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V I P Industries Ltd
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Ladies and gentlemen, a very warm welcome to the VIP Industries Limited Q2 FY '23 Earnings Conference Call. From the senior management, we have with us today, Mr. Anindya Dutta, Managing Director; and Ms. Neetu Kashiramka, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anindya Dutta, Managing Director of VIP Industries Limited. Thank you, and over to you, sir.
Thank you. Good evening, everyone. Thank you for taking out time for this earnings call late in the evening. And at the outset, apologies for a late upload of the presentation as well as the results we just about finished the Board meeting, and that caused the delay. However, I'm hoping that you would like the presentation that we sent across to you. It's more detailed than what we've shared in the past. Having said that, I think it's quite a delightful moment to announce a really good set of results for quarter 2. This is somewhat what I think the whole organization is working towards. This may be 1 of the milestones that we wanted to achieve in terms of the all-around result that the organization has been able to put forward.
We see -- we saw revenue grow about 56% year-on-year, while year-on-year important now because somewhere from quarter 2 last year, things have started to normalize. However, even if you were to look at it from the base year point of view, which is FY '20, the growth rate for the quarter has been 25%. The flow-through of the revenue with a healthy gross profit at about 48% has been [ down the line ] through a good fixed cost management as I had -- had a good profit -- resulting profit as well with a PBT at about 10% and an EBITDA at 14.8%.
All key metrics that we see has gone through a very positive uptick as far as the quarter performance is concerned. If you were to talk a little bit detail on the revenue and as you will see in the presentation shared, I think all channels and equally brands and categories have worked very, very well. General trade -- in all the physical channels, general trade retail and modern trade has done extremely well as well as e-commerce also.
Specifically talking about some of the key shifts that has happened in that channel level. I think what we were pursuing in terms of increasing our retail outlets -- our exclusive retail outfits in the market has really worked for us. As of quarter 2, we were still lower than the corresponding quarter in FY '20 in terms of total number of retail outlets. However, the total revenue in retail has seen a growth, which means that per store throughput has been extremely good.
I just wanted to share some numbers with all of you. We are today at about 413 stores operational end of quarter 2, and we have almost about 45-odd in [ fit ] outs. So that takes the tally to about 458. We should definitely have this number to be more than 500 by the end of the year. The same number was about 485 exclusive stores in the corresponding quarter in FY '20. The mix is quite different. We have majority of this -- new stores that we are reopening or opening after the -- after where we have reached in terms of the lowest was about 365 stores. All the new stores are franchisee stores, majority of them are franchisee stores.
The other highlight, I think worth mentioning here is modern trade. Modern trade, we had a big, I would call, a headwind in terms of future group not active. And in terms of the 432-odd stores they had, even in quarter 2 only a fraction of that was operational. I think we've done a great job in making sure that the demand that was lost in because of the future group shutdown has been caught very well in all the other modern trade chain stores as well as in retail or in MBOs in the same catchment area.
And from our internal estimates, modern trade has surpassed the budget and the internal estimates that we had for the quarter, and it has resulted in a growth despite this of about 22% over the base year. So both likewise, all channels have done extremely well. E-com has been able to leverage the buying season for the usually quarter 2 is almost 1/3 the annual sale in e-commerce because of the big properties that are there in quarter 2 big days and festive buying. We've done very well there and have done a significant -- the growth numbers are almost double of the base year as of this year quarter 2.
I think the 1 more key highlight here worth mentioning is our international business. We've been pursuing it, not enough big mega strategy, but more to make sure that where we were present and in geographies where we could get a inroad. We've started to get that. Middle East has worked very well for us as well as many -- several about new countries, about 7,8 that we have been able to open in H1 the international business in first half of the year stands at 5% of the total business, this was about 2%, 2.5% in the pre-COVID era.
When I talk about brands and categories, I think both the big news there or heartening news rather there is while [ value ] and Aristocrat has been on a run. The premium and mid-premium brands Skybags, VIP, and Carlton has joined in. And in quarter 2, it was very heartening to see all these all the 3 brands growing on the base numbers of FY '20. So not only our strength, our renewed strength in value, but I think our strength in the mid-premium segment has come back in its full play as far as Q2 is concerned.
