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Vaibhav Global Ltd
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Ladies and gentlemen, good day, and welcome to the Vaibhav Global Limited Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Karl Kolah of CDR India. Thank you, and over to you, sir.
Thank you, Melissa. Good evening, everyone, and thank you for joining us on Vaibhav Global Earnings Conference Call for the Quarter and the Financial Year ended March 31, 2022. Today, we have with us Mr. Sunil Agrawal, Managing Director; Mr. Vineet Ganeriwala, Group CFO; and Mr. Prashant Saraswat, Head 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. Vineet Ganeriwala, after which the management will open the forum for a 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 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, Sunil.
Greetings to all, and thank you for joining us today in earnings conference call of Vaibhav Global Limited for the quarter and financial year ended 31st March 2022. I hope all of you, your colleagues and near and dear ones are healthy and safe.
We delivered revenue of INR 685 crores for the fourth quarter, up by 2.9% Y-o-Y and closed the fiscal year with 8.5% -- 8.4% revenue growth, which is in line with the guidance we set out in Q3. The revenue growth is more engaging when we compare to Q4 of FY '20 and full year FY '20, which is 37.6% and 38.6% respectively. We maintained our gross margin at 60% in Q4 and 62.3% for FY '22, which is at par with FY '21. Our industry-leading margins are made possible because of high product mix, efficient price management, efficient planning, in-house manufacturing and wide sourcing base.
EBITDA margin for the quarter was 6.9%. Excluding Germany, it would have an 8.9% versus 12.8% last year. This reflects the impact of accelerated investments in digital marketing, marketplace marketing and increased airtime on OTA platforms. In FY '22, our unique customers were static over FY '21, owing to a large number of customers who bought essentials and spend many times. Our investments on digital platforms are generating desired results in terms of higher new customer acquisition. New customer acquisition on TTM basis stands at 2.3 lakhs, adjusted for essential, it is higher by 15% over FY '21 and 60% higher over FY '20. FY '22 was a year of investments for us, wherein we made long-term investments in building our digital competencies, automation, channel upgrade and geographical expansion. We continued with our planned investments in new OTA homes, elevated digital marketing spend on OTT, social media search and third-party marketplaces. We believe these investments will be necessary for future growth and offer long-term profitability cost.
First half, license value of an OTT customers are almost 5x more than TV customers. We also invested in our tech infrastructure, where we upgraded our website in U.S. moving into Salesforce Commerce Cloud and upgraded our mobile and OTT apps in the U.S. and U.K. In U.K., our free channel upgrades to channel #22 from erstwhile channel 50 is yielding improved viewership and increased new customer acquisition. We expect this benefit to sustain for long-term to come. Implementation of Robotics automation at our U.K. and U.S. warehouses have started to yield positive results, with complete benefits occurring in coming quarters. Germany has also been faring well and its performance has been as per our plan. We are expanding our customer funnel there through continuous onboarding new and prominent transporters, OTAs, social, search and marketplace platforms. We continue with our guidance to achieve breakeven determined by H2 of FY '24.
During the quarter, Shop LC has finalized architect for its upcoming headquarters in Austin, Texas, with expected completion by H2 of FY '24. This investment is expected to provide cost optimization, functional integration and resulting in growth opportunities. VGL Group has also completed the acquisition of Encase Packaging Private Limited. This acquisition will further strengthen our supply chain network, providing requisite flexibility, cost advantage and sustainable packaging. Our vertical and integrated supply chain network spanning in 30 countries is the backbone of our business and a key differentiator vis-a-vis our peers. The low-cost manufacturing is value sourcing enables to serve affluent but value-conscious customers in our addressable markets in U.S., U.K. and Germany. This helps achieve industry-leading gross margins at VGL. Further, the 4 R's widening reach, new customer registrations, customer retention and repeat purchases remains to be our key priorities for overall growth.
The reach of our TV networks by end of Q4 FY '22 was approximately 124 million TV homes, which is 19% higher Y-o-Y. We reached 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-month period came in at 3.2 lakhs. The number was slightly higher last year owing to official customers. As of end of FY '22, we are receiving an average purchase of 27 pieces on TTM basis by our customers, which is at par with FY '21. Our customer retention rates stood at 40% on a TTM basis, vis-a-vis 51% of last year. The retention ratio is lower Y-o-Y and last year had a wider base of customers who bought essential items.
Recently, VGL has been conferred with IGJ Award by The Gem & Jewellery Export Promotion Council, also called GJEPC for being the brightest or being the highest exporter of silver jewelry from India, and this is the sixth time in a row that VGL has won this award. Sustainability is at the core of everything we do, and the same is reflected in our mission and guides our decision and action. We are delighted to announce that recently we issued our maiden interim ESG report showcasing our efforts and sustainability factor and our long-term goal, along with plans to achieve them.
VGL distributed 84 2-wheeler electric vehicles to its employees for their commute without any cost. These EVs will enable to sequester approximately 25 to 28 tonnes of carbon every year. Another important aspect of sustainability efforts is our 1-for-1 mid-day lead program, your purchase fees. Recently, we have crossed the milestone of 63 million with a run rate of 59,000 net unit every single school day.
