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V I P Industries Ltd
Earnings Call Analysis
Summary
Q1-2025
VIP Industries gained 2% market share last quarter and targets another 2% this quarter, aiming for a total of 40%. Inventory reduction was achieved, cutting INR 120 crores or 13 lakh units. Revenue remained flat, but e-commerce grew by 66%, while offline sales lagged due to heat waves and elections. Hard luggage now constitutes 56% of revenues. Gross margins fell by 510 bps due to soft luggage liquidation and mixed sales channels. Despite a challenging first quarter, the company anticipates improved profitability from Q3, aided by Boston Consulting Group’s initiatives.
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Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Earnings Conference Call of V.I.P. Industries Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Pratik Patil from Adfactors PR, Investor Relations team. Thank you, and over to you, sir.
Thank you, Steve. Good morning, everyone, and welcome to the Q1 FY '25 earnings call of V.I.P. Industries Limited. From the senior management, we have with us Mr. Neetu Kashiramka, Managing Director; and Mr. Manish Desai, Chief Financial Officer. Before we begin the conference call, I would like to mention that some of the statements made during the course of today's call may be forward-looking in nature, including those related to the future financials and operating performances, benefits and synergies of the company's strategy, future opportunities and growth of the market of the company's services. Further, I would like to mention that some of the statements made in today's conference call may involve risks and uncertainties.
Thank you, and over to you, Ms. Neetu Kashiramka.
Good morning, everyone. Thanks for joining the call. We announced our first quarter results yesterday. Before I get into revenue and profitability, I would like to highlight 2 positives for the quarter. Firstly, we gained 2% market share last quarter, and we also expect to have 2% gain in this quarter. And therefore, December end, our market share of 36%, now will look like 40%.
The second is, we have made progress in inventory reduction. So during quarter 1, we have been able to reduce our inventory by INR 120 crores. In pieces, it is 13 lakhs.
Moving to quarter 1 P&L. The revenue growth value-wise was almost flat, but volume was 11%. Overall revenue growth for the quarter was actually low mainly because of April performance, which was hit mainly by less wedding days, heat waves and some part of availability. However, May and June we had a healthy growth of 14% and 18% value and volume was 31% and 36%, respectively.
Channel-wise, again, this quarter, e-commerce continued its growth trajectory and we grew by 66%. Offline channel, as I said, got impacted because of lower footfall due to heat wave, Lok Sabha elections and lower wedding dates. Institutional sales again did better because of focused approach. International business got impacted due to countries like Asia and GCC.
Our premium share of business continued to hold at 56% of revenue. Value segment again showed growth. Carlton was actually successful in the premiumization agenda and our average selling price increased by 16%. VIP continued to grow on the back of successful new launches, mainly in lightweight and tech-enabled luggages. Skybags volumes were impressive during the quarter driven by backpack and pickup in e-commerce.
In case of Caprese, Kiara collection was very successful, and we are seeing better response in July. Soft luggage year-on-year drop in the share of business was actually in line with the overall shift. Hard luggage now continues to be the fastest-growing category. And as on date, 56% of the overall revenue of the organization now is hard luggage.
Moving to profitability. Gross margin declined by 510 bps mainly on account of soft luggage liquidation, channel mix and under absorption of overheads due to lower production at Bangladesh. EBITDA year-on-year movement was again on account of lower GC and increased other expenses on account of ForEx and marketplace expenses. I also mentioned in my previous quarter that the organization is on to a transformation journey this year.
As a part of this journey, sustainable profitability is a key milestone. To help us on this journey, we have engaged Boston Consulting Group for EBITDA improvement. I've also mentioned earlier that meaningful improvement in profitability will start showing from quarter 3 onwards. I still maintain this.
If I have to talk about the demand indicators, barring quarter 1, we still feel that festive season, travel and if you see the travel hotel results, everything is pointing towards better demand indicators. However, we'll have to wait and watch. Quarter 1 for this sector, especially for luggage has been subdued. We are definitely moving ahead in our transformation journey. A lot of work has happened, which will be -- the results of the same will be visible, as I mentioned in the quarter 3.
