VIPINDNSEQ4 & FY25May 20, 2025

VIP Industries Limited

6,904words
134turns
10analyst exchanges
2executives
Management on call
Neetu Kashiramka
MANAGING DIRECTOR - VIP INDUSTRIES LIMITED
Manish Desai
CHIEF FINANCIAL OFFICER - VIP INDUSTRIES LIMITED
Key numbers — 40 extracted
Rs.200 crore
out for ourselves at the beginning of the year. During the year, we reduced our inventory by over Rs.200 crore, in volumes approximately 25 lakh pieces. Our cash flows from operating activities improved signi
25 lakh
he year. During the year, we reduced our inventory by over Rs.200 crore, in volumes approximately 25 lakh pieces. Our cash flows from operating activities improved significantly during the year to Rs.292
Rs.292 crore
lakh pieces. Our cash flows from operating activities improved significantly during the year to Rs.292 crore positive, versus a negative Rs.131, crore last year. The cash generated was utilized to reduce bo
Rs.131, crore
ing activities improved significantly during the year to Rs.292 crore positive, versus a negative Rs.131, crore last year. The cash generated was utilized to reduce borrowings and also funded some of the busin
Rs.118 crore
nues have increased. It has been invested in the debtors. Our debt during the year was reduced by Rs.118 crore. We also got a favorable judgment in the high value indirect tax litigation. Contingent liability
Rs.357 crore
favorable judgment in the high value indirect tax litigation. Contingent liability to the tune of Rs.357 crore have been taken away, so contingent liability is no more existing now. Moving to some macro env
10%
owth has been flat after removing the price support, volume continues to grow in double digit, at 10% for the quarter and 11% for full year. We are trying to balance our premium portfolio with vari
11%
removing the price support, volume continues to grow in double digit, at 10% for the quarter and 11% for full year. We are trying to balance our premium portfolio with various new product offerings,
40%
the channel specific performance: E-commerce continued to be the fastest growing space for us at 40% both for the quarter as well as for full year. Focused approach for B2B partnership also resulted
60%
was the fastest growing category both for the quarter as well as for the year. It contributes to 60% of our total portfolio. We have also made headway in travel accessories category during the year.
rs,
vement in gross margin is underway and will help us improve our gross margins in the coming quarters, starting from the quarter 1 itself. Manpower cost optimization with year-on-year and quarter-on-qu
16%
quarter 1 itself. Manpower cost optimization with year-on-year and quarter-on-quarter decrease of 16% and 20% respectively. VIP Industries Limited – 14th May, 2025 Our employee benefit exp
Guidance — 20 items
Moving on to the channel specific performance
opening
“Going forward, we will concentrate on penetrating deeper into top 14 markets in the country to ensure better store level profitability.”
Future outlook
opening
“Successful result of the same will be showcased in the upcoming quarters, starting with the quarter 1.”
Future outlook
opening
“To conclude, I would like to say that, the year 24-25 was a year of big solves across multiple areas, and the results for the same will be visible from the next quarter as we see FY’26 to be much, much better year for us.”
Manish Desai
qa
“RM will be approximately around Rs.215 odd crore”
Neetu Kashiramka
qa
“It will be available in our annual report though.”
Manish Desai
qa
“In terms of warehousing, I would say that the impact by another three lakhs will be surrendering it so in a year time frame, we will be saving another Rs.2.5 crore minimum on the warehousing side, considering that next 1 or 2 Quarters, I am talking about.”
Manish Desai
qa
“Quarter 4 again will be a seasonal period, so we will see that point of time, what we need to commensurate into this.”
Neetu Kashiramka
qa
“For example, a store where cost is Rs.5 lakh, if my revenue is Rs.2 lakh, I don't think it will ever VIP Industries Limited – 14th May, 2025 be able to make profitable so going forward, the idea is, for exclusive stores we will focus on top tier cities where minimum threshold revenue is Rs.8 lakh per month.”
Neetu Kashiramka
qa
“It may not reduce, but we want to be at 30% for FY26.”
Bharghav
qa
“So, net-net the focus in FY’26 will be to get the gross margin back to 50% right?”
