PNB Housing Finance Ltd

NSE:PNBHOUSING

Ladies and gentlemen, good day, and welcome to the Q3 and 9M FY '25 Conference Call hosted by Vaibhav Global Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Ms. [ Nishita Bhatt ] from Adfactors PR. Thank you, and over to you.

Good evening, everyone, and thank you for joining us on Vaibhav Global Limited Earnings Conference Call for the third quarter and 9 months ended 31st December 2024. Today, we have with us Mr. Sunil Agrawal Managing Director; Mr. Nitin Panwad, Group CFO; and Mr. Prashant Saraswat, Head of Investor Relations. We will begin the call with the opening remarks by Mr. Sunil Agrawal under business operations, key initiatives and a broad outlook, followed by a discussion on the financial performance by Mr. Nitin Panwad. After which, the management will open the forum for the Q&A session.

Before we get started, I would like to point out that some statements made or discussed on today's call may be forward-looking in nature and must be viewed in conjunction with the risks and uncertainties that we face. A detailed statement and explanation of these risks is included in the earnings presentation, which has been shared with you earlier. The company does not undertake to update these forward-looking statements publicly.

I would now like to invite Mr. Sunil Agrawal to make his opening remarks. Over to you, sir.

Thank you, Nishita. Good evening, everyone, and thank you for joining our quarter 3 FY '25 earnings call. I hope you would have reviewed the quarterly results and investor deck.

Before diving into quarterly updates, I'm happy to share that our Germany operations have broken even at the EBITDA level. And Ideal World, the new business that we have acquired, has turned profitable in Q3, as expected. Now let me start on the quarterly updates.

I am pleased to share that we achieved our highest ever quarterly sales of INR 977 crores, showing a 10% Y-o-Y growth. Owing to a surge in demand of high-end jewelry, gross margin came in at 61.3%, which is 110 basis points lower Y-o-Y. EBITDA margin improved to 11.5% this quarter, which is 40 basis points higher than last year. Lower gross margins were offset by savings in shipping costs, operating leverage, Germany reaching breakeven levels, and our ongoing cost optimization drive.

Before I cover category-wise performance, I would like to update on lab grown diamonds. Going to the consumer demand towards lab grown diamonds, we have successfully scaled our offering, which contributes to 8.9% of quarterly sales versus 0.2% a year ago. We are leveraging our in-house sourcing, extensive jewelry design bank, and in-house jewelery manufacturing to stay ahead of our peers in this emerging segment. Now let me take you through our key retail markets.

In the U.S., revenue grew by 3.6% Y-o-Y, boosted by strong festive season and improving consumer confidence. In the U.K., the revenue was up 6.5%, with Ideal World making a significant contribution. Germany continued its robust performance, posting a 30.7% Y-o-Y revenue growth. With operations achieving breakeven this quarter, we are confident about maintaining this momentum in Q4 as well. We further expect Germany to start contributing to our bottom line from FY '26 onwards.

Our 4R strategy with widening reach, new customer registration and acquisition, strengthening customer retention and repeat purchases continues to deliver strong results. Our TV networks now reach 127 million households, and our unique customer base has grown by 30% Y-o-Y to approximately 698,000. Excluding acquisitions, our customer base grew by 6% Y-o-Y. Customer retention remained strong at 43% with an average 22 pieces purchased by customer annually.

I would like to update you on Ideal World and Mindful Souls. Ideal World showed impressive Y-o-Y growth of 95% and achieved full cost profitability in Q3. Mindful Souls also performed well, maintaining PBT margin of 7% this quarter. With over 102,000 unique customers, we are getting visible benefits of the leveraging VGL supply chain and are regularly launching new products as well. At this year, community give back is our area of focus. We recently achieved a milestone of serving 97 million meals to school children through our [ your purchase feeds ] One for One Meal Initiative, with 69,000 meals donated every school day. Our long-term goal is to provide 1 million meals per school day by FY 2040.

On the sustainability front, we generated 1.1 million kilowatt hours of solar energy in this quarter, entirely powering 2 of our manufacturing units in India, which aligns with our long-term goal of achieving carbon neutrality for Scope 1 and Scope 2 greenhouse gases emission by 2031.

During the quarter, we received the IAGJ Award for the German Jewelery -- from the German Jewelry Export Commission Council for being the highest exporter of certain polished color gemstones from India. This reflects our operational capabilities and commitment to contributing to India's leadership in gemstones and fashion jewelry industry. As we aim to balance growth, reinvestments and shareholder returns the Board has declared an interim dividend of INR 1.5 shares for this quarter, representing 39% payout.

