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

Stock Opportunities Untested - but worth a good look
333

VAIBHAV GLOBAL AGM NOTES FY-2020

MD – SUNIL AGARWAL

  • Continued bossiness operations even during pandemic as online retailers were a part of essential services.
  • Currently selling over 250+ types of essential Products.
  • Distributed 3.4mn meals to migrant workers in India.
  • Focussing on 4R’S- Reach, Registrations, Retention ,Repeat Purchases
  • LONGER WE RETAIN CUSTOMER HIGHER ARE OUR PROFITS.
  • Invested in AI(ARTIFICIAL INT.) to analyse our customer data i.e buying patterns etc.
  • Focusing more on Emerging Platforms like – Market Places i.e Amazon,Ebay etc.,Social media ,tying up with social media influencers.
  • Products ,Raw mat r procured directly without any intermediary.

WAY FORWARD?

  • Believe Covid crisis as an opportunity to achieve even more.
  • Will make further investments for acq. Of potential customers ,to assist the growth for future years.

Q&A

1.Mr.Vijay Kedia – Was disappointed that Mr.Puru Agarawal was leaving the organization at this juncture when co. was preparing itself for thriving mode.

I am watching the co. from the last 16years, but made investment only in 2016.

Plans for the future?

We investors are bored of 15-20% growth why not to aim for 30-40% now?

MD’s Response - Agree that this is time to thrive but we always look at market with a very Skeptical eye.

We constantly think where customer is going, what brands is he/she buying.

What competitor might arise that might impact us.

So will keep our guidance for 15-20% growth but whenever opportunity arises we will definitely grow faster than that.

During PANDEMIC we growing faster than our normal growth rate.

Lot of potential to grow as our household Revenue is still low as compared to our competitors QVC is at 50$/household revenue.

Ecom platforms like are seeing high growth although our base is small but growth is maintained.

2.Organic & Inorganic Growth?

MD- we do have cash reserves & whenever opportunity arises we can raise more cash. Right now do not see any opportunity in inorganic growth. Not aggressively going out for inorganic growth.

We believe that we hv tremendous opportunity within our organic space that we have & can have consistent 15-17% growth or even higher in future.

3.Permanent Disruption in Supply chain?

MD- our Supply chain is very agile when India had lockdown of over 1month at that time CHINA supplied a lot esp. essentials, lifestyle products & some jewellery as well.

Thailand really ramped & filled up the slack that INDIA created.

Also sourced from US ,UK as well.

In India we have around 3000 employees & many of them are working from home, therefore r able to maintain production while maintaining Social Distancing.

-Dividend policy already announced .

-Future of essential Products?

They comprise of masks, sanitizers etc.

The Vitamins & cookies sold very well.

Sold pasta also but it did not do very well.

Immunity booster still continue to do well.

Some dresses like nightwear,tops continue to do very well.

Earrings, necklace & tops are doing well because there are Zoom Calls.

Does Essential Products Reduce margins?

NO, some of the products hv lower margins and we have discontinued but others provide very good margins.

Sold some masks with gemstones,fancy masks & they sold like crazy.

Could not transcript some part as the voice was not very clear. VAIBHAV GLOBAL AGM NOTES FY-2020

MD – SUNIL AGARWAL

  • Continued bossiness operations even during pandemic as online retailers were a part of essential services.
  • Currently selling over 250+ types of essential Products.
  • Distributed 3.4mn meals to migrant workers in India.
  • Focussing on 4R’S- Reach, Registrations, Retention ,Repeat Purchases
  • LONGER WE RETAIN CUSTOMER HIGHER ARE OUR PROFITS.
  • Invested in AI(ARTIFICIAL INT.) to analyse our customer data i.e buying patterns etc.
  • Focusing more on Emerging Platforms like – Market Places i.e Amazon,Ebay etc.,Social media ,tying up with social media influencers.
  • Products ,Raw mat r procured directly without any intermediary.

WAY FORWARD?

  • Believe Covid crisis as an opportunity to achieve even more.
  • Will make further investments for acq. Of potential customers ,to assist the growth for future years.

Q&A

1.Mr.Vijay Kedia – Was disappointed that Mr.Puru Agarawal was leaving the organization at this juncture when co. was preparing itself for thriving mode.

I am watching the co. from the last 16years, but made investment only in 2016.

Plans for the future?

We investors are bored of 15-20% growth why not to aim for 30-40% now?

MD’s Response - Agree that this is time to thrive but we always look at market with a very Skeptical eye.

We constantly think where customer is going, what brands is he/she buying.

What competitor might arise that might impact us.

So will keep our guidance for 15-20% growth but whenever opportunity arises we will definitely grow faster than that.

