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Tribhovandas Bhimji Zaveri Ltd
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Ladies and gentlemen, good day, and welcome to Tribhovandas Bhimji Zaveri Limited Q1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Binaisha Zaveri, Whole-Time Director, who will also be accompanied by Mr. Mukesh Sharma, CFO at TBZ Limited. Thank you. And over to you, ma'am.
Ladies and gentlemen, good afternoon. As we gather here today for our Q1 FY '24 Earnings Call, I am filled with pride and a sense of focus. We stand on a transformative journey, one that is shaped by our unique position in the market and the goodwill we've nurtured for over a century.
In a landscape where players have risen and fallen with the tides of economic cycles, we have stood strong, resilient and unwavering in our commitment to our customers. We carry with us a legacy of trust and reputation that has been tested and proven through the harshest of storms. Our value proposition remains not just intact but fortified by the challenges we've overcome.
Today, as we look at the horizon of opportunities, our focus aligns with India's growth story and the aspiration of its new consumers. In a market that has seen its fair share of fluctuations and uncertainties, our strategy is clear. We are here to grow our business with a resolute emphasis on high-quality margins and products. It is a path where transformational margins are not just a metric of financial success but a testament of our resilience and innovation.
We acknowledge that these are times of shifting sands, where consumer demands can fade. Yet against all odds, our brand resonates and it resonates strongly. In this quarter, we welcomed 45% of new customers, extending our reach to fresh audiences. This is a testament to the enduring relevance of our offering.
As we move forward, our journey isn't just about maintaining our position. It's about crafting a legacy that transcend generations. We have also embraced India's growth aspirations and be a catalyst of those cherished movements. Our Q1 FY '24 performance gives you a flavor of where we are headed. And we look forward to maintaining our strategy on margins and seeking sustainable growth.
Thank you. I'd now like to hand over the call to our CFO, Mr. Mukesh Sharma, who will get into the financials of this quarter. Thank you.
Thank you, Binaisha. Good afternoon all. It is my pleasure to welcome you all to TBZ Limited's Q1 FY '24 Earnings Call today.
Q1 FY '24 was marked by an impressive margin growth, a testament to our strategic initiatives and unwavering focus on cost optimization. Notably, our gross profit witnessed a Y-o-Y increase of 30.7%, complemented by a 342 basis points improvement in gross margin. This early-stage margin growth reflects our dedication to financial discipline and decision-making.
Our EBITDA also demonstrated robust growth, surging by 72.6% Y-o-Y to reach INR 32.2 crores. This reflects our efforts to strike a healthier balance between revenue generation and cost management as underscored by a noteworthy 243 basis points improvement in EBITDA margin. In addition, we achieved a 293% Y-o-Y growth in PAT, reaching INR 11.4 crores. This rise in profitability and returns underscores our commitment to delivering value to all our stakeholders.
In Q1 FY '24, we have experienced the early stages of our long-term margin growth, attributed to our rigorous financial discipline and smart decision-making. Our primary focus is on robust operational leverage and exceptional value for customers.
Going into the future, we look forward to embarking on a journey of growth with a focus on further optimizing our operational efficiency. The margin improvement in Q1 FY '24 is bolstered by our culture of fiscal prudence and strategic pricing. With an emphasis on cost management and industry positioning, we are setting the stage for transformative returns.
Looking ahead, we are well positioned to seize market opportunities in line with India's promising growth led by consumer demand and upholding TBZ Limited's 158 years' legacy amongst India's most trusted jewelry brands. The company remains steadfast in its commitment to innovation, customer satisfaction and sustainable financial growth.
Thank you for your time and participation in this interactive session today. We will now begin with our questions and answers.
[Operator Instructions] We take the first question from the line of Mr. [ Darshil Zaveri ] from Crown Capital.
Congratulations on a great set of results. Sir, I wanted to know with the start of quarter 1 behind ourselves now, what do we see our FY '24 outlook in terms of revenue and margin?
See, we look forward for around revenue growth around 15% to 20%. And margin, as you can see, we have already delivered 2.5% of PAT margin in Q1 -- in the financial year '23. So I believe that we will be much ahead on that percentage as well. And we should be delivering more than 2.5% PAT margin for the entire financial year FY '24.