We'd like to reiterate that there are multiple levers for our future growth, and we are doubling down on our efforts to various strategic investments. In our addressable markets of U.S. and U.K., consolation has reached its multiyear peak levels, which could soften the consumer sentiment. We, however, perceive this as an opportunity for us. As this may result in down trading by our customers with shifting demand for value products from branded ones. And we are well positioned to cater to this possible economic environment.
During last few months, despite industry-wide supply chain constraints, we were able to operate uninterrupted owing to our vertically integrated supply chain. Further, our omnichannel model facilitates a greater level of engagement and provides deeper value proposition to our customers. While the data economy is grappling through inflationary pressures, demand and cost challenges being very clear, we are optimistic on medium- and long-term growth journey of VGL and would like to reiterate that our long-term investments would support our growth ambitions. Supported by our value proposition -- value positioning and integrated supply chain, we are confident to convert the challenges and deliver continued growth and expect current financial year to have mid-single-digit revenue growth. However, our outlook for medium- to long-term is unchanged, and we are confident to maintain and deliver our original guidance of mid-teens growth.
We remain cautious of the ground development and will take informed business services accordingly. We will keep our focus on growth and profitability with prudent capital management. We had a healthy cash and bank balance, which will be deployed prudently considering future growth drivers and efficient operations. We are evaluating our venues to provide more value conscious options in these times while maintaining overall profitability and healthy cash conversion. We have a robust cash flow model and a track record of returning meaningful cash issues. The Board has paid dividends of INR 4.5 per equity share during the first 9 months of FY '22 and have further recommended final dividend of INR 1.5 per share for this year.
With this, I now hand over the call to Vineet to discuss financial performance. Over to you, Vineet.
Thank you, Sunil. Good evening, everyone. A warm welcome to Vaibhav Global's earnings conference call. We hope everyone is staying safe. I hope you have reviewed the financial results and the presentation. While Sunil has given an update on operational performance and key initiatives undertaken during the year, I will now take you through our financial performance for quarter and financial year ending 31st March 2022.
As Sunil mentioned earlier, revenue growth was softer during the quarter, owing to various macro headwinds. Still in line with our guidance, we delivered revenue growth of 2.9% in the fourth quarter and closed the financial year '21-'22, with a growth of 8.4% year-on-year. When we compare these numbers against FY '20, growth rates are significantly stronger with quarterly and annual growth of 37.6% and 38.6%, respectively. In local currency, Shop LC U.S. and Shop TJC U.K. revenue degrew by 2.3% and 7.1%, respectively, in Q4. However, the growth was robust when compared with Q4 FY '20 and was 25.8% and 25.2% year-on-year over FY '20, respectively.
In full year FY '22, in constant currency, Shop LC grew by 4.8% year-on-year, but it was 28.1% over FY '20. While U.K. was flat year-over-year in FY '21 or FY '21, for FY '20, it grew by a strong 32.3% in constant currency terms. The economy is opening up and people moving to in-person shopping after a sharp jump towards digital medium a year ago. We faced macro headwinds after tailwinds of last year. But we believe this is a temporary operation in the ever-increasing digital transition. And at the same time, are taking strategic steps to utilize this opportunity to serve customers with expanded value proposition and filling product gaps.
Our preview channel upgradation in U.K. has positioned us in close proximity to market leaders. This is expected to further strengthen our channels visibility and enhance the viewership substantially. Revenue from TV was flat at INR 416 crores, although on a very high base of last year. Digital revenue grew by 3.5% year-on-year, suggesting positive traction and reassuring our investments on digital platforms. Sales mix of digital continues to improve, which currently is at 37% versus 22%, 5 years back. TV includes customers accessing our products through our proprietary TV channels that reach their homes, both on conventional TV media as well as free-to-air channel on OTA platforms. While digital includes online purchases on our proprietary website and apps, apart from popular marketplaces and social commerce. Our core focus is to promote and encourage customers to transact on both TV and web platforms, which gives them a unique shopping experience and search omnichannel customers tend to have a significantly higher lifetime value than customers that buy only on TV or only on that.
Revenue mix of budget pay has improved by 300 basis points to 39% in FY '22 against 36% in FY '21. Fashion jewelry accounts for 70% of our retail sales, while non-jewelry maintained its share at 30%, implying segment-wise growth in this year. The non-jewelry segment comprises lifestyle products, which includes home day card, apparels, Beauty Care, haircare and accessories. Gross margins continue to remain at 60% and above level, which is attributable to our strength of having a vertically integrated supply chain. Drop in EBITDA reflects our planned OpEx investments on digital marketing, marketplaces, increased our airtime for OTA platforms and our initial setup costs of Germany. We are optimistic of reverting back to our earlier levels of mid-teens EBITDA margin from next year, led by continued customer growth, improved productivity and cost optimizations. We have undertaken a cost optimization program in the recent times and are expecting annualized visible savings of $6 million to $7 million through these cost efficiency initiatives taken during the last few months.