Risks & concerns — 6 flagged
Heavy discounting initiated by online brands and e-commerce platform has also put some pressure on realization, not only for us, but across the industry.
— Moving to some macro environment
Our commitment to reduce slow moving inventory further added pressure on our average selling price so while our value growth has been flat after removing the price support, volume continues to grow in double digit, at 10% for the quarter and 11% for full year.
— Moving to some macro environment
Profitability was definitely a challenge during the year, mainly gross margin which was impacted by downward pressure on selling prices, inventory provisions and netting off of price support for e-commerce channels.
— Moving on to the channel specific performance
But what is unfortunate events have played out in last one month or so, do you believe that somewhere there is a risk of slowdown happening in our calculation for the first quarter or first half of this year which is non-wedding season largely?
— Tejas Shah
We are not seeing any kind of larger substantial disruption coming on the way because of this kind of concern, and that's where we stand as of now.
— Manish Desai
We are not seeing that kind of pressure below what we are already there.
— Neetu Kashiramka
Q&A — 10 exchanges
Q
First of all, Madam, can you let us know what is the quantum of slow moving stock that is now left with us, and also out of this Rs.700 crore of inventory that we have with us, can you tell us what is the quantum of RM and WIP inventory?
Manish Desai
If you look from the slow moving inventories, we would not like to give any absolute value, but has come down considerably over the last year. The pain has almost reduced to a negligible amount as we stand today. In terms of the WIP what are you talking about the raw material WIP, or the capital work in progress? No, the inventory WIP? It’s the split of FG and RM. RM will be approximately around Rs.215 odd crore Understood. And also, on the other expense side while we have given the reasons that it was higher sequentially due to performance marketing and professional fees, also we did some VIP
Q
Ma’am first question is, you indicated on closure of stores by the modern trade partners. Can you provide some more color over here, and secondly, what is the motivation behind Carlton exclusive new stores, basically if you could help us underlying the thought process and economics. Thank you.
Neetu Kashiramka
Yes. Basically, we have closed 133 stores overall, and have opened 32 stores. The idea is that, lot of these stores were opened in tier three, tier four cities where the throughput is very low. For example, a store where cost is Rs.5 lakh, if my revenue is Rs.2 lakh, I don't think it will ever VIP Industries Limited – 14th May, 2025 be able to make profitable so going forward, the idea is, for exclusive stores we will focus on top tier cities where minimum threshold revenue is Rs.8 lakh per month. And basis that, this year we are targeting to open 50 stores, 20 in Carlton, and balance in VIP l
Q
Ma'am my first question is that, obviously we have spent a lot in terms of marketing starting April, and also a lot of new product launches have been done. So, the idea behind this is to get back our GT market share which has reduced from 21% to 17%, and also our modern trade market share, where salience of revenue has again reduced from Rs. 26 % to Rs. 23 %?
Neetu Kashiramka
It's not market share it's basically the salience, that offline salience for the business has to go up. The idea behind spending the money on the brand is to actually showcase and have a change in the perception in the minds of people. Like lot of people didn't know that VIP is as contemporary as any other brand can be one is that, and also the product on which we have spent on VIP is the first product from the Japanese designer. All these are reasonable prices, better margins, and also will definitely increase the confidence of the channel partners. VIP Industries Limited – 14th May, 2025 So
Q
Just starting with clearly this year as the year progressed, our priority shifted from growth to repairing balance sheet first. So looking at the current scenario of inventory debt, what are the levels you will be comfortable with to pivot back to growth? And then, if you can share the VIP Industries Limited – 14th May, 2025 absolute numbers or ratios which you are actually looking to kind of shift focus to growth rather than balance sheet?