Lastly, there is a lot of news, which is floating around, Bangladesh. The situation looks alarming. However, V.I.P factories are in EPZ zone, which has not got impacted. In fact, in last 40 days of unrest, only 3 days our factory were shut. Even as we speak, all our factories are up and running. All the employees are present and production is happening as desired.
Material movement is also happening. Further, if there are some production losses, we still have 6 lakh pieces of soft luggage inventory so that we can use. We are, however, closely monitoring the situation as it progresses, and we'll take corrective action as and when needed.
One good part is that all our Indian expats who are working in our factory, we move them into India a day before the episode. At the end, I would like to conclude by saying that it's one more quarter of pain before we start to see good profitability.
Let me open the forum for questions.
[Operator Instructions] The first question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited.
Yes. Madam, in the opening remarks, you mentioned that the inventory reduction in 1Q was about INR 120 crores. So can you highlight how much of it was soft luggage? And I believe in the last quarter, our slow-moving soft luggage inventory was about INR 300-odd crores. So when do you think the full liquidation will happen, especially given your comments that from 3Q, you may see margin improve, but given the liquidation which we have to do in 1Q our margins were under considerable pressure. .
So the soft luggage inventory has reduced by INR 80 crores. And I think one more quarter -- so today, as we speak in number of pieces, it is around 6 lakhs, and we are selling 1.5 lakh pieces approximately a month. So that's where most of this old inventories will get cleared by September. .
Sure. And madam, my second question pertains to our other expenses, which is at about INR 175 crores in this quarter. Now given INR 120 crores of inventory reduction has happened, perhaps our warehousing and freight costs should have fallen -- leading to fall in other expenses. And also from this quarter, you have mentioned in your PPT that payout relating to e-com is getting netted off from the revenue rather than getting clubbed in the other expenses. Despite these levers, our other expenses up by 4%. So any specific reason which you would want to highlight here? .
So one, there is a ForEx loss of around INR 5 crores, which was impacted. Other one is warehouses cost reduction takes time. Like once -- it's a cycle. If we have to give notice also, there is a 3-month lock-in. So most of these reductions in the warehousing cost will actually start to come in quarter 2 and large part in quarter 3.
The other one is on the e-commerce costs. So there are 2 kind of costs which are paid to the e-commerce. One is discount. And the second one is performance marketing, which is basically the marketing expense. Marketing expense is part of the other expenses, whereas the amount given for discount is netted off from revenue. So generally, it's 50-50.
Understood. Understood. Madam, one last question from my side. You also mentioned that we have engaged BCG for EBITDA improvement. So can you highlight some of the details surrounding this? What is the term? What will be the outgo for it...
I don't think I can give you more details because I'm not going to be bulging out as it happened in the e-commerce because it's all dependent on reduction in costs. So the reduction in cost will be much higher than what we are paying to them.
So in short, it is linked to the outcome, Jinesh, so.
Understood. And hopefully, we'll turn around by 3Q or 4Q.
The next question is from the line of Shirish Pardeshi from Centrum Broking.
Congratulations for gaining market share. I think things are happening. But just more curious, I have 3 questions. So first question is that you did mention that the inventory is cut by 16 lakh pieces. But if you can help us to understand this 11% growth, how the growth has happened in terms of volume for the Premium and Mass and -- versus the other segment? And if you can give me the volume number?
Yes, I will give you. Premium is 10%. And value is 18%.
Okay. Okay. So what is the total number of pieces which would have sold in quarter 1?
Around 50 lakhs. .
So that broadly remains. The second question, which I wanted to check that when we look at this slide says that premium and Mass, Premium segment has remained a 56% brand saliency. But within that, if I look at the hard luggage, which used to be about 48% a year before, which has now moved to 56% and soft has come down from 25% to 19%. So what explains this 515 -- 510 basis point decline in gross margin? Is it largely the discounting has gone up in the system or something else is there?