This reflects upon robust cash generation ability of our business and a strong growth outlook. Looking ahead, we remain mindful of macroeconomic trends, particularly the muted consumer sentiments in U.K. and Europe. We expect 12% revenue growth for FY '25, reflecting these commissions while maintaining operating leverage. From FY '26 onwards, we anticipate early teen revenue growth with a continued focus on operating efficiencies and leverage.

I will now hand over the call to Nitin to discuss our financial performance in detail. Over to you, Nitin.

Thank you, Sinul, and good evening, everyone. I will take you through our financial performance through the December quarter.

We are pleased to report that this quarter, we recorded our highest ever quarterly revenue of INR 977 crores up from INR 880 crores of Q3 FY '24, which is 10% year-over-year growth. Our gross margin was 61.3%, suggesting the impact of product mix tweaking to match with the consumer demand. EBITA margin improved by 40 basis points to 11.5%. This was primarily driven by Germany achieving EBITDA breakeven, Ideal World achieving full cost profitability, operating leverage, part of which we reinvested in digital spend in the U.S.

Profit after tax for the quarter stood at INR 64 crores, a 36% year-over-year growth, reflecting the degree of operational leverage of our unique business model. In terms of regional performance, U.S. revenue grew by 3.6% supported by a strong holiday season and improving macros. The U.K. posted a 6.5% revenue increase driven largely by Ideal World. Germany recorded a strong 30.7% Y-o-Y growth, with operations achieving breakeven this quarter. As Sunil also mentioned earlier that this progress strengthened our confidence in Germany's ability to contribute to the bottom line from FY '26 onwards.

For Q3, TV revenue reached INR 547 crores while digital revenue totaled INR 380 crores. TV revenue grew by 6% year-over-year and digital revenue grew by 12% year-over-year.

Digital sales is contributing 40% of total B2C revenue. Our budgetary EMI options accounted for 38% of B2C revenue, highlighting its convincing for our customers -- highlighting its convenience for our customers. Ideal World's full cost profitability this quarter is a significant milestone and we are focused on scaling the business for this. Mindful Souls also contributes to perform well with cross-learning from its digital operations, benefiting our existing business in the U.S., U.K. and Germany. Our balance sheet remains strong with a net cash position approximately USD 12 million, that is INR 106 crores. Free cash flow and operating cash flow stood at INR 58 crores and INR 78 crores, respectively.

Quarterly cash flow generation was slightly impacted by our receivable due to increased inventory and prepayment to suppliers. Our ROCE improved to 18% and ROE to 11%, reflecting steady progress. We are pleased to announce a third interim dividend of INR 1.5 per equity share, representing 39% of quarterly to 63% of YTD payouts.

As we look ahead, we remain cautious about broader market condition, especially in U.K. and Europe. Factoring in these challenges for FY '25, we now expect 12% revenue growth while maintaining operating leverage. From FY '26 onwards, we aim -- for FY '26 onwards, we aim for an early-teen revenue growth along with operating leverage.

[Operator Instructions] First question comes from the line of Rushabh Shah from BugleRock PMS.

Yes. Sir, in the last call, you mentioned that our current market share is 4% compared to the Q date and sharp HQ, and their market share has grown less than 2%, which is good for us. So as we grow our revenue per household, which we are at [ $3 to $3.5 ] and the leaders are sitting at $60. So what steps are we taking reach towards the leaders? I know the journey would be really long. What -- and what would -- how much time would it take the management, and does the management have the vision to reach nearer to $60?

Yes, Rushabh, thank you for the question. Good question. So we focus on our 4Rs, expanding our reach on television footprint as well as our e-com reach through social, Google and affiliates. Then we expand additional registration to get more customers coming and raise or join us and retention and repeat. So for these, we have action registers for each of these drivers of our business. We also have are guardrails in place. The gross margin is a guardrail. Our CE is the guardrail and the profit leverage is the guardrail.

So with these guardrails, we function and invest into these 4Rs continuously. We'll continue to grow our market share for many years to come. Our business models is, I would say, unique and very difficult to [ avail ]. So more our moats are strong because being vertical from India and Asia, and very agile to the market. So we'll continue to see gaining the market share in these advanced economies of the world.