Profit after tax for the quarter is INR 27 crores versus INR 56 crores year-on-year, point to earlier discussed increase in investments and headwinds. Adjusted for loss in Germany, tax for the quarter would have been INR 41 crores. Operating cash flow of INR 86 crores in March '22 reflects impact of higher inventory, part of which is because of higher transit inventory because of port congestion and lack of -- as capacity. Negative free cash flow is on account of planned CapEx towards technology infra upgrade, warehouse automation, Freeview channel upgrade in U.K., a new headquarter in the U.S. and initial setup costs of Germany. However, in spite of these investments on a TTM basis, our ROC and ROE continue to be strong at 31% and 23%. And this reflects our short-term impact of conscious business investments, though they are still at par with normal 3 COVID years.
The Board has paid dividends of INR 4.5 per equity share during the first 9 months of FY '22 and have further recommended final dividend of INR 1.5 per share for the year. Towards that end, I would like to say that we are continuing -- we are confident to continue our growth trajectory with healthier margins in the long run. Our current investments will help build on significant opportunities in the medium and long term.
With this, I hand over back to the operator.
[Operator Instructions] We have the first question from the line of Pritesh Chheda from Lucky Investment.
My question is with respect to your growth guidance for '23, which is mid-single digit. It means that it doesn't factor any revenue operation from our new geography in the assumptions, that's how it is? And when I'm trying to then correlate with the mid-teen margin, which was our original margin before we went into the new geography and the costs associated with it. So you see have a mid-teen growth assumption, I couldn't correlate with the -- sorry, mid-single-digit growth assumption revenue. I actually couldn't correlate with the mid-teen margin. So if you could help us understand this to get assumptions of yours?
Yes. So Pritesh, so the guidance of mid-teen margin is for next financial year. So for this financial year.
For FY '24, the guidance for mid-teen margins.
That is correct. For this year, we are giving a guidance of mid-single-digit revenue growth, with leverage -- of earnings leverage for this year. So there will be leverage by end of this financial year. Although the first quarter is still tough because last year, we had a very high base of 25% growth. And also, there is still a lot of opening up pressure. But for the year, we are confident of mid-single-digit growth. Now we do not know how long the opening up will continue. That is why we are giving this guidance of mid-single digits. If the situation changes, we may do better than this, but this is what we feel comfortable at this point of time.
This doesn't assume any significant revenue assumptions from Germany?
Yes. Not very significant. We are on the track of where we originally planned when we launched the channel, and we are confident by next financial year, H2 it will be breakeven. So we are not giving revenue guidance for Germany specifically at this time. This is still relatively small. But overall, this does contribute to the overall sales. I can't say whether the local U.S. and U.K. will be flat or a slight growth, because we've not broken down in our guidance, because it may change from geography to geography, where the opening up may be higher or lower.
Just to give you an example, I'm traveling to U.K. next week and to London, the flight cost is 3x I paid pre-pandemic. So U.K. is really opening up environment right now. It may change from time to time. So we are not giving individual unit level growth guidance. But overall, for the year, we are giving mid-single-digit growth guidance for this actually.
Okay. And my last question is, sir, on the budget pay side. Where do you think it will stabilize because it has already reached about 39% and it takes a slice of our cash flow. So where do you think will the budget number stabilize if you could help us understand that?
Yes. So we have around 40% approximate guidance we have for the budget pay. So we are still within the guidance, it can go a couple of percentage up and down. And during the -- a little bit economic challenge time, during budget pay is helpful for our industry.
Okay. So if it is going to -- it has already reached 39% and if you are capping it at 40%, which means incrementally, we should not see the thing much into our cash flows?
Yes. We don't expect it to go above 40%, but it can be 1% or 2% plus or minus. When we look at the daily and weekly numbers, we don't really pay as much attention to how much we have achieved so far. We look at what is the right for the customer, what is right for the product and then [indiscernible] this time.
And sir, lastly, the German cost -- business cost has already been baked into our P&L for the last 4 quarters. Is that correct?
Yes. So it is part of OpEx.
Yes. And Vineet was talking about a $6 million cost saving, I couldn't catch that? What is that, sir?
I'll take that, Sunil. So we undertook a cost optimization exercise across all the geographies, looking at the challenge in hand. So whatever measures we have taken in the last 3, 4 months, we see an annualized saving opportunity of $7 million to $8 million already from the measures taken. So that's what I was testing and I mentioned about the cost drive.
So it is reflected in the quarter 4 or it is going to reflect in the next 4 quarters?
So the full benefit will be coming in the next 4 quarters. And this is baked in when Sunil was mentioning that while the revenue guidance is mid-single digit, we also expect operating leverage to flow in the full year. So this will partly come from the revenue growth and partly from all the cost drives we are doing in spite of any inflationary challenges we will face.
We have the next question from the line of Chintan Sheth from Sameeksha Capital.
