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Vaibhav Global Ltd
Earnings Call Analysis
Q2-2024 Analysis
Vaibhav Global Ltd
The company's commitment to an omnichannel strategy is proving advantageous, particularly in their lifestyle category, which has seen substantial growth at a compounded annual growth rate (CAGR) of 31% over the last five years. This level of growth is indicative of strong customer adoption and market penetration fueled by leveraging both online and offline channels comprehensively.
Recently, the company has made significant strategic moves with two major acquisitions aimed at bolstering their market position and product offerings. These acquisitions are a clear signal of the company's intent to expand its footprint and diversify its revenue streams.
Looking ahead, the management has conveyed a positive outlook with revised financial projections, expecting revenue growth of 13% to 15% for the forthcoming year. This projection is set to climb even higher in the subsequent year, with an anticipation of revenue growth in the high-teen range for FY '25. Such projections reflect the company's confidence in their strategies and market opportunities.
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Ladies and gentlemen, good day, and welcome to the Vaibhav Global Limited Q2 and H1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Disha Shah from Adfactors PR.
Good evening, everyone, and thank you for joining us on Vaibhav Global Limited earnings conference call for the quarter and half year ended 30th September 2023.
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. I welcome you all to Vaibhav Global's Q2 FY '24 earnings conference call. I hope you have reviewed our results and the presentation that details our business operations and current market trends.
Our financial performance in Q2 was in line with our guidance. At the group level, sales for the quarter was INR 705 crores, showing an increase of 9.1% over the same quarter of the last financial year. Gross margins in Q2 FY '24 came in at 61.4% of the revenue. Over the years, VGL has created a robust supply chain. We are the only company in our peer group that has its own manufacturing setup in addition to a global sourcing base.
This vertically integrated supply chain has enabled us to consistently maintain gross margin above 60%. Better pricing and a focus on operational efficiency has enabled us to improve profitability margins during the quarter.
EBITDA margin for the quarter was 9.5% of revenue versus 8.1% in Q2 FY '23. In absolute terms, EBITDA was higher by 29% Y-o-Y, suggesting operating leverage. Let me now take you into each of our retail markets. In Germany, our proprietary teleshopping channel Shop LC will now be airing on HD channels in 13 million and 2 million households through Vodafone and Tele Columbus networks, respectively.
With these distribution arrangements, Shop LC (Germany) is now present in approximately 95% households, thus further strengthening our visibility and market share. We would like to reiterate that by H2 of FY'25, we will be breakeven in Germany. Publicly available data suggests that broader macro challenges in the U.S. have peaked out with a gradual rebound in consumer demand and confidence.
The U.K. economy, however, grapples with an ongoing cost-of-living crisis, exacerbated by increased mortgages, rentals and inflationary pressure. Nevertheless, our endeavor is to engage with our existing customers better as well as expand our reach. Today, our broadcast coverage is approximately 139 million homes, which is approximately 4% higher Q-o-Q.
Furthermore, we have been streamlining our portfolio of branded products. In connection with our flagship umbrella brands, that is Shop LC and TJC, our in-house product brands help us gain customer loyalty while maintaining overall margins. Presently, revenue generated from these branded products constitutes approximately 29% of overall B2C revenue. So the target is to increase this to 50% by FY '27.
This growth is expected to be achieved by integrating brands based on comprehensive metrics that considers factors such as price laddering, brand archetype and unique offerings. Further the 4Rs, that is widening Reach, new customer Registrations, customer Retention and Repeat purchases, remain our key priorities for overall growth. The reach of our TV network by the end of Q2 FY '24 was approximately 139 million TV homes.
We reach TV homes through cable, satellite, telco networks, and over-the-air antenna, also called OTA platforms. Our products are also available on digital channels, including proprietary websites, smartphone apps, OTT platforms and marketplaces. New registrations in trailing 12 months period came in at 3.1 lakhs. Our customer retention rate stood at 37% on TTM basis vis-à-vis 40% of last year. Customers bought an average of 23 pieces on TTM basis.
Our dedication to sustainability and community welfare continues to be our priority. I'm pleased to share that this quarter, we touched the milestone of donating 81 million meals to school children since the inception of our mid-day meal program called Your Purchase Feeds. We serve approximately 46,000 miles every school day. This initiative aligns with our commitment to making a positive impact on the communities.
