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

Is anyone still sailing in this boat?
Q1FY17 results are out.On YoY basis, revenues are up by 13.5% on net basis and by 28% on gross basis. PAT is up by 17%.

Observations : FINALLY, Revenue de-growth has stopped.If Tax expenses were not down by 31% YoY basis, PAT would have been flat.Cash flow is negative in this quarter as well.Eagerly waiting for conference call for more details about lower taxes.

Looking for AGM notes.Any fellow valuepickr would be kind enough to share.

Disclosure : Invested up to the portfolio limit and no transaction in last 30 days. It’s been a psychologically demanding position, do not use this note to decide a transaction in your portfolio.Basic thesis is that earnings are depressed and would improve sooner or later considering all the initiative taken up by the management.

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Notes from ConCall (Q1FY17) : Please pitch in to add/correct as per your notes -

  • Tax is down due to Operations from SEZ and DTA (???) loss recognition for US business.
  • Operating cash flow of 20Cr. is nullified due to increase in inventory and Increase in EMI pool.
  • EMI’s contribute to 23% of sales and returns are at around 19%.
  • Website with Hybris 5.7 is launched. It’s a more responsive website which adjust as per the gadget (iPad, Phone etc.)
  • TV segment revenue from US business might be impacted (5~7%) due to elections.
  • E-Commerce capable App (iOS and Android ) to be launched in H2.
  • Plan to reduce ASP to around 25 to drive volume growth.Lower ASP also leads to lower returns.
  • Easy Pay EMI to be introduced on Web as well from end of this Qtr or early next Qtr.
  • Competitor JTV growing at double digit…Competitive Intensity to stay at higher level.

As anybody recently noticed proff. Bakshi’s tweets on Vaibhav being a mistake ? I will be diving in to in the next 2-3 days, any insights in to this will be a great learning!
Disclosure: Invested.
Would not mind changing my mind, if facts have changed!


Notes from results/ConCall (Q2FY17) -

YoY - Revenue is up 15% on net basis but Net Profit is down 40%.

What? More revenue but company made less money....What's going on or Should I say what has gone off?

Closer look at result shows that Mfg expenses are up by 38% and Costs of Materials Consumed is up by 75%. If not so, Profit numbers would have been far better.

Per say Conference call,
Costs of Materials Consumed increased substantially due to Pound devaluation (Opening Inventory was recorded at a higher rate while closing inventory was recorded at a lower rate) and higher B2B business. Going forward, Management expects it to be normalized.
Mfg expense was high due to higher volumes, more contract labor, and two plants are operational instead of just one.

Key take away from concall : Seeing the positive traction for the Budget Pay initiative in US , It would be now launched on Web as well as UK TV from current quarter.

Off-late, activity in this thread and participation in concall (hardly 4-5 guys were available to ask questions and it was the shortest I have seen…Just 33 minutes) suggest that heading of the thread (Vaibhav Global : Back from Dead) has been inverted (Vaibhav Global : Back to Dead) :wink:

Please pitch in with your notes/comments if either you are interested in this business or at least you want to help me to realize that it’s futile to wait for a ride from the dead horse.

Disclosure : I hold. No transaction in last 90 days.

I tracked this business and held it in 2014-15 but sold off once I realized that :slight_smile:

  • the management in their quest for market share were doing irrational things like offering sub $ 20 items on EMIs - look at the impact it has had on cash flows - they have plummeted from 2015 to 2016. if one were to draw a matrix, the company is in the lowest most quadrant of low ticket size and low profitability which is a bummer - earlier they were focussed on low ticket size but higher profitability given no EMIs/ no returns. Wonder how they BoD did not think through ramifications of the above.
  • they are getting into too many categories just to bump up topline - this is a dangerous obsession and potentially could lead to mark downs as has been described above.
  • you only have to look at the difference in language betweeen AR 2015 which was full of words like moat, fcf and AR 2016 which seems like a discontinuity from the earlier one.

Thankfully, I did not lose anything - lesson learnt, when a biz model changes think through cash flow/margin ramifications of the same then re-align your valuations. Growth in topline does not mean anything.


An overly bullish report on the back of overall business improvement and on a belief that the same will continue.