So sir, you -- just a follow-up on that one. You said your moats are firm because you're a vertical integrated business. What else separate you from the competitors? Is it In the SKUs? Or what else separates you?

So vertical bring low cost, so we can afford to undercut the competitor should a competitor come. And agility for any new idea coming in. Other people are working through middlemen, so it takes time for people to respond to any new opportunity that comes. We being vertical, we can turn around an idea within 2 weeks, from an idea product on air within 2 weeks, pretty much like Zara that they have perfected the model. From concept to showrooms within 4 weeks since our product is mostly shipped by air.

So any idea how much time does the competition put an idea into a product? So you say you take 2 weeks.

So they take much longer, months. I do not have exact number for each of the competitors, but they didn't have multilayers in between. So the concept has to travel and it has to translate into the product and has to be assembled, has to be approved. And the product has to be shipped. So much longer lead time. So I can tell you from my experience, we used to supply to QVCs or HSS or other -- Walmarts of the world. So they used to give us 3 months lead times. So we took a long time to make and then shipped to them and concept used to be 6 months in advance. So it used to be a much longer period when we were vendors to them.

Okay. So my next question is, in the budget pay, if a customer defaults one product and he orders another product on our website, so how do you maintain the list of people who are defaulted? And do we offer a new product to him via budgeting?

Rushabh, Nitin here. Let me take this question. So we assign the limit based on customer profile, customer payment, return and customer default or failure history.

So as soon as a new customer comes, we don't assign a full limit to them. We view, for example, budget available over there. If customers default at the first place, then customers will no longer able to take budget pay, while they can checkout via full payment through card. As soon as customers repays their debt, then customers will be eligible from the assigned limit, respectively, based on our internal management system.

Okay. Okay. That's right. And sir, in the last call you mentioned that when a customer comes to you, you want to retain the customer and move them to the other platforms when the lifetime value goes up. So how many of the customers have been able to convert in the past 3 to 4 years?

So that actually, how we monitor is based on our total customer portfolio. So we monitor as a pre-categorizing our customers. One is an omnichannel customer, one is TV consumer and one is buying only on web consumer. Though there is a different subtractions also in between. But omnichannel customers roughly contribute in count is around 12% of our business, which contributes roughly around 70% to 80% of business sales.

And while TV and web has a different numbers. So that is why we promote the customers for heavy omnichannel experience so we can increase the customer lifetime value. And we maintain this ratio and try to increase that customer count ratio of 12% to 13% I mentioned to you to higher levels to achieve higher revenue per customer.

Last question is, what is your vision for Vaibhav Global? Where do you see Vaibhav Global going in next 5 years?

So our mission is to reach 1 million meals by FY 2040. And we evaluate ourselves against that goal. It is a stretch goal from currently 68,000 meals per school day to a 1 million meals. And for that, we have an internal tracker how we are doing against that. So that counts into number of pieces, revenue and the continued profitability deliveries in short to midterm.

[Operator Instructions] We take the next question from the line of [ Anusha Chitnet ] from [ Arion Capital ].

I have a couple of questions regarding material cost. They seem to be substantially higher this quarter. So any particular reason for that? And also, I would like to know about how you see your lab grown diamond business shaping up in the future because it was quite a large contributor to top line this quarter. So can you just talk about that a bit?

Let me talk about lab grown diamond first, and then Nitin will take the first question. So lab grown diamond is a strong trend right now promoted by most retailers, particularly Swarovski and Pandora. So these are large retailers and they are trend setters. And we believe that our value proposition in lab grown diamond is pretty strong because of a direct costing, direct sourcing and our in-house jewelry manufacturing and design. So that's why it has taken a large portion of our sales. And for foreseeable future, I see this ratio to continue. It may go up a little bit. I don't know. We are very agile in addressing consumer demand. So we expect it to be double digit for about 10% to 12% for foreseeing future.

And about your question of material cost. So gross margins remains strong, what we earlier guiding over 60%, though the margin is lower than the last year because of the mix in product portfolio and the higher number of clearance days that we have done in this quarter. And we expect that our gross margin will continue to [ above ] 60% in upcoming quarters and years.

The next question comes from the line of [ Aditya Singh ] from Robo Capital.

Sir, I'd like to understand more on the TV revenue and the volume growth because it is kind of flattish. So is there some kind of risk that we need to know in the TV segment?