During the second quarter, Shop TJC U.K. executed an asset purchase program agreement to acquire the assets of ideal world, which is -- which includes its IP rights, broadcasting rights, studio equipment and other intangible assets. The purchase consideration of the deal was GBP 1.125 million. Ideal World, through its proprietary TV shopping channel, is in the teleshopping shopping and digital retail of lifestyle products.
Ideal World is one of the major teleshopping brands in the U.K., with a legacy of over 21 years. We expect that this transaction will create synergies and help us continue market-leading growth.
Further, we also acquired 100% equity of Mindful Souls B.V. for a purchase consideration of EUR 12.5 million. Incorporated in Netherlands in 2018, Mindful Souls mainly serves United States, one of the largest e-commerce markets, through this proprietary e-com websites and marketplace.
While more than 90% of revenue is derived from U.S., it also has business in U.K., EU, Canada and Australia. It primarily sells subscription boxes comprising fashion jewelry, gemstone and lifestyle products. The company's performance over the period has been robust, having achieved an annual turnover of EUR 18 million with a hefty PBT of approximately 10% in 2022.
We expect Mindful Souls native digital abilities to allow us to strengthen our digital businesses and create synergies for Mindful Souls through our deep sourcing and manufacturing abilities. Both acquisitions were funded through internal accruals, reflecting the strength of our balance sheet and strong cash-generating business model.
We continue to reward our shareholders. And despite major investments undertaken recently, the Board has declared a second interim dividend for this financial year of INR 1.5 per equity share. We look forward to maintaining this fine balance between growth investments and quarterly payout to generate sustainable value for our stakeholders.
As I conclude, I would like to emphasize that over the period, we have exhibited resilience in our performance. Thanks to our recent acquisitions, we are now revolving -- revising our [ guidance ]. In FY '24 of the current financial year, we expect the top line to grow between 13% to 15% and in the high teens range in FY'25, with decent operating leverage.
We are confident in our business model, value proposition and execution abilities. And hence, in the mid- to long-term, we expect to maintain revenue growth rate in the mid-teens range. With this, I now hand over the call to Nitin to discuss financial performance. Over to you, Nitin.
Thank you, Sunil. Good evening, everyone and welcome to Vaibhav Global's Q2 FY '24 earnings call. Our Q2 FY '24 revenue reached INR 705 crores, which shows year-over-year growth of 9.1%. U.S. and U.K. sales, in local currency terms, were down by 3.3% and 2.2%, respectively. However, in constant currency terms, the group revenue has grown by 4% year-over-year.
Germany continues to fare well with increased household penetration and customer outreach. Germany maintained its growth momentum, and revenue grew by 62% year-over-year. Having achieved 95% of household penetration in Germany within 2 years of operation is encouraging. We believe that these building blocks in place, we will be breakeven in Germany by H2 of FY'25.
In the current economic environment, we are still seeing that customers remain cautious about pricing and seeking out deals with lower spending on discretionary items. Keeping this trend in mind, we continue with our value-conscious product offering to match the customers' demand, supported by our vertically integrated supply chain.
During the quarter, our TV revenue had a growth of 2.3% year-over-year to INR 406 crores. Additionally, our digital revenue witnessed a robust growth of 13% year-over-year to INR 263 crores, underscoring our investment in digital platforms. TV revenue is attributed to 61% of our total return revenue, with the remaining 39% attributable to digital platforms.
TV includes customers accessing our products through our proprietary TV channels that are released via cable, satellite and OTA. Digital refers to online purchases on our own proprietary website, shopping apps, OTT platforms and social media. Our core focus remains to encourage customers to transact on both TV and digital platforms, which gives them a unique shopping experience. Such omnichannel customers generate significantly higher lifetime value than customers that either buy only on TV or only digital.
In our overall product mix, the revenue contribution from lifestyle products was at 27% in Q2 FY [ '23 ], which has significantly increased from single-digit level a few years back. This clearly demonstrates our ability to expand wallet share by entering existing categories over time. It is pertinent to note that lifestyle category has a growth at a CAGR of 31% during the last 5 years.
Lifestyle product categories includes home decor, fashion accessories, apparels, beauty products, et cetera. This trend has also balanced our revenue streams.