During PANDEMIC we growing faster than our normal growth rate.

Lot of potential to grow as our household Revenue is still low as compared to our competitors QVC is at 50$/household revenue.

Ecom platforms like are seeing high growth although our base is small but growth is maintained.

2.Organic & Inorganic Growth?

MD- we do have cash reserves & whenever opportunity arises we can raise more cash. Right now do not see any opportunity in inorganic growth. Not aggressively going out for inorganic growth.

We believe that we hv tremendous opportunity within our organic space that we have & can have consistent 15-17% growth or even higher in future.

3.Permanent Disruption in Supply chain?

MD- our Supply chain is very agile when India had lockdown of over 1month at that time CHINA supplied a lot esp. essentials, lifestyle products & some jewellery as well.

Thailand really ramped & filled up the slack that INDIA created.

Also sourced from US ,UK as well.

In India we have around 3000 employees & many of them are working from home, therefore r able to maintain production while maintaining Social Distancing.

-Dividend policy already announced .

-Future of essential Products?

They comprise of masks, sanitizers etc.

The Vitamins & cookies sold very well.

Sold pasta also but it did not do very well.

Immunity booster still continue to do well.

Some dresses like nightwear,tops continue to do very well.

Earrings, necklace & tops are doing well because there are Zoom Calls.

Does Essential Products Reduce margins?

NO, some of the products hv lower margi ns and we have discontinued but others provide very good margins.

Sold some masks with gemstones,fancy masks & they sold like crazy.

Could not transcript some part as the voice was not very clear.

8 Likes
334

Cfo leaving is not red flag? Why should cfo leave if the company is growing well.

335

its good to be skeptical. But its surely not a red flag always.
Like in technical analysis u can’t rely on any single technical indicator,Similarly red flags should always be seen in conjecture with other red flags too.

Mr.Puru has played a key role in co’s growth.
If there would hv been something fishy then , he could hv resigned earlier too rather than resigning after being promoted to senior position.
Why he resigned?
I also don’t know might be a personal reason or a better opportunity.

No one really knows beyond a certain point.

2 Likes
336

In general comment for any listed company-
had the CFO resigned during ‘not growing well’ phase, the same question would have been asked.

1 Like
337

Better than expected results.

Rgds
RR

2 Likes
338

Results Presentation (Link

Good performance on all parameters. Nom jwellery revenues has increased.

Surprisigly no stock reaction on Friday post results.

Disclosure: Invested

339

tjc.co.uk website has been gaining lot of traction since march.

image
image827×562 45.5 KB

Disclosure: Invested

8 Likes
340

Amazing how home-shopping has become mainstream in the name of live stream shopping.

Btw: Analyst meet today was a delight…and Bharat Shah asking questions was also a pleasant surprise.

Rgds
Rajesh

3 Likes
341

Presentation from today’s analyst meet.

Rgds
Rajesh

2 Likes
343

Corruption Charges

I found this interesting video which contains the promoters rebuttal in his own words:

PS: entire playlist contains a good story of how the business has evolved in last 40 or so years. Quite a good resource for all investors and potential investors to consume to learn more about the company.

The tldr is that the promoter used help from a friend who worked in Canadian visa department in order to fast-track his visa appointment (not the grant of the visa).
The promoter, being friends with the person also regularly gifts the person products of his company on Christmas. This was misunderstood as bribing by the state department.

Few observations from me :

  1. If I were running a small company, I would have done that as well. I blame more the legal councel for the company and the promoter rather than the promoter himself.
  2. Kudos to the state department for being able to catch this. Quite amazing.
  3. The transaction did not come across as being nefarious or I’ll intentioned, but more like a mistake.
  4. It is up to the individual investor whether they choose to believe the promoter or not.

Operating Leverage

In a lot of recent management commentary, we have heard about the operating leverage of VGL:

From Q1-FY21 Concall:

So you are right. Our model is unique, and we operate on a very stable kind of a fixed cost, which will not go up commensurately as the revenue goes up. So we have been able to drive operating leverage for the last many years, and we expect to continue doing the same. In this quarter also, like the same as reflected in the expansion of EBITDA margin to 14.1% and even PAT margin coming closer to 10% now. So we do not give any guidance on our profit margin expansion. But yes, cost being largely stable except shipping cost, which will continue to go up in terms of volume growth. The other costs are more or less stable. So we’ll see operating leverage going forward as well.

From Q4-FY20 Concall:

Given the company’s resilient operating structure and agility, in the medium term and short term (2-3 years), we expect revenue growth to grow by 15% to 17% on constant currency basis for our B2C business with consummate operating margin leverage owing to a relatively fixed cost base.