Neetu Kashiramka
Most of the large ticket items on balance sheet is done, so we have started focusing on growth already, which is visible from a media campaigning We are now looking forward for growth and the other ratios will all start improving as the business improves. However, on the inventory level, we are looking at reducing it further by Rs.150 crore and the same level we want to reduce our debt in this year. Sure. My second question is to this branding spent that you spoke about on VIP. Now, in last decade or so, we would have done multiple attempts to kind of make look VIP standalone brand contemporar
Q
Ma’am just wanted to understand with all these initiatives that you have spoken about, what is the growth that you think is achievable in this year, and how do you see whether we should think about double digit growth coming in, and how would the volume and pricing play now, given that last year was a big price correction year. So, do you think we can see price increases or premiumization helping you to gain ASPs at an average level?
Neetu Kashiramka
Yes, that’s the endeavor, this year most likely our volume and value growth should match. On the growth front I would say that whatever is the category growth, we should do 1% or 2% better than that. Okay. So if the category growth for example, is around 10% we should be able to do 12% is where we are? Yes, that’s what I am saying. And it should be equally divided between volume and value is? Yes, that will be our key focus area. Okay. And in terms of hard luggage versus soft luggage, do you see the weight of hard luggage increasing further as the industry trend is moving towards. No, we don't
Q
Just two quick questions, on the retail front, general paid and retail, what is the March closing inventory you are working with, at the shelf?
Manish Desai
You are talking about the retail channel, distributors and retailers, or stores, or our own stores. Retail and general trade? General trade would not be high, the last 10 days were going in to clean up the shelf and other stuff to make available for the Muhrat billing, so you won't expect high accumulation of inventory with the retail channel. 15 to 20 days of inventory. And what kind of DSO we work with general trade? Seven days. Okay, my second question is, on the journey which you walked about last one year, looking at new designs and new colors and more to suiting with the new Gen Z popula
Q
So, if I recall in your concall, post Q3 results you had guided for a double digit exit EBITDA for this year, around 12% if I remember correctly. And, obviously we have not sort of achieve that. I just wanted to understand, when you gave that double digit EBITDA guidance you would have had certain expectations in mind of how things would pan out and how they have actually panned out. Just wanted to understand where are the big misses between where you had guided and what has actually happened. A few areas you could help us understand why we have missed that guidance would be very helpful.
Neetu Kashiramka
One, biggest thing is that we took some calls in the view of reduction in inventory to sell some of the items at cost or slight very little margin. Second we also decided to have lower inventories with the channel partners all this we have done for a sustainable future growth. Otherwise, lot of our channel partners were unhappy because they were holding stocks, and therefore their ROIs were also low. I wanted to start my FY’26 with a positive note, therefore we took some of those calls and we did inventory provision so basically the idea was that, let's leave the baggage in FY’25 and start FY’
Q
This is just a follow up on the last person's question. Look, this was the halfway through February, where we were talking about double digit like 12% EBITDA exit run rate. And even earlier, when we had met we had discussed that there were certain amount of rationalization of expenses which had already happened, so it would like naturally move up and that the numbers were already in the bag. So, what would be helpful is that, we understand that and we appreciate that you are accepting that we have missed the number, but just wanted to understand that with a little bit more granularity of how m
Neetu Kashiramka
One thing on inventory with channel partners, in February we did some meetings, we did conferences, roadshows, and we met some of the large channel partners from top 25. This was a common problem which everybody alluded and as an organization we took this big call, that for a future sustainable business going forward we need to take those kind of tough calls.. Whether we should have spoiled one quarter or we should spoil few years that was the balancing which had to be done. The second thing on inventory, definitely we had plans to reduce slow moving inventory to maximum. We always know that i
Q
So before I ask my question, just a piece of feedback, which I had given last quarter as well, just to reiterating it now, if you could release the investor presentation a little in advance, rather than just five minutes before the call, it will be helpful. Thank you.
Neetu Kashiramka
Yes, definitely. So, my questions are, what is the quantum of debt reduction we are planning in this FY’26 and the second question is, some of the expenses like professional fees and product road shows, VIP Industries Limited – 14th May, 2025 et cetera that have bumped up the other expenses this quarter. So which of these do you think are one off and which one could repeat in H1. Thank you. Reduction in debt Rs.125 crore, and legal and professions 50% is one off, which will not be there in H1. These roadshows are done in March, but not to the extent what we did this time on a lower scale, but
Q
So, I hope we have answered all the questions satisfactorily, if anyone still remain in the queue, I would request them to reach out us and we will definitely provide clarification and answers to it. Thank you and have a good evening to all of you.