So I'll take that. So thanks for the question, Aditya. TV segment for us, still there's a lot of untapped opportunity within U.S. Although there is a cord-cutting happening on the cable front, OTA continues to grow year-over-year. And we expect a single-digit growth continued into television space, which could be low to mid-single-digit growth year-over-year. Now some quarters may fluctuate a bit. Some quarters may not. But overall, we expect it to continue to grow.

On the other hand, Digital, we expect to grow faster than TV. Therefore, overall growth will continue on early teens for the future years. Now the volume is also a factor of average price point with lab grown diamond taking a larger product revenue share, our ASP increased last quarter. Therefore, the volume you might be seeing are a little bit subdued. But in the long run, we see the steady state at around similar price points, and we'll continue to grow on early teen numbers overall.

All right. And with respect to Germany, Ideal World and Mindful, do we see any potential revenue or target market share that we might be targeting to achieve in their respective geographies?

Yes. So Ideal World, we include within the same geographic and TV demographic. Mindful Souls is completely B2C Digital business, and we see this to be accretive to the group from our top line and bottom line both ways. And also, we are learning from this pure B2C business, transferring that learning to our Group 4 TV channel brands. And we've seen benefit of that. Our leisure spend has gone up, digital efficiencies have gone up. They're still not at the level of Mindful Souls but we expect the learnings to inculcate more and more in coming years. And our TV business will become as efficient as Mindful Souls in media spend, at the digital media spend that we do.

The next question comes from the line of Anusha Chitnet from Arion Capital.

So I have again a couple of questions. I want to know the [indiscernible].

Since there is no response, we move on to our next question, which is from the line of [ Shubham Biswal ] from [ Conversion Capital ].

Yes. So in one of our slides, you have mentioned how we are making several B2C brands of our own. So these brands necessarily have higher retention rates for -- have you observed this or have you observed this bigger company is having their own brand? What's their playbook? So what's your thought process here on our own brands? That's my first question.

It's a good question. We track our own branch performance against the benchmarks, we have some industry. So we create the benchmark against each vertical of digital marketing that is the social -- organic social, paid social, organic SEO, paid Google affiliates through e-mail retargeting, and other properties we're targeting through display ads and all that. And through that, we constantly review and we try to improve each of our brands.

To your point, yes, we track not only B2C brands, but our legacy brands as well against those [ references ].

So the next question is we have been trying to expand our digital medium. I mean, I think it's a significant portion of our revenues now. But what i have been trying to understand is our majority or more, right, in a way because we have been catering to a very old population to primarily [indiscernible], right?

But now once you are transitioning to digital, the customer base changes, right, now there's a much younger population. So what I want to understand is, is this digital transition of kind of an omnichannel approach that you're following or if these are the higher A&P spend going forward? Because it completely different, will be bit higher competition as well in this segment. So how are you looking at this digital generation? So that's my question.

Yes. So even retail space, we target customer 40-plus only. So that's why we go on Facebook and Google for our customers, not on TikTok or Snapchat or other younger demographic platforms. The reason of targeting this customer is because this customer is more affluent, this demographic is increasing every year as the population is aging, so this demographic increases and they have more disposable income.

So our web customer is just about 5 years younger than our TV demographic, but still is same. And our product offering is also addressed towards this demographic, 40- to 70-year old -- mostly White-Caucasian female. We also have some Hispanic, some Asians as well, but largely White Caucasian females and as seen in Germany and U.K. as well. So our ecosystem is largely driven towards this audience.

The next question comes from the line of Pritesh Chheda from Lucky Investments.

Sir, I wanted to know for the 9 months, what would be the margin percentage or loss percentage number in Germany operation? And what will be the profitability or loss percentage number in the Ideal World?

Yes. Pritesh, so Germany in the first 9 months, roughly around 2% margin was consumed by Germany, Germany losses. Ideal World was very small. I don't have the exact number, but I would expect roughly 0.5% Ideal World was in first 9 months.

So you're saying Ideal World will be 0.5% of the Ideal World revenue, right?

Not 0.5%, as a group as a group percentage, if I talk.

Okay. So basically, both these operations put together consume 2.5% of the group's revenue and so adjusted for that, if you're 9 months -- whatever was your 9-month margin, we have to add 2.5% with?

Right, yes.

We take the next question from the line of Anusha Chitnet from Arion Capital.