Challenging period, I guess. If you can elaborate on -- you did mention that the tailwind for last year was converted into a headwind because of the physical movement shifting the customer preference to offline shopping and online shopping. How much that trend has an impact to the industry? Because I try to understand when I look at QVC and other commentaries, their challenges are slightly different from what we speak about. We still -- after 3 quarters, we still continue to blame off-line channel being preference changing to offline shopping tend online while they are facing challenges in the procurement as well as understanding what the consumer wants. So I'm trying to understand from your end, what actually is impacting our growth?
Yes. So thanks for your question, Chintan. So this is true, the QVC has suppliers seen challenges, which we do not. We have too small extent because we have longer on transit times and this supplemented to some extent. We don't have any shortage of inventories, but we have more cash tied up into that. So I do not know full -- to what extent is the supply chain challenge versus the opening up challenge at QVC. But QVC/Qurate Group had substantial negative year-over-year growth, where we had already noted in the guidance, we are guiding for positive growth for the year.
So do you see this offline consistently abating over the quarters from Q2 onwards when things start to reopen and at the end of the 4Q, where there is a closed flat or 2.89% growth. The base is kind of likely to normalize from Q2 of next year. And despite that and despite Germany getting in such a -- we are kind of revising our growth guidance lower, which means there is -- do you foresee a structural demand impact? Obviously, inflation you've spoken about, but we did benefit from downtrading of providing a value proportion to customer, which eventually favor the compared to our peers. So I'm trying to understand your next year's growth rate?
Yes. So we've already given guidance for next year onwards of mid-teen growth year-over-year. So we believe we're confident of mid- to long-term growth prospects for the company. Now for the current financial year, we have opening up as well as inflationary or potential eyeball diversion due to our stories in the media and potential inflation. So all these cycles put together, we are giving guidance of mid-single digit for the current financial year. If the situation improves, our performance will improve as well. Our effort has been to give prudent guidance to the street, to the investor community and that we have done for many years for multiple years. Last year, we were not able to meet this guidance because of a rapidly changing environment, and we are learning from that and giving more prudent guidance as we go forward.
Sure. And lastly, on the investment which we did for the H2 in Austin, how does it fit in terms of our capital allocation, given the situation that we see clear or impeding slowdown? How do we judge our capital allocation reason to invest in a larger H2 versus we could have reserved cash for a weaker period upcoming weaker environment in terms of business?
Yes. Thanks for the question, Chintan. As I've mentioned multiple times, we have very good cash flowing business. So we are a cash generating business. That is why we are confident and we continue to pay dividends, even if the performance for this quarter was not the best one. We are considering future cash flow of the business as well. So that is why we continue to the business as well as continuing our investment into OpEx and CapEx. We made -- we continue to make investments into better channel position, digital marketing -- market base modeling and the CapEx in terms of a better channel position, digital infrastructure, automation, warehouse and new headquarters in U.S.
Specifically to your question about new headquarters in Austin, we feel that -- there are 3 buildings right now and there is rented building. Consolidating all under 1 roof will create more efficiency and cost benefit. We did our ROI analysis for that premises. So we'll have positive ROI of going into our own premises.
And how much we paid for that?
So we paid approximately $12 million just for the land and that will be constructed over the next 2 years ,will cost another $20 million…
Okay. So over the next 2 years.
We have the next question from the line of Sameer Dalal from Natverlal & Sons Stockbrokers.
My questions actually are a continuation to the earlier questions on the margin front. So if you look at Slide 27, you'll have talked about major OpEx investments that where marketing went up by 151%, marketplace is 38% increase air-time OTA is 30%. And then if I look at Slide 28, the margin hit because of this increased cost was about 2.2% because of the accelerated investment in digital and broadcasting. So my question is, are we going to continue at these higher rates for this part of the business? Or I mean, this is for the yearly or is this going to stabilize and come down a bit? What exactly is the plan of action?
For the digital and marketplaces, we see a lot of growth potential in those spaces. And once we get that customer in and if he can convert that into multiple multichannel customer, the lifetime value of the customer increases. And we have multiple platforms that we can convert in the customer into. Within our e-com space, we have web TV and with live streaming gaining traction in U.S., it is very interesting for the viewers. We have a rising auction, the $1 auction platform that also gets customer addicted our hooked to our digital platform.
And we have other additional potential to target the customer to OTT platforms on air-TV, on Roku, and Samsung high-sense all the TV, smart TV. So the value addition of the customer is high. That is how we are making the investments to continue to acquire these customers and so that we can transition them and gain into the latter value of that customer. Having said that, the investment we made the last financial year in U.S., U.K., Germany on retail, maybe a same or slightly lower number than last year. But if you are model, you can design around similar levels for this financial year as well, from absolute dollar perspective, not the increased mid-single-digit growth, but in absolute dollar terms.
Sure. If I can ask you another question related to this. You talked about the fact that you can get a lot of customers onto your platform, which can be used and then retain -- you help retain these customers. Can you give us some idea of what kind of additional customers you have got because of these additional spends?
We don't have a separate breakup Sameer. The numbers that we shared our new customer acquired is a mix of TV, OTA, TV, OTT, digital and customer transition from marketplace over to us.
