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Tribhovandas Bhimji Zaveri Ltd
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Ladies and gentlemen, good day, and welcome to the Tribhovandas Bhimji Zaveri Q2 FY '23 Earnings Conference Call hosted by Dickenson Intellinetics Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sonam Raghuvanshi from Dickenson Intellinetics Private Limited. Thank you, and over to you, ma'am.
Thank you. Thank you so much. Good evening, everyone. I welcome you all to the earnings call of Tribhovandas Bhimji Zaveri Limited for Q2 and H1 FY '23. Today on this call, the management of TBZ Limited will be represented by Ms. Binaisha Zaveri, Whole-Time Director; and Mr. Mukesh Sharma, Chief Financial Officer.
Before we get started, I would like to remind you that the remarks made today might include forward-looking statements, and actual results may differ materially from those contemplated by forward-looking statements. Any statements made today on this call is based on our assumptions as on date. Now I would like to hand over the call to the management. Over to you, Binaisha.
Thank you. Good afternoon, everyone. I welcome you to the Tribhovandas Bhimji Zaveri Limited earnings call for Q2 and H1 FY '23. Thank you for joining us here today. To start with the financial performance front, we are delighted to announce a quarter demonstrating robust growth. The company experienced improved footfall and sales traction this quarter backed by the festive season.
We saw a 17.8% revenue growth in Q2 FY '23 and 71.8% in H1 FY '23, conforming the return of discretionary demand in a post-COVID era. In addition, amid our ongoing plan for growing our footprint responsibly, the company recently launched its brand-new store in Kalyan, Mumbai in October. Through this launch, we are now also present in another highly prolific micro market blessed with a density of aspirational customers.
During Q2 FY '23, the company implemented several marketing initiatives towards garnering higher traction from the seasonal demand derived from the wedding and festive season, which have historically proved to be a very strong month. Our marketing initiatives included promotional offers like No Making on diamond jewelry and blocking gold prices.
We also launched new wedding sets and a strong festive collection to take advantage of the upcoming wedding season. To support this, we implemented sharp promotional advertisements through digital and social media campaigns, featuring the renowned actor Sara Ali Khan.
All these initiatives resulted in increased footfalls of more than 55,000 customer walk-ins during Q2 2022. Furthermore, we are focusing more on online customer engagement and are also planning to use online platforms and social media to attract more customers and grow our consumer base. Going forward, we remain in expansion mode and through our various initiatives, we are optimistic for the upcoming quarters ahead. The company's key focus will continue to be on acknowledging and reciprocating customer loyalty, increasing market share by expanding our customer base and penetrating into untapped jewelry markets by opening new stores.
I thank you all for joining us on this call today. I would now like to hand over the call to Mr. Mukesh Sharma, our CFO.
Thank you, Binaisha. Good evening, everyone.
Participants, kindly be online. We'll have to reconnect the management line.
[Technical Difficulty]
Mr. Sharma, kindly proceed.
Yes. Thank you, Binaisha. Good evening, everyone. I would like to begin with the key highlights for quarter 2 and half year ended FY '22, '23. I will first read out the quarter numbers and then half year numbers for ease of reference.
In quarter 2 FY '23, revenue numbers achieved INR 537 crores vis-a-vis INR 456 crores in quarter 2 FY '22 with a Y-o-Y growth of 18%. In quarter 2 FY '23, gross profit achieved INR 59 crores as against INR 49 crores during the same period last year with a Y-o-Y growth of 18%.
In quarter 2 FY '23, EBITDA achieved is INR 23 crores vis-a-vis INR 21 crores during the same period in last financial year with Y-o-Y growth of 10%. The EBITDA percentage in quarter 2 FY '23, 4.2% as against 4.5% during the same period in last financial year.
In quarter 2 FY '23, profit before tax achieved basically INR 7.6 crores vis-a-vis INR 9.1 crores during the same period last year. The PBT margin percentage in quarter 2 FY '23 stands at 1.4% as against 2% during the same period in last financial year.
Now I'll read out half year performance of the company. In first half of FY '23, revenue numbers achieved INR 1,117 crores, vis-a-vis INR 650 crores in the first half of FY '22 with Y-o-Y growth of 72%. The gross profit achieved INR 119 crores vis-a-vis INR 73 crores during the same period in last financial year with a Y-o-Y growth of 64%.
The EBITDA achieved is INR 41.4 crores vis-a-vis INR 19.8 crore during the same period in last financial year with a Y-o-Y growth of 210% (sic) [ 110% ]. The EBITDA percentage to revenue stands at 3.7% as against 3.1% during the same period in last financial year. The profit before tax achieved is INR 11.6 crores vis-a-vis a loss of INR 3.5 crores during the same period last year.