Okay, sir. But sir, with this kind of growth, we might be able to have better operating leverage. Are we being a bit conservative in our PAT margin? Or will we spend more of our margin on ads?
See, if you see our Y-o-Y number, we have come away and ahead on the PAT margin delivery. We foresee there would be -- price challenges would be there in the future and which will create a pressure on the margins as well. So we believe that 2.5% -- above 2.5% margin is quite achievable.
Okay, sir. And sir, what kind of ad spend and store expansion we might see this year?
We are expanding to our franchise network. And we have a couple of discussions on. In fact, one is on a couple of franchisees. And we are hopeful that we should be able to see a few stores coming up around Diwali season from the franchisees that presented. The ad spend is in line with the revenue. It goes -- on a yearly basis, we spend around 1.8% in the marketing cost. However, it differs on the quarter-to-quarter or case-to-case basis, it differs.
Okay, sire. And sir, with our long-term growth, maybe not right now, but how would we see -- maybe next 3, 4 years, we might be able to double our revenue. What are maybe long term which that we have for ourselves?
Yes. So I can't commit whether it will be double or how much. But as you correctly said, we are very positive and focused for the future growth. It would be hard to predict growth because any price increase in the gold also has an impact on the consumer demand.
We take the next question from the line of Mr. Rohit from Samatva Investments.
So my first question would be on the gross margin part. So how much of this would be due to pricing benefits that the gold price benefits we received during the quarter? Or will it be due to the product mix change of gold versus studded rubies?
See, the gross margin increase is a mix of all these factors. The gold price did contributed to our margin growth. In addition to that, our gold and diamond business has also peaked in this first quarter. There is also a better sourcing margin in diamond and gold category, it has been increased. So all these factors have contributed to an increase in the gross margin.
Okay. Sir, what will be the mix of gold versus diamond [indiscernible]?
See, historically, we have been 80-20. But for the quarter 1, our diamond ratio has increased to 25% and the gold is 75%.
And do you feel you can maintain this ratio for the year? Or how do you see it? Like will we go back to the 80-20 part? Or do you still see...
We believe we will be able to maintain this or maybe 1% or 2% here and there. But we believe because the diamond, we have much, much better designs and the pricing for the diamond jewelry, so consumers trust on the diamond jewelry as well a lot on TBZ. So we believe we will be able to maintain this ratio.
Okay, got it. Sir, my second question would be on the retail store outlets. So if you look at last 2 years, you haven't -- last 2, 3 years, you haven't added a bunch of -- a lot of stores. So what was our strategy in the last 2, 2.5 years? And how will it change going forward in terms of adding stores? You mentioned you're speaking to a couple of franchisees. So I just wanted to know, last 2 years, what was our exact goal? And how do you foresee it going forward?
See, the last, last year was quite [indiscernible] because it was a COVID year. And we have focused -- from last year onwards, we have focused a lot on the back end and improvisation in the margins and increasing the efficiency in the back end. Keeping in mind on that aspect, we have, in fact, shifted a few stores. And with that, closing one store at one location and opening altogether a new [indiscernible] store at a new location within the same city.
So we have done that changes in a couple of stores, which has given a positive results to us. So that is what we are doing currently. We are focusing on our existing stores and moving the location or improving the store look and feel. So a lot of focus is on the back end and the efficiency and margins and all. In the future, yes, we do foresee a growth through franchisee network. We have a lot of inquiries coming in for the franchisees for TBZ. And we are very positive and we believe that we will be able to drive the growth through the franchisee growth.
Got it. Sir, but on the franchise network, if I'm not wrong, in the past, we tried to expand to the franchisee network, but it didn't quite work out for us. So how -- what changes? And how are you so positive on the franchise growth going forward? Because if I'm not wrong, in the past, we weren't able to grow through the franchise route. So what changed right now?
See, we already have three franchise operating for TBZ. So I'm not able to comment that whether it has not worked out in past. I'm not aware about any such thing when I look at the numbers of past. But we are very hopeful, as I said, there are a lot of franchise inquiry for the TBZ brands.
