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Vaibhav Global Ltd
Earnings Call Analysis
Summary
Q1-2025
Vaibhav Global Limited experienced a robust 15% year-over-year revenue increase in Q1 FY '25, totaling INR 756 crores, driven by improved gross margins at 66.1%. However, EBITDA margins decreased to 8.7% from 10% last year, mainly due to higher digital marketing and airtime expenses. The company aims to reduce overall content and broadcasting expenses to 18% of revenue for the full year. Revenue grew by 4% in the U.S., decreased by 6% in the U.K. due to weak consumer demand, and rose by 18% in Germany. For FY '25, Vaibhav Global targets revenue growth between 14% and 17%.
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Ladies and gentlemen, good day, and welcome to Weibo Global Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Disha Shah from Adfactor (sic) [ Adfactors ] PR. Thank you, and over to you, ma'am.
Good evening, everyone, and thank you for joining us on Vaibhav Global Limited Earnings Conference Call for the First Quarter ended 30th June 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 opening remarks by Mr. Sunil Agrawal on the 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 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 all 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, Disha. Good evening, everyone. Thank you for joining our quarter 1 FY '25 earnings call. I hope you've reviewed the results and investor presentation.
I'm pleased to announce that we have sustained our growth momentum with a 15% increase in revenue. Our gross margins have improved substantially to 66.1% from 61.2% in Q1 of last financial year, thanks to focused pricing efforts and a favorable product mix.
Our vertically integrated supply chain has also helped us to maintain gross margin above our 60% target. EBITDA margin was 8.7% of revenue, down from 10% for the same period last year. This decrease is primarily due to higher spending on digital marketing for new customer acquisition and higher spending of airtime for better channel position. These investments are expected to sustain our growth momentum in coming periods.
However, our overall content and broadcasting expenses will reduce as a percentage of revenue from the current level of 20% to approximately 18% of revenue for the full financial year.
Now let me take you through our key retail markets. In the U.S., we saw a 3.7% year-over-year growth driven by favorable macro factors, which propel growth in the online retail industry.
Our wide product range with quick turnaround times owing to vertical operation integration has also supported this growth. In the U.K., revenue growth by 17.8% Y-o-Y. However, when adjusted for acquisition, it decreased by 6% Y-o-Y, owing to cautious consumer behavior amidst economic and political uncertainties. Germany continues to perform well, having achieved Y-o-Y revenue growth of 18% in Q1 FY '25.
During the June and July months, trends were even more encouraging with Y-o-Y growth of 30%. We believe we will sustain this growth momentum during the remaining period of the year and will be profitable and the operating level by H2 of FY '25.
Our 4R strategy: widening reach, new customer registrations, customer retention and repeat purchases, has shown positive results. Our TV networks now reached 130 million households, and our unique customer base has grown by 37% year-over-year to approximately 636,000. Excluding acquisitions as well, the unique customer base has been improving quarter-on-quarter.
Customer retention is strong at 40%. Overall repeat is 24 pieces per annum on a trailing 12-month basis. In Ideal World, we upgraded our business on the HD network now. It is already profitable on a direct cost basis, and we expect to achieve profitability on a full cost allocation basis in the next 3 to 6 months.
Similarly, Mindful Souls continues to launch new products regularly and has created a base of 85,000 unique customers since acquisition. We expect that the utilization of VGL Group supply chain will further improve the profitability of the business in the coming months.
Further, the company has discontinued its apparel manufacturing, owing to the lower margin nature of that business. Impact of the discontinued operation was negative 25 basis points on an overall margin on TTM basis.
At VGL, commodity giveback is a core part of our business. We're proud to announce that we reached a milestone of 90 million meals being donated to school children under our flagship mid-day meal program Your Purchase Feeds. We currently serve approximately 57,000 meals every school day and aim to donate 1 million meal every school day by FY '30.
On the sustainability front, we generated 1.1 million kilowatt hours of solar energy this quarter, meeting 100% of the power needs of 2 manufacturing units in India. Our premises in the U.S., U.K. and Germany are also running on renewable energy. These efforts support our goal of achieving carbon neutrality in Scope 1 and 2 of greenhouse gasses emission in 2031.