The PBT margin percentage is 1.4% (sic) [ 1.04% ] as against loss of 0.5% during the same period in last financial year. I would like -- I would now like to invite everyone for a Q&A session.
[Operator Instructions] The first question is from the line of [ Sagar Shah, ] an individual investor.
Congratulations for the good set of numbers. My first question is what is our online sales strategy? And what percentage of sales we are expecting from the online platform?
We are working on the -- working to be present on the online. Right now, we don't have any online sales on the product side. Yes, we have the online presence for our Kalpavruksha promotion scheme, which is doing very well. Long term, for any healthy online business, any company would target somewhere around 20% of the revenue to come through the online channel. Rest assured, we are working on the online to be live very soon in the coming quarters.
So is it something like that through our website, we will be doing online or through some channel partner?
No channel partner. We are working to be -- offer the online presence on our IT platform, which will be company driven.
Okay. Okay. And my follow-up question to that is like, what kind of competitive intensity you see for the online channel?
Online, there is a different strategy. If you see the competition, every other competition is there in the online, but the quantum of sales they are generating, I'm not sure how much. What I see is mostly into the gold coin category or maybe a lower ticket item. From a strategy perspective, the entry level product would be more sellable in the online platform rather than big ticket items. It is a more marketing strategy from getting a customer's share or maybe low ticket item product offerings. We are also working in the same line as the other market players are working currently.
Okay. So how do you see the online sales for the quarter? And like what are the margins for online sales? Are the same as store sales? Or -- and like what are your plans for further expansion of online sales going ahead?
Yes. So as I updated to you, we do not have online presence of our product sale, except for the Kalpavruksha scheme. There are various things you can do on the online, as I said, as a marketing strategy to gain a customer share, or you can also sell through your gift cards. You can also sell the low ticket item. So we are working on all these lines and hopeful that very soon we will be available online also.
[Operator Instructions] The next question is from the line of [ Nagendra Gupta from South India Investor Group. ]
Hearty congratulations for the profitable quarter once again. My question is in the IPO 2012, you had promised that 43 showrooms will be opened to the 14 existing at the time. Till today, you have only 32 showrooms. The prospect had clearly stated that these showrooms would be opened within a period of 2 years. Now it is already 10 years passed. What are the reasons for this [ stage ]?
Thank you, Mr. [ Gupta. ] We were already at 44 showroom a year back before COVID, okay? As you know, the COVID -- everyone knows what had happened during the COVID. And as a prudent business strategy, we had cut down the stores from 44 to 33 as on today, and we are consistently looking out for the business opportunities for expansion.
Sir, you are telling me about the last 2 years, but this is 10 years passed already.
Yes. So we were at 44 stores 2 years back before the COVID. And during the COVID, we had rationalized wherever in the all -- basically in all the mall stores wherever we were present, we have cut down as a cost-saving strategy. And as I said, we are working towards opening of the new showrooms into newer markets. We have already opened one showroom in this financial year, and we are looking for few more showrooms to open in the upcoming quarters.
One more question, sir. The revenue got almost doubled if you compare that since IPO days. Gold price [ to raise ] almost [ doubled there ], but the shareholders' share price has come down to about 50% though markets are good, in good shape. What are the reasons behind this, sir? Is it something business model or what is it?
See, the numbers are available. It's a public listed company, numbers are available to everyone. As far as the share market is concerned, it's a market-driven force which decides the price. You can also see in the last 6 months, the share has gone up by 40%, yes? What I see is share prices will be how investors view the company in the longer term rather than not for the cash performance. The investors are seeing the values, and that's how they are investing into the share pricing. I would not like to comment much on the share prices. As I said, it's decided by the market.
And as far as the numbers are concerned, it is available to everyone. The fundamentals of the company is very, very strong. Company is on a growth path, which is visible in the numbers also. And that's it. I mean, nothing more I can offer on this.
How many showrooms more we can expect in this current financial year to be open, sir?
Sorry, repeat your question, please?
This financial year, how many more showrooms are expected to be opened?
Yes. So we have opened 1 showroom, and we are looking for 3 more storerooms in this financial year.
[Operator Instructions] The next question is from the line of [ Surinder Shahi ] from [ ISR Investments. ]
My question is, sir, what is the normalized EBITDA margin -- sorry, what is the gross margin breakup for the studded and plain gold jewelry for the quarter and 9 months?
