Vaibhav Global Limited: Healthy financial profile and favorable sectoral dynamics should lend support

Vaibhav Global Ltd has its own manufacturing set-up in Jaipur, Rajasthan, catering to ~70% of its fashion jewellery requirements. It sources lifestyle products (like watches, hair accessories, etc.) and balance ~30% of jewellery is being retailed directly from its stable supplier network in over 30 countries, such as China, Thailand, etc.
Strong brand presence of the company-owned channels in US and UK, attractive value positioning of products and healthy financial profile are expected to support Vaibhav Global Ltd.

Vaibhav Global Limited

Company overview:

Vaibhav Global Ltd is jewellery company, engaged in carrying out retailing and manufacturing of fashion jewellery and lifestyle accessories. In 2005, apart from reaching patrons through intermediaries such as WalMart, Sears, Macy’s, etc. (B2B business), the company has decided to build its 1^st retail store at holiday destination in Alaska. By 2007 end, the company had 19 retail outlets at several other holiday places (such as Alaska, Mexico and Caribbean). Till 2006, the company operated in USA and UK with only brick-and-mortar model.

With focus on expanding further in retail, several investments were done in consumer retailing through proprietary teleshopping channels and internet in 2007.

Business model of Vaibhav Global Limited

Vaibhav Global Limited manufactures jewellery and gemstones with help of its facilities located in India. The company provides products through online platforms e-commerce websites, mobile apps, etc. It compasses in traditional B2B wholesale distribution, operating through retail and whole chains in United States and United Kingdom. Vaibhav Global Limited provides products under several brand names including Rhapsody, Iliana, J Francis, Karis, Elanza, Strada, Eon and Genoa. It carries out operations in India, US, UK, Thailand, etc. The company has its headquarters in Jaipur, Rajasthan, India.

Track record of management

At Vaibhav Global Ltd, better governance is more than just being in compliance with sustaining law as a checkbox. Impact of best practices adopted by management are exhibited in success and growth of the company and several external recognitions it has received for these practices. The company continues to benefit from extensive experience of its promoters spanning over 3 decades in fashion jewellery and lifestyle products e-retail industry.

Mr. Sunil Agrawal, the company’s Managing Director, is a first-generation entrepreneur. He established Vaibhav Enterprises in 1980, with focus on professionalizing gems and jewellery trade. After travelling and gathering immense knowledge of gemstones and jewellery, he brought expertise to bear on success of the company. He represented Vaibhav Global Ltd at several international trade shows and jewellery fairs. He was involved in commercialization of popular gemstones like Tanzanite.

Mr. Harsh Bahadur is Non-executive Chairman of the company. He is presently on Board of Indian Terrain Fashions Ltd. and is serving as an Independent Director. Apart from this, he works as a senior advisor in PricewaterhouseCoopers (PWC). He advises Private Equity Funds and has evaluated several companies in automobile servicing, branded food, and e-commerce sectors.

Financial performance of Vaibhav Global Ltd

Vaibhav Global Limited released its financial results for quarter and year ended March 31, 2023. Its 4Q and FY23 revenue growth came in at 1.1% and (2.2%) year-over-year, respectively. However, strong growth of 39% and 36% against pre-Covid period of Q4 and FY20 respectively was seen. The company saw year-over-year improvement in EBITDA margin as a result of efficient pricing and cost rebase. Its PAT for 4Q came in at INR23 Crores against INR27 crore in prior year. Its ROCE was 14% and ROE was 9%, exhibiting effect of subdued profitability. In current challenging environment, the company has seen continued market share gain across territories, demonstrating its ability to adapt and navigate challenges.

Vertically-integrated supply chain of the company and a strong global sourcing reach offers it with a competitive advantage and enables the company to maintain strong gross profit margin at 61% in 4Q23.

In FY22, in constant currency, Shop LC (US) saw a growth of 4.8% year-over-year, but it was 28.1% over FY20. While Shop TJC (UK) was flat year-over-year, but against FY20 it saw strong growth of 32.3% in constant currency terms. With economies opening up and people moving to in-person shopping, the company saw macro headwinds after tailwinds. The company continues to take strategic steps to utilise digital era as an opportunity to serve customers with expanded value proposition and filling product gaps.

EBITDA margins in FY22 came in at 11.0% of revenue vs 15.3% in FY21 and the company is optimistic of reverting back to its earlier levels of mid-teens of EBITDA margin over medium-term. This is expected to be supported by customer growth, improved productivity, and cost optimisations. PAT for FY22 was INR237.1 crore (8.6% of revenue) versus INR271.8 crore (10.7% of revenue) year-over-year.

Risks

In US and UK, economic challenges continue to impact consumer sentiments and resultant demand. However, it has been taking all mitigating measures such as focus on lower ASP products and higher air-time allocation for under 10 & 20 $ products. Moreover, it continues to augment its reach by adding more TV cable and OTA households. Sharp step-up in competitive intensity with advanced logistics capabilities and increased inflation in addressable markets of US and UK can impact the company’s financial performance moving forward.

Future prospects of Vaibhav Global Ltd

The company’s outlook for future seems to be positive. As a result, it has reiterated its earlier guidance and outlook for business and Vaibhav Global Limited is confident to deliver 8-10% growth in revenue in FY24. For years ahead, the company continues to target mid-teens revenue growth with healthy operating leverage. The company has seen improvement in consumer behaviour, resulting in revenge outings. Therefore, it expects substantially higher brick and mortar shopping, more family gatherings and holidays.

Business of the company continues to be supported by deep value proposition at an expanding range of products and deep penetration. It continues to increase its market share across geographies. The company remains cash accretive and has been financing all initiatives out of internal accruals.

On digital front, Vaibhav Global Ltd has done some significant investments in technology, which has resulted in revamping digital platforms and marketing strategies. It sees that underlying long-term business prospects are promising. There are several levers for future growth and improvement in margin and the company’s long-term goal is to sustain growth whilst building healthy operating leverage. Balance sheet of Vaibhav Global Ltd is lean and sound. The company on becoming agile to ground developments and is doubling down on market connect and digital initiatives. It is confident about its resilience and ability to outgrow markets. Focus is on adopting pragmatic approach to continue to improve further market share.

Industry analysis

Over previous 2 years, global e-commerce market has seen some revolutionary changes with consumers becoming accustomed to purchasing items from comfort of their own home. Change in consumer behaviour propelled e-commerce industry forward by minimum 5 years. Significant part of this shift in shopping behaviour seems to be permanent and not transitory. Global e-commerce market touched USD 4.94 trillion in sales in 2021, exhibiting 16.3% growth over 2020. Sustained double-digit growth should be seem over upcoming 3 years, exhibiting significant opportunity for businesses with exposure in digital online sale channels.

Increasing internet penetration, unhindered availability of internet supported by strong fibre optic infrastructure and latest technology, easy and continuous access to internet, IoT-combined AI resulting in AIoT, etc. are some factors which are likely to act as growth enablers of digital retail.

Global teleshopping market size is expected to touch USD 49 billion by 2027, from USD 45 billion in 2020. Therefore, market is expected to compound at ~1.3% over said period. This growth is expected to come from higher number of television viewers, better living standards, safer online payment options, lucrative demonstrations, promotional offers, etc. Global social commerce market size should reach US$ 6.2 trillion by CY30. This market is anticipates to be compounded at a ~30.8% from 2022 to 2030. This growth should stem from increased ease of online buying.

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