20170210_Vaibhav-Global-Limited_55_QuarterUpdate.pdf (768.0 KB)

I don’t think it is overly bullish. Technology glitches and late response to competition affected them past two years. But last two quarters are showing improvement. They’ve successfully added two verticals - beauty and kitchenware. Underlying jewelry segment growing well. This is a high fixed cost business, with operating leverage potential. As revenue scales, operating margin will expand. The leader in this segment is QVC. QVC has 18% OPM on 36% gross margin. That is an example of scale based operating leverage. Now bear in mind Vaibhav has 60% gross margin - if it can scale revenue from 1500 this year to 2000 crs in F20, then OPM can climb beyond 15%. Roughly 65% of EBITDA ends up as operating cash flow for Vaibhav. If they deliver 15% on 2000 crs revenue, then EBITDA would be 300 crs and OCF would be 210 crs. Now Vaibhav can be valued as retail, e-commerce or FMCG company. In each case the minimum PE would be 20X. If we apply that multiple to 210 crs OCF, then Mcap could be as high as 4200 crs (or higher). Current market cap is roughly 1400 crs. That is my realistic case assessment. I am open to contrasting viewpoints.

Agree with almost all your points including the “ifs” to which when you add the still present though reduced possibility of various previously experienced issues and the many known yet unstated risks present in the TV/eComm industry’s competitive and uncertain future, would warrant far more tempered growth expectations esp wrt OCF and, therefore, a significantly moderate, yet bullish view. In other words, just a brief 2-qtr improvement on the back of an excruciatingly long 2-yrs of poor performance shouldn’t lead us to build a near certain scenario of future growth.


I am sharing a recent write up (a very brief and high level) to tell you how I viewed this stock then. I had written this to a small group of friends a few days before the results as an exercise in shared learning on how to spot mispriced opportunities engulfed in uncertainity and not as a recommendation: (pls ignore the typos as it was penned on a mobile platform)

There are many reasons why I like this company but for the moment I think it looks mispriced as the market doesn’t seem to be believing in its turnaround whereas I see very clear signals that it is going to.

The company was growing well till Dec-14 since when it started facing competition from a new competitor in the US.

The growth till Dec-14 had given mgmt the confidence to do more capex in fixed assets ie new factory as well in new technology and that growth if continued would have taken care of the new capex without hurting return ratios which looked unbelievably good at that time at around 30-40 ROE.

But the competitor gave a very tough fight and Vaibhav was caught on the wrong foot. This led to some fall in sales and a major fall in profits due to operational leverage in it’s business.

For those who don’t know the biz of the company - it procures raw materials from low cost locations like china, makes fashion jewellery mostly using precious stones at its SEZ at Jaipur and sells thru it’s 24-hrs TV channels - one in US and one in UK apart from selling on the web and now on mobile as well.

It positions itself as a Walmart of this biz - selling decent products at discounted prices. It has huge focus on repeat purchase. It also has its own studios in US and UK. It tracks latest fashion trends in US/UK and designs it’s jewellery based on those trends. And the customer is told on its TV shopping channels that e.g. - you can buy this piece of earrings at 25 dollars compared to the same design being sold at premium showrooms for 150-200 dollars.

You can read more about its biz on VP and there are some reports as well

I think this is the recent one

So the investment argument is that it’s sales which were falling for 5-Qtrs have started growing for last two qtrs

But since the profits are still subdued the market is still not enthused and its share price which had fallen from 800 to 250 is till at around 300 only

So at this price or at around 260-270 it looks like a good bet ie you won’t lose much but can gain big

Now there are many reasons why profits hv fallen and why they shud look up

  1. The competitor started offering EMI as well as returns on delivery as convenience to lure customers away from Vaibhav. Initially Vaibhav dismissed these as gimmicks but soon realised that it will need to match these offers which it did but that led to increased working capital therefore increasing costs at the time of slowing sales thereby squeezing margins/profits

  2. The competitor offered better web interface offering ease of use to customers. To match this Vaibhav had to invest in new technology and this took more time than planned leading to project cost overruns and lower sales again squeezing profits

  3. The company had planned investments in new SEZ at Jaipur which it went ahead with and even though it was completed ahead of schedule it led to some addl expenses as well as higher depreciation, again hurting PAT

  4. The company also invested more in its senior management team as it needed more web sales savvy and experienced people and also as some senior people left (which might hv been viewed negatively by mkt) so this meant increased variable expenses again squeezing margins

  5. It also invested more in buying additional coverage for this tv channels in US giving it additional viewership but this also led to more addl expenses which are fixed in nature

So overall the play here is that the worst seems to be behind as company has taken various corrective actions and made almost all major investments in revamping and improving its businesses

The competitive intensity seems to be ebbing as is borne out by 15% sales increase on both of last two quarters which even on the low base of last yr is quite impressive

As most costs are fixed in nature, from hereon any additional increase in sales would add much more to bottomline and therefore profits should be on growth trajectory from q3 onwards which is also their best qtr due to festive season in US & UK

Also they are launching mobile Apps in h2 which would add to customer convenience and to use a not so good word but relevant here - stickiness

The company has also started selling other fashion accessories like bags, watches, etc earlier but that focus was paused due to pains in the main jewellery biz. Now with stable growth expected it is only a matter of time when they will start focusing on accessories again

