Sunil Agrawal, Chairman, Vaibhav Global Ltd is a commerce graduate with an MBA from Columbia University, New York (USA). Established Vaibhav in 1980 as a first generation entrepreneur and has led the company’s transition into a leading brand for fashion jewelry and lifestyle accessories. He travels extensively across the world, overseeing operations, sourcing raw material globally and representing the company at major trade shows and jewelry fairs in the US, Europe and Asia.
Vaibhav Global Limited is a global electronic retailer of fashion and lifestyle accessories. The company has access to over 100 million households in the US, UK and Canada on its 24/7 TV and e-Commerce platforms integrated with a global outsourcing and manufacturing supply chain infrastructure.
Replying to Yash Ved of IIFL, Sunil Agrawal says “In Q2, we expect 15 to 20% revenue growth and EBITDA margin at 11%.”
What is your outlook on the retail sector?
Our strategy is to create a value perception through lowest price guarantee. Our focus is on the discount seeking buyer, a market that has historically continued to expand across various stages of the growth cycle. To support our customer proposition, we have developed a strong supply chain infrastructure that includes our manufacturing operations in Jaipur and outsourcing from micro markets in China, Thailand and Indonesia.
We closely follow the latest fashion trends to keep the product aligned with our customers’ needs. Given these unique attributes of our business, we are confident that the markets for our products will keep expanding in the foreseeable future along with increase in our market share. This will deliver growth and create value for all stakeholders.
Brief us about your Financials?
In FY2013, Vaibhav Global recorded total income of Rs. 931 crore, up 38% YoY, EBITDA margin was 11%, profit after tax at Rs. 78 crore (excluding exceptional items). The company reduced debt by Rs. 31 crore from internal accruals and reported Return on Equity at 49% and Return on Capital Employed at 34%. Sales volume increased from 4 million units to almost 7 million units comprising the company’s fashion jewelry and lifestyle accessories products sold on TV and Internet. The company’s proprietary TV home shopping channels reach over 100 million households in the US, UK and Canada on all major DTH and cable platforms. VGL’s e-commerce websites in these countries create another important sales platform for its products.
Your outlook for the coming quarters?
In Q1 FY2014, VGL recorded total income of Rs. 264 crore, up 28% YoY, EBITDA margin was 14%, profit after tax at Rs. 40 crore. The company reported Return on Equity at 50% and Return on Capital Employed at 31%.
In Q2, we expect 15 to 20% revenue growth and EBITDA margin at 11%. Q2 is traditionally a low quarter for our business as we organize the annual summer clearance sale before the holiday season. Last year in Q2, EBITDA margin was only 6%, so there should be strong growth this year. During the current year, we expect to deliver steady growth and margins.
What would be your focus areas?
Being a retailer of fashion jewelry and lifestyle accessories on TV and Internet platforms, we are currently focused on improving on our key operating parameters of average revenue per household, contribution per minute of TV airtime, repeat buying activity and lifetime value per customer.
We will use the wide access of our US and UK home shopping channels to engage deeper with existing customers and add more customers.
We are also making some strategic investments in our web interface to improve the customer experience.
Further, the company plans to expand TV household access in existing markets to create growth opportunities.
At present, we sell about 20,000 products every day which is 3-4 times volume growth over the last 2-3 years, indicative of the tremendous progress made by our business model. We expect to continue the strong growth momentum this year.
What are your investment plans?
We are looking long term and will continue to invest in marketing, operations, facilities, people and technology to create a great customer experience.
Most of these investments are reflected in our financials, being expensed out every quarter. Our business model requires low incremental capital investments and throws up strong operating and free cash flows.
Last year, we generated cash of Rs. 76.7 crore from operations, capital expenditure was Rs. 13.5 crore, resulting in free cash flow of over Rs. 63 crore. We expect to drive strong cash flows this year as well.
Brief us about your business in different segments?
We internally assess our business in the following segments – fashion jewelry and lifestyle accessories on three platforms: TV retail, web retail and B2B. Our proprietary TV home shopping channels reach over 100 million households in the US, UK and Canada on all major DTH and cable platforms.
In Q1, volumes in this segment grew from 1.1 million units to 1.4 million units on a y-on-y basis, revenues expanded from Rs. 150 crore to Rs. 188 crore.
Our e-commerce websites are liquidationchannel.com in the US/Canada and thejewellerychannel.tv in UK. In Q1, volumes on web sales grew from 0.3 million units to 0.5 million units on a y-on-y basis, revenues increased from Rs. 21 crore to Rs. 33 crore. The B2B segment is the wholesale part of the business, which largely supplies to our own TV and web platforms. B2B Q1 external revenues increased marginally from Rs. 29 crore to Rs. 30 crore.
What is your revenue target for FY14?
During the current year, we expect to deliver steady growth with margins of 11-12%.
We will be focused on paying down debt from operating cash accruals, allowing revenue and profit growth on a smaller balance sheet leading to strong return ratios.
What is your revenue mix?
About 75% of our revenue comes from TV retail sales, 13% from web retail sales and remaining 12% from B2B sales in Q1.
Your current debt and debt to equity ratio?
The outstanding net debt as on 31st March 2013 was Rs. 114 crore, compared to Rs. 146 crore as on 31st March 2012. Net debt to equity was 0.7 times, net debt to EBITDA only 1.1 times. The management is now focused on paying down debt from the company’s strong internal cash accruals.
What are your hiring plans?
Recently, we have made multiple senior level hires, including Colin Wagstaffe to head the UK retail business, Michael Raisbeck to head global HR and Gaurav Vishal Soni as Chief Operating Officer in our Jaipur corporate head office. We have also added key personnel to strengthen the middle management layer. We believe that our expanded management resource base readies us for the transition into a significant player in our key markets. In addition, resource addition at the execution level will continue to happen along with business expansion.