So one is soft luggage is sold at a discount. The second is the channel, which are growing, are actually the lower end of the pyramid. So for example, e-commerce, now on e-commerce, we don't sell high premium. It is Mass and slightly Premium. So VIP and Skybags, which is in the opening price point range only will sell on e-commerce. .
So you mean to say that the contribution of e-commerce is rising because we are giving discounting, and that's why which is we are getting...
I won't say that, but the e-commerce is actually -- so we were under-indexed on e-commerce. We are catching up the game. So e-commerce -- travel industry revenue from e-commerce is around 30%. We were at 20%, we are catching up and therefore, the growth is high. But on e-commerce, we don't sell too much of Carlton and VIP Premiums. So it will be opening price point, which gets sale. So my average realization of e-commerce is actually lower than the other channels.
Okay.
And furthermore, I just want to add what MD said, you have to appreciate that the -- unlike the other industry, still in the luggage, the value contributes more compared to the premiumization or high premium. And that's why you find that our volume growth is much higher compared to the value one. And we are not seeing any major change in the shift in the demand in the next 1 or 2 quarters, given that it is more related to the festival and the e-commerce buying.
Manish, that's helpful. But I have a broader question. Now we are getting the volume at a price discount. Now historically, we have under-indexed in the channel. So I'm only saying that if the margin expansion story has to be built over the next 2, 3 quarters and the e-commerce channel will go back to 30% what the industry is doing so where is the margin lever? And what is the confidence which we are talking about?
So Shirish, there are many levers on which the cost optimization drive needs to work to improve the overall margin. And when I say about it, in terms of the growth is coming at a cost, I would not like to agree on it because we have to align with the market demand. If market is asking for a value product, I cannot do tom-tom on the premiumization. And that's the alignment what we did, and that's why I repeatedly saying that our volume growth was on the higher side compared to the value one.
The cost optimization drive, on which we are working towards it, including the calibrating the price at which we are seeing the option to go up, will certainly contribute in the overall gross margin. And what I repeatedly said again or reiterate that, MD said it can be seen only from the quarter 2 -- quarter 3, and that's what our objective is.
So it will be in all segments, Shirish. So for example, there will be some kind of price increases in some of the ranges. There will be some direct costs. So basically on the product side, we'll be doing some work, and then on the overhead as well. The gross margin is definitely going to be around 50%.
Just one question here. Do you think the price -- input prices will remain stable from here to next 2, 3 quarters?
Import price you're talking about, Shirish?
Input prices.
Input prices? It will -- we have to see over there looking into the geopolitical situations. But if I see the last 10 days trend, it is showing on a downward side. Furthermore, on a continuous, we are also working on a value engineering drive, what a few minutes back MD explained. So altogether, we like to contain our input cost from where we are currently, rather improving upon it, looking into the various options we have to go on a cost optimization.
Just last question...
I'm sorry to interrupt, sir. Could you please fall back into the question queue.
Yes, I'll just put the question, you can answer later. The question is on the employee cost because we have already taken a lot of action, as we move the manufacturing from Bangladesh to India. So INR 59 crores what we have charged in this quarter, is there any further room for further reduction in employee cost? Or it will be stable at INR 59, crores going forward? Yes, that's it for me.
Actually, INR 59 crores, there is a reversal of performance incentive payout of INR 7 crores. So INR 65 crores to INR 66 crores is what the employee cost will be at this point of time. Reduction on employee cost is planned in the last phase. So that will happen only in quarter 4 onwards.
The next question is from the line of Bhavin Rupani from Investec. .
My first question is related to netting off of e-commerce thing. Is it possible to quantify the amount of net off from revenue related to e-commerce?
It's around INR 15 crores.
INR 15 crores. And do you think this will continue going ahead or it will decline?
See, as we all know, Q2 is largely e-com, even 3. so probably, it will see some kind of incremental trend. And we are growing as well so obviously in e-comm channel. So the amount will keep on an increasing trend.
So as a percentage of revenue, it might remain the same. However, it will change depending on the...
Percentage to revenue expected to remain the same.