I have a couple of questions. I would like to know about your U.S. and U.K. growth ex the Ideal World and Mindful Souls acquisitions. And the second question is, what -- how do you see your medium-term margin outlook shaping up? And how will the German business be contributing towards the margin and the bottom line in like going ahead in the next 3 to 5 years?

Yes. So this is Sunil, I'll take the second part and first part, Nitin will answer. So we expect the U.S. economy is relatively better. So we expect the U.S. to continue to give us a growth of high single digit in the coming quarters and coming years. And DSC and in the U.K. DSC and Ideal World are sort of combined operation. They are both -- they are a combined legal entity, and they have a lot of common staff, and operations are also quite common. So we prefer to give the guidance together with U.K. And so together, the U.K. will give us low double-digit revenue growth in coming quarters and years. You ask -- does it answer your question? Or you had other question to it?

I wanted to know about the ex the 2 businesses, what kind of...

Let me take, Anusha, the question that you asked me. So U.K. in the first 9 months, if we exclude the acquisition of Ideal World, U.K. stand-alone [ PJC ] was -- they grew by 2% while Ideal World grown significantly. In the first 9 months, U.K. grew by 12.3% year-over-year, including Ideal World.

Okay. That is helpful. And regarding the medium-term margin outlook also, if you can see anything in the German business as well?

Yes. From a gross margin point of view, we expect the gross margin to be in the region of around 62%, 62% or up in the medium term. And Germany continues to grow. As you saw, we have a 30% growth rate in January last quarter. So we'll see good growth in 20 to 30-ish-percent kind of growth in the coming quarters as well.

I also have one more question, if I can squeeze it in. I noticed that your B2B revenue is up substantially compared to the B2C revenue in terms of growth. So why is this? And also, do you have any plans to significantly enhance your retail presence?

Yes. So I'll take that. The B2B revenue is more a reflection of our operational excellence from India. A lot of customers are approaching us from Europe, the U.S.A., Japan. Probably because of China plus one and also seeing our operational efficiency and value that we offer to them.

So long time ago, we used to have our own B2B operation in U.S. that we discontinued quite a long time ago. So whatever is done from India. And we also make sure that these operations give us at least 18%, 20% ROIC and also learning from the markets because we are in these markets, Europe, and U.S. And we do hope to go to Japan. So these learnings are valuable to us.

The next question comes from the line of [ Sourav Kumar ] from Scientific Investing.

I have a question. So our target audience is basically 45-plus and women. And TV has been historically a key revenue driver and we are trying to grow digital to 50%.

But my question is this whole Internet in U.S. and Europe, it caught up in post-1985. So ideally, if we look at the age band people who are like at a young age, they are after '95, '97, they are the one who are hitting 45 years of age band. Do you see some major disruption coming in next 3, 4 years? Because now the next generation of 45-year plus people, you will see in the next 5 years.

There will be the people who have grown on Internet. So I know your digital growing and you want to take it to 50%. But do you see any major disruption in the consumer behavior coming in the TV segment because of this risk? And if yes, how are you planning to mitigate? Is 50% good enough or we need to have a higher aim for digital?

Good question, Sourav. So we expect the digital to continue to grow as a ratio of sales and TV to continue to grow in absolute numbers for foreseeable future because we still have some footprints that we can still acquire on television. We are not fully covered.

But the main phenomena that we look ourselves is that we are a live programming company. We broadcast our signal right now through television, through cable, satellite, telcos. But more and more, our web stream revenue share is going up as a percentage of revenue. Now web stream would be consumed by these consumers through OTT platforms, say, Netflix or the Fire TV, Amazon Fire TV, Rokus, Hulus and AT&T now of the worlds. And those platforms will become bigger and bigger issue of our sales.

So our USP is a live programming with engaging content now and here, kind of entertainment education and company to this audience that we have 40- to 75-year-old. They are mostly single, they are living in their homes, single with families which shouldn't have gone -- they are at home, they have time on their hand, and they want the company education and entertainment.

So whether the signal goes through cable, satellite, telco or OTT or over the air that we don't pay. Or through their desktop or tablets or iPhones. So we see that as our strength, and that will continue to grow. As you might have seen it, I'm not sure, the web stream business in China is substantially large. And that phenomenon is coming in the U.S. as well more and more. So those saving advantage that we have over many years will continue to help us in a long time to come. The medium may change.

Okay. And sir, I have added a question there. So when it comes to competing in digital, in digital, what kind of market share we have? And who are our key competitors? That is one.