From Q3-FY20 Concall:

We’ll continue to see the leverage coming in as we continue to increase our top line at approximately 60%-plus gross margin because our – some part – a major part of our costs are fixed largely in nature.

In this post, we will analyze VGL’s operating leverage analyzing the cost structure. This analysis is very similar to an analysis done for Transpek by @spatel here:

Attribute / Year 2020 2019 2018 2017 2016 4 year CAGR
Revenue from Operations (cr) 1986 1814 1575 1439 1275 0.1171648553
Cost of Materials Consumed (cr) 276 302 309 310 227 0.05007617805
Purchases of stock-in-trade (cr) 423 351 283 226 191 0.2199070749
Raw Material (cr) 699 653 592 536 418 0.1371695537
Employee Benefits Expense (cr) 358 337 271 250 234 0.1121587737
Depreciation and Ammortization (cr) 31 25 25 29 24 0.06607464158
Other (Administrative, Manufacturing & Selling) Expenses (cr) 669 669 591 600 593 0.0306064499
Net Profit (cr) 190 154 112 65 40 0.4762958619

Some observations:

  1. Administrative, Manufacturing and Selling expenses and Depreciation and Amortization have grown Fairly slowly. Since this is the largest part of the expenses, it is the slow growth of this relatively ‘fixed cost’ that provides the company the operating leverage.
  2. Since the company derives part revenue from self-manufacturing and some from contract manufacturing, I look at Cost of material consumed and Purchase of stock in trade together as Raw material cost. This has grown largely in line with the revenues, which makes sense since they maintain a 60% type of gross margin.
  3. Employee expenses have also grown largely in line with revenue.
  4. Due to largely fixed costs, the Net profit has grown ~47% CAGR in last 4 years, compared to ~11-12% CAGR for revenue.
  5. Please take this with a big bucket of Salt. All projections are wrong. This is only to understand the size/quantum of opportunity. If we assume similar growth rates in future for revenues and same expense heads (similar cost structure), then we can expect the 190cr net profit in 2020 to become 500 cr net profit after 4 years.
4 Likes
344

Q2 Business Updates

Great Q2-FY21 numbers from Vaibhav Global:

  1. Revenue growth of 23% YoY.
  2. Earnings growth of 47% YoY.
  3. Healthy Cash Generated from Operations (OCF): 94cr in Q2FY21 versus 73cr in Q2FY20.

EDIT:

Q2-FY21 Concall notes

  1. [Business updates]: Retail revenues improved by 29%, EBITDA by 42% and PAT by 44% on Y-o-Y basis. Correspondingly, we continue to deliver margin accretion – EBITDA & PAT margins at 16.5% and 11.8% have expanded by 220 bps and 170 bps respectively. Our cash position improved with operating cash flows at Page 2 of 19 Rs. 93 crore and free cash flows at Rs. 77 crore for H1FY21. ROCE reached the milestone of 50% on TTM basis.
  2. [Growth granularity]: Our retail businesses, Shop LC in the US and Shop TJC in the UK, witnessed robust growth during the quarter, at 19.5% and 26.6% in their respective local currencies. For Q2FY21, within retail, TV revenues grew by 24% and Web revenue grew by 41%. For Q2FY21, TV volumes grew by 21% YoY while Web volumes grew 37% YoY.
  3. [Unique Customers]: On TTM basis, we served ~450,000 unique customers- a significant jump of 27% over the previous 12 months
  4. [Operational updates]: At Shop TJC, UK, these initiatives include – launching of QuickPay for pre-registered customers on the website, Rising Auction now available on the mobile app, expanded our presence to the Fruugo and Wayfair marketplaces, launched Social DR, organized Two virtual customer open days receiving heartening response. At TJC, we now deliver ordered products on an average of one and half days quicker compared to same period last year.
  5. [Growth Guidance]: We expect to close the second half of the year with 18-20% constant currency growth in retail revenues. While doing so on a relatively stable cost base, we see the current momentum of margin expansion to sustain, creating opportunities for ongoing cash generation. On a medium-term basis, we are confident of delivering 15-17% revenue growth on the top of strong revenue growth in current financial year.
  6. [Business Mix]: At the end of H1, TV contributed ~64% of total retail revenue while web contributed ~36%.
  7. [Cost Structure]: So approximately, below the gross margins, out of the total expenditure, approximately 30% of that is completely variable. So they are in the nature of shipping costs, credit card expenses, marketplaces and so on. So, they are completely variable in line with revenues. And maybe about 10% odd would be kind of a semi-variable expenditure which would include the freights, etc., and so on and so forth. The others are relatively fixed in nature, the balance 60% would be kind of more fixed or stable.
  8. [Composition of non-jewellery sales]: So, non-jewellery, the beauty is number one for us, beauty would include the antiageing creams or fragrances or hair care. So, that is number one. Number two would be home, at this time people are staying at home, they need kitchen utensils or home decor, bed sheets or the bathroom accessories, all that; followed by other accessories like scarves, handbags and all that.
  9. [OTT segment]: This is still small. We recently hired a 20-year experienced veteran from HSN to lead our OTT initiative, very powerful, very capable person. So we expect this year to do just about $2 million in OTT in the U.S. So that is less than 1% of our sales in OTT.
  10. [Marketplaces: Amazon, eBay]: Amazon has its own space and very powerful space, and amazing business model, all my respect for them. So, we are learning from them every day and accelerating our time to consumer. As I mentioned in my opening remarks, in U.K., we are already one and a half to two days quicker in delivery. In U.S. also, we are going towards that to be quicker to the consumer. And also, we are on Amazon as well, so marketplace we started three years ago, and this year we expect the marketplace to contribute about $13 million in our sales between U.S. and U.K., compared to last year, it was just about $4.5 million. So even on the marketplaces like Amazon, we are expanding our business rapidly.
  11. [Time to Delivery]: The day’s improvement is in U.K., not in U.S. So in U.K., it used to be approximately four days earlier, now it is two and a half days. So a product gets to a consumer in two and a half days. In the U.S., we have not been able to execute on faster delivery yet, due to pandemic, there is a lot of demand and pressure on all the carriers. So Page 10 of 19 we are negotiating with them to reduce the time to delivery to the customer. In fact, during pandemic, earlier it used to be about 4.2 days, and during pandemic it is actually now about 5.3 days right now. So it has gone up during pandemic. We hope to bring it down after pandemic maybe Q4 of this year or Q1 of next year. Our aim is to bring it down to three days. And we are working towards that. We are trying to do that in a cost-effective manner that doesn’t impact our profitability
  12. [Amazon Japan, Germany]: Actually this was just added two weeks ago. So, our India unit has started to put products on Amazon Germany, and we are testing those markets with some product, what product is working on them for our future potential growth in these markets.
  13. [Budget pay guidance]: due to essentials which are at really low price point, we didn’t give any budget pay in that. So we typically don’t give budget pay on under-20 products, if it is over 20 we give budget pay. As the price points come down, as it did during COVID essential velocity, so the budget pay came down. But in longer run we think about 40% to 45% of our sales will come from budget pay
  14. [Visibility about threats]: We always try to de-risk the business, whether it is in the terms of business growth drivers, or in terms of people, or in terms of competitive intensity. So just from a Page 17 of 19 business driver point of view, we have constantly put in a lot of effort into having new bullets fired. For example, marketplace that we fired three years ago, Social DR we just fired recently, the Innovation Excellent Centre for product innovation, we just hired somebody very capable person from Titan, he comes with a lot of experience for innovation, to create a Centre of Excellence for innovation. And we stood up those people across all the business units. So every unit has a innovation manager now. And then we are creating a team for branding. We are constantly searching for a very good capable branding person to develop in-house brands. And product merchandising, we are assembling a team, from a strategy point of view, we constantly scan what our computers can do. And from an affiliate point of view, from OTT, we will just make the investment in very capable person. So, we are constantly scanning the horizon for potential business disruptions and insulating ourselves against those disruptions. So having said that, what we don’t know we don’t know. So, to answer your question, from the visibility point of view, I don’t have visibility of any threat coming to us
12 Likes
347
2 Likes
348

Hello everyone,
Can someone please forward the report prepared by Prof. Sanjay Bakshi on Vaibhav Global ? I am able to get the link but it is not working. So, thought of asking forum members if they have downloaded it. I want it for learning purpose.
Thanks in advance.

1 Like
349

Teaching Note- 62-Bagger and Counting.pdf (2.0 MB)

One of the best he has ever written!!

Rgds
Rajesh

9 Likes
350

@karan_malik

Apart from reading the teaching note, professor had also written later about what led him to change his mind regarding this company as a long-term investment. Though m not aware of his current stance, I recommend considering both views to get a balanced perspective.

1 Like
352
3 Likes
353

Promoter group was buying from open market on Dec 22. Increased share holding by 0.14%.

1 Like
355
5 Likes
356

Good results yet again …https://www.bseindia.com/xml-data/corpfiling/AttachLive/d2f83083-1242-4ab3-9a53-b0b1372f68d9.pdf

2 Likes
357

Investor presentation for Q3:

4 Likes