With the company focusing more on web and mobile it is addressing the long term trajectory of this biz where customers are likely to shift from tv shopping to web and mobile shopping in the long run

In the overall tv shopping space the company’s size is a fraction of the market size offering huge runway for growth

The promoter appears to be very good and this can be discussed separately for those interested but there are just too many pts which would tell anyone that the promoter would pass the test on most parameters of integrity, intelligence and energy

Also a mgmt which isn’t capable cannot be expected to compete in the hugely competitive retail space in US

The biggest moat of the company is its low cost procurement, and its low cost operations in India, a combination which isn’t easy to replicate

The company had stated giving good dividends which will likely be restarted once growth stabilised

On the valuation front the current profitability at around 40cr (on 1300cr sales) appears to be an incorrect way to value the company given the operational leverage inherent in the business

At 1000 cr mktcap it is valued at 25 pe at 300 a share

So if the company continues to grow sales at a very pessimistic 10% p.a for next 2 yrs reaching say 1650cr then given the operational leverage it is not unlikely that the current profitability of less than 3% can easily improve to at least 5% giving it 80 cr PAT in 2019 which valued at 20 pe for a growing, 20 plus ROE, eCommerce biz should ideally have a market cap of 1500-1600 cr (offering 25% cagr from a price of 260-270).



its comparison to WallMart and the moat in the business has been used many times by many people (One of them is Sanjay Bakshi sir) .

We should not forget Warburg Pincus invested Rs 208 cr in 2006 and sold out everything for 18 Cr March 2011 booked almost 90 % loss.

We should not forget many investors again poured in after the revival with same story low cost moat (WallMart) and hardworking competent management , E-comm and what not … had to bear lots of pain again.

On the other hand the experience of investors with WallMart has been completely different because WallMart is not Vaibhav Global.
Below chart explains all -

I always hate when investors develop a bias by comparing one company to another successful company, I think its the worst form of psychological bias that we create. Why WallMart is different is because yes it do retailing like Vaibhav Global but products are completely different.
When crisis hits (like 2008 financial crisis) people do not stop taking bath or doing brush or cooking food or washing cloths etc moreover during crisis they want them cheap which WallMart caters thats the moat but yes they definitely don’t want to buy Jewelry specially the one selling on TV with cheap tactic designed to make fool out of people.

So product does matter. its a cyclical product which depends on feel good factor in economy. If people are happy, feeling the wealth effect they will go out and spend on things Vaibhav Global Caters and during bad time there is no moat whatsoever. Personally i don’t like investing in cyclical businesses because i don’t have the ability to predict boom and bust.

So one reason why they go bust is economic down turn in 2008-09 and then they again recovered and again many analysts turned bullish with another moat theory which went bust in 2015-16 and of course you will always have a explanation why they went bust but isn’t moat supposed to be intact ?

I personally feel its a good company but average/ bad cyclical business , Good businesses makes money for all but average/ bad businesses make money for bottom pickers very lucky few who able to sell at right time.

No doubt management is very committed , hardworking and honest but i think chances of U.S Europe Japan economies going bust again way higher than India (why not pick companies catering to india). Its been 9 years since crisis with ultra low interest rates with huge debt ever increasing, all that makes me uncomfortable to invest in businesses catering there.
ever increasing populism in west is another problem

I don’t know when they going to go bust or they may not ever and as i don’t know i don’t know when vaibhav global going to go bust again which makes me more nervous to invest in it.

It may be a good trading call in today’s bull feeling environment with very little options to invest but i believe its going to give sleepless night some years if your investment horizon is 10 yrs or more.



Secondly -
I came across this article by Prof Sanjay Bakshi

I was thinking about the Moat (low price) and i believe its very badly misused throughout by investing community.

Low price is moat depends on product you are carting to the society,Price has never been the single criteria for the customers. Like Apple moat is Quality they place their product at premium (way above competition) still enjoys the highest market share in phones, i don’t think cheap Chinese manufactures have any moat at all as we keep seeing new and new brands coming in that segment but i have not seen any brand apart from Samsung trying to complete with Apple.

Moreover if you see low cost moat companies like WallMart or GIECO they don’t sacrifice with the quality WallMart selling the same brands at lower price than anybody else people know these bands and its a easy decision for them to pick up from WallMart same applies for GIECO too.

Even page industry formed its moat around the quality at adequate price they were never the cheapest underwear sellers using beautiful model selling it over the TV and they will never be.