And second is a bookkeeping question. I think out of 9 years, only 2 years we have gone free cash flow negative else, we have already have a lot of good free cash flows. And given now we don't have any major CapEx for next 2, 3 years, can we expect an increase in dividend in the years to come for next 2, 3 years? These are the 2 questions.

Yes. I'll take the first one, the digital market share. Now we are right now counting against the relative TV/e-com companies. Now we do not compare ourselves against the Amazon or all the B2C companies so far. Because our pure B2C is a very small portion. As we learn the B2C to that level of being pure B2C, then we will start to measure that market. But we are not there yet, so I don't want to figure out a guess how big is the market, what is our market share in that space yet.

But we are confident that we are learning rapidly and giving more and more efficiencies in our digital spend and gearing those customers, and hopefully, transitioning those customers to live stream that goes through web or OTT, and it does increasing life time early of that customer that other DTC players can not because that they don't have the experience. Sourav, can you repeat your second question?

So let me take the second question about the free cash flow. So our business model is very unique where we get the payment early from the customer. And we generate pretty high cash. There's a low, very asset-light model apart from a year that we had, as you mentioned, we did cash flow. But all the year, we had a good amount of cash flow.

We reward that through dividend payments and we constantly look for our future opportunities to get more market share via digital or TV mediums. But if you don't find a suitable opportunity, which gives 20% or above ROIC, then definitely, we may think of rewarding to shareholders.

The next question comes from the line of Gaurav Nigam from Tunga Investments.

My first question was on Mindful Souls and I just wanted to get your view. Since the acquisition, your view how has the business performed, what has worked favorably and what has not? And a related question, which I wanted to ask if I'm looking at the right numbers.

In Mindful Souls, I think the last quarter, the [ PPMTB ] margin is close was 10%, which is right now 7% in the presentation. Is this number right? And the growth numbers are also looking almost similar. So just wanted to check if the numbers are printed correctly and if you can help understand on Mindful Souls what should be -- what has worked and what has not?

Sure. Nitin, here. First part. So the -- for the Mindful Souls, the last some months, we moved our warehouse facility to our own in-house and also, supply chain started using from our only house [ Weber Global ] rather using from third-party China. So that required air shipments that resulted in lower gross margins, what we initially had with the Mindful Souls. But now as the leveraging of the supply chain, which we fully completed in February onwards, that we converted in a higher gross margins.

So numbers you are looking is right as a current EBITDA margin is 7%. But with the leveraging full supply chain from India after having sea shipments started that will come from this quarter onwards, we will see the higher gross margins. And Sunil can take the other part here.

Yes. So other part about the revenue growth we transitioned the business to us. In that process, we are also learning and implementing new strategies. For example, when Mindful Souls was doing its own business as a separate -- not our company, they are only focused on subscription. And now started adding single item sales as well. Their hope is to get the single item customer to move into subscription and to acquire a single item customer, it's much lower cost and easier than a subscription customer.

So debt is paying off. So our customer acquisition is now higher year over year, every month, now every week now. And we are hoping to transition that and having those e-mail flow, text flow and retargeting flow, to convert them into subscription. So we are very happy with the business that we acquired from ROIC point of view and some learning point of view for other parts of the business. So this is one of the best things -- deals that we've done.

Very interesting. Sir, one -- another question was on Ideal World. So when we said it is full cost profitable, are we talking about at the EBITDA level or at the PBT level? Just wanted to clarify this point.

Yes, it is PBT level. There is no much depreciation costs involved in Ideal World.

We take the next question from the line of Nirvana Laha from Badrinath Holdings.

Sir, to hit the early teens revenue growth that you're targeting now, can you please break down the volume growth, the ASP growth? And any kind of INR depreciation that you're factoring in, in this 13% -- 13% or 14% early-teens growth number? The reason I ask is because the volume growth in this quarter, I think it's the first full quarter with Mindful Souls and Ideal World and the base is only 1.7%. So what are the levers that you have to take it up to your target volume growth number? And what is the target volume growth number to achieve the target revenue number?

Yes, I'll take that question. So thank you, Nirvana. So for us, we are a very agile company. For example, lab grown diamond came as a trend. Last year, we had almost net 0 revenue share of lab grown, and this is almost touching 10%. So we take opportunity of the trend and address and cater to the market. So in that process, our ASP went up. And because we give more airtime to higher ASP, our lower price point product was not given sufficient airtime time. So overall volume came down.