In addition to that, a lot of competition has taken the growth through the franchise, which is quite evident. It's a proven formula. So that should not be an issue. I don't foresee any issue. We are open for all kind of franchisee discussions. So I foresee particularly that it will bring a lot of growth to the company through the franchise network.
Got it. Sir, any particular number you have in mind? Like how much do we want to add every year going forward?
The idealistic scenario in any retail business would be a 50-50, own store and franchise network. But I am not fixing any number as of now. As I said, we have got a couple of inquiries in a few stores. We may see also around Diwali open to franchisees. Yes, so not any specific number I have taken right now.
Got it. Sir, and one more question was on the sourcing strategy. Like if you look at competitors, they are much larger scale in how they source. So in terms of sourcing, have we changed any -- the way we source our raw materials? Any changes in that aspect?
Raw material change, there is no change in the strategy. Yes, there's always a continuous churn improvement keeps happening in the back end when we talk about the jewelry sourcing. But raw material, there is no change.
No change, okay. Sir, and one last question, in the presentation, you mentioned that the new Kalpavruksha Plan. So what is it? So like what was the old? And how has it changed? So I just want to know what would be like this?
Yes. So Kalpavruksha Plan, there's a lot of changes that happened. I would suggest that you can have a copy through our website, you'll be able to see lots of change in Kalpavruksha Plan. It is made much more consumer-friendly. In fact, we have given a lot of option to consumers. Because we see a lot of demand of our Kalpavruksha scheme by the consumer. So we have made it a lot of exit options we have given to our consumers.
So they can enter into Kalpavruksha, they can exit at their own convenience from fifth installment onwards, which I don't think so there is any in the market which does do that. It's much more consumer-friendly. I would encourage you, if you can visit one of our stores or if you go through our website, you'll get to know more on the Kalpavruksha scheme.
Okay, got it. Sir, and my last question on the margins. So are you confident that you can sustain these margins. Because last 2 quarters, we have improved quite a lot on margin part. So this between 13%, 14% gross margin, is it sustainable for the next year or so?
Yes. So if you follow TBZ, you must have seen last quarter result, we had delivered 14.1% margin in Q4. Q1 FY '24, we have delivered 13.9%. It's quite evident. If you go back, you will see the similar margin range.
The next question is from the line of [ Riya Savant ], an individual investor.
Just had a couple of questions. My first question would be what is your outlook for the Indian diamond jewelry business in India? And what market share do you currently have according to your assessment? And how much of it for the next 2, 3 years?
TBZ outlook for the jewelry business is quite bright in the Indian market. The love for the gold jewelry and diamond jewelry will never fade. It has survived all the ups and downs of the past, which shows the confidence of Indian consumers in the jewelry business.
Market share is hard to define. There's no specific data available that would show that there is specific market share. In fact, in jewelry industry, there are very few structured players, but a lot of unstructured players exist in the market. So saying any number would be a wrong depiction of the market share.
Right. Just had another question regarding the customer acquisition, you see that there is like 45% in customers during this period, which is quite an achievement. Can you just shed some light on the unique approaches on your marketing strategy that has led to expanding your customer base? Also, if you could specifically reach out to the -- how do you guys reach out to the first-time customer to TBZ? So if you could just shed some light on that.
Yes, TBZ is an aspirational brand for the consumer. So whenever there's value angle that comes during any festival, we always see a surge in the new customers coming to our stores. The KP scheme also contributes to our new customer acquisition. We have a lot of digital leads. We have a lot of followers in [indiscernible]. Whoever visits our stores gets lots of light from the social media. And they all visit -- following them, a lot of people visit. So there are a lot of factors which has contributed to our new customer acquisitions.
[Operator Instructions] We take the next question from the line of [ Reddy ], an individual investor.
My question is how are you tracking walk-in customers? Is there a matrix used?
Sorry, can you repeat your question, [ Reddy ]?
My question is how are you tracking walk-in customers? Because I read that 80,000 customers came in the...
See, every store has a footfall count by the store -- by the [indiscernible] security. So they count the footfall. And we have a robust mechanism of documenting those footfall under various categories in the store-by-store we track. And that goes into the company's IT system. So from there, we track the customer count.