Management
Speaking time
Neetu Kashiramka
51
Manish Desai
16
Moderator
12
Prerna Jhunjhunwala
12
Shirish Pardesi
8
Bharghav
6
Jinesh Joshi
5
Tejas Shah
5
Ritesh Shah
4
Prachi Kotekal
4
Opening remarks
Devyanshi Dave
Thank you. A very good afternoon to everyone. A warm welcome to the Q4 and FY’25 earnings call of VIP Industries Limited. From the senior management we have with us, Ms. Neetu Kashiramka – Managing Director and Mr. Manish Desai – Chief Financial Officer. Before we begin the conference call, I would like to mention that some of the statements made during the course of today's call may include certain forward-looking statements, including those related to the future financials and operating performances, benefits and synergies of the company's strategy, future opportunities and growth of the market of the company services. Further, I would like to mention that some of the statements made in today's conference call may involve risks and uncertainties. Thank you and over to you, Ms. Neetu Kashiramka.
Neetu Kashiramka
Good afternoon everyone, thanks for joining the call. Before we move on to P&L performance, I would like to just highlight progress which is made on balance sheet commitment, we had set out for ourselves at the beginning of the year. During the year, we reduced our inventory by over Rs.200 crore, in volumes approximately 25 lakh pieces. Our cash flows from operating activities improved significantly during the year to Rs.292 crore positive, versus a negative Rs.131, crore last year. The cash generated was utilized to reduce borrowings and also funded some of the businesses, like e-commerce and modern trade where the revenues have increased. It has been invested in the debtors. Our debt during the year was reduced by Rs.118 crore. We also got a favorable judgment in the high value indirect tax litigation. Contingent liability to the tune of Rs.357 crore have been taken away, so contingent liability is no more existing now.
Moving to some macro environment
Luggage industry, has been one of the most attractive sectors post COVID. High growth rates, positive travel macros, low entry barriers have attracted multiple new entrants. Most of these VIP Industries Limited – 14th May, 2025 new entrants are in the online space backed by large investor funding. High heat competition has fueled price war in our segment, especially in the mid-price segment. Heavy discounting initiated by online brands and e-commerce platform has also put some pressure on realization, not only for us, but across the industry. Our commitment to reduce slow moving inventory further added pressure on our average selling price so while our value growth has been flat after removing the price support, volume continues to grow in double digit, at 10% for the quarter and 11% for full year. We are trying to balance our premium portfolio with various new product offerings, we have exciting new launches coming up in our premium and mass premium brands Barring a few, most of these
Moving on to the channel specific performance
E-commerce continued to be the fastest growing space for us at 40% both for the quarter as well as for full year. Focused approach for B2B partnership also resulted in a double digit growth for this channel. The closure of modern trade stores by partners impacted growth for the channel, also our EBOs, we have actually closed non-performing retail stores to the tune of more than 100. Going forward, we will concentrate on penetrating deeper into top 14 markets in the country to ensure better store level profitability. We are also opening Carlton exclusive stores to improve our premium mix. Overall, today we have 404 stores. Traditional channels had growth challenges during the quarter as we focused on reducing channel inventories. In fact, we closed our traditional trade sales on 20th March for the first time in the quarter 4 of this year. Multiple planned initiatives to improve a premium mix are underway. Our recent backpack collection received positive response in the market. Backpack
Future outlook
Fundamental demand indicators seems to be positive. There are multiple wedding dates in fact, this year the number of weddings is maximum in last 10 years. Even hotels and travel portals are definitely showing better results. We are very confident that the demand indicators will definitely be in favor of the category. We are steadfast in our transformation journey. Successful result of the same will be showcased in the upcoming quarters, starting with the quarter 1. To conclude, I would like to say that, the year 24-25 was a year of big solves across multiple areas, and the results for the same will be visible from the next quarter as we see FY’26 to be much, much better year for us. With this, I conclude my opening remarks and open the floor for questions.
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