Our Budget Pay future provides customers with a convenience of buying on EMI. During the quarter, the products sold via Budget Pay contributes 39% of total retail revenues. This feature has an added level of affordability for our customers.
Gross margins in Q2 continued to remain strong at 61.4%. Profit before tax for the quarter is [ INR 41 crores ], which is higher by 31% year-over-year. Our sustained efforts in operational efficiency and better pricing have enabled us to consistently improve our profit margins during the last few quarters. We are committed to sustaining this positive momentum and delivering consistent value to our stakeholders.
Owing to improvement in profitability ratios and prudent financial management, ROCE and ROE have also improved marginally and are 16% and 10%, respectively.
Recently, we made two [ major ] acquisitions. The first acquisition pertains to execution of asset purchase agreement to acquire assets of Ideal World Limited, a major teleshopping brand in U.K., with a brand legacy of over 21 years. I believe the combined synergies through an efficient and lean cost structure, we will be able to continue our market-leading growth in U.K. profitably.
The second equation pertains to an e-commerce company, Mindful Souls, a Dutch-based e-commerce company, having sales presence in U.K., EU, Canada and Australia. Its performance over the period has been robust, having achieved an annual turnover of EUR 18 million, with a healthy PBT margin of 10% in 2022 calendar year. .
We expect that this acquisition will allow cross-learning with huge growth potential in the digital segment for us, wherein we could also leverage our supply chain and sourcing capabilities.
We remain cash accretive in each reporting period. During the half year ended 30th September 2023, operating and free cash flow stands at INR 85 crores and INR 55 crores, respectively. At the end of Q2, VGL remained net cash positive with a balance of INR 26 crores after funding both of the acquisitions internally.
We strongly believe in creating value to our shareholders, and I am pleased to announce that the Board of Directors has approved a second interim dividend for the fiscal year of INR 1.5 per equity share. .
To conclude, we have demonstrated resilience and strength in our performance. We are confident in the business prospects ahead of us and will continue our growth trajectory with healthier margins in the long run.
Having completed recent acquisitions, we would like to revise our revenue guidance. As Sunil just mentioned, in the current financial year, we expect our revenue to grow between 13% to 15% and in the high-teen range in FY '25, with decent operating [ margin ]. Further, in mid- to long-term range, we are confident of maintaining a mid-teen revenue growth. With this, I hand over the call to moderator. Thank you.
[Operator Instructions] The first question is from the line of Shreyansh [ Jai ] from Swan Investments.
Sir, congratulations on the two acquisitions. My first question is, sir, pertaining to Slide 44, where we are seeing that U.K., we see muted consumer sentiments; and the U.S., we're seeing gradual recovery. But when I look at your local currency Q-o-Q, U.K., in fact, has been better versus U.S. So just wanted some sense on what are the markets looking like individually?
Can you repeat the question again on Slide 44? I was trying to open my presentation. Can you repeat again, please?
So sir, in the slides, you have mentioned that U.K. continues to face muted consumer sentiments. But when you look at your Q-o-Q number in local currency for U.K., we've grown about 11-odd percent. Whereas U.S., we see recovery. You've mentioned in the presentation, we'll be seeing some recovery. But the number looks to be a tad weaker versus U.K. So just wanted some sense on this [ divergence ].
Yes. So Slide 44 is of the economy as such, not [ individual ] groups' numbers. So UK -- from 30.9% ratio that the U.K. had, has gone down to 25% [ vis-à-vis ] e-comm contribution for overall retail and U.S. slightly improving to 15.5% from earlier 14-something percentage market share. .
So U.K. continues to face overall macro challenges as well as e-comm is [ facing ] more headwinds than overall retail. So U.K., that has macro challenges. And in this environment, we've bought Ideal World at a great value, and we believe that we can add substantial value to [ individual ] group through this acquisition.
And alone TJC itself will grow as per our guidance for next financial year. And within this financial year, we are giving a guidance of 13% to 15% growth, overall, for the business with this acquisition. Now without the acquisition, we will continue to grow -- we will stay with our original guidance of 8% to 10%. With acquisition, it will be 13% to 15% growth, combined at both units.
Now to your question, how does -- U.S. is -- economy is better than -- while we have not because economy as such, U.S. is still doing a little bit better, but TV shopping has not done as well because people have moved out, and they are spending more on experiences rather than products.