Mr. [ Surinder, ] I don't have a readily available data for the studded as well as gold separately. In the normal scenario -- for the exact numbers, I don't have. In a normal scenario, the studded margin ranges between anywhere between 15% to 25%. And for the plain gold, it ranges somewhere between [ 19% to 50%. ] So the gross profit margin would be falling in between somewhere.
So what will be the EBITDA margin for this plain gold and studded jewelry?
So as I said, I don't have -- we don't have calculation product line-wise on the EBITDA side because there are lots of costs which needs to get allocated. So as I said, the normal gross margin ranges for the studded is between -- anywhere between 15% to 25%. And for the plain gold jewelry, the normal gross margin is between somewhere [ 19% to 50%. ]
Okay. Got it. And I just want to know like we have recently launched one branch in Kalyan -- and can you throw some light on like what is the company's strategy? And like how would the company [ improve ] better penetration in the state we are already present? Are we looking to expand in new geographies?
Yes. We are planning to expand into new geography as well. Coming back to Kalyan, we are very excited to see the kind of response we have got in the Kalyan showroom. The sales were very, very good during the first month. And as far as the expansion is concerned, we are very hopeful to open three more new stores in the coming four months.
So three new stores in particularly Kalyan only or somewhere else?
It will be a completely new geography. We are looking one store in Gujarat. One more stores we are looking into -- two stores in Gujarat and one store in Rajasthan.
Okay. So any plans we have to target the South area for the expansion?
We are looking at newer markets in South India. The work is all there.
Okay, plans are already in...
Yes, yes. We are studying the market in a couple of important cities of South India.
Okay. Okay. And my last question is, sir, what is the ideal inventory turnover as a company you're targeting both for diamond jewelry and gold jewelry? And what is the strategy for the same so that we can improve the turnover issue?
Yes. So I think a very good question, Mr. [ Surinder ]. See, for gold jewelry, the ideal inventory turns would be somewhere near 3. And for the diamond jewelry, it ranges between somewhere 1.5 to 2. We are already at around 2.2 stock-out of the gold jewelry. And for diamonds, we are already at 1.5 turns of the diamond jewelry, and we are consistently working to improve the turn of the gold and diamond jewelry.
Okay. So you mean the 1.5 to 2x of the turnover inventory?
Yes, 1.5x of diamond we have already achieved. As far as the gold jewelry is concerned, we have already achieved 2.2x, and we are looking to increase it somewhere around 2.5x then to 3x.
The next question is from the line of [ Harshish Agarwal] from [ Lawyer ] LLP.
Is my voice audible?
Yes, it's audible.
I have a couple of questions for the management. As we understand, we're into the business where we're highly dependent on the gold. [ I'd be able ] to understand that versus the company's policy per se where it makes a business model more resilient to the gold prices, and we do not take the sharp hedge per se when it comes to the volatility in the gold prices.
Some of our peers have been able to withstand those volatility in the gold prices. I mean, we will be really glad to hear that is there any thought process behind the company wherein they are -- besides one could be the more and more studded jewelries, where the diamond share keeps on increasing -- besides that, any other thing?
And my second question will be, as we see that store opening has been after some years of gap, I want to understand that -- what could be the material difference between the new stores, which you have opened now and the shops which you have shut down earlier, barring the malls ones? So what could be the difference? If I understand that this store is 2.0, the second version of it, so what could be the material change in terms of financing is concerned, the store size, the design? What could be the primary difference? We would be happy to hear that from you, sir.
Okay. I'll [ try to reassure ] confidence. As far as the gold price question is concerned, in India, there's no hedging mechanism which is available to healthy gold fluctuations, okay? We don't want to gamble anything on the gold prices since there is no official mechanism of hedging the gold prices in India right now. So gold prices, we are hedging our sales on a natural hedging basis on whatever sales we do, we keep booking the rates of the similar quantity so that there is no gold fluctuation prices hits to our margin. Though in the short term the movement of gold prices does impact the margin, but on a long-term basis, [ since the single ] quantity, we also buy because the moment we sell, the hedging mechanism of natural hedging of -- to the extent of sales is taken care of. [indiscernible] gold prices, I'm not sure which other player you are referring who is doing the hedging in the gold in absence of any of the hedging mechanism in India, right?
I guess, I am completely wrong with that -- might have [indiscernible] one thing kind of hedging something what I'm [ thinking of ], can we make a business model more resilient to the gold price movements? I didn't say hedging it. I want to say that at the end of the day, I mean there are many other companies besides jewelry companies who try to make their business model more resilient to that -- avoid that volatility.