We have also commissioned our third rainwater harvesting tank with a capacity of 600,000 liters. With this, we have built a total rainwater storage capacity of 1,100 kilometers. We are honored to receive the IGJ Award 2024 from the Gem & Jewellery Export Promotion Council, that is GJEPC, for being the highest exporter of cut and polished colored gemstone from India during FY '23. This award reflects our global competitiveness and customer trust. It recognizes our contributions to the Make In India initiative over the past 4 decades.
We are committed to creating long-term value for our shareholders. And thus, the Board has declared the first interim dividend of INR 1.5 per equity share for this fiscal year, representing a 90% payout.
Looking ahead, we will focus on growth and profitability with a prudent capital allocation. We retreat to achieve 14% to 17% revenue growth for FY '25 with operating leverage. For future periods, we project revenue growth in the mid-teens range with operating leverage.
I'll now hand over the call to Nitin to discuss the financial performance in detail. Over to you, Nitin.
Thank you, Sunil. Good evening, everyone. I would like to extend a warm welcome to you all at Vaibhav Global Limited's Q1 FY '25 earnings call. While Sunil has provided an overview of our operational performance and key initiatives. I will now present a detailed review of our financial performance for the quarter ended 30th June 2024.
In Q1, we have achieved a revenue growth of 15% year-over-year, totaling INR 756 crores compared to INR 658 crores in Q1 FY '25. We also recorded 20% year-over-year volume growth with a 6% volume growth, excluding acquisitions. In Q1 of '25, the gross margin was substantially stronger at 66.1%, reflecting the efficiency of our vertically integrated business model and product mix.
EBITDA margin for the quarter was 8.7%. Excluding Germany, the EBITDA margin was 11%. As Sunil mentioned earlier in his remarks, due to limited investment in digital, EBITDA margin was slightly lower than expected. As a result, content and broadcasting expenses as a percentage of revenue have become 20% in Q1 FY '25.
We believe that this cost will around 18% of revenue for full financial year. Profit after tax for the quarter reached INR 27 crores versus INR 30 crores in Q1 FY '25.
Now I will provide an overview of our revenue down by geography. In Shop LC-us, experienced the growth of 4%, agency down by 6% and Germany saw a growth of 18%. Overall, our existing B2C businesses grew by 2.3% in U.S. genres. The overall growth of existing businesses was dragged by softer performance in U.K., where a broader macro indicators were -- are suggesting sluggish consumer demand.
In Germany, recent revenue trends are quite encouraging, and we are confident that the year-over-year growth of 30% will enable us to achieve profitability at operating level by second half of FY '25.
TV revenue for the first quarter was INR 440 crores, while digital revenue was INR 289 crores. TV revenue grew by 12.2% year-over-year and digital revenue grew by 22%. Digital now accounts of 40% of total revenue and 45% of our volume. This growth is due to our sustained investment in digital, marketing and technical infrastructure.
Additionally, our Budget Pay option, allowing customers to purchase products on EMI basis, has proven valuable and contributing 38% of our B2C revenue in Q1 FY '25. Ideal World is already profitable on a direct cost basis, and we anticipate it will achieve full cost allocation profitability within the next 3 to 6 months, surpassing our initial expectation.
Mindful Souls is a profitable and margin accretive business that continue to perform well. We are leveraging media supply chain to boost group's overall profitability and strengthen our digital segment. We are pleased to report that we maintain a robust balance sheet position and net cash positive balance of INR 158 crores.
However, our free cash flow and operating cash flows remained flat during this quarter due to increased working capital investment in preparation of upcoming festive season, primarily in inventory. Currently, our ROCE and ROE is 17% and 10%, respectively. The Board has declared a first interim dividend of INR 1.5 per equity share for this financial year with 90% payout, reinforcing our commitment to long-term shareholders' value.
We continue to demonstrate resilience, agility and strength to capture long-term opportunities, we are confident in our business prospects ahead of us and are investing in capture growth. We remain confident of our prospects and deliver our stated growth guidance of 14% to 17% for the current year with operating leverage. For subsequent periods, we project revenue growth in mid-teen range with operating leverage.
Thank you. Over to you, moderator. We may now open the line for Q&A.
[Operator Instructions] The first question is from the line of [ Nirvana ] from Badrinath Holdings.
Am I audible?
Yes, you are.