So with that good set of revenues, and I think, as I spoke about, our supply chain strategy, our own manufacturing strategy and our cost controls have resulted in the profit that you are seeing on your -- on the results that we have announced.
So by and large, a good quarter and really looking forward to even possibly a better one with much more in terms of consumer impact activities coming out from -- that you would see in the coming quarter. And the presentation that we have sent across gives some sneak review of what we are about to launch for our consumers in quarter 3.
So quite positive about how we see the future from here onwards for the rest of the year. Thank you on the -- from the opening remark point of view and any questions, please.
[Operator Instructions] We have the first question from the line of Tejash Shah from Spark Capital.
My first question pertains to [indiscernible] demand...
Tejash your voice is breaking up in the call. If you could kindly come on the headset mode once?
Yes. Is this better?
Yes, this is better.
Yes. So my first question pertains to a demand environment in general, you [ agreed ] on the same. As in we have seen a lot of categories like us where there was an element of a pent-up demand, which was very much loud in the second half of the last year and even first quarter of this year. So are we seeing the pent-up part still playing out? Or you are seeing that the recovery we are seeing now is more of a sustainable 1 and the pent-up element is actually receding in this phase now?
So I think it's a mix of both and somewhere I would -- it is more middling out. There is a bit of pent-up that we are experiencing. However, a large part of this could be sustained. And where I'm coming from in this is definitely the unorganized sector into organized seems like could sustain at least for a much longer period, unless something very differently evolves as far as the unorganized sector is concerned. So that's working differently in our sector than any other sector. Generally travel and the whole buoyancy on spending and the marriage season is ahead of us in the next half of the year. So I think I'm quite hopeful and quite optimistic about the demand environment to sustain the way we are seeing right now.
Sure. Sure. Second, on your presentation, first of all, congrats on -- and thanks also for a very detailed presentation. In fact, quarter-on-quarter, we are improving our disclosure levels. One theme which I can't miss out this premiumization, which is very much clear on most of the slides. So if you can elaborate what are we doing exactly on this? And when we are talking about premiumization, somehow Carlton is actually not much have got slide space. So just wanted to understand how are we going about the whole portfolio premiumization and all the premiumization initiatives in the existing brands also.
Right. No, I don't think we should measure it from the slight share point of view in terms of how many slides it has got. But really, premiumization is something that we've been driving -- one thing you -- the starting point is that this is something that we have strong at. It is not a new strength value is a new strength and I think we are doing pretty well there. We started to do pretty well there.
In terms of premiumization, both from a consumer [indiscernible] consumer activation in terms of innovation and communication and promotions, all that, if you were to look through the presentation and otherwise, that's most visible. If you go to our stores, you would see all the new launches in VIP and Skybags there is certain themes that we are working on, which are extremely premium or adding consumer value themes and more and more products are coming there.
In terms of advertising, Skybags taking it to the next level in terms of how we are connecting with the Gen Z. And also, if you see the whole retail strategy, and I spoke in detail about how we are expanding our exclusive business outlet network that is also something that is adding hugely to be able to sell that experience to the consumers as well as therefore sell more premium products. So it's a 360-degree around this in terms of driving the mid-premium and the premium agenda. And it is something that was there and will come back -- will continue to be there and in fact, get strengthened going forward.
Sure. And VIP Highlander is this just a collection or we have launched a flanking brand along with some other vendor?
The Highlander, every product has a name. So even in the presentation is there, but it's not going to be something that will be advertised to the consumer. It's a VIP product. It is designed with an SUV in mind. So in a way, this is the rugged looking macho looking backpack that you would like to believe that taking it with you and answer to the image that you would want to portray. So that's the theme behind what VIP wanted to bring to the consumer. And as we call it, it's [indiscernible] and luggage. And if you see every component of that, whether the handle, whether the wheels or whether the whole composition has to be built -- has built to sustain more tough -- tougher environment and a tougher terrain, as they are calling it -- it's not a new brand launch Tejash. It is a VIP.