Even on product essentials, they are buying; but discretionary, spend is still a bit subdued. Even the Amazon recently declared their results, they shared that the essentials have done well, but discretionary has been a bit challenging for them as well.
My second question is, sir, on the acquisitions. So we understand Ideal World was already facing some issues. But Mindful Souls, what we understand is Mindful Souls was doing really well and growing at growth rate of [indiscernible]. Just wanted to understand the rationale for this promoter selling the company to Vaibhav.
Yes. So most of the -- many of the e-comm companies, promoters, they go from project or [ area ] venture to venture. So they sold this venture to us along with their 42-people team, and they went on to the next venture. So they have another venture of snacks or [indiscernible] admitting and -- with the three other ventures total.
So they sold the biggest venture and more successful venture to us, got the cash, and then they went on to grow other ventures. So that is the environment in Western World, like these entrepreneurs or people come with the idea, grow and then sell.
All right. So my last and final question is on the balance sheet. So when I look at your cash flow statement, there has been some decrease in other assets. But when I'm looking at the balance sheet towards this September versus March, whereas September last year, I don't see any decrease in other assets, but there has actually been an increase. So that was one. And the second is we see an entry of gold loan. So just wanted to understand even that number.
So other effect is long-term deposits that we have. We have kept our deposits in U.S. So that deposits were ready. So that is why the -- there's a movement in other assets. And the other question is gold metal loan, which is the facility we are getting. Before, we were importing the loan from -- sorry, importing the gold from outside India, which takes a target time. But now we are getting this facility locally, which saves time and the cost also in terms of [ rate ] spread. So the gold metal loan facility from banks that we are getting, and we repay within a month [ later ].
Okay. So coming back again to the deposits, where was it in the March quarter because there has not been a significant increase from your March numbers? So just trying to understand that.
Yes. It was with us in a couple of [ years ] with us. We had a long-term deposit that we had it. We haven't redeemed those deposits because they were not required. And with the recent acquisition, it was required. So that's why we had redeemed those deposits.
Okay. And sir, lastly, the INR 29 crores of CapEx, what is this for, sir?
So out of INR 29 crores, INR 12 crores is related to the asset purchase agreement from Ideal World. And the remaining is related to the intangible assets, which is the IT applications and upgradation of our softwares.
The next question is from the line of Ritik Tulsyan from Concept Investwell.
So my first question is, so if we see in the IP, so our own brand contribution is 29% of B2C, right? So if you can give any view on how we are doing in terms of customer retention and growth in the customer base for our own brands? So that is my first question.
Yes. So I don't believe we have separate number for brand customer or nonbrand customer yet. We haven't broken that down, but we are seeing that a slight margin benefit to us in brands. And also, we understand bit from customers the brand affinity when they develop, they stay longer. I'm not sure if we have data on that separately. Do we have data?
Yes, we don't have that data readily available.
So I mean -- so if you can give any qualitative figure, like internally, how is it doing? Better than your expectations or you think it can still get better? If you have any internal expectations regarding your own brands? And how is that...
They're definitely available to us because that's why we've given a guidance of 50% of brand revenue by FY '27, where we are seeing benefit in terms of better margin and also customer affinity. So better [indiscernible] value.
Okay. And my next question is, sir, like if we see, TV growth has been quite muted as well. So like when do you expect it to get better, like from -- in the other -- the coming 2 quarters or you think it can get better in FY'25, if you have any view on that?
So the coming 2 quarters, it will be better because we have given a guidance and a higher guidance as we gave an 8% to 10% growth like-for-like guidance for this financial year. We expect Q3 and Q4 to be better for television as well as e-comm, both of them.
And next year, definitely noticeably better for two reasons: One is that we've got some extra airtime that we've taken in the U.S. And second thing, we expect the economy to stabilize, as I mentioned,in my comments that the U.S. economy seems to be moving up and people are coming back to the normal life.
People went away quite aggressively for experiences last 1 year, 1.5 years. And when they have had their full of the experiences, they'll come back to normalize and spend at home, watching our programming on television or through streaming.
Okay. And do we have any other M&A lined up or in the pipeline, which we can expect to get closed in the coming 2 quarters, if you have anything?
No, nothing in the foreseeable future.
