Vaibhav Global

Vaibhav Global reported its highest ever quarterly sales of ₹977 crores in Q3 FY25, marking a 10% year-over-year growth. Despite a 110 basis points year-over-year decline in gross margin to 61.3% due to product mix shifts towards high-end jewelry, the EBITDA margin improved by 40 basis points to 11.5%. This margin expansion was attributed to savings in shipping costs, operating leverage, Germany reaching breakeven, and ongoing cost optimization. Profit After Tax (PAT) saw a significant 36% year-over-year increase to ₹64 crores, reflecting strong operational leverage.

The US market grew by 3.6% YoY, while the UK saw a 6.5% increase, significantly boosted by Ideal World. Germany continued its robust performance with 30.7% YoY revenue growth, achieving EBITDA breakeven in Q3. TV revenue reached ₹547 crores, growing 6% YoY, and digital revenue totaled ₹380 crores, growing 12% YoY, now contributing 40% of total B2C revenue. The mobile app contributes roughly 30% of digital sales, and the proprietary website (desktop) contributes around 50%.

Lab-grown diamonds emerged as a significant growth driver, contributing 8.9% to quarterly sales, a substantial increase from 0.2% a year ago. Management expects this segment to maintain a double-digit contribution (10-12%) in the foreseeable future. Ideal World, a recent acquisition, demonstrated impressive 95% YoY growth and achieved full cost profitability in Q3. Mindful Souls maintained a PBT margin of 7% and has over 1,02,000 unique customers, benefiting from VGL's supply chain leverage.

The company's 4R strategy (widening reach, new customer acquisition, retention, repeat purchases) continues to yield strong results. TV networks now reach 127 million households, and the unique customer base grew 30% YoY to approximately 6,98,000. Customer retention remains strong at 43%, with an average of 22 pieces purchased annually. The digital strategy targets customers aged 40+ on platforms like Facebook and Google, aligning with their existing TV demographic, which is primarily 40-70 year old white Caucasian females.

For FY25, Vaibhav Global expects 12% revenue growth while maintaining operating leverage, with early teen revenue growth anticipated from FY26 onwards. Germany is projected to contribute to the bottomline from FY26, with growth rates of 20-30% in coming quarters. The company sees significant untapped potential in OTT streaming platforms like YouTube TV and Roku TV, which are currently not utilized. Gross margins are expected to remain above 60% in the near term and around 62% in the medium term.

Management explained that the Indian market is currently not viable for their business model due to several factors. Airtime costs in India are disproportionately higher compared to sales, and unlike Western markets, consumers do not pay shipping costs, which account for about 6% of revenue. Furthermore, a high Cash-on-Delivery (COD) return rate of 30% in India, compared to less than 0.2% in the US, UK, and Germany, makes the economics unfavorable. The company believes the Indian D2C market is still in a 'discovery mode' and does not fit their current model.

On the sustainability front, the company generated 1.1 million kilowatt hours of solar energy in Q3, powering two manufacturing units in India, aligning with its goal of achieving carbon neutrality for Scope 1 and 2 GHG emissions by 2031. The board declared an interim dividend of ₹1.5 per share, representing a 39% payout for Q3 and 63% YTD, reflecting robust cash generation and a strong growth outlook. The company also aims to provide 1 million meals per school day by FY2040 through its 'Your Purchase Feeds...' initiative.