We are seeing too much too many -- too much volatility in our margins per se, right? When I say some of the peers, the margins are not that volatile as compared to TBZ's are concerned. So I want to understand that, is there any mechanism wherein we are giving a thought process to where we can reduce the volatility of -- in margins going ahead, sir?
See, to my mind, the gold prices movement will hit the margin, and it does hit margins of every other retail players. The depth of inventory may insulate to some extent, but that depends how much inventory to carry and what is the stock on day [ of much on. ] As far as the TBZ side is concerned, we are very clear that we want to play at a very optimum inventory level with an optimal sales and the gold price movement does hit in a short term. But in long term, it gets pared off. That's what, to my mind, comes to. I would be welcoming if you have any other thoughts you can share offline, and we will be definitely touching upon that.
As far as your next question on the gold studded as well as the pure yellow gold is concerned, I think it's more driven by the market. It more depends on what consumer demands and we work accordingly what consumer wants. So the ratio of the studded as well as the yellow gold depends -- varies from each region and each store. So it is not the same inventory. Spread will be there. So if you [ took the Kalyan ] store, the inventory spread will be very different if you come to the [ Vijayawada ] store. The designs and all would be top notch. However, as you see and -- go and see the inventory in some young stores, it will be more from a local taste -- what the locals buy out there. And as I say, there's a lot of work goes behind that. The team works day in and day out before opening up any of our stores. And there's a lot of market studying customer taste and demands. A lot of study goes around that, then only we open the store. So this also partially answers to your question in terms of the presence in the mall stores as well as high street store.
I think in a vicinity -- whether we open into a mall store or you open into a high street store, the consumer demands remain the same. The mall store has a footfall -- incredible footfall available. However, the brand pool which TBZ carries, it does not make much difference for us, except for the cost model, which would be definitely different than what is available in the high street store and mall store. Other than that, I think product mix or the store design, everything remains static for us.
Right. So when we said that we opened a new store, this is the change which TBZ has implemented new? Or I mean, I wanted to understand that a few of the stores which we closed down and the new stores had opened what is the [ time, if it's different, ] are we following the same strategy? If that is the case, then the chances of those new stores opening up -- the same store which are making the same [ problems ] which we are making earlier. So I wanted to understand that, is there any new strategy when opening up the new stores, sir?
Strategy as well as the product and spread and all these thing concerned, it remain same. As far as the cost model, as I said, the cost model for the mall store as well as the high street store is very different. During the COVID -- during the first two years, everyone is aware of the kind of restrictions the government has put on the operations of demand, was very different versus the high street. The kind of cost being -- we were incurring in the mall store and the high street store were very different. So as a prudent businessman and as a prudent business strategy, we have taken a call where -- wherever the cost was very high vis-a-vis compared to what profit we are going to gain from those stores, we have shut those stores. And largely, mall store came into the ambit of the closure.
Understood. And sir, if I can ask you the last question if I'm allowed to do that, sir, to take you a liberty of asking one last question. Sir, even when we're trying to understand that we have not changed our, say, offerings for a long period of time, we have been positioning us as the wedding jewelry player for the long time. So is there any calibrated approach by taking by, say, introducing new products, for example, those jewelry watches or in terms of, say -- any particular product we are targeting like, say, bracelets, which are high margin; I would say, rings which are higher margin; I would say, necklace. I want to understand that in terms of getting into more detail in terms of products offering, how do we -- I mean trying to get more into market share. One is a number of stores, but in terms of product perspective, are we targeting -- is that the right way of looking at the things, sir?
Yes. I think when you get into the detailing of the product, what is being sold at specialty stores, as you said, you are talking on one side of it, onto the inventory, which particular category -- product category is getting sold. We also look into the different weight range. We also look into the diamond and gold ratio.
[Foreign Language]
Kindly proceed, sir?
Yes. So there's a lot of work goes in the deciding of the product category. And as I said, this goes store by store. We also look into the weight range wise, which particular product is getting sold, as I said earlier, it is actually driven by the consumers. So what consumer exactly wants. There's a lot of interaction with the consumers we work and basically consumer demands in a particular region, we accordingly do the product offerings.
What could be a ticket size -- change in ticket size we are targeting? Or we are keeping the same -- ironically the same ticket size which we are offering earlier? [ Tickets could ] be in terms of gold prices, but I'm talking about in the grammage wise ticket size, please.
Yes. So we have seen a slight increase into the ticket size, approximately 5%, I can say. We have seen, therefore, increase in the ticket size.