Okay. Okay. Sir my last question is you have elevated in your investor presentation that we got benefit of 1.1% from logistic cost negotiation, right? So if you can elaborate a bit more on that, that how -- what was it, if that is possible.
Yes. I'll take this. So we have around 1% -- 1.1% benefit in EBIT margin side from logistic side, partly related to the lower volume that we are getting, and partly, it's related to our operational efficiencies in terms of clubbing the orders and in negotiation with the carrier partners.
The next question is from the line of Nilesh Shah from Envision Capital.
Congratulations, Sunil and the team, on a steady quarter. Sunil, it would be helpful if you can just throw some light on the two acquisitions, what's been our rationale behind these acquisitions, and both a qualitative and a quantitative perspective in terms of what is it that we hope to achieve through these two acquisitions in terms of synergies? And how these acquisitions will accrue value to us? So if you can just kind of throw some light on that, please.
Ideal World has 21 year of brand recognition in the U.K. market, much before we came on the scene. And we got phenomenal value at a great price of GBP 1.125 million, whole brand, and a customer list of 480,000 customers that they had. And we also got a channel position on the [ TV EPG ] with them.
So it creates -- we get visibility into the consumer mind for a very low value. And with our sourcing capabilities, we expect this to become profitable within a year. So this will add to revenue as well as to the bottom line in coming years for us.
The second brand, Mindful Souls, has two benefits. One is the digital learning as in the digital native brand. We are a TV/e-comm company. And digital native brand is coming from a bit different angle, and we wanted that learning within the company. We are developing that learning as well, but getting that learning from outside will definitely help us.
Second benefit that we had was that the subscription business. So on an average, the customer buys 6.5 months. So whenever they enter the business, they continue to subscribe for 6.5 months, is assured annuity business in the model, and we want to do learn that annuity because we don't have it yet.
Third thing is there's a leverage of supply chain because the product that they were selling, we were already manufacturing or sourcing. So we can use our scale and leverage to better cost manage that. There's already a 10% EBITDA business, and we expect that we can take that business to 14%, 15% EBITDA very quickly.
Okay. That's very helpful. My second question is around the margins. So from a peak of 15%, 16%, we went all the way down to maybe 6%, 7%. And from there, the margins have witnessed a steady recovery to about 9%.
I'm just kind of trying to understand that are there any kind of very visible low-hanging fruits that we see for the margins to kind of go from 9% to whatever the earlier highs of 15% or is that just going to be purely a function of scale there as we grow at our guided rate, the margins could go back to the earlier levels?
Or are there any specific levers that we can see, which will help us to kind of see further improvement in the margins, apart from, of course, also the fact that Germany will -- you expect Germany to breakeven by H2 of FY'25? So apart from Germany and scale, are there any other levers that we currently see, which will help us to kind of recover or clawback some of those margins?
Yes. Good question, Nilesh. As you rightly said, Germany will be one of the majors because it's still, right now, in a buildup phase and is negative to our margin base. That will help, the scale will definitely help, as you've seen in the last few quarters as we have scaled whatever the margin -- whatever the revenue growth, the margin growth has been more than that. This model is a beautiful model when it grows, and it can be -- it's adverse when it degrows. So as we expect the growth to continue, our margin will continue to be a leverage for us.
Other than that, we continue to look for a product line or -- within product categories and in particular, space that we find with better margin. We continue to look for that.
We also stay away from products that doesn't give margin. For example, there was [indiscernible] came and there was a lot of discussion around selling gold bars, like a small 1 ounce gold bar or 10 gram gold bar. There's a huge sales velocity by Costco or Walmart on gold bar. That would have been a lower-margin business. And we stayed away from that, where we still got only 60% plus kind of profit margins.
So we constantly look at product offering to us, categories to us and look at the opportunities which [ point ] to margin. So even when we had inventory change last 2 years, the consumer taste changed and we had to make the changes to inventory. We didn't need to go below 60%, owing to our ability to service competitively in [ DHI ]. And we'll continue to explore that and leverage that as opportunity comes.
The next question is from the line of Pritesh Chheda from Lucky Investment Managers.
Sir, I have one question. When I was looking at your presentation, I couldn't find a customer count number. Can you share what are the customer count numbers now, the active customer numbers that you get?
Yes. Pritesh, active customers are 450,000, trailing 12 months, 30 September.