New range.
Range.
Yes. Yes. Looks very classy though, congrats on that. So last 1 on business part, on market share, and we have been like transparent there also in sharing the details there. So should we believe that the worst is behind in terms of losing market share and we should somewhere bottom out here and then start gaining market from here on?
The numbers are saying so, and we strongly believe that I've always said that this is something that we would pursue very, very aggressively. But it's important to have the stance very clear that I am pursuing it along with making sure that we have sustained profitability.
Perfect. And 2 financial questions, if I may. Ma'am, have we provided for future group exposure totally in this year? And second, any update on the insurance -- different this will...
Future growth, the Big Bazaar fees were provided fully last year itself. So this year, what open exposure we have is on the FLFL, which is the central and the brand store. That also around 25% is provided. And on the insurance piece yes, we should get that in quarter -- sorry?
What could that be in absolute the exposed unprovided number?
Should be around INR 9 crores.
Okay. Okay. Okay. You were saying about insurance.
Yes. So the insurance space is the last leg of final survey report, so we should get that in quarter 4.
Happy Diwali to the whole team there.
We have the next question from the line of Jinesh Joshi from Prabhudas Lilladher.
I have a question on [indiscernible] I mean post-COVID, I believe that many countries are looking to diversify their supply chain from China. So in that context, which other countries can emerge as a probably alternate destination apart from India? And do we have any structural advantage vis-a-vis to countries like duty benefits, et cetera? The reason I'm asking this is because our current export share is approximately 5% odd, but we plan to scale this up over the next couple of years. So any thoughts on that?
Yes. So Jinesh, definitely, we would like to scale it up going ahead. And there is definitely a huge opportunity. It's just not a duty or advantage that we are only looking at. I think being good manufacturer ourselves, cost-effective manufacturer would give us a right to success in markets which we are buying from China. So here, over a period of time, being competitive to China in manufacturing would be the key that would get us access to international markets. So that's what we are perceiving.
As of right now, yes, we had seen some low-hanging fruits, which we have initiated. But obviously, the bigger opportunities will be in the larger markets with of U.S., Europe, Canada and so on and so forth, where the higher quantum of luggage sale happens, would enter. But some of these markets will be equally difficult to enter from a branded point of view.
So I think it's too early for me to talk in any more detail other than what is the opportunity in terms of how we will go about it, maybe once we are ready, we will talk about -- I'll talk about how we are going to approach it or when we have started approaching it, we will talk about it. As of right now, our strategy on interest is to make sure the market we would present before we go deeper into the market.
For example, you've had a huge jump in UAE alone where our penetration into at a store level into all the modern trade chains have gone -- have gone through a big change in the last 8 to 9 months post-COVID. And that itself has brought us a benefit good enough to get us a growth over our base pre-COVID base to almost twice -- double R -- more than double R turnover [indiscernible]. A very small base, but I think what I'm trying to say is that, that focus strategy, creating a go-to-market approach in a particular market and going deeper is working, and that's what we're doing right now. until we have reached to a stage where we kind of look at a wider strategy.
Sure, sir. Sir, second question is on your gross margin profile. I look at this quarter, I think we are at about 48% or -- and in 1Q, we were at about 50%, is there is some erosion in gross margin on a sequential basis. But I mean, given the fact that raw material prices have subsided and the credit cost is also pulling off. I mean can you give us a fair estimate of what would be the gross margin expansion in the second half vis-a-vis what is the average number in the first half, and that will be operate in?
I will give you in the way you've asked the question without giving -- I can't give you specific numbers for the future. But what you said was absolutely right that the cost -- the raw material cost and the freight cost was possibly at its peak in quarter 2 and it can only -- and it is only going to go down from here. How much exactly in quarter 3, how much in quarter 4, where it stabilizes, is a matter of crunching the numbers