Correct. But my question is, is there any way to quantify if these spends are actually bringing in the kind of customers that we need, or?
Yes, we look at it constantly, and we look at what is the rewards we're getting from each channel. We have now 3 different channels, U.S., U.K., Germany. And regarding these each we have social, we have Google search, we have insurances, we have affiliate marketing. So each has their different criteria for judging what ROA should be from each of them. So we constantly monitor and modify our marketing study.
Okay. One of the other reasons for the margins to be lower this year was, of course, the sea freight elevated prices. Given that we've had this, are we taking any price increases to offset this? What exactly are we doing? Because they still remain elevated, if I'm not mistaken.
Yes, they've modified a little -- they've moderated a little bit, but they still are elevated. But as you have seen from a gross margin basis, so we are able to pass on the majority of that to our customers and get to our gross margin of 60%.
Correct. So any more price increases we can expect for any of these cost increases that we are facing? Or I mean that's not something you're looking at, at all?
Well, inflationary pressure is there that is everywhere.
Correct. That's my point.
Component. It is going to be there as per analysis going to be there for full of this financial year. So -- but the good thing is that we can pass on to the customer because we are not locked into a particular product. We're bringing INR 150 crores, INR 200 crores everything new product and within that, we are able to build up the margins and the product which has really gone out of cost, we discontinue. So we are able to do the private distance across our solid platforms.
Okay. Now coming back again to the similar kind of question that your first person asked, you've given a single -- mid-single-digit growth guidance. And he's talked a lot about the fact that our channel upgrade from 50 to 22 in U.K. is going to actually bring a lot more customers on board. So is that view now a little bit changed that this year, it may not be the case? Or I mean, see, the 2 statements are not gelling together where you say that we get a lot more eyeballs, but then it also says that we're not going to be able to translate those eyeballs into customers. So I'm just trying to get a feel of why we are being so -- I'm not saying pessimistic, but so conservative on giving a growth guidance?
So the first point about U.K. channel. So U.K. channel, when we launched this, that was in January, we launched in January, middle of January. So at that time, the U.K. TV customer acquisition was trending about 20% to 30% negative year-over-year. So as of May, the first 20 days, we are seeing about 8% growth on TV acquisition year-over-year. So we are seeing new customers coming in from TV and variable customers is high compared to even the customer. But how the timing behavior of that customer will be given the macro situation, the customer going out of inflationary pressure or the recessionary pressure that might happen, we are conservative on the impact.
Okay. And the last question I have is on the inventories. You've seen a big jump in the last quarter also, you had talked about the fact that inventories were higher because sales through didn't happen. And of course, we have seen inventories go down from, I think, last quarter to this quarter, but what would be the comfortable level of inventory that you would be happy to sit on or would this be the new trajectory for the inventory level at about INR 620 crores, INR 640 crores out.
Yes. So inventory level was a bit higher this year compared to last year. So what we are looking forward is to moderate that and not take hard right turn but hard left turn, but moderate it over this financial year. So we are not giving specific guidance on inventory, but this will be lower in number of -- in terms of number of days, also in absolute dollar terms.
We have the next question from the line of Sabyasachi Mukerji from Centrum PMS.
My first question is kind of a follow-up to one of the previous participants. If I look at your OTT digital spend over the last 4 quarters, it has ranged around INR 14 crores, INR 15 crores in a quarter. Whereas if I look at the OTT revenues in one of the slides that you have put up, it's around INR 14 crores, I mean USD 1.8 million, INR 14 crores, INR 15 crores quarterly run rate in the last 2 quarters. So where do you set this benchmark of, let's say, spending 1 unit in the digital or OTT space and how much do you get in return in terms of the revenue from that particular OTT customer? And do you have some kind of quantification in this regard?
So the INR 25 crore in Q4 is the digital marketing spend and not OTT. OTT is very small subset of the digital spend. We do spend on Fire TV and Roku to get our apps on those platform downloaded, but it is very small substance. And the sales number has picked up for only OTT. So to the earlier question from Sameer I answered, we would have overall digital spend, about similar or slightly lower spend for this financial year, given the trend productivity we are seeing on these trends. If you can get to higher productivity of the spend, as we are learning every day or else we are going into new platforms. For example, we are going to kick off now. If you see higher productivity on that, we can spend -- increase our spend over there. So the current position for us [indiscernible] about similar level or slightly lower than last year in absolute dollar terms.
No. So just to understand this thing. So if you -- let's say, if you spend $1 in digital, so how much does it aid in terms of revenue?
Yes. So there's 2 components of that. So one revenue, you get right away. So within the digital spend, we have 2 kinds of campaigns. One is to acquire new customers, which gives lower revenue by away and other is to get revenue right away the ROA by the way. So within those 2, it changes from channel to channel. Example, the social revenue ROA is lower than Google. Google is higher. Within Google, there is search, there is shopping, there is marketing, there is banner ad. Then there is affiliate marketing and then insurance marketing and brand to brand in the first, Germany, U.K., U.S. and our 2 small to new digital brands. So this [ ROA ] differs from channel and to the tactics to the verticals and within verticals, different whether it's through customer acquisition and -- or to get the sales from that. So I don't have the overall number, Sabyasachi, because it's too [indiscernible], but we constantly review the tactics or the strategy in terms of what productivity we need to do.