Okay. So now my associated question here is, the customer account number is what we are not seeing improvement. From our P&L, we ended up spending about 5% to 6% of our EBITDA margin on, first, buying more airtime and second, spending on the digital side, being only present or omnichannel, and we try to take up some customers.
Any reason why we don't see those spend still translating into customer? And how are we looking at these metrics? How are we looking at improving the metrics on the customer account number?
Now this 450 also obviously includes Germany, I think. So if I recall, pre-COVID, we were at about 350, 360, then we went to a certain higher number, and then that number curtailed down to 450 number, but this 450 number include Germany now. So if you could spend some time on this part, some time on the margins that we had used to acquire some airtime, some digital spend, yet not [ translating into customer ], it would be very helpful. So it'll be good if we can get some comments there.
So customer count is a factor, in our business, of the viewership, overall, on television or even on the e-comm. So during COVID, we had a good audience, captive audience, and our customer count was quite substantially high on the back of high audience. And after COVID, when economy opened up, people were hungry for experiences, people traveled quite aggressively. And during that experience, we lost that audience. And therefore, the customer count was lower than the previous year.
Having said that, even after [ ensuring ] Germany, our customer count for U.S. and U.K. put together is higher than pre-COVID period. I don't have a number [ in front ] of me. Maybe Nitin can pull out and read give it to me that, that number is noticeably higher than pre-COVID period. And we expect the numbers to come back to normal numbers after the people settle back in their daily lives.
We would also appreciate that our average price point went up on the back of us offering a little bit higher price points, owing to addressing the inflation of existing products. And as we see in the long run, we -- our average price point will come down, volume will go up and the customer count will go up.
What you mentioned is a forecast. What are you -- what strategies have you changed to deliver that forecast? And my other question was what -- why are we not seeing -- it's still happening in the last 2 years, despite spending 5%, 6% of our sales margin and spending on digital?
Yes. So we take up airtime distribution whenever we get that opportunity. We don't wait for that, and we don't really hold back our investments because these are very long-term relationships people build. And whenever the opportunity comes, we take it. And opportunity came to us, and we took it in the U.S. and in the last [ 3 ] years when they presented themselves.
And digital spend is constant learning, constant spending. So we would continue to do that. But again, I reiterate, compared to the 2019, 2020, which was pre-COVID period, our customer count is noticeably higher. After the call, our team will take out the number and share with you how much it is, trailing 12-month basis. I see it here, the U.K. was 115 Q4. What is Q3 number?
How much is your Germany count, if you can tell us this 450?
Let me check again. Germany -- this is [ 53,000 ].
How much?
[ 53,000 ].
Which means that your U.K. and U.S. number has moved from 350,000, 360,000 to 400,000, about 40,000, 50,000 additions. But Sunil, the amount that you have spent from the P&L is much higher, so all these customers have come really expensive. Are we looking at that...
Yes. We look at all the affiliates that we do, we look at -- very truly, 1 month, 3 months, 6 months, 9 months, 12, 15, 18 months. So we have a criteria already in place. If those markets don't work for us, we [ abridge ] from those markets. And that churn constantly happens, a bit of churn, not a whole lot, but that churn happens. So we are very careful about how much we spend, where we spend.
And on digital, the customer [ lag ] time is shorter, and the cost per customer acquisition in different channels is in our visibility constantly, and we spend based on what the customer lifetime is worth for us. So we are quite careful about that.
But we have to be cognizant of how the economic macro conditions are and what is the average price point we are currently giving. As you would appreciate, with 400,000 customers in U.K. and U.S., our ASP is noticeably higher compared to pre-COVID period, therefore, the revenue compared to pre-COVID period.
Are you going to relook at some of these spends because one of the previous participants who asked on margin lever, you said growth is the only margin lever, which means you're not going to relook at these spends, is that the interpretation that I have to do? Or what is the change in incremental strategy that you want to deploy for your forecast of customer account to go up?
Yes. We don't give a forecast for customer count or we don't guidance to customer count because...
Directionally, you mentioned, right? Incrementally, you'll see customer count going up, volumes going up, pricing coming down.
The business is so dynamic, so we look at overall ASP, a balance between ASP and the customer count, customer -- new customer acquisition,and average -- total unique customers and our average selling price and a total revenue growth and total margin growth.