But for going forward, we see about similar ASP for foreseeable future. So you must assume in your model similar -- early teens volume growth and therefore, a similar operational expenses as similar volume and from revenue coming up at early teens, the leverage coming down from our other expenses -- HR expenses, logistics expenses and so all the distribution expenses.

The digital spend will go up because we see that as future leverage potential. So that may go up, so container distribution may stay constantly as a percentage of revenue and we'll be leveraging it from other areas.

Got it, sir. Next question is strategic on the TV, sir. So if we look at our reach, it's 127 million households, but a unique customer only 0.7 million, which is like a 0.5% penetration, right? And when I compare this with [ Qurate ], Qurate reaches not many more households, only around 200 million, but the penetration by unique customers is very high. It's 41.5 million. So almost like a 7%, 8% kind of penetration compared to our 0.5%.

So my question is, out of the budget that we say that out of the 18%, at this time, 11% goes towards TV. My question is out of this 11%, how much are we spending in tying up the broadcast deals with the carriers will just carry the channel to the households versus how much are we spending to actually market our channel to the viewer so that they actually tune into our channel? So if you can help in understanding how the spend is split between the 2. And what we are doing to get our penetration number high because I think our household reach is already very good.

Thanks, Nirvana. So household reach has 2 factors. One is the footprint, how many homes we are in. And second is, what is the channel position in respective home that we have?

So Qurate has been able to get very low channel positions or client position and multiple channels in each home. So Qurate has 3 or 4 channels in most of the homes, and we have 1.2 or 1.3 channels per home. I don't have the exact number, but it is substantially lower than them. And the channel position also is not as high as them.

So I had -- not as a prime item. It's a factor of how much we pay to this airtime companies. Now our effort is to continue to improve the channel position and number of channels each home that is broadcasting based on the ROI that we expect from these markets.

So we are very tied in managing that expense where it can run away very quickly. So they have good analytics team, so we evaluate that continuously every week. There, these deals are offered to us and we evaluate them. We go with that open eye. If it doesn't work, we are able to get out of these deals within, say, 90 days or so. So we'll continue to evaluate those opportunities and try to get better and better channel positions or more footprint in time to come.

And the biggest opportunity for us coming time, Nirvana, is the streaming channel position. For example, YouTube TV is about 11 million or 12 million homes. And we are not there at all. They are local TV, they are not in that. This is a couple of million homes. So we are not into that OTT, online media same space yet. It's a huge potential market for us.

But as we go deeper and deeper into the understanding of this OTT, that will add bottom line revenue -- top line, bottom line to us. So there's a lot of potential in TV space to grow per household revenue, the channel position, larger foot print, channel position and more channels within each market. But we are frugal in getting -- analyzing each of these opportunities.

The next question comes from the line of Gobinanda Reddy from PNR Investments.

My question is, why are we start entering Indian market -- have shown our channels among the women viewer and they are very much liking the models, as well as they are very much fine with the pricing also. And I wonder why we are not entering given that we are also entering into lab-grown diamonds now, which is a good market in India.

Yes. Thank you for a good question, Mr. Gobinanda. So we evaluated the main market a few times. We couldn't make the model work even in the 3, 4 years' time line that we make our Western companies profitable. Indian market didn't have the visibility for a few factors.

Number one, the airtime costs in India are higher than Western World as a proportion of sales. Number two, the shipping cost is all on us. Consumers don't pay shipping costs in India. Wherein the world, we charge shipping costs. Shipping cost contributes about 6% of our revenue. So that doesn't come in India. Thirdly in India, when we look at numbers of some of the target community, we are thinking of acquiring in India. The 30% of the customers don't release the [indiscernible] reaches them on COD basis.

So those 30% packages come back, whereas in U.S., U.K., Germany, this ratio is less than 0.2%. So the economics of India TV space doesn't work. Now India is a potential market for complete B2C in future, but still is a discovery mode. So the majority of B2C companies in India are still loss making. So we will come into India market down the road, but we believe that it is still in discovery mode and doesn't fit well for our business model.

The next question comes from the line of [ Manan Vandor ] from Wallfort PMS.

So one of the participants had asked about excluding Germany, like how much cost Germany took and -- so that number, you said, 2.5%. So that 2.5%, I add in the PAT or in the EBITDA?

