, in the same year; not sure what to make of it.
  2. Of course, they keep Cash Flow Statement unaffected by the above and hence if we focus on CFO etc it looks better than it really is i guess.

There was 2 write off related to STS jewels due to substantial erosion of net worth (151cr) and STS creations thai due to liquidation(1.5 cr) and write back off of loses for 13L—are you referring this one? this one doesn’t looks like a manipulation


3 Not sure what different they r doing. I guess anyone who manufactures jewellery can buy/invest in some channel and start selling thru it, naaptol etc are doing the same so what different they r doing?


copied from above post by Sambath

Competitive landscape:

On a high-level,if we think,the competition in the jewlry space in quite intimidating.On the whole we have jewelry specialized brick mortar stores like Kay jewellers,Tiffany,Zale, home shopping players like QVC, and HSN and ecommerce players like amazon,ebay etc.Where does the competitive edge lies for VGL:

Customers that VGL targets,the medium it operates predominantly, the average selling price(non-branded items) at which it sells,if combine all of these,there is not much competition in this space here.It addresses the discount jewelry space where there is negligible competition.If that is the case,can someone copies it model and replicate it? That is where VGL’s low cst producer model along with end-to-end vertical integration comes into play which acts an entry barrier for a new player.


4 There is a gap of 300 crore in balance sheet of FY14; as per auditor some subsidiaries have -ve net worth and write off should have been higher by above amount.


STS Gems Thai Ltd. and Genoa Jewellers Ltd. (parent company of the USA and UK based retail companies) were having negative net worth and VGL on a standalone basis had an aggregate exposure of Rs.418.92 crore as on March 31, 2014 to these subsidiaries which declined from Rs.548.10 crore as on March 31, 2013. However, these subsidiaries have been reporting profits for some time. Aggregate provision of 111 cr has been made – The management of the company does notforesee any further requirement of provision in respect of these subsidiaries. Since the investment in these subsidiaries are long term in nature and all of the subsidiaries are having substantial carrying business value.
Also, on a consolidated basis, VGL’s networth stood positive at Rs.204.27 crore as on March 31, 2014 (Rs.86.29 crore as on March 31, 2013).


(Karan Maroo) #55

Thanks @Augi - will try and contribute to the BQ model for VGL.

Came across this article today:

It talks about the company expecting to grow at a CAGR of 20% for the next three years. It also talks about possible expansion to newer markets. However, VGL is not looking to sell in India at this point of time.


(Rahul ) #56

You cannot outsmart your dumbest competitor -Professors comment… Is VGL not doing the same thing with the stretch pay? Well i know very little bit of it,yet have to do a lot of work.


(Rishi) #57

Looking at the financial statements, there is an issue with the use of Foreign Currency Translation Reserve (FCTR) to inflate earnings in P&L as described below. Refer Consolidated Accounts in Annual Report of 2013:

  1. In FY’13 the starting FCTR per accounting note 3E was (-)6.6 cr and ending was (-)28.5 cr. During the year they transferred 38.2 cr from FCTR to P&L. In effect they created phantom money by borrowing from a negative reserve and making it more negative. This phantom money shows up in Other Income - Exchange Fluctuation (net) per accounting note 21. If we take away the 38 cr, this would become (-)17 cr.

2.In FY’14, they became smarter and removed the specific amount of Phantom money being transferred to P&L, that call out is now missing. While for FY’13 accounts one can make out by referring to AR of FY’13, but for FY"14 accounts one has to guess the amount of Phantom money transferred to P&L. Considering the FCTR went from (-)28.5 cr to (-) 62cr one can only guess that a substantial amount must have been created.

I’m not an Accounting expert but using common sense, this amounts to inflating earnings. Thoughts?

Disclosures:
•No holding, sold a small starting position.
•This post is not a recommendation to buy/hold/sell. Please perform your own due diligence.


(hazariwalapu) #58

Dear Karan

I do not believe in this stretch pay kind of sales in this low priced items. As in US and Canada, this retiree use to spend this $10-20 in one go anywhere. As well how u gonna stretch it is it for 2-4 EMI it will be more cost to follow up and by the time they pay for it , fashion will be changed and the same person will buy it again on stretch pay, so if stretch pay will work their Working capital will move up for sure and administration cost too.

Correct me if i am wrong.

Thanks
Prashant.


(jainaj) #59

karan- One thing that must be paid attention to is American economy is consumption oriented with no savings as such stretch pay system works wonderfully there. One silver lining here is vaibhav sells so cheap an average of $20 means even if they mark up their prices by 10% or so to my knowledge it should hardly pinch their sales.
On the contrary, it should push sales up. But no denying the fact that next two quarters will be washed out particularly current one because their website issue is still lingering. Horrible results in offing.


(Augustine Jos) #60

Annual report clearly explains what kind of transactions would be transferred from FCTR to P&L and what will be accumulated at FCTR. below is the extract from AR.

As per annual report, exchange difference arising on translation of Loan and Advances to non – integral wholly owned subsidiaries and forming part of net investment, are recognized in foreign currency translation reserve. Such accumulated exchange differences are taken to statement of profit and loss account
on liquidation or on proportionate basis on partial liquidation of such loans and advances.

This is mentioned in standalone books. only in FY13 or maybe before that, this amount transfer to P&L got mentioned in consolidated books, there after it got mentioned in standalone books.

Below are transactions that will get accumulated in FCTR.
For the purpose of Consolidation, the amount appearing in foreign currencies in the financial statements of the foreign subsidiaries are translated
at the following rates of exchange:

  • Average rates for income & expenditure
  • The yearend rates for assets & liabilities
    Resulting difference due to differential rates is accumulated as foreign currency translation reserve.

Hope this makes sense.

Thanks,