All right. Second question, our general checks suggest that there were certain schemes during Q1, wherein we were offering soft luggage at a discounted rate if a customer purchases about certain value -- above certain value. Hence, do you think that could be one of the reason for decline in gross margins during the quarter, as our selling price of soft luggage in the promotional scheme was way lower than what our actual prices were.
That's what I mentioned also in my opening comments.
Liquidation drive -- see, there are 2 ways in which we can do it, either I can do flat a discount or I could do a bundling of the product, giving, I would say, more offering to the end consumers, and that's what we plan for. And that's one of the reasons attributing to the lower.
Okay. My second question is related to Bangladesh. In your earlier con call, you had mentioned about converting soft luggage upright capacity to duffle and backpack. Is it possible for you to quantify how much capacity of soft luggage will be converted to duffle and backpack?
So earlier, we had a 2.5 lakh pieces of capacity of soft luggage upright, which we are reducing to 1 lakh?
Less than 1 lakh.
Yes, close to 90,000 actually, to be more precise. And backpack and duffle will be closer to 2.5 lakhs.
See what happens, generally, it's kind of fungible because what we are doing is we are recalibrating our manpower. However the machines are going to be still there. So the strategy is to have a completely going on a fungible. So whenever we require, we can adjust our capacities to the market demand. .
Okay. And if I'm not wrong, there is a FDA between India and Bangladesh to export goods duty-free. Do you think if this is removed, we will lose the duty arbitrage that we hold right now?
I won't see any impact on this because both country needs for their economy support. But we have to see because situations are getting evolved. I don't think so, FDA will come as a first stage of negotiation between 2 countries, keeping aside the -- keeping in mind the safety is secured in the economic growth for both countries are looking for. And more importantly, from Bangladesh perspective, even that their GDP is largely contributed by textiles and garments industry.
All right. And my last question on guidance. You indicated double-digit revenue growth and 15% EBITDA margins for FY '25. Do you still maintain the guidance for the year?
I always said that H2 for profitability, if you can read my transcript of last quarter also. I have always maintained that H2 will see profitability, and exit quarter at 15% is what I have guided for. I still maintain.
All right. Perfect. That's all from my side.
The next question is from the line of [ Surya Narayan ] from [indiscernible] Securities.
Just wanted to know, that you said the liquidation of the stock loss will continue until another 2 quarters. So we have reached nearly 44% this quarter, and this will -- this is nearly 12 quarters low, I mean it is there. So shall we -- going forward for the next 2 quarters or so, we'll be seeing a similar kind of JP?
One more quarter.
One more quarter.
And then it should start inching, and exit should be 50%.
Our exit would be 50%, you are saying?
Yes, exit quarter should...
Exit quarter of the year.
Exit quarter will be 50%, but 44% is the lowest and it can improve -- inch up to 50% as we move forward, right?
Yes, yes. And one more quarter of pain, like September should be around this, but from December onwards, it should start improving.
Okay. And secondly, so any update on the Bangladesh fire insurance claim?
So we have received interim INR 5 crores in the month of July and balance -- we'll have to see. It was expected in 3 to 4 months, but now looking at the current situation, it might get delayed. We'll have to wait and watch.
Okay. And secondly, you -- what I'm seeing channel-wise, we have put a lot of effort to improve the general trade, but it is showing opposite results so when can we expect this debt challenge because that has just the biggest one. So when that can improve?
Now that channel improvement, we will see only in the next year because the biggest salience in that channel is actually quarter 1. And this time, because of the no wedding dates, the pickup was very, very weak, and the secondaries are not there for that channel. And that's why you see this salience has come down. .
Over a period of time, I think that 25% is where it will remain -- over a period of time, it will stabilize at 25% salience for the channel. Some people are starting to buy from modern trade from e-commerce. Even smaller towns are now having chains like Vishal and D-Mart. A lot of people are going there. And Reliance Retail is becoming aggressive.
Okay. And in the modern trade also, it has declined Y-o-Y so just wanted to see...
E-commerce has increased from 13% to 21%.
Yes. But no, but more we do the e-com or let's say, post e-com, then obviously, we are also sacrificing the margin on commission under this thing so wanted to know...
