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Tribhovandas Bhimji Zaveri Ltd
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Ladies and gentlemen, good day, and welcome to Tribhovandas Bhimji Zaveri Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions] This conference call is being recorded. I now hand the conference over to Mr. Mukesh Sharma, CFO; and Ms. Binaisha Zaveri, Whole-Time Director. Thank you, and over to you, ma'am.
Ladies and gentlemen, good afternoon, and welcome to the TBZ Limited Earnings Call for the Fourth Quarter and Fiscal Year 2023. At TBZ, we take great pride in our commitment to operational efficiency and our ability to create exceptional jewelry designs.
These 4 principles have not only contributed to our financial growth, but have also earned us the the trust and loyalty of our valued customers for over 157 years. During the fourth quarter of FY '23, the launch of our various collections like HUES, Svara, Navya, Kavya received a overwhelming response with over 50,000 plants working.
During the fiscal year 2023, we witnessed a significant year-on-year growth of approximately 25%, totaling over 2.5 lakh walk-in. These numbers reflect the legacy dedication of TBZ and our ability to create jewelry that resonates deeply with our customers.
Looking ahead, we remain dedicated to driving innovation, ensuring customer satisfaction and achieving robust financial growth. Our continuous focus on delivering exceptional jewelry designs further now enhancing our operational efficiency and maintaining our established market position will enable us to seize future opportunities and provide customers with unparalleled products and experiences.
Thank you for your continued support. I'd now like to hand over the call to our CFO, Mr. Mukesh Sharma, to share some financial highlights for Q4 and FY '23.
Thank you, Binaisha. Good afternoon, everyone. It's a pleasure to welcome you to TBZ Limited's earnings call for quarter 4 and FY '23. I am pleased to present our audited financial results for quarter 4 and FY '23.
To start with the financial performance front, we are delighted to announce quarter and year-end demonstrating sustainable growth. For quarter 4 FY '23, our total revenue increased by 7.7% Y-o-Y INR 464 crores. EBITDA grew by 96% to INR 30.3 crores with EBITDA margin of 6.5%. PBT grown by 368% to INR 13.3 crores, with a PBT margin of 2.9%. PAT rose by 363% to INR 11.3 crores with a PAT margin of 2.42%.
Moving on to performance for FY '23. Our revenue grown by 30% Y-o-Y to INR 2,394 crores. EBITDA grew by 58.9% to INR 115 crores with EBITDA margin of 4.8%. PBT increased by 125% to INR 51 crores with a PBT margin of 2.2%. PAT rose by 132% to INR 40 crores with a PAT margin of 1.7%. In addition, our operational efficiency has improved, resulting in sales growth across all categories.
We achieved a Y-o-Y revenue growth of 30% for FY '23. In Q4 FY '23 alone, we achieved a 3.8% margin growth. Our unique manufacturing designs have resonated well with customers, seeking craftsmanship and quality.
Furthermore, we experienced growth in both the gold and diamond segments, demonstrating our strength and diversification. Our focus on optimizing sales and margins has shown progress with notable improvements in quarter 4 margin. Maintaining reasonable inventory levels has been a key focus supporting our growth objectives. We remain committed to driving innovation, customer satisfaction and sustainable financial growth.
We will continue delivering exceptional jewelry design, enhancing operational efficiency and optimizing margins to seize future opportunities. Thank you for your continued support. I am now ready to take your questions.
[Operator Instructions] We take our first question from the line of Neha Sharma, who's an investor.
As a potential investor, I had a question regarding TBZ subtle situation and future prospects, particularly in relation to the high debt levels and interest rate costs. Over the last 5 years, TBZ has been experiencing semi growth. Could you please provide some insight into the factors that have hindered the company's growth during this period?
Maam , can you repeat your question, please?
Yes. So I was -- I wanted to ask over the last 5 years, TBZ has been experiencing semi growth. Could you please provide some insight into the factor that has hindered the company's growth during this period?
See, I will not be able to comment on last 5 years. But looking at the current year performance of FY '23, you can see the sales revenue side of INR 2,400 crores is a very reasonable revenue level, which is grown 30% on a Y-o-Y basis.
[Operator Instructions] We'll take our next question from the line of Rahil Shah, who's an investor.
Congratulations on these result. So my question is pretty simple on the outlook. So what kind of top line and margins now you see likely to achieve in FY '24, given the business dynamics, the demand scenario and everything put together.
Thank you so much, Rahil. We are very positive to maintain our sales growth momentum. We foresee approximately 20% sale growth in FY '24 on the current level. The margin side, which is we have already clocked 11.1% margin in FY '23, and we believe that there is a scope of further growth in the margin flavour. And we are committed in working towards it. Hopefully, we should see some growth at the margin level as well.
For both gross and EBITDA?
Yes.
Okay. Okay. And any risks you are foreseeing for FY '24? And if so, any challenges which you expect?
The only risk which is exist in business is fluctuations in the gold prices. Yes. So any downside, huge fluctuation may impact, but a normal fluctuation of 5%, 10%, 15%, may not impact our growth.
Right, right. And just last one would be the prime -- like key focus going forward FY '24, which will help you achieve good growth.
Yes. So our key focus is to optimize our inventory level. Our key focus is to increase the churns to consistently work on the margin side, increasing the operating efficiency across company level introduction of the new brands, new products, new design, which is an ongoing effort. And these are our key focus areas.
[Operator Instructions] We'll take our next question from the line of Neha Sharma. Who's an investor.
I just had one more question from my end. In light of the high debt levels and interest rate cost, what measure is TBZ limited taking to reduce the interest burden on its debt. Are there any initiatives to improve the margins and optimize the cost of finance?
Ma'am, debt is not high. If you see our leverage ratio, it has actually rationalized further our leverage is 0.95% -- used to be a year-on-year. Now it is 0.86% debt-to-equity ratio. So our debt is well within the limits. I believe there is a further scope of -- for utilizing the dates more in GML facilities and all. Those scopes are existing in current operating scenario. As far as the cost is concerned, the finance cost is concerned, there is a huge increase in the interest cost in recent last one year, which has resulted in higher finance costs. We believe that in FY '23, we will start seeing easing in interest rate, which will bring down our finance cost. So because of the increase in the volume, obviously will be a -- for more utilization of the working capital limits. And because of this, there is a increase in finance cost is evident in our book, which has also because of higher interest rate, which may not be comparable exactly with the previous year has resulted in more finance costs. But we are working very consciously to use more [ JMM ] facility than the [ BCC, ] which will bring down our overall weighted results finance cost.
[Operator Instructions] We take our next question from the line of Ankit Shah, an investor.
Yes. So my question is in terms of the gold prices, what is the percentage of inventory, which is -- and of the policy of hedging in terms of -- inventory is something between 10% of that is hedged.
So Ankit, we work on natural hedging principle, so the day we sale different quantities bought at the same rate, which keeps us the natural hedging in our old business. As far as the inventory concern is around 50% inventory is paid inventory in 50% work for now is GML basis, which is open to fluctuation. It gives us the balance in terms of in terms of -- if there's a huge fluctuation. My margin will not go in line with the [ U. S. ] fluctuation. So that's how we hedge our gold inventory.
No, your goal, GML is automatically hedged, right? Because you are borrowing in terms of gold.
The exposure on that. Right? Impacted on your GML. But on your own inventory, you are not hit?
Correct. Correct.
So tell me something the gold prices have gone up so much, right? And then I look at your financials, right? Over the last 7, 8 years. Actually your own inventory or the amount of gains that one should have made just on your own inventory should be huge, right? Because the prices in the last 10 years have gone up multifold. But why is that not visible in the increase in net worth or the profits of the company?
So if you have followed the company, you must have noticed, there is a -- issues jump in the profit in FY 2021.
Historical -- sorry, sorry, I'm saying historically, if you look at the last 8, 9 years profit, right, then if you see -- if you are not hedging your own portion also, which is roughly INR 600 crores that to date, as of March, right? Your own inventory funded by your own work. Then why is that not visible in the profits, Right?
Okay. So let me clarify you conceptually that GML is not a hitting, okay? GML is a way of buying, which has a very, very lesser cost of fund, okay? GML in a rising interest -- rising rate scenario, we actually -- whatever you bought on the GML is open to a market fluctuation. In case of rising rate scenario, it hits your P&L. In case of falling rate scenario. It adds to your P&L. Yes? That's how GML works.
When it comes to the paid inventory, it works exactly opposite GML concept. So in case of paid inventory, when the rising estimated gives you a profit. And then following this scenario, it gives you a loss. So as I said, that we balance our GML, as well as our paid inventory ratio, which allows us not to -- not to show -- show us jump in profit or show us lost in the profit when there is a huge rate fluctuations. So that's the project of GML as well as -- inventory.
Yes. Sorry, I understand the concept of GML, I think my question was really that for example in [ GFC, ] you have a -- say on a INR 3,000-odd crore revenues, you have a INR 1,200 crore inventory, right? So you're -- basically, your inventory is also getting sold, right? So in case of GML what happens is, that you don't have that much of a price exposure because while you're -- you have a mark-to-market on your GML, but you're also getting a higher realization on the inventory, right? So that's what I meant in terms of your margins in a way it is hedged, right? So that's what I was trying to understand, just at a very broad level.
And also, that just on the gains that even if there was no making charges that you made, but just on the pure increasing the price of your inventory over a period of time, that should have ideally increased, right? In terms of the net worth. But when I look at the net worth or even the total profitability over the last 8, 10 years, that has not happened, right? Like your network was around INR 210 crores in FY '13. And today, its INR 560 crores. So that quantum jump has not happened and which is why I was just puzzled that why is that translation of higher rates of gold not translated into profits or increase in your net worth?
Sure. I understand your point. See, Sahil, (sic) [ Ankit ] what happens is -- sorry, Ankit, what happens is -- you keep buying and selling. Right? So what happens is your buying cost -- weighted average cost of inventory keeps changing over a period, yes? So we are not -- in fact, if you see we have not been selling the inventory, which we had bought in 2013, '14. just for example. The inventory keeps replacing. When in fact, the older design also will go and melt -- melt it back and then we again create a new design. So it's a continuous process of buying and studying of the inventory. So the buying happens on a GML basis we keep buying and -- we keep doing -- doing mark-to-market which means to hit our COGS, cost of sales. Now all this -- the margins which is reflecting is a combination of real as well as paid inventory with which keeps getting bought and keeps getting sold. So that's why the fluctuation may not be of the -- all previous years will reflect into the P&L of current debt. As I said, obviously, the operating levels were different in '13, '14. The operating revenues are different in -- current FY '23. And the cost of sales also has changed in line with our current gold rates, which are currently going on.
So it's all combination, it's very difficult to point it out exactly how much has come on the paid inventory, how much is coming from the payment quantity. It would be very difficult to pinpoint towards that. So.
So net -- so last quarter also, the gold prices had gone up quite a bit, right? So how do you -- like how does 1 look at sustainable margins going forward, right? While -- like if I were to look at -- say next -- just on a broad basis, like what is the range of margins, excluding the impact of gold prime views, right? So.
Yes. So the controllable in our hand is operating efficiency. The noncontrollable is rates of gold. Right? So the -- as the gold rate increases, obviously there is a positive impact on the margin side, maybe only 50% kind of inventory, 50% we have to absorb the higher cost of gold at current rate because we are paying off our GML basis the actual sale as well. So the controllable side, we are working hard on engaging into product mix, increasing the stock turn. So we are working consistently on that, and we believe that this is going to yield better results in near and long term. It's really difficult to pinpoint a particular margin percentage, which we foresee in FY '24, but yes, we are ...
No FY -- No. Yes, So I'm not saying FY '24, but in general, like internally also, you must be working with certain level of margin, right? That okay, We have to -- on an ongoing basis, we have to generate this much margin, right? So right now, say, for example, you are at 5% for last full year, that is last quarter was 7%.
Correct.
And it has been improving. But what is the -- like -- where would like -- if I were to -- and -- that's why I'm saying if I were to adjust the impact of gold, right? Because that's not in your control, but what is in your control is that adjusted for that, what is the margin that one can deliver because -- that's what I'm trying to understand.
Yes Ankit. So Q4 has also -- because the results immediate jump in the gold prices in quarter 4. As actually bottomed out somewhere near Diwali and has part of it has increased quite a bit. Now when you say yearly profit of 4.8%, around 5% EBITDA level. This is achievable because this is a combination of the gold bottom rate also, somewhere in Diwali where we have a huge business and a higher rate also in quarter 4. So that's a weighted average percentage of EBITDA margin. And we believe that you should be able to achieve some growth in the EBITDA margin from those percentages. But as may not be exactly quarter 4, if the gold keep rising, obviously, the margin will be much higher.
Okay. And sorry, just one last question. I can see on the shareholding pattern that Malabar Gold has been buying continuously for the last 3, 4 quarters. So is there any -- on this -- I mean -- is it -- is there some understanding or they are just buying it from an investment perspective? Because I'm sure you guys must also have discussed this, right?
No, we don't comment on this. We have -- I just want to clarify that there's no understanding. There's no discussion with Malabar, they -- they are buying as a normal investor who buys from the market. From a company side, there's no discussion at whatsoever level absolutely with Malabar.
[Operator Instructions] We take a next question from the line of [ Bhushan Wankhede ]. an investor.
I just wanted to know regarding the expansive strategy. Can you provide me some details on whether the company plans to open new stores or is just focused upon improving the performance of existing stores?
Bhushan, we are working on few proposals on the franchise model. And we are hope that we should be able to open a couple of stores in quarter 2 and quarter 3 of the FY '23.
[Operator Instructions] We take the next question from the line of Rahil Shah, an investor.
Yes. You just mentioned you are planning to open a couple of stores. What kind of investment does it require? And how long does it take to breakeven? If you can provide a timeline.
Yes, Rahil, so we -- we work in a -- the model of franchisee operations is open for discussion. We work in both model, all kind of model. We're in investment, 50-50 and then margin distribution accordingly or entirely invest 100% inventory and reinvesment in CapEx or 100% CapEx where 100% investment were franchises. So there are different kind of models, which we are going to operate. Obviously, the margin sharing will be a different percentage in all different scenarios. So all these are open for discussions. However, we see that, with a minimal investment from the company side, we foresee that majority investment in the working capital will be from our franchisee partner. And we foresee that will be positive EBITDA without further investment on the working capital on the company side. So all kind of model are open for discussion, but largely in the line that working capital investment will be franchisee.
Do you have any positive prospects so far?
Yes, we have a couple of strong prospects in our hands as of now.
[Operator Instructions] As there are no further questions from the participants, I'd now like to hand the conference back over to Mr. Mukesh Sharma for closing comments. Over to you, sir.
Thank you, everyone, for joining us on this call. Please contact Dickenson World or us directly. Should you have any other further queries. I wish you all a great evening. Stay safe, and we can close the call now. Thank you so much.
Thank you very much, sir. Ladies and gentlemen, on behalf of TVZ Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.