On the volume front, I mean [ barring ] the gold price momentum, [indiscernible] to say that, sir?
Yes, yes.
The next question is from the line of [ Neha Sharma, ] an individual investor.
Congratulations on the good set of numbers on the top line numbers. I just have a couple of questions. So what are the reasons for our margins being so [ so less ] for the quarter?
You are referring to the gross margin?
Yes, gross, EBITDA, PAT?
Okay. So I think gross margin largely remain into the same range what we have achieved into the last year same period as well. However, we could have seen a much better gross margin had the gold rate not gone down during the month of September, which was a little bit -- has impacted on the margin side. As far as the EBITDA and PAT is concerned, we had incurred a good amount of marketing expenditures, which were ticking up because of the festivals performed in this financial year vis-a-vis last financial year. Last financial year, Diwali and Dussehra was in November and October. This financial year, Diwali was in October as well as some part of Navratri was in the month of September. So we had to perform a lot of our marketing activities and which has actually added to the cost. And because of that, the margins have gone down, EBITDA margin and PAT margin.
Okay. Sir, one more question. So what are your various market activities you have done in the quarter? Can you throw some light on that?
Yes, madam. I think if you see our various marketing activity, July, we had done diamond no making. In the month of August, we had run from flat 50% off on to the making charges at the gold jewelry. We have launched Mangala collection, which is a new collection, especially for the South market. It's more on the Jadau jewelry collection side. In the month of September, we had done a [ pre-booking onto the gold rate. ] We have done the festival offer of flat [ 399. ] In the South market, we had lost the [indiscernible] gold rate plus flat 30% off on making charges. We had -- there was an offering from the State Bank onto the cash back of INR 5,000 on shopping of [ Rs. 1 lakh and more. ] So there were various kind of marketing activities which were done in the quarter 2.
Okay. And one last question, sir. In terms of gold loans, where are we standing right now? And what are our aspirations for the future?
So gold loan is a mechanism of getting the right inventory. So gold loan, do you want the exact numbers or what?
No, sir. If you could just throw some light on that?
Yes. So see, gold loan mechanism that we buy the gold from the bank, largely and whatever the [ hold ] gold, which customer sells to us, that is the only two mechanisms we take the -- we buy the gold from. And the mechanism of buying of the gold is from the bank is through Gold Metal Loan, which comes at a very, very cheap rate as of today. So these are the only two mechanisms we buy the gold from.
The next question is from [ Rahul Gattu ], an individual investor.
Sir, can you share our revenue guidance for next few years? And do you have any big CapEx in line in coming years?
Yes, [ Rahul, ] I can share a picture for this financial year. As I said, around 3 stores, we have already in pipeline. And as far as the CapEx is concerned, approximately INR 2 crores to INR 2.5 crores [indiscernible] the CapEx goes, which gets financed through our internal approvals. As far as the revenue guideline is concerned, we are working on the same-store growth. There are two ways to increase the revenue: it's inorganic and organic. We are persistently working to increase the revenue from each of our stores, plus -- as well as increased footprint into a new market. As I said, three stores are already in pipeline. And for the next financial year, the various market studies already in pipeline, which is going on to identify newer markets where we can expand.
[Operator Instructions] The next question is from the line of [ Viral Shah, ] an individual investor.
What are your plans for client acquisition going forward? How much percentage of [indiscernible] do you have target for the planned promotions?
Sorry, [indiscernible], can you repeat your question? I couldn't hear it.
What is your plan for brand promotion expenditure going forward? How much percentage sales you have target for brand promotions?
So [indiscernible], as I said, the marketing cost ranges between -- somewhere between 2% to 3%. For quarter 2 specific, we have incurred a marketing cost around 2.4%. See in India, it is [ festivals come in different ] months and the marketing cost also spreads accordingly. So the marketing spend may not be directly comparable from a quarter-to-quarter perspective, but on an overall number, when you see the marketing cost ranges between 2% to 3%. This depends on the situation of the market, the situation on to the gold prices, situation on the customer sentiment. So there are a lot of factors which works around it. And accordingly, the marketing cost as a percentage varies from market to market. As far as the -- how much revenues coming directly to the marketing spend, there is no such mechanism to monitor that. But yes, marketing does play a very important role in terms of achieving a particular sales number.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments. Mr. Sharma, over to you for closing comments.
Yes. Thank you so much, everyone, for coming to this conference call. If there's any question which remains unanswered, I would encourage you to write to the company. We would be more than happy to answer your questions offline. Thank you so much.
On behalf of Dickenson Intellinetics Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.