That's the only channel which is giving growth, what is the choice, either leave it or grab it. So if I don't take it, somebody else will take it. That's what happened earlier also.
Just to add to this, probably some of the channels will get recalibrated in such a way that everyone will have a potential to grow. And that's what our objective in a midterm kind of tenure because the overdependence also on 1 channel may impact your -- and create a more kind of risk.
So this is going to be a midterm strategy, although current, we are increasing our position in the e-com because we are letting behind compared to the market brand. But I'm sure that over a period of time, you find that all important channels are getting equalized in terms of the sales mix and contributing handsomely to the overall results.
So we are not doing any kind of downsizing in the general and modern trade?
No, no, no, there is no downsizing. It's like if I have a more proportion of sales coming from 1 channel, obviously, it impacts the contribution of the other channels.
The next question is from the line of [ Ashok Jingal ] from Anand Rathi. .
I have a question on product mix. So if you can give a brand-wise gross margins. And also, we were saying earlier that we will focus on premium category brands, but we are expanding in lower end of the population that are 30k to 50k population where we believe that Mass brand would be dominant this would keep Aristocrat share higher and continue to put pressure on margins, right?
So basically, if you see the salience of our VIP Skybags, Carlton has remained the same. So it has not declined. And Aristocrat has moved from 40% to 41%. So it's not that it's -- Aristocrat is moving substantially up. So we are definitely working on across the brands. In fact, Aristocrat used to grow like 3 and 4x in last 3, 4 quarters. This quarter, our volume growth actually is highest in VIP. VIP, I think volume growth is 7%.
Okay. And earlier, we were saying that the contribution from...
Let me just tell you. So the VIP 7%, Skybags is 15% and Aristocrat is 18%. So it's like almost close.
Okay.
And premium agenda is there. The only thing is that market is not taking that. If you see some of our competitors, who are in premium segments are degrowing 10% to 12%. I didn't want that situation. And therefore, we have to supply what the customer is demanding. Our focus on premium will keep continuing, but I don't want to miss the bus also.
So just to add to what will happen is even though Skybags and VIP remain our premium portfolio, there is a need to come with the entry-level product as well to fill up the price gap. And that's why you find some kind of difference between Aristocrat and the price point of the VIP or Skybags. It will still fall under the entry product, but it still come on some kind of higher realization for -- between these 2 brands. .
Okay. But going forward, we will keep the Aristocrat share to around 25%, right, which we have said earlier?
So it all depends upon how the -- as I said, you cannot be different than what market is asking for, right? Otherwise, the other brands who are on a premium segment showing some kind of degrowth, we cannot be a different alike on this. So we keep our strategies aligning with what market requires and keep introducing the products to fill up the price points at which the demand is coming from.
Understood. And one bookkeeping question. Sir, what is the current capacity now...
Sorry. Could you just fall back in the question queue for further questions? [Operator Instructions] The next question is from the line of Saumil Mehta from Kotak Mutual Funds.
Just 1% growth in the offline channel, which has been there in the presentation. In your best estimate, how much is got to do with the weak wedding season in which you went by or it has largely got to do with customer shift towards the non-offline, which is also visible from significant rise in e-com contribution from...
It's difficult to quantify, but I can say that 50% of it will be because of the less wedding days, and 50% because a lot of the consumers who were earlier buying from off-line are moving to online. .
And my second and last question, in terms of the gross margin from 44% to 50%, which is going to be for the exit quarter in Q4, which you just alluded. Do you believe this 50% will be more sustainable for a year as a whole in FY '26? Or maybe it's too early to comment on that, while assuming things actually as of the March?
So historically, we used to be in the range of 50%, 55%. So in FY '26, our endeavor is to go back to 55%.
After seeing the success, [indiscernible]
Sure, Manish. Then I was coming from is -- unfortunately, the industry competitive intent is not coming down or Safari is also hitting market so I'm sure they will be in the urge to gain market share and overall pricing will continue to remain...