There are multiple variables we look at on very regular basis, on a daily, weekly basis. And we fully expect to meet our guidance of 13% to 15% growth this financial year and high teens for next financial year.
Okay. So on the margin side, we will not see any cutting down of any cost, right? It's just pure sales growth, which brings in [ everything ]?
We look at the costs on a weekly basis. In fact, I am involved into a weekly basis of this affiliate cost structure. And we look at the numbers, we look at, very minutely, what market is working, where we need to get out, where we need to double down. This is a constant process and weekly process.
Wherever we can come out -- get better cost, we can do better cost. There can't be a guidance on that, we will cut so much percentage of the airtime cost. There cannot be any guidance on that.
Okay. And when you said 13% growth for FY '24, this includes these acquisitions, right?
Yes. So without acquisition, we'll move to 10. With acquisitions, it'll be 13% to 15% growth.
So you've moved up your number from 6 to 8 to 8 to 10 now, right?
That we moved last quarter, only last couple of quarters ago, 8 to 10 for the financial year without the acquisition. With acquisition, it's 13% to 15% this financial year.
And next year also, it is high teens, right?
Next year, high teens, [ on average ].
The next question is from te line of Rohan Mehta.
First off, I wanted to ask your opinion on what the impact of this geopolitical tension in and around Israel is likely to be on our operations since we are spread across various geographies. Has there been any noticeable change in consumer sentiment or any other impact that you may foresee of this?
So far, we haven't seen impact on the business at all. I can understand the impact on the people's psyche, people's [ difference ] and instability. I understand that. And I feel for the people who have suffered. But from a business point of view, we haven't seen any impact so far.
So in terms of discretionary spending, it's not likely to impact our target demographic, sir?
So far it hasn't, unless conflict widens to wider Middle East or wider that area. So far, we haven't seen. And we have not taken that into account in our forecast because that is so unpredictable, and we can't really break that into the guidance. The current -- if the profit is constrained within Palestine and Israel, then I don't see it impacting us. But if it gets a wider conflict, it may, but that is difficult.
And sir, in terms of diamond prices having gone down, is that a potential risk for us?
No, not really. Personally, I think diamond prices going down is a temporary phenomenon happened with the confluence of a few factors. And I believe the diamond prices would come back up in foreseeable future. But we are not diamond-centric business anyways. We are -- our so much [ color is ] on stone or paying it metal or non-jewelry. Diamond's a very small portion of our business. So that is not really [ significant ].
Okay. Okay. So it would not really affect our average ASP that much?
No, it will not.
And sir, in Germany, regarding our tie-up with Tele Columbus, so what kind of investment did we incur to acquire these 2 million-odd households that you have had?
Yes. We acquired 13 million HD homes on Vodafone and 2 million on Tele Columbus, [ 15 ] million homes in this month we just acquired early October, late September. So these two homes -- this -- we can't disclose the amount because [ MBS ] is signed by NDA, but that pushed our profitability from H1 -- H2 of current financial year to H2 of next financial year because it takes about 1 year to 18 months for a household to mature.
Sir, do we plan any further investments in Germany?
Germany, we are 95% covered, so there is no need further. There will be very small incremental homes that we may acquire in Germany or in Austria. So not much spend on our guidance of next financial year breakeven, H2 [indiscernible] of that.
Sir, also in terms of the targets that have been sort of given in the mid- to high teens for FY'25, what would be, if you were to say, 2 or 3 key triggers to spur the growth to justify this projection, what would those be triggers?
Yes. So number one thing is, higher revenue per home that we are already addressing. Number two, I'm seeing U.S. economy improving. So with the customer coming back to their normal lives, we would see some growth coming back in.
And also, our merchandising learning that we are doing with the branding that we are improving [indiscernible] improvement happening with our [indiscernible] per home, per reach that we have had the acquisition of customers for marketing and hopefully, better repeat purchase from the customer from the same household we've acquired or from the same custoimers that we acquired. So 4Rs that we focus on, Reach, Registration, Retention and Repeat are our drivers of business.
Okay. So sir, interest rate pressure is not, right now, impacting us in the U.S.?
Not very much. Our price points are not very high. So I'm not seeing so much -- earlier, I was skeptical of U.S. falling into recession and U.K. also falling into recession. But that kind of the recession where we are now on a back burner that we feel comfortable in giving you guidance.