Now come to luxury products like jewelry, Is low cost really a Moat ? I think when you are going to buy gold or stones you worry about getting cheated more than cost. Nobody understands quality of gold and stones in general. Stones i have found hardest to understand which Vaibhav Global sells.
and i would defiantly not buy looking at framed TV advertisement.
I think in both aspects Prof Sanjay Bakshi was wrong in the above report the Moat and Psychological aspects, In hindsight its easy to say but its imp to understand why ? if you have read the first chapter in the book influence (mention by Prof Sanjay Bakshi) about the Ruby you will know where i am going , In that a lady had a hard time selling Ruby stone even by doing all she could like putting it at prime location in store, giving discounts etc but when her shopkeeper mistakenly doubled the price of ruby it got sold immediately. The reason is the biases we have in our mind that says quality is always priced high and because no ordinary person has the ability to judge quality of stone they took price as a parameter to determine it.
This is way important psychological aspect in Gem selling than cheap TV trick Vaibhav Global plays (Something completely ignored by Professor in his thesis)

This plays a huge role in gems selling and i don’t think cheap gems has any moat at all in jewelry business what Vaibhav Global catering to, here the moat is like out of 4 road side " Thela wala " one manages to sell at cheapest price that no one can compete with. well that is good enough but that will not turn the fortunes of " Thela wala " bcoz customer base is very small there is no scale in that business on the other hand quality and brand can change fortunes that is what exactly happened with TITAN & Rakesh Jhunjhunwala .

If cheapness would have been moat NANO wouldn’t never been disaster for TATA MOTORS.


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Results presentation:

Guidance for low double digit revenue growth i. FY18

Last 2 quarters have been turnaround for Vaibhav Global… Hope it outperforms in the coming quarters…

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Q1 Results out:



Vaibhav Global Concall details:

• Main attention was on web growth. TV should see volume growth coming back in following quarters.
• Currency impact from Q2 will be minimum.
• EBIDTA margin will continue see leverage to the bottom line.
• Started selling products to vendors like eBay, Amazon etc. No dilution on Margins on these sales, will remain the same. Not buying anything new for this, no additional cost/inventory.
• Expecting new customers from eBay, Amazon. Shipping cost is included in the product price.
• Average selling price will continue to be + or – 5%
• Q1 is seasonally lean, Q2 is good and Q3 is the best.
• No discussion on dividend yet. May be end of this year.
• Promoter shareholding 58%
• Debt is down to 97Lacs vs 6cr FY17. Net cash from next Q.
• NO new geography planned.
• Competition is growing. But we are level playing field now with much lower price comparing others. Low cost operator.
• Payment experience with Budget Pay. Provisions made around 1%. KPMG is the new editor and done extensive exercise to analyze the provisions.
• USA budget pay sales 34%, UK 43%

• Company’s credit rating for the long term bank facilities have been
upgraded by one notch up from CARE BBB+ to CAREA- which denotes adequate degree of safety
regarding timely servicing of financial obligations. The rating for the short term bank facilities have
been upgraded by one notch up from CAREA2 to CAREA2+ which denotes strong degree of safety
regarding timely servicing of financial obligations.


I don’t understand why they are not coming in India ?? India is the emerging e-commerce market and if they compete in us then in India I think have will be market leader if they come .

Then why they are not coming??
Expert comments please.

Q2 results presentation:

Q2 FY18
• Revenue INR expanded by 2%, retail revenue product increased by 11%
• Increase in gross margin due increase in retail mix
• TV viewership has been growing although with the help
• Working capital has increased due to increase inventory for holiday season
• Launched brands on its sale channel
• Serve 340,000 unique customers. Repeat buying at 19 times vs 17 times
• Retention rate at 48.4% in US and UK
• Volume growth at 5%. Increase in ASP due to change in product mix. Change in product mix due to increase in wig sales.
• Increasing sales towards web. Decrease in TV volume in H2 due to increased ASP and incentivize TV crew to divert traffic to web
• FY18 topline guidance of 15% in constant currency terms. PAT will grow faster than topline going forward


Hi Guys,

I am a bit suspicious about the Subsidary in the British Virgin Islands., Genoa Jewelers Ltd.

I know that not all offshore companies are bad, and they offer great tax advantages but how do we know that the business that Vaibhav is doing in the british virgin Islands is legit and not some place to Hoard and siphon cash into offshore assets?

I tried to look at the shareholding pattern.

Geona is 100% owned by Vaibhav
Geona has subsidires LFDI Secreatries Limited (Hongkond), LFDI Corporate directors limited (Hongkong), etc, and all of them are incorporated at the same time.

The Hongkong companies LFDI Directore and LFDI Securities and Geona all have been incorporated in 2004 April.

Another thing is that the out of the share of total revenue of Vaibhav for YE 2016 March (1276 CR), 91% of the revenue is from Geona (1100 Cr).

Report on Geona Financial statements from Vaibhav’s website

Geona shareholding pattern and links

How do we know if the numbers are Legit? Correct me if my suspicion is not valid.