No, agree, but you must have seen one remarkable change what is happening is those brands who have been having presence in the e-coms are now looking for retail trade for expansion of their business, right, which means what we are seeing in the last 18 to 24 months, probably they'll be seeing now for the next 2 years, and let's see and then compare where are we and where are there. But we're very premature to make the statement, but that's what they are coming up, right?
All fund mobilization what they are doing today, it's to expand the retail strategy. And retail comes at a cost. It doesn't come as quickly as -- or accessible to what we have in the e-com.
Sure. And any trends on the raw material prices, BC or PC, any positive, negative...
It's stable, showing some movement on upward trajectory on a few commodities of ABC and PC, but our contribution to that is minimal. The worrisome is only the freight rate, which is almost quadruple compared to what we have seen quarter before. So that's only a cost element to keep in mind when we are looking into a price collaboration.
The next question is from the line of Jigar Jani from B&K Securities.
Just a clarification on value and volume slide, is 14% and 18% growth [Technical Difficulty]
Sorry, Jigar, your voice is breaking. I could not hear the question. Some clarification on volume, but after that, I could not hear.
[Technical Difficulty]
No, it's breaking.
Not completely audible.
Hello?
Yes, continue.
Yes. So I was asking that on the value, volume slide that you mentioned 14% and 18%, this is ex of discounting, right? This is from the gross revenues that you have mentioned the growth right?
Yes. This is gross revenues.
So would it be fair to assume that discounting has been the major factor why growth in terms have been like majorly impacted this quarter?
So I would say something on -- see, we just answered a few minutes back about the SL liquidation contributing to a lower growth and coupled with the contribution coming from more on value products. So I would prefer -- I would say product mix and the SL liquidation resulting into a lower value growth.
Understood. And sir, just 2 bookkeeping questions. What is the debt that we have on the books as of Q1? And...
Sorry, continue. Sorry, I understand.
And the tax rate that we are expecting for the full year?
Tax rate? Okay. So if I look from -- the answer to the borrowing, it remain at the level of what we there in the March. However, as we plan to reduce some of the dates during the year, and you can see some results in this regard by end of quarter 2.
In terms of the tax rate, it is the 25%, which will continue, which is there, in fact, is under the new tax regime.
The next question is from the line of Pranay Chatterjee from Burman Capital.
Am I audible?
Yes. .
Great. My question is basically with respect to the Y-o-Y volume and value growth that we saw in Q1, which is flat and 11%. So as far as I recall, I think in Jan 2023, there was a fire-related incident and which sort of impacted -- started impacting our sales after the strong run from Q1 FY '24 onwards.
So the base was actually weak. So with this context, how should we read the results? And then would you say that the overall market would have actually declined or stayed flat and the volume growth that we see is not a true representative of the market.
I would say differently, because fire took place is right, but what is contributing or what is more noticeable is the overall shift in demand. So it's moved from an Bangladesh operation, where the fire took place. It was largely attributed towards the soft luggage, and soft luggage demand seen as a dramatic change from the Q1 of the last year. So I would not agree on the lower kind of -- fire resulting into a lower base and other stuff.
Got it. And the market share movement you said 200 bps Y-o-Y -- sorry, 200 bps, was that Y-o-Y or quarter-on-quarter?
It's on a quarter-on-quarter.
Quarter-on-quarter.
The next question is from the line of [ Niharika Karani ] from Capgrow Capital.
Am I audible?
Yes.
Yes.
So you mentioned about 2% gain in market share in this quarter and maybe 2% more in next quarter. So if you could throw some light, whether we have gained this from the major competition? Or have you gained it from the unorganized sector? And are we facing any threats from the upcoming B2C brands more?
So whenever we are talking about market share, we are telling about the 3 large company market share because the data for others is not available in the public domain. So between the 3 companies, large companies, this is the market share what we have talked about.
And on that basis, the data will get published. For this quarter 1, this is based on our internal estimate and some more players are going to have a negative growth. And that's why we have gained market share.
Okay. Understood. And my last question is, will we see any more new designs of the product coming into the market in the next couple of quarters?