It is a margin number. The initial first 6 months, we had losses in Germany for this year. And though we have achieved our breakeven in quarter 3, but 6 months in terms of our margin site, roughly around 2% of our margins were lower due to Germany. So I meant to say that excluding Germany and Ideal World, both if I exclude that, I could have achieved 2.5% higher EBITDA margin in this quarter -- or in this 9 months.

Okay. So -- Okay. So you were saying that at the EBITDA level, if we would have -- if we exclude the cost -- sorry, the losses of Germany and Ideal World, both on the EBITDA level, then you would have had 2.5% more, right?

Yes.

Okay. Understood. And sir, second question is that, could please tell us what were the Germany revenue, okay, in INR for quarter 3 and for full 9 months '25 in INR?

INR? I'm not sure, but we reported that number in one of the slides. It was EUR 7.5 million in quarter 3 we have done, and EUR 19.4 million in first 9 months we have done.

The next question comes from the line of [ Pradeep ] from RGI Private Limited.

My first question is why our company call off the margin between Vaibhav Digital Limited and Vaibhav Lifestyle by selling Vaibhav Digital Limited. What is the reason?

Yes. So both these companies are not in operational nature. So the merger is to -- that the Vaibhav Digital not in operational. It was just sitting with the asset of a land in that company. So to the -- optimize our working capital, we have sold that asset. So that is not needed for our operational perspective in India site. We already have 6 different buildings in India, which has a capacity of even 30% to 40% higher production in the current capacity. So that is why we have sold that, and we called off the merger of Vaibhav Digital and Vaibhav Lifestyle.

Okay. And my second question is, is the gross margin for lab grown diamonds that you said that it's 10% of our top line, total topline. Can you comment on that?

Yes, it's slightly better than our overall margin, a couple of percentage points better.

That means our actual gross margin now this current quarter is 61.5% approximately. That means higher than that?

Yes. Correct.

The next question comes from the line of [ Pratik Daria ], an Investor.

My questions have been answered.

The next question comes from the line of [ Ketan Chera ], an Investor.

Congratulations on good results. Sir, what I would like to ask is in terms of our digital platforms, of the various mediums like the digital -- the websites, the mobile app, social, OTT or the third-party marketplaces, which contributes higher amounts with digital options in terms of revenues?

Can you repeat, please?

Yes, sure. My question is that of all the various digital avenues that you have like the mobile application, the website, the social media, the OTT platforms. Of all these different avenues, which revenue generates maximum revenue in the digital platform space for us currently?

So digital, our main medium is our full proprietary website, where we do our live streaming of our lifestyle shopping, live running video commerce and also the other selling medium for fixed price catalog rising options and clearance. Apart from that, we have other medium of marketplaces, and selling through smart TVs, but our majority of almost around 80% of sales is coming through our own proprietary website -- sorry, if you let me correct this. The digital medium also includes the mobile apps.

So mobile, if I -- if my total digital sales is 100, then mobile app itself is contributing roughly around 30% of total region sales. And around 50% roughly contributing our proprietary website through desktop. And rest is our other different mediums of marketplaces and smart TVs, OTT.

That was very helpful. So again, a question in terms of the spends, if we were to -- for the 9 months FY '25, if we were to divide the spend between digital and TV, could you give a breakup, either in absolute or in percentages, however?

In percentage terms, absolute, I don't have that. Percentage terms is -- the cost is roughly around 18% our continued costing. And out of this 18%, 11% is our TV-related broadcasting cost and 7% is our -- related to digital medium cost, which is primarily in Meta and Google.

Okay. So does it mean that we are spending less on the digital right now even though our -- the growth rate of digital revenues increase and the share of revenue also is increasing digital?

Yes. So digital, we have a good amount of sales coming through live shopping medium. That is also part of the broadcasting some of the customers who watch our show in live streaming platform on our website. They're also watching from television. So that digital 100% cost, we cannot attribute that our sales -- our all digital sales is coming through our native digital platform. That is why you may see that the lower amount of spend generating higher revenue in digital.

Ladies and gentlemen, that was the last question. And that concludes our question-and-answer session. I now hand the conference over to Mr. Sunil Agrawal for his closing comments.

Thank you, Ayan. I want to thank all the participants for your time and great questions. If you have any further questions, feel free to reach out to Prashant Saraswat at VGL or Amit Sharma Adfactors PR India, and we'll be happy to answer your questions. Thank you once again.

Thank you. On behalf of Vaibhav Global Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.