And out of these...
Number answer on that because it's pretty complicated mathematics, analytics forward, say the calculations we do on a weekly basis.
Okay. Okay. My next question is, of course, we have seen volume decline in TV in FY '22 and web volume growth of hardly 1%. So where do you see the TV volume and the web volume growth in the next probably not I'm talking about FY '23, but for the next 2 to 3 years, where do you see this number?
Yes. So that's a good question. So last quarter -- last few quarters, our volumes have been moderated because at this time of the customer is of a slightly higher price point. For example, the gold plain gold chain sold very well in recent quarters, probably for inflationary pressure for whatever the reason they did and lower the mid-price point was a little moderate pull from customer, probably because of low number of eyeballs watching us people going out. So we are able to build our agility in supply chain and our new customer -- new products coming in velocity is very high. We moderate, we modify and serve customers what we look. Our guidance for the coming year, I would encourage you to look at the current financial year, ASP as a benchmark for -- last financial year, ASP as a benchmark and build your model with mid-single-digit growth on that ASP. And then have similar volume growth. So have similar ASP for current financial year as last year ASP and grow volume in mid-single digits on that.
Okay. Okay. Last question, a bit of bookkeeping one. So I see the packaging and distribution spend expense in Q4 being higher than Q3 despite our revenue going down. Do you -- I mean, why this happened? Like can you explain?
Yes, I'll take that, Sunil. So packaging, all depends a lot on the products being sold, the mix of the products, volumetric, et cetera, plus there are also impact of the fuel charges, peak season and so on and so forth. So it may not be apt to look at quarter-by-quarter number. Our recommendation would be to look at year-by-year for the same. So for the quarter, it grew by 4% in spite of all the rate increases, et cetera, which has happened during the year. As I was mentioning, and you have noted -- you would have noticed in the presentation as well. So we have undertaken a lot of measures in this shipping and packing cost already, which should give us at least a saving of around $2 million for the year.
[Operator Instructions] We have the next question from the line of Ashish Shah from [ Business Match ].
Sir, on Slide, this is 28 where you have mentioned the major CapEx investments done in FY '22. Sir, can you talk a little bit about your investment in the 2 D2C brands that you did in FY '22? And you mentioned in the earlier calls, I think, a couple of quarters back that you are experimenting going D2C brands. So any early thoughts on how is experimenting and testing gone and how do you see the future?
Yes. These 2 brands are -- we are slowly ramping them up. It would have been -- if we had not as much opening up as we've seen, we might have earned them quicker. So we are ramping up but slowly. So not to burn cash and keeping our guidance of the current financial year, giving leverage. But we are learning quite a lot from them. The revenue is not going to be substantial. Those brands put together this year would be is around between $2 million to $4 million. There's a very wide range related because risk is moderating looking at -- without burning much cash, if we can increase our customer acquisition, retention and repeat. So still experiment in testing.
Sure, sir. That's very helpful. And sir, just one -- just bookkeeping question. Any CapEx guidance for the next year and for FY '23 and '24.
I'll take that one, Sunil. So we don't give any CapEx guidance and such. As Sunil mentioned about the land and building expenditure of the headquarter one for U.S., which will be spread over next 2 years. We expect that to be completed in H2 of FY '24. But that will be about $20 million spread over all this 2, 2.5 years. So that will be an additional CapEx. But other than that, we have done a significant CapEx expenditure in the last year. We expect our CapEx other than the land and building want to be moderate only for the next 2 years, maybe in the range of INR 50-odd crores, which we used to have prior to the last year. But yes, if any substantial opportunities are there, we would not shy away from investing there.
We have the next question from the line of Chintan Sheth from Sameeksha Capital.
On the channel upgradation, how much we have spent, and this is capitalized, I guess? And if we capitalize for how many years we need to amortize it?
Yes. Chintan, we have spent INR 74 crores on these broadcasting rights, and we amortize it over 15 years.
Over 15 years. Okay. And yes. And second one, if I look at the OTT numbers, the customer that will be repeat element, I guess, but the average customer revenue per -- revenue per average customer, it seems to be taken high over $500. Obviously, there will be a demand of repeat purchase and we don't know the volumes there, but that is typical to other channels as well?
Sorry, Chintan, can you repeat the question, please?
So the OTT revenue we -- from the chart, we can make out that around we made around 1.8 million for the fourth quarter, and we have around 3,000 to 3,200 customers, unique customers with us. So average works out to be around $500-plus revenue. Obviously, there will be repeat purchases and units are -- will vary. But does that reflect with all other platforms we have that the per customer revenue works out to around quarterly on a $500 kind of number?