So you're saying that there would be a technology which is actually counting people?
Yes.
So don't you think that there would be an issue because if one person is going in and out twice or probably multiple times, then that would be a double count?
No. So there's no such possibility there. In our stores, there are checks and balance. In fact, they register. Whenever a customer comes in, they enter their name for [indiscernible]. So the store counts, the customer -- basically, actual one person walks in into a store four times is counted one on the...
So this is done manually. So of course, like probably [indiscernible] 80,000 registrations were done manually?
Yes. If it is computerized, it will be accounted for. But if it is manually counted, it gets counted once. So we count one if one customer walks four times during the day.
The next question is from the line of Sneha Jain, SKS Capital.
I just wanted to ask, do we see [indiscernible] basis on the lab-grown diamonds? Do we have access to a business in that? And what is our own take on that?
No, we don't deal in lab-grown diamonds at all.
No, we don't, of course. But there's a market for it. So I just wanted to ask, I mean, it's growing day-by-day. So do we see it as a threat? That's what I wanted to ask.
We don't see it a threat. See, diamond is a diamond, however much lab-grown. In India, it hasn't picked up also. Indian consumers do not believing in the lab-grown diamond. So the love for the diamond will never fade. That's our belief. And we are not going to get into this business at all.
So the demand is intact for natural diamonds then?
Absolutely. In fact, we are seeing the demand has been increasing. In fact, within Q1 also, we have seen 20% growth in our diamond business.
And sir, there was a recent study that we are seeing to -- I mean, for the year, for FY '24, the world is seeing like a 10% degrowth in gold business, basically gold demand. Do you foresee that? Or do you think India would be an exception on that?
See, there is a report of World Gold Council, which has shown that the gold jewelry demand has declined because of the higher prices in quarter 1. It has declined more than 8%. And we also see in the gold business, you can see our revenue numbers are flat. The gold number has gone down, obviously. So there is an impact. But this impact is temporary.
Have you seen any revival? I mean, in the coming wedding season, do you see -- like do you foresee any revival in the demand?
Absolutely. There is only immediate reaction. After that, it settles down at that level. So if you see gold journey, it gets settled down at a particular level. And after that, then again, there is a jump, the demand goes up. But then again, demand dips. We have seen this quite in past. In fact, in COVID also, you have seen gold prices have gone up 50%, 60%. And there was a dip in demand. But then again, it gets settled down at that level.
Okay. And sir, are we seeing any -- I mean, we haven't seen any institutions in our shareholding pattern. Are we looking -- I mean, is there any inquiry or something like that in that direction?
See, whatever movement is through the stock exchange, people are investing. There are a lot of investors who keep coming and buying through the open market. There is no such discussion with any of the investor [indiscernible].
The next question is from the line of Mr. [ Naresh ] from RoboCapital.
Congratulations on a good set of numbers. My only question is, are we looking to expand our store count in the coming years or the store expansion would be through the franchisee line?
Thanks, [ Naresh ]. I think it's a mix of both. While we are not committing on our own store, however, at the back end, we are looking for newer market or newer locations in the same city. So the search is on. And I foresee a couple of stores which will come through franchise network, but we have our own store to prune out.
Okay. And so what would be a rough average of your CapEx that you need to do on one store and opening a store? Any number if you could provide.
It's roughly around between INR 2 crores, INR 2.5 crores, somewhere in the range of 10,000 square feet in spend. So on an average, 2,500-square feet stores comes around INR 2.5 crores.
The next question is from the line of [ Ankit Shah ], an individual investor.
So my question is that our ROE, if I look at even the last 12 months, is around 8.5%, 9%, right? So despite all the improvements, our ROE is still way below what most other jewelry firms are at, right? So what are the reasons for that? Are we carrying any -- like are we carrying too much working capital related -- I mean, versus the revenues? Or are there any unproductive asset? Can you just explain this part?
A lot of work has gone in FY '23. And you will see the ROE has gone above 10%. And it will continue to be above 10% in the coming quarters as well. So we have been maintaining the ROE more than 10% in last 3 quarters in a row. And it will be much more better than the current number going forward.