Every quarter, we keep refreshing or adding a few products. In fact, if you have gone through our presentation, we have already shown quarter 1 launches. And there are a few in pipeline. So as we speak, we have launched something which is a signature collection, you can go to our store and see. It's doing very well in Carlton and that we will share in our quarter 2 presentation. But if you go to the store, you can see a few more happened already after this quarter 1 also.
The next question is from the line of Naveen Baid from Nuvama Asset Management.
Can you show -- throw some more color on brand-wise gross profit margins?
So brand-wise gross margins, we do not share. However, what I can say is that, there is a 10% gap between the Premium and the Aristocrat. So basically, 3 brands which we club as premium and mid-premium versus Aristocrat, it's a 10% gap.
The next question is from the line of Dipak Saha from DRChoksey Finserv Private Limited.
I have only 2 questions. The first question is on the Bangladesh front, if you can quantify the total percentage of supplies that you are receiving from Bangladesh? And second one, in one of the earlier con calls, you highlighted you're targeting to reduce the debt nearly to half. I mean the amount was somewhere around INR 250 crores. Are we still sticking to that number?
That is for the -- at the end of March.
Yes. For the entire year -- the FY '25 target.
Yes, our target is to reach there, and hopefully, we should be. In terms of the Bangladesh, it is largely, I would say, the soft luggage or the soft luggage contribution comes from the Bangladesh. And it fluctuates between the quarters depending upon the...
Overall 20%.
Overall remains at 20%, 23%.
Okay. And is there any issue on the labor side?
Labor account, there is no unrest as such currently...
No, count. So basically we have reduced it by 50%. So it used be 8,000. As we speak, it's 3,800. By June end, it was 4,100. Today, it is 3,800.
Okay. I mean last few weeks, how is the situation on the labor front? That's what I was trying to understand.
So at this point of time, I mentioned in my commentary also, that the EPZ zones are running fine. In the last 40 days, our factory was closed for 3 days. Since yesterday, it opened normal and all the workers are coming. Even material movements are happening.
[Operator Instructions] The next question is from the line of Surya Narayan from [indiscernible] Securities.
So ma'am, you told that the labor force at Bangladesh has been reduced from 8,000 to 3,800, right?
Yes.
So how much is the contract labor? And what is the on payroll...
There is no contract labor in Bangladesh. This was all on payrolls. And that is planned reduction because of the soft luggage demand reduction. So we used to run our factory in 2 shifts, and we made it 1 shift now. .
Okay. So I mean, irrespective of the production, the wage will be paid? .
If for the balance 50% of the people, yes, it has to be paid.
Okay. And second question...
Only 3 days were shut and normal production now.
From this level, this will be maintained or it will be further reduced?
Depending upon demand. So as I said, your production facilities to be completely fungible and that's what we are working towards.
Okay. And...
And it's not as difficult as India for asking workers to go there. It's very flexible. The law is very, very flexible around it. .
Okay. The -- compared to the last year, the revenue though remain flat, but the interest component has gone up significantly. So just wanted to understand -- and you would say that the debt level is also remaining same. So what is led to the rise in the interest rate, whether any working capital legs have spiked?
So when I said debt remain at the same level, I was comparing with March and not the June over the last year. If I compare it with June, the debt has gone up by at least INR 280 crores.
Because of high inventory levels. So by March, we were almost 900 plus inventory. So the debt has gone up in last year, which now will get reduced.
So can you give -- is our working capital cycle improved in the first quarter?
Yes, the inventory is getting reduced. So definitely, it has a cycle on the working capital days. And that's why we are still sticking to our target to reduce the debt by March '25.
By 50%.
By 50%?
Yes.
The next question is from the line of Drisha Poddar from Carnelian Asset Managers.
Just a couple of questions. I wanted to understand...
You are not audible, Drisha.
Sorry to interrupt, ma'am. The current participant has been disconnected. We will move on to the next question. It's from the line of Anik Mitra from Finnomics. .
My question is related to current Bangladesh situation. Ma'am, what is your employee mix in your Bangladesh plant? I'm referring Indian employee and Bangladesh employee?