Yes. So for OTT is generally one group that we see, the other e-com is different, TV is different and a customer who buys from TV and e-commerce is very different. Just for OTT, based on customer -- overall for the retention and the latter value is pretty high on OTT as you saw in our…
Right. And secondly, I was looking at the per unit expenses. You mentioned packaging and distribution, but broadcasting cost as well as other OpEx. Anything in the other OpEx part has seen to -- absolute numbers remaining flat, but I think there is some element of higher costs. Any provisioning or anything we did this quarter?
I'll take that, Chintan. So packaging, I already spoke about, shipping and packaging, content and broadcasting includes the airtime and the web marketing largely. We have been speaking about that. So air marketing is higher, and that's a conscious investment. Expenditure is higher also year-on-year by 30%, but that's also in line with the investments we've made in the various OTT homes during the year. Like Sunil was mentioning, these 2 expenditures will not now substantially increase in the current year, both with marketing and airtime, of course, any significant opportunity comes in airtime in OTT homes we may opt for that, if it makes sense for us. Other than that, there is no significant increase in any cost. In terms of like jump in the quarter. And one correction, Chintan, the amortization of the PTC U.K. channel is 10 years and not 15 years.
Right. One last question on the Austin office. The 3 centers currently you have, what kind of annual rental savings we can expect beyond FY '24?
I'll take that. So we -- when we model that so we found, I will not speak about the rentals alone, but all OpEx took together, we should get an OpEx saving of about $1.5 million per year.
We have the next question from the line of Ritik Tulsyan from Concept Investwell Pvt Ltd.
Am I audible?
Yes.
So my first question is, so sir, there has been changes in the leadership team. So any specific reason for those changes? Also are they hired from outside or they are a part of VGL team earlier as well? And I will ask the next question after this question has been answered.
Yes. So the change is a fact of like Ritik. So sometimes, we will leave for better opportunities, sometimes we take decision for various reasons. So we are looking some -- we are looking internal as well as external for replacement of these positions.
Okay, sir. And my next question is e-commerce industry expense is facing headwinds in U.K. and U.S. And in case of television, I believe the headwinds are getting stronger and substantial part of business comes on television. But you mentioned, we are gaining market share in it. So is it that the industry is deviating, but we are gaining market share. So can you provide some clarification on that as well?
Ritik, you were not clear in your question. Can you repeat? And your volume is a little bit echoing.
Just a minute, sir. So my question was e-commerce industry itself is facing headwinds in U.S. and U.K. And in case of television, I believe the headwinds are even stronger, like you said. And substantial part of business comes from television, but you mentioned you are gaining market share. So is it that the industry is delevering itself, but we are gaining market share over there. So a little bit clarification would be beneficial for us, sir?
Yes. So the growth of earlier year was very, very high, and there is a change in customer behavior, you have to look the trend in a longer perspective. That is why we gave the number of FY '20 as well. So for us, we continue to gain market share, whether the industry is gaining rapidly or for external circumstances is not showing growth. So we will be having growth of market share in any circumstance.
Okay. And my last question is, sir, that how should we look at the TV business going forward? So anything on that aspect?
Can you repeat the question, please? What...
Yes, I was saying how should we look at the TV business going forward? So like do you have any plans in mind, which you can share with us?
Yes. So we look at the TV business for a long-term business because our market share is just about 3% of the listed players, we see the financials for. And also, the OTA homes that over the air free antenna, that side of business is growing, and we are gaining more and more homes into that space. So this is quarterly happening on the cable side, but our market share is small, so we can continue to grow in that space. OTA space is growing, and we are gaining more and more scale of customer share in that space. So for next 7 to 10 years, we don't see a reason to be concerned about TV, the linear TV. Having said that, we are making appropriate investments into OTT space, that is connected TV, smart TV on top -- set-top boxes as well as on digital and social. So all put together, we are confident of our long-term growth irrespective of the platform.
We have the next question from the line of Aditya Mehta from GK Capital.
Sir, my question is regarding our manufacturing units, which we have set up a few quarters back for the manufacturing of apparels. So how is that unit new scaling up?
Yes. Very well. We have a good number of people. We made some additional small CapEx for improving the machines and processes. So we are happy with the progress. We're happy with the apparel progress on our TV channels also. So generally, happy with the progress on that.
So how much of the revenues we will be generating from -- we are generating from that unit?
So I don't have the specific revenue. It's not a whole lot, but it is as per our position.
Okay. And sir, for FY '23, how much loss are we anticipating from our Germany equation?
So we are not giving specific loss guidance on that. It will be lower than what it was last year. And in H2 of FY '24, we expect it to be profitable.
Okay. And for FY '23, what was your EBITDA margin guidance?
So for the current year, we are not giving any EBITDA guidance. We mentioned that we will deliver positive leverage for the current year. And what we are mentioning is that for the next year, which is FY '24, we believe we are confident of our EBITDA margins to come back to the mid-teen levels which you saw in FY '21.
[Operator Instructions] We have the next question from the line of [ Sohail Kamdas ], an investor.
In the expense item in the content...
Mr. [ Kamdas ], I'm sorry to interrupt, but the audio is not clear from your line, sir, if you could adjust the instrument?
Is it audible now?
Yes, it is.
In content and broadcasting, I'm seeing that the expenses there for the full financial year is increased by almost 35%, whereas the revenue has increased by only 8%. So how should we see that? Is that mostly an operating expense? Or is it variable and how it is linked to the sales?
Yes. So we made some investments into OTA space, and we found that investment to be productive for us. For the current financial year, we should look at similar numbers. And the last year's number that we had last year investment that we made are on the track for meeting our achievements. So from absolute dollar point of view, you should plan your model base in similar numbers last year.
Okay. So absolute number would be similar as last year?
Yes.
We have the next question from the line of Pooja Doshi, an Investor.
Sir, I wanted to know the...
Ms. Doshi, this is the operator. I'm sorry to interrupt, but the audio is not clear from your line, ma'am.
Is it better now?
Yes, Please go ahead.
Okay. So sir, current quarter being high, I wanted to just understand if there are any off beat or non-moving or slow moving inventory? And if you can't quantify the same?
So we have the provision in the process of exiting the sales of slow moving inventory through clearance mechanism and our rising auction. So we don't have much of non-moving. And whatever the inventory, which should be slow or non-moving or whichever is the aged inventory, we have a provision created for an engaged product. So the value of the inventory continuously goes down as per our clearance. So we are confident of our quality of inventory over the long term over the next -- over the course of this year to be able to reduce absolute dollar terms or rupee terms to reduce the inventory this current financial year, before the end of the year.
And sir, if you could help me understand that the test of identifying bad inventory and what could be the exact steps to do that?
Yes. So we have got -- at any given time, we have 60,000 SKUs in the system. So we have an automatic system algorithm of product, if it is lower-than-expected productivity, it goes into the clearance flag or goes to rising auction flag. And from there, it switched out to automatic scheduling of the product for a customer to bid on, and we start -- such product at $1, and it ends wherever it ends, the customer gets that product. If it is age product beyond a certain time line that we have, it has clearance from a certain time to certain time and keeps on depreciating over that time. So we have a very robust mechanism in the company to create provisioning as well as exiting of the product.
All right. And sir, what would be the trend of returns to sales ratio if you could help me with trends for the last 8 quarters and then particularly this quarter.
Pooja, your question wasn't clear. You're going in and out.
Okay. So could you help me with the trend of returns to sales ratio for last 8 quarters, if you have those numbers handy?
It is pretty constant. We haven't seen returns going up in the last quarters. It's fairly constant.
And what would the range be then?
So for U.S., it is around between 16% to 18% returns. For U.S. it's about 25% to 28% range.
Sir, understood. [indiscernible]
I'm sorry to interrupt. This is the operator. Pooja, your audio is breaking.
Okay. I'll try again. So sir you said this has been constant since last couple of quarters, right, the 16% number and 25% number you said.
Yes. So U.S. is between 16% to 18%, 19%, and U.K. is from 26% to 28%.
Okay, perfect. And sir, lastly, I wanted to understand shipping and trade cost as percentage of sales, what would that number be for this year?
So in absolute dollar terms, it will grow maybe in line with the volume growth, and you can factor in the $2 million savings, which we are projecting for the year.
Okay. All right. And sir, lastly, on seasonality. Is there any seasonality in sales like usually all these companies have been built out during Q3. So do you have something similar or its even to other quarter?
Yes. So there is seasonality in the sales. But jewelry, there is not a lot of seasonality. It's mostly first purchase and except for pretty much all year around. There are sometimes some colors, for example, [indiscernible] it has more into winter times than the summer times. Summer time is oftentimes some lighter colors than some sell better. Now in April, there are some summer fashion, some is winter fall, so there is a difference between these. But for our inventory makeup, after our provisioning policies, we don't have any concerns with overall inventory.
We have the next question from the line of Siddhant Dand from Goodwill Warehousing.
I just wanted to understand that because shipping costs and all have been going up -- firstly, have they been going up for us. And because we are in the lower ticket price [indiscernible] lately in the last few quarters with inflation going up?
Your voice was in and out. Can you please repeat the question?
Yes. So firstly -- so you answered in the previous question about the shipping costs being in line with the volumes. But because our ticket size is lower, does it affect us in a way with inflation, especially with shipping?
No. Like I said, you can project our shipping costs in line with the volume growth and factories savings for that. So...
Okay. So it's not a major issue.
It's not a major issue.
Ladies and gentlemen, that was the last question and we will now close the question queue. I would like to hand the conference back to the management for closing comments. Please go ahead, sir.
So I want to thank all the participants for your time and great questions. And I also thank you for your support in VGL and partners. If you have any further questions, feel free to reach to Prashant Saraswat of VGL or Karl Kolah at CDR India, and we'll be happy to answer your questions. Thank you once again. Over to you, Melissa. Thank you.
Thank you, gentlemen of the management. Ladies and gentlemen, on behalf of Vaibhav Global, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.