No, I'm just trying to understand the reason. Because see, 8%, 9%, 10%, there's not too much of a difference. If you look at most of the jewelry players, whether it's Kalyan or Titan or any of the other ones, they are about 15%, 18%, 20%, right? So there is a huge gap.
I don't disagree to you, [ Ankit ]. There's -- of course, there is a scope of improvement. And as I said that the ROE has been more than 10%. And we foresee it to be improving continuously. And this is what is quite evident if you see from last 3, 4 quarters, the numbers, if you see the margin numbers have increased. And we are rationalizing the inventory.
In fact, our quarter-on-quarter gold inventory is also down by around 5% to 7%. So we are continuously working on both sides, improvement of the margin and rationalization of the working capital, which will obviously reflect into the ROE. So then I don't comment on the others. But yes, we are continuously focused on the improvement on the ROE.
Next question is from the line of Ashwin Reddy from Samatva Investments.
I had a couple of questions. So firstly, first was on the sourcing part for the gold jewelry. Because I understand the entire gold jewelry is sourced from vendors. So I'm trying to understand what would be a differentiation because you are known for designs, right? So what is it that enables you to get the better designs from your sourcing vendors versus the larger-scale players? So do they get better terms? Or what exactly enables you to have an advantage in sourcing versus the bigger players?
So I may not be able to answer on the quite detail. I can only give you an overview that the gold jewelry is a mix of the -- as the gold already partner who worked on a lot of designing side of the gold jewelry. TBZ is known for its designing part.
We continuously develop the vendor. We continuously work on the different designs or different weight range or different margin percentage, product mix, a lot of things which goes into the gold jewelry. I'm not the expert to answer on that. I would be happy to answer. If you can send a detailed query, we would be happy to answer your query.
But just to get some more clarity, sir, do you design and then the vendor makes it or the vendors come up with designs and then...
It's a combination of both, the [indiscernible] is the best designing delivery to the consumer.
Okay. And secondly, in terms of your geographic focus. So are there any specific states where you want to go deeper? Or how do you want to go? Because right now, you are still subscale. And I don't -- and it might not be prudent to spread across a large area. So any area -- any specific geographies you want to highlight where you want to spend your energies on? Or how are you thinking about this?
So there is no specific geography we are focusing. As a commercial prudence, if you expand in the same city, demand across India is there. You can go to B cities, also there is demand. It's only depending on how much capital you want to invest and how much return you get out of it. So we see there is demand all across is there.
We are focusing that expanding in a new geographies, which is near to our current states. Maybe like, for example, in Odisha, we would be expanding in maybe -- we are investing more, so we may be expanding in Odisha or maybe expanding in Jharkhand states. So these are the nearby so that operationally, it is easier for us to manage these stores.
Got it. And so if you take a 2-, 3-year kind of a view or more longer view, so would you believe that the proportion of the diamond jewelry will continue to keep going down from the current 25% or this is like a new normal and it has settled here? Because you were at 20%, another 25%. But will this be a new normal for you going ahead? Or can this keep increasing in the times ahead?
We are focusing on diamond jewelry. Also, there's a huge demand of the diamond jewelry. And we believe that we will be able to maintain this ratio.
Okay. But it's not go up from here is what you're saying in the next 3, 4 years?
It's hard to predict. But yes, we believe that we are committed that the ratio would be going up. A lot of work is going behind that also. So we have tried we have -- see, last quarter, I couldn't have promised that we would go to 25%. And this part, we have been able to deliver because there's growth caution going on in the back end. But we believe that we should be able to maintain this ratio.
So the context of my question is, is this like a focus area for you? Or would you want to grow both gold and diamond part?
See, we have to deliver to the consumers' demand. Consumers believe a lot in TBZ brand and design. It's more aspiration for them. So they do come for the gold jewelry as well as diamond jewelry both at a different place. So it's not that we would not be focusing on gold jewelry. We do focus on the gold jewelry, which is the largest of our business. Obviously, we will be growing that business also. It's only a matter of seeing that which grows, how fast and what ratio comes out of it.