So all the Indian employees -- so we have around 20 people from India. All of them are already moved to Calcutta a day before this incident. All the other employees, which is 4,000 -- 3,800 are all Bangladesh.
Okay. And I'm considering a strong anti-India campaigning in Bangladesh so what impact you are sensing could have in the production or, let's say, in the operation? And what would be your strategy as well?
It's too early for the comment. As I mentioned that currently, we are having stocks on soft luggage. So I have some time to think. We are definitely strategizing. It's just 3 to 4 days old incident. So we will need some time to restrategize. At this point of time, as I said, the factory is running full-fledged with all the workers.
I don't see an immediate issue there. But long term, we may have to think depending on whatever is being talked about anti-India and all that. So -- but there are so many companies who are there. So even for Bangladesh economy, I don't think they can afford to not have Indian companies there. All Indian companies put together are generating so many employment.
The next question is from the line of Dipak Saha from DRChoksey Finserv.
Just one follow-up, ma'am. You said 20 people have shifted from Bangladesh to India, Calcutta site. So what -- these employees, where do they come in terms of the structure of employees. They are like managers, supervisors or just labors who are working...
No, no. These are all management staff. So all our senior top line -- top management is from India at Bangladesh. So they are now in Calcutta. They are working from Calcutta office.
So do you see this shift will not lead to any kind of disturbance as far as the operations are concerned in terms of running smoothly?
I don't think so. For short term, it should not.
Okay. And just one hypothetical question. You said, though it's a long-term thing, we need to look into how does this Bangladesh situation evolve. But if at all, you have to shift, what -- is there any kind of internal risk management measurements you people are working already?
Yes. For short term, we are already working on something. For long term, we need to still decide basis the situation. We'll have to -- we'll wait for some time to assess the risk and then look at the mitigation. For short term, we have already decided what we will do. But for long term, we are still waiting for -- waiting to know how it will pan out.
Okay. And then short term -- I mean just one last one before I wrap it up. So the short-term measurements you are taking, you're confident about sticking to the guidance that you have alluded in the con call so far?
Sorry, we missed your question because...
I mean the measurements that you are taking for the short-term purpose, you're confident about those measurements would be sufficient enough to adhere to the guidance that you have given on the top line and the bottom line front?
Yes.
The next question is from the line of Drisha Poddar from Carnelian Asset Managers.
Am I audible?
Yes.
I just got disconnected. I don't know if this was answered. I just want to understand that what's the capacity utilization currently at the Bangladesh plant? And where do you see it at the end of FY '25?
It is at 54% currently. Going ahead, it should increase by 10% to 12% for the next quarter. After that, it will depend on the demand. So we have to assess it.
Okay. Understood. And I wanted to understand a bit on the strategy on the Carlton side, you did mention that Premium is kind of a muted growth, and we've seen that also in the salience of Carlton coming down to 5%. So what is our strategy to increase the salience of Carlton and where do we see this -- what is our kind of aim to take it to by the end of FY '25 and '26?
So by FY '26, we definitely have a vision to take it to 10%. We are working towards it. A lot of new launches -- in fact, next 2 quarters, a lot of the new launches are planned in Carlton. We're also looking at expanding Carlton exclusive store.
So what is stress is actually mid-premium. I think super premium will still doing well. But today, we do not have many touch points. So we are basically going to increase our touch points in case of Carlton and have competitive launches around it.
Right. So how many outlooks are we targeting by '25 and '26 for Carlton?
By '25 end, we should have 10 and 20 by FY '26.
And this would include the airport outlets as well?
Yes.
Ladies and gentlemen, that was the last question for today's conference call. I would now like to hand the conference over to Mr. Manish Desai from V.I.P. Industries Limited for the closing comments.
So I hope that we could answer to all of the questions you have. If anything remain unanswered, we are just a phone call away. And I'm sure that the strategy on which we are working upon, you can see major upsides when we go and close the year FY '25. Thank you all, and have a good day.
Thank you.
On behalf of V.I.P. Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.