Got it. Got it. Sir, just one last question. Do you look at the digital route to acquire customers separately and whether there is a dedicated strategy for that versus nondigital methods?
Yes. So we have three ways to acquire -- actually 4 ways to acquire customers: Number one is predominant television, number two is digital that we do paid media, Google, Facebook affiliate and influencers. And number three is a marketplace that we sell on Walmart and eBay.
And number four is OTT. OTT is part of digital but a [ separate ] study that is through Roku and [ RTV ] and [indiscernible] TV and all the other fast platforms, fast as free ad-supported [ meaning ], and also through app platform -- app environment.
So all these four have our people in charge of them in respective locations and have their own budgets and strategies.
Okay. So digital would not be any more focused upon -- compared to the other three, okay?
Yes. So there are separate teams for digital, and they have their own budgets and targets to grow after the number of customers, revenue from the customer, retention rates and lifetime value and the CAC. So they have their own targets.
The next question is from the line of Nihar Mehta.
In terms of digital channels, like are you [Technical Difficulty] steps like how you plan to increase your digital [Technical Difficulty] in relation to digital [Technical Difficulty]?
You are not very clear, Nihar. Can you repeat your question? I heard something about digital, but it [ broke ].
Sure. Are you taking [indiscernible] digital [indiscernible] this [indiscernible] from business [indiscernible] to increase it further?
If I understood your question correctly, you're asking, what are we doing to capitalize or penetrate digital further? Is it correct?
Right, right.
As I answered to Rohan's question, so we have separate teams for digital -- paid digital. So digital also has separate teams within digital: One is the customer -- digital sales to the customer that we acquired from television, and other division is for paid acquisitions. So for -- within paid, we have Facebook teams, we have Google teams, we have affiliate teams and we have influence teams. So we have attention to grow all paid channels as well as organic.
So we also have SEO team to improve our SEO footprint for all the businesses that we have, U.S., U.K. and Germany, and we have capitalized on whatever we can get organically.
Yes. So there's a lot of attention in [ giving ] up the paid profitably, profitably in the sense that we must acquire a customer at half or 1/3 of lifetime value -- 1 year lifetime value for customers. Earlier, we used to do 2 years lifetime value. We have now brought it down to 1 year lifetime value. So we must acquire a customer at half to 1/3 of the lifetime value of that customer.
And different product categories have different lifetime values, jewelry has a high lifetime value, LSP has a lower lifetime value, with the customer acquisition cost in the lifestyle product is lower and [ duty ] acquisition cost is higher. Yes. So we have the strategy in place to accelerate in that area but given the guardrail of certain percentage of lifetime value.
The next question is from the line of Supan Parekh.
So my question will be -- you mentioned a target of 14% to 15% revenue growth for FY '24. So like, can you elaborate on the separate strategies on the market that [indiscernible] growth?
Can you repeat the first question again?
Yes. I just mentioned -- you mentioned that your target for this FY '24 is 13% to 15% revenue. Can you elaborate like how are you going to achieve this growth, like any specific strategy for the market that will drive that particular growth?
An as I mentioned earlier in Rohan's question, we have marketing teams in place for television, for e-comm, for OTT, for marketplaces. And there are a lot of drivers for growth, the product, the marketing, the message, the content and getting the new product in, getting the existing products repeat purchase higher or scale up the existing products.
So there are a lot of different marketing strategies from multiple channels that we have in place in U.S., U.K. and Germany. So we have multiple growth drivers available to us. But from broad categories, we can say 4Rs are there: One is Reach, then next is Registration, third is Retention of the customers, fourth is improving the Repeat purchase of the customers. And within this 4Rs, there are multiple subsegments that is TV, digital, marketplace and OTT.
And also, I would like to ask how confident are you in actually [indiscernible] crores by FY'25?
Fairly confident. I would -- I'm generally -- I tend to be conservative, although post-COVID, we were kind of taken off guard when people went out and we could not meet our guidance. But other than that, I take pride in that we met our guidance or exceeded our guidance.
[Operator Instructions] Ladies and gentlemen, as there are no further questions, I now hand the conference over to Mr. Sunil Agrawal for closing comments.
Thank you, operator. So I want to thank all the participants for your time and great questions. If you have any further questions, feel free to reach out to Prashant Saraswat at VGL or Amit Sharma 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.