The next question is from the line of Yash Mishra from SKS Capital & Research.
I was wanting thing to know that basically, as a company, we have -- we're a well-entrenched player in the industry for a long time. We have a strong brand, a trusted group for generations now. In the last 5, 10 years, the values of listed players have grown manyfold, and whereas TBZ seems to have [indiscernible] the value in the last 5, 10 years.
What are your thoughts on that? Why do you think you've been such a big laggard both in terms of performance as well as market value and perception amongst investors? It seems like we've been listed for so long. But there's no interest amongst any serious investors in your company. And also, for a small company like yours, your promoters also do not meet investors or come on these conference calls, which shows that to create market value...
The opening call was from Ms. Binaisha Zaveri, who is the promoter of this company. The opening call of this investor earnings call was from Ms. Binaisha Zaveri, who is the promoter of this company. The promoters belief in the company gets reflected in the holding what promoter is having -- stake of what promoter is having in this company. They have a 75% stake, which is maximum permitted by TBZ.
So from a promoter's belief, I hope this question is answered. From the past 12 years, going into that discussion, I don't think so we are going to lead to any discussion or any conclusion. If you see in last 1 year, the company has delivered more than 40% growth in its share prices. That itself shows the belief of the investors in the company.
What about the investors who have invested for the last 10 years? What returns have you given to them vis-a-vis a company like Titan? Why have you been such a laggard? There's no comparison. Maybe 10 years ago, Tanishq, when you were -- 15 years ago might have been the same size. And now there's no comparison.
So are we looking to change anything to kind of jewelry sector in India as everybody says has a huge opportunity? Others have been successful in capturing that opportunity, both in terms of revenue, profitability and market value. But is there anything that we can do to kind of improve, sustain -- have a high growth and sustained performance with profitability and change in market perception? This is, I know, a lot of deeper questions. But the idea is to just kind of get you to reflect.
I get you where you are coming from. I think last 1 year, if you see the growth momentum, I think that should answer your question to some extent. And in the future years, you will be able to see a lot of value increase in the valuation of the company. So that will be there. That shows the faith of the investors in the company who invested. And we do understand your point.
And therefore, if you see last 1 -- around 3 to 4 quarters, we have been continuously working on the value increase for our stakeholders. That's why I said if you see last year to this year, there's more than 40%, 50% increase in the valuation. So I believe -- I do believe that it may not be up to your expectation. But yes, we are working -- continuously working towards it. And we are hopeful that the next year or so, we should be able to be placed along the [indiscernible] companies.
[Operator Instructions] We take the next question from the line of [indiscernible], an individual investor.
I just wanted for you to pinpoint the core operational [indiscernible] or market strategies that assisted your growth in profitability and returns. And do you expect it to be sustainable going forward?
Yes, we do expect that the growth will be sustainable. If you see the gross profit in Q1 was 14% -- 14.2% and gross profit in Q1 is 13.9%. So the gross profit remains in the same range. And we believe that this is only going to increase from here on. So we do believe that the growth momentum in the profitability will be maintained.
We are very cautious about the cost optimization. So cost may not increase in that same proportion. As we see the growth, the profitability will be much higher. So quarter 1, quarter 2 is always a challenging period for all retail business. Quarter 3 onwards, the profitability improves a lot because of the festivity and all kicks in. So you will see much, much better results from Q3 and Q4 onwards.
I had one more question to ask, let me congratulate yourself on the 72.58% year-on-year EBITDA margin. Can you please provide some details on precise areas of business where the growth is most pronounced, for example, from diamond or from gold?
Yes. So the quarter 1, the gold demand was quite sluggish. So we haven't seen a growth in gold business. In diamond business, we did see growth in the diamond business, more than 20%. We saw the growth on quarter-on-quarter number in the diamond business as well as we also saw the margin growth both in the gold and diamond business.
Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to Mr. Mukesh for closing comments.
Thank you so much. As we continue our growth journey, we look forward to the road ahead and the potential for further progress. Thank you for your continued support and engagement. If you have any further questions, please reach out to Dickenson, and we will be happy to answer. Thank you all, and have a good evening.
Thank you. On behalf of TBZ Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.