Detailed Narrative
Strong Q3 FY26 Performance Driven by Digital and In-house Brands
Vaibhav Global reported a robust Q3 FY26, with consolidated quarterly revenue reaching INR1,066 crores, marking a 9.1% year-over-year growth and crossing the INR1,000 crore mark for the first time. Gross margin expanded to 63%, an increase of 170 basis points YoY, supported by a vertically integrated global supply chain. Digital channels contributed 42% to B2C revenue, while in-house brands achieved 48% of sales contribution, both progressing towards their FY27 targets of 50%.
Profitability Expansion and Operational Efficiency
The company's EBITDA margin expanded significantly by 170 basis points to 13.2%, with absolute EBITDA growing 26% year-over-year. Profit after tax (PAT) saw a substantial increase of 41% year-over-year, reaching INR90 crores. Operational efficiencies, including a 1.2% improvement in HR costs due to automation and AI, contributed to this margin expansion. ROCE improved to 21% and ROE stood at 15%, reflecting enhanced return ratios.
Mixed Regional Performance with Germany Turning Profitable
The US market registered a 3% year-over-year revenue growth despite elevated precious metal prices and cautious consumer sentiment, while the UK saw a 1.8% revenue decline, primarily due to TJC's negative 6% growth. However, Ideal World in the UK grew by 12% YoY, and the overall UK operation delivered a strong 40% profit growth. Notably, Germany turned profitable during the quarter with an EBITDA margin of approximately 6%, and the company expects it to achieve full-year EBITDA breakeven for FY26 and contribute to group EBITDA from FY27.
Strategic Focus on Lab-Grown Diamonds and Higher-Value Customers
The company's strategy to focus on higher-value products, particularly lab-grown diamonds (LGD), is driving ASP increases. LGD now contributes roughly 10.7% of retail revenue with an average selling price of $250, compared to a general digital ASP of around $40. Management emphasized targeting customers with higher lifetime value, shifting away from lower-price point acquisitions, especially in the US digital segment, to improve profitability over volume.
Investments in Digital Channels and AI for Future Growth
Vaibhav Global continues to invest in digital channels, including OTT platforms, where viewership is almost 4x that of linear TV in the US, and customer lifetime value is higher. The company is actively implementing AI across various business processes, such as chatbots, email responses, TV scheduling, and internal data analysis, which has already led to efficiency improvements in HR costs. These initiatives are aimed at enhancing operational efficiency and driving future growth.
FY27 Guidance and Capital Allocation
For FY27, Vaibhav Global has guided for a revenue growth of 9% to 11% and an EBITDA margin of 10.5% to 11%. The Board approved an interim dividend of INR1.5 per equity share, reflecting a 28% payout and a balanced approach to capital allocation. Management expressed confidence in sustaining profitable growth, with ROE and ROC expected to improve in the next year and medium term, despite ongoing adverse macroeconomic conditions.