Yes. So my question is regarding the content and broadcasting costs. So if I look at the history of the line item, from FY '21, the cost has really ratcheted up. So in FY '20, it was around 11% of our top line. FY '24, it became around 17%. And this quarter, it's around 20%. So from FY '20 to now if I see the TAVR growth in this line item is 23%, whereas our revenues have only grown by half of that by 12%.
So I just wanted to understand what is the reason for this bigger divergence during the 2 areas? Is there some operating leverage sitting there inside? Or is customer acquisition getting really positive for us and therefore, is this going to be a permanent drag on our margin?
Yes. Thank you for your question. We have made the investments where we see the opportunity. So this contains the airtime as well as the digital spend. There are different drivers for both. For airtime, we make investments, especially the new acquisitions that we made, that is Ideal World, we took new airtime for that. In Germany, when we launched, we have to go in for the airtime full fledge even though it takes time for business to scale up.
Even in the U.S., we took some airtime, which is lower channel position. That will be productive in the next 12 to 18 months. So the 3 investments that we made in Ideal World, airtime; Germany airtime and within U.S., a new airtime has got the cost high. But as I gave guidance in my opening remark that this line item will be approximately 18% of revenue for the full financial year.
This would be -- over the time, we will see this moderate a bit because of the start-up 2 businesses and some new airtime read. But we always look for opportunity for future growth prospect for the company.
Understood. But even if I look at 18%, that's a Y-o-Y increase of 30% plus. You had a INR 500 crore cost last year. But now, according to this 18%, approximately, it'll be north of INR 600 crores. So again, while top line growth will be 15% and so scale line item is 50%.
Sir, this is what I'm trying to understand sir. Like is this the new normal for us, high-teen type of content and broadcasting? And therefore, our ROCs and ROEs are, are they permanently impaired to that extent? Or are you looking to bring them back to the levels where it was, say, [ debt repo ]?
Yes. So the startup nature of our kind of business is that the real-time cost and even the HR cost in initial years is relatively high. So as we saw in Germany in Ideal World. So those are relatively high.
Now in other geographies whether its U.K. TJC or Shop LC, the -- these costs are really lower than the overall mix that you would see. Now the other component is the digital spend that we do [indiscernible] opportunity of ramping up customer acquisition for future benefit. We did make the investment appropriately.
That may moderate over the time, there is no specific guidance to that. The current guidance we're giving is 18% of -- item for this current financial year and continued leverage for foreseeable future with mid-teen growth.
That would maintain -- that would entail that this line item would have some leverage coming back in and some leverage will come with some other line items as well. Some will come with HR costs and some other small costs.
Sir, sorry, last question on this particular topic. So let's looking ahead 2, 3 years, do you think that this number can come down to 15% or below? Are you in a position to sort of comment on that?
[indiscernible] long-term to see in today's dynamic retail environment to give a 3-year guidance on that. But the guidance, what we feel comfortable giving guidance is 3-year term, you will continue to see the leverage coming in as our businesses mature in Germany, Ideal World as well as scale leverages in the U.S. -- existing business of the U.S. and U.K.
Sure, sir. So my next question is on the leverage side. So in the last call, you had mentioned that content broadcasting will not see any leverage. In fact, we'll see the opposite of that, as I pointed out I think. So you had mentioned that Hr cost and SG&A and shipping costs, these will be the potential operating leverage items and cost would be.
So It's a little confusing whether SG&A, which line item are you talking about that is not clear. So what kind of operating leverage are you hoping FY '25 to play out? Or alternatively, if you can give us some understanding of what percentage of the cost base will see the operating leverage?
Yes. So number one, we believe the margin -- we will be having at least 200 basis points higher margin than last year. So there will be one benefit. And other, as I mentioned last earning call, and I appreciate your memory. The HR will see about a little over 100 basis point leverage. The other component of SG&A will have some leverage as well.
For example, the rent or the travel or some other areas will have some leverage as well. Now shipping, we have negotiated some better rates for shipping in U.S. because of the volume getting higher. So there will be some leverage in shipping as well.
So overall, to summarize, the leverage will come with higher margin and some lower costs in these 3 areas.
[Operator Instructions] The next question is from the line of Pritesh from Lucky Investments.
Sir, just on this content and broadcasting costs. So from quarter 3 of last year is where I see the pipe coming in at about INR 300 crores plus. Is there any organic -- so basically, is there any content cost rise in your [ EGST ] and Shop LC business?
Yes. So compared to quarter 4 in our existing TJC business, actually, cost is flattish. But in U.S. we have taken some of the airtime. So the small portion is increase in U.S.
So I was referring to -- you started consolidating Ideal World and Mindful Souls from December '23?
From Q3 FY '24.
Yes. That is basically quarter 3 FY '24, right?
Yes.
Right. So can you tell us what is the content cost on account of these acquisitions? Or you can tell us what is the growth rate in the content and broadcasting costs in your base business of U.S. and U.K.?
Yes. So U.K. the content and broadcasting cost is flat. And U.S. in Q4 to Q1, there's a 10% higher cost in Q4 to Q1.
And between Q3 and Q4?
Q3 and Q4 is flat.
Sorry, Q2 and Q3, sorry. Q2 and Q3 last year.
Q2 and Q3, the cost because there is a new airtime that we have taken, the cost increase was around roughly, if I recall correctly, is around $1 million in absolute terms.
So INR 8 crores there and INR 20 crores. So basically, on your base business, you added INR 28 crores of content cost. You are running at about INR 250 crores all these quarters for the last 8, 9 quarters?
Yes. Yes.
Okay. Basically, I'm including content plus other G&A items, okay. Okay. So the Ideal World and Mindful Souls, at what operating margins this business is operating at?
Ideal World on a direct cost basis, it is profitable. But if I allocate all the business costs, back-office staffing, it is not profitable, but next 3 to 6 months, it is profitable. Mindful Souls is already operating around 9% profit margins, but we expect that the supply chain and the warehousing leverage will come in upcoming quarter.
And both these businesses versus the channel business of TJ -- of U.S. and U.K., are both this business on a higher than the base business in terms of content and broadcasting costs as a percentage of sales?
Yes. So as a business run is differently like Mindful Souls is pure D2C business. So their content and broadcasting cost is higher than our existing business because predominantly, the nature of the Mindful Soul is digital only just selling on social media and the platform. So their cost to sales ratio is roughly around 25% on content and broadcasting and Mindful Souls. But we don't have other expenditures, higher expenditures like SG&A or HR cost is much lower compared to our existing businesses.
Okay. Okay. Any reason...
Ideal World -- and just sorry, I've just missed -- another point of Ideal World. Ideal World is now, as Sunil mentioned in the earlier remarks, this is a start-up business phase. So initial phase, the cost to sales ratio in terms of airtime is higher. But pretty much 100% of the U.K. we have covered from Ideal World size. So no additional airtime we anticipate from Ideal World. So that the -- with absolute terms, the cost will be fixed for Ideal World.
Okay. In U.S., it was an airtime increase? Or was it content increase?
Yes. So it's a both area that we have invested, the airtime and also on digital side.
So in U.S., you guys were always a fairly high household penetration in reach. Then why this additional requirement? Is it additional household addition or it is a price hike which has happened in those markets?
Yes, better channel position.
Better channel position, okay. Okay. And my last question is, sir, on your customer side -- slide. Like so between quarter 2 and quarter 1, you guys have given 452,000 customers going to 472,000 on the existing business. Can you give us a number in this, Germany will also be there between the 4 quarters? So ex of Germany, what it would be? So basically, I wanted to understand your U.S. and U.K. [ regional ] business customer number.
Yes. So just real add up, but just to add on the Germany part. So in Q4 to Q1...
Or you can just give us in quarter 1 FY '25, what is our Germany customer number?
Yes, 59,000.
59,000. So 472,000 minus 59,000. So 413,000. So basically, in the last 5 years, you have moved from 350,000 to 413,000?
Yes.
Okay. In your original business?
Yes. Yes.
All the best to you, sir.
Thank you, Pritesh.
The next question from the line of Ravi Teja from Taj Capital.
Could you provide more insight into the performance and the growth strategy for the German market? And any plan -- how do you plan to achieve the breakdown towards the second half of FY '25?
Yes. We go by the unique customers trend that we see in the business and historically, what the repeat purchase and what is the AUV we get from these customers. So based on our cadence, we look at the number of unique customers we made so far, how many of them historically come back, month-over-month based on historical cadence, and how many new customers we're expecting and what is their revenue expected in H2. Based on that trend line, we see on operating level, we've become profitable in H2 for the whole period.
Okay. Also, there's another question that I had. The reported revenue that we have is about 15%. This includes our recent acquisition. So what would be our growth rate x of this acquisition without the impact of this acquisition?
In rupees terms, x of this equation, growth is 4%.
And one last question would be what are the key drivers behind the increase of these custom acquisitions and the retention rate? Are these momentums also sustainable for us?
Yes. So we have 4Rs that we focus on. One is expanding the reach, that is through television and digital properties. And registration that is acquired new customers within the reach that we have, again through television, digital, OTT and social platforms. And then retention of these customers. As you would have seen, our retention numbers are improving to marketing efforts and repeats.
So more product variety, better customer service and better way of selling multiple platforms getting one customer to the platform, so that it will help more to the same customer. So these are 4R that are drivers for business growth.
The next question is from the line of Chitra Joshi, an individual investor.
Yes. Am I audible?
Yes. Chitra, you are.
Fine. Yes. So I just had one question. How do you plan to diversify your product portfolios? And what will be the impact of that on your revenue and margin?
So Chitra, we come up with about 100 new products every day with our TV channels. And there's a large organization for product development in VGL Group, hundreds of people. There is the designers, the trend spotters, the [indiscernible], pro-type meters and merchandisers. So they score different areas of the world, our competitors, as well as the trend spotting sites to look at those and bring them.
And we bring relatively lower quantity. And if something hits, can we expand those quantities very rapidly through our own manufacturing or supply chain mechanism and we scale them up. So it's a constant exercise in different product categories, predominantly jewelry, but many different product categories. So any specific asset to a particular product may not be feasible with such high velocity of newness.
Okay. So are you looking for any margin expansion in coming quarters?
Yes. So we just gave guidance of about 200 basis point year-over-year margin expansion for this financial year over last financial year.
Okay. Fine, sir.
There's a gross margin. And EBITDA level, we are giving an leverage guidance over last year, but we're not giving specific EBITDA margin growth guidance.
Okay. Fine, sir.
Thanks, Chitra.
The next question is from the line of Nirvana from Badrinath Holdings.
So we just clarified that the leverage that you're talking about is a gross margin leverage. Did I hear you right, sir?
Yes. So 200 basis points from gross margin and on EBITDA level also, we'll have decent leverage this financial year, over last financial year. We are not quantifying the EBITDA because of our retail nature. But we've seen the drivers coming in, in Q3 and Q4 for these particular areas I mentioned earlier. And with Germany coming to EBITDA profitability, we have decent leverage for minimum EBITDA levels.
Okay. Sir, you are confident of having like a good EBITDA leverage -- operating leverage at EBITDA level in spite of the broadcast and content cost line item actually contributing 1.5% negative leverage sir, right? So If I calculate your projections right, you are going up to 18% there. Last year, you were 16.5%. So there's a negative leverage from that line item. In spite of that, you think that can be like a 100 basis point improvement in the EBITDA margin?
We expect it to be better because 200 basis points is just the gross margin leverage, we have seen. And then we are seeing over 100 basis point increase in HR cost and some other into shipping and other [ Israeli ] line items. So we expect the overall leverage to be better than 100 basis points.
Got it. And sir, when you say HR cost, you mean employee cost, right?
Correct. Yes.
So in Q1, there was no leverage. So when do you think the leverage starts playing out around in employee cost and what is the driver for that? Is it simply increase revenue base? Or is that capitalization in the cost base?
Yes. So one is revenue growth and others, we have found opportunity in our warehouse operations to be -- to automate the processes and reduce the costs from there.
Okay, sir. And final question from my side. How do you see the demand environment shaping up in the U.S., it is your largest market? Like are you seeing some positive signs of maybe realizations also going up along with volume because in some consumer pockets, we are hearing good comments [indiscernible]?
So generally, we see better economy in U.S. GDP continues to grow steadily. So that is good. Overall, jewelry market is seeing negative growth in U.S. currently, but that is predominantly due to less people getting married because the dating [ season ] is about 3 years and COVID people delayed that. So -- but from our space point of view, we are seeing a positive momentum. Only we moderated a little bit our guidance earlier was because of the year selection. So some -- we lose some eyeballs digitally as well as on television because of election cycle every 4 years.
Got it. And sir, when you say that you have extra in from broadcast costs to position yourself better in the U.S., what does that exactly mean? In business numbers, how do we see the impact of that better position, right? Your unit sales price has been going down in the TV category. Volumes have increased, but it's probably to an outsider, it looks like it's because from the strongest sales. So what do you mean by better positioning? And how as an outsider should I see it getting reflected in the business?
Yes. So our airtime takes 12 to 18 months to mature with enough critical mass of customers to make a meaningful difference. So having better channel position is long-term sustenance mechanism for us and leverage over the period of time.
Now if -- assuming that our ASP will stay constant, then it will translate into volume increase. Therefore, the revenue increase. And as we've given the guidance of mid-teens revenue growth for future periods. So these investments will be part in those continued future periods.
Right, sir. And one, all these new acquisitions fully commencing a date, say, earlier in FY '26, do you think that you can still grow as you've seen? I mean, there will be cycles of [indiscernible], but adjusting for cycles, do you think on a fully mature base, will you be able to keep growing at net fee?
We expect that because Europe and U.K. we are still seeing negative cycle, partly to do with high interest rate and high mortgage cost unlike U.S., U.S. you have fixed mortgage and U.K. you don't, and people are suffering because of that. And there was some election that impacted bid.
So we expect those cycles to fall off and to calm and going back into positive territories both in U.K. and Germany. In U.S., after election cycle, we expect the economy to be a steady state and the -- our business more or less pretty robust with a steady state with investments that we made in airtime as digital will continue to give a growth in the coming years.
[Operator Instructions] The next question is from the line of Aditya Shah from Mutual Wealth Management.
Sir, my first question is how are you addressing the macroeconomic challenges and competitive pressure in the markets. What trend do you see shaping the industry in the coming years in all the 3 regions?
That's a very broad question, Aditya. And I can only say from our observation because I'm not an economist. My observation is that, as I just mentioned to Nirvana's question earlier, that U.K., we continue to see a bit of stress in the consumer sentiment as we saw with the numbers also.
So -- but we expect that to moderate as Bank of India just cut the rate yesterday. And that we expect to impact mortgage costs positively and cost of living index positively.
U.S. continues to be positive from a GDP growth point of view with the election cycle also getting away by the end of this year, we expect U.S. to get back into the good, steady positive territory.
Germany, also, we expect -- again, it is difficult for me to say, but we expect interest environment to be moderating over the year -- coming years. So Germany should continue to grow well. Over the last 2 months, June and July, we saw 30% growth year-over-year, and we are seeing similar growth in coming times as well.
So we are overall positive for the economy coming in unless some black swan event comes in, we are fairly positive.
Fair enough. Sir, my last question is, how is digital and social integration in the business panning out for your business? And how impactful is Mindful Souls in leveraging the digital business to your company?
Yes. So Mindful Soul is a native digital company. And the process here we think, the thinking process of the staff is completely digital and somewhat different than our hybrid business model. So we've integrated a lot of the learning into our business, and that is already helping overall for the business. As you saw, the new customer numbers are spiking up within our main core business. And to some extent, there were a benefit of Mindful Souls.
And on the other hand, the benefit to Mindful Souls is our supply chain we've bought all the supply chains for 3PL in U.S. and U.K., we brought that into our own warehouse in U.S. already. And we expect that to give us leverage in coming quarters. And our sourcing also we bought in-house initially, we had to send by air because of Red Sea disruption. But that is a matter of this -- a couple of quarters last quarter and this quarter. But after that, we expect the VGL Group's supply chain leverage coming into Mindful Souls as well. So all in all, pretty positive experience for us.
The next question is from the line of Rohan Mehta, an individual investor.
Sir, regarding the new customer acquisitions that you had, what would you point out as the top reasons initiatives, which have been driving these new customer acquisitions and the retention rates that we have? And can we consider these to be a sustainable level, say, for the coming quarters as well?
Yes. I expect the new customer acquisition velocity to continue for existing businesses as well as the new businesses. Now let me take it back. The Ideal World customer acquisition was pretty robust for the -- since we acquired this company. So that may moderate a little bit. Because as a new business, it takes -- especially on television, it slows down over the time.
But for our steady state U.S., U.K. and even Germany business, we expect the current growth rate to continue.
And your other customer -- the other point question was about the retention rate. The retention rate with our marketing initiatives that we've really augmented our marketing teams. So those initiatives are helping customers retain better and also to have better repeats as well.
Okay. Sir, do we have a marketing budget per se as a percent of sales?
Yes. So different brands have different budgets. And given marketing also, there are different segments. One is the traditional marketing, whereas e-mail or flyers or discount offers, or buy 1 get other 1 50%, those kind of offers with 1 segment budget. Other is a digital paid, which includes social, which includes search, it includes affiliates, includes influencer and also retargeting through [indiscernible] or other tools. We have different levels of marketing.
Okay. Okay. Understood, sir. And sir, our revenue growth has been to the tune of 15-odd percent, but that includes the inorganic initiatives as well. So just for the super granular understanding, what kind of growth can be expected excluding inorganic move?
Yes. So we are hoping that the economy will return to steady state next year. So we expect our steady state growth -- steady-state growth to be mid-teens with operating leverage.
Fine sir.
Because we have sufficient drivers in 4R framework that we have unless there is a macro environment, we expect the growth rate to continue at mid-teen numbers.
Okay. Okay, sir. So this would be applicable to the U.S. and U.K. market, excluding the impact of Ideal World and Mindful Souls. Is that understanding correct, sir?
So for next year, we won't have the acquisition period in under us. So for next year, overall for the business, we expect overall growth to be mid-teen numbers, including the new acquisitions as well.
Now new acquisition Mindful Souls is already a decent size business. So this will -- the growth there will be similar steady state at other businesses. Ideal World will be a little bit more elevated level, and Germany would be a little more elevated levels in U.K. and U.S. But overall, we expect to be mid-teen numbers.
Okay. Okay. That's excellent. Just if you could touch upon our supply chain-related initiatives, if any, in terms of improving efficiencies on that front and leveraging the manufacturing hub that we have at Jaipur. Is there anything -- if you could shed some color on that, please?
So it's a continuous process to learn and to implement learning and make the operation efficient. And over the years, sometimes the leverage does [indiscernible] because of we find some [ process ] or efficiencies in the supply chain as well. But I cannot point to one specific area that would give additional leverage in addition to what we have already mentioned.
Okay. Fair enough, sir. All the best, sir.
[Operator Instructions] The next question is from the line of [ Parth Lal ], an individual investor.
Can you hear me?
Yes, Parth. Go ahead.
Sir, about the U.S. election this year, do you see any impact? I think it will be around our best quarter historically. So is there any impact that you see?
Yes, we've already accounted for that in our guidance. So we expect our revenue to be overall 14% to 17% growth year-over-year with decent leverage for the year.
Okay. Okay. And the next question is, sir, about a couple of years back, we had this Investor Day or a call, where we had this all country-level teams as well. I remember, I think U.S. team had a saying that they were increasing some investment around the same -- I mean, number of PIN codes, with the same-day delivery or 1-day delivery, something like that. So how is that panning out? Has that -- I mean, is that happening? The quick delivery has been happening in the U.S.
So I don't think it is for U.S. because we don't have such initiative in place. The U.S. is pretty large operation, and the only 1 warehouse in the U.S. [indiscernible]. But in U.K., we do deliver some higher -- high end items with next day deliveries. We ship same day, and it comes to customers, and that helps into a better retention. But in U.S. we don't have such initiative in...
Okay. So maybe I think I'm mistaken by U.K. and not U.S. [indiscernible] got you. In the same call, I think we had this -- we were -- I think there was 1 unit initiative, particularly for just the lifestyle products. If I'm not wrong, we had also hired some resources over there and all. So is it still going on? Or -- I mean is that line still ongoing for the lifestyle products?
Yes. So for -- we had bought business, which had apparel manufacturing as its main business...
Right.
That was in 2021.
Correct.
We've recently taken a decision to exit apparel manufacturing because we found that there is a low-margin business, and we can source that apparel at little bit fair competitive price from Bangladesh, Pakistan, Vietnam and India, as we went deeper into the space, we have decided to exit the apparel manufacturing.
Okay. So I think that was not disclosed on the exchanges? So we are not [indiscernible].
In commentary, as we mentioned about that, the [indiscernible] we are exiting, yes.
Okay. And also one packaging unit or 1 small unit that we had acquired a couple of years back. Is there any advantage we are seeing from that?
Yes. We are still fulfilling our packaging from that factory. And we constantly review the product and pricing. That if it is competitively available from any other country or any other vendors. So we review it whenever we find opportunity. But right now, we are fulfilling the -- partially our packaging material requirement from that company.
Okay. Okay, fine. And last question, again, a very long-term one. After Germany, is there any plan -- I mean, any other region territory country that the management or the Board is looking right now?
So not right now because we still have -- we would like to see Germany giving robust leverage to the group before we grow next country. So possibly next country might be Japan, but this is at least it might be in 3 years away.
Right. Right. Okay. Sure, sure. Got it. 3 years. Of course, after that, even [indiscernible]. Got it, sir. All the best.
The next question is from the line of Nirvana from Badrinath Holdings.
Yes. So I wanted to understand for your digital versus TV, at a steady-state return on capital level or unit economics level. Is there any different, I understand that in some state is digital is still ramping up. So I'm talking about things that have already settled down in our legacy business digital. The unit economics for the return on capital, is it any different from TV?
So for us, it's difficult to break down the 2 businesses separately, Nirvana. The reason is that we find the customer coming from television and then us migrating them on digital platforms to be very highly accretive. Because last time, value goes 4x up when we are able to migrate the platform for the customer. So we look at the growth as holistic business overall for us.
Having said that, the digital paid like Google paid or social paid customer that we acquire. So that first acquisition cost is certain amount, and then we make money with the margin that we make from that customer in subsequent periods for repeat -- to repeat purchase.
If we are able to migrate them on television, they are kind of very valuable. But if we -- they stay on digital and very few people do go to television, but significantly on digital, then we try to make sure to make them profitable within a certain period of time.
So there are different drivers from pure digital to television to television to digital or division to digital or OTT, there are different drivers. But we look at it -- we look at the business as a holistic business.
Right, sir. I got a little confuse. You said the customers that you acquire to TV and migrate to digital, that kind of customer has a very large lifetime and -- or was it the opposite?
No. from television to digital, the lifetime value goes up by 4x. Pure digital to television, the migration is very few and very rare.
Right. So from television to digital, so you are acquiring a customer via your TV channel, and then you're getting them to shop on your website. You are saying that the person is likely to shop 4x more compared to if she had only been TV audience. Is that the right understanding?
That is correct.
So why does this happen? Because I would assume for your TG formula connect with the sale person would also be important, right? So you're seeing for -- even for your kind of TV, digital is giving you higher lifetime value?
Yes. So we have pretty high lifetime value for TV, almost $800 as a just TV, pure TV customer. Customer who goes on digital property goes to almost $4,000 in lifetime value.
Now the reason you asked why does it happen? Our theory is that the television is only push marketing. We tell them what to buy or why they should buy this. But on the website, we also address their want. So they bought as a ring and assessing on television. And on website, they bought matching necklace or matching hearings, then they would become more valuable because we are addressing their impulse purchase mix as well as their [indiscernible], their considered bonds, and it helps overall.
Got it, sir. Sir, also if I understand you right, you are saying that the cost of acquiring a customer on digital is higher than cost of acquiring them on TV. So the best kind of customer for you is somebody who is acquired on TV, but then migrate to digital?
Yes. So let me rephrase that statement. On television, we have only 1 shot to acquire customers and as well as to sell, so it's difficult for us to set in what is the customer acquisition cost on television because it's the same shop. Now on digital, there is acquisition cost that is a certain ago. So that's why we know what the digital acquisition cost on digital is, [indiscernible] know the cost.
If we look at overall, what is the revenue -- what is the percentage revenue we can afford to pay on certain broadcaster overall as a percentage of revenue over a period of time. So it starts with high percentage when we acquire a home, it starts with about 70%, 80% of revenue goes in airtime. But over 18 months, it goes steadily down, goes down to up to 15%.
As there are no further questions from the participants, I would now like to hand the conference over to Mr. Sunil Agrawal for the closing comments.
Thank you, Steve. I want to thank all the participants for their time and great questions. If you have any further questions, feel free to reach out to Prashant Saraswat at VGL or Amit Sharma at Adfactors PR India, and we'll be happy to answer your questions.
Thank you once again.
On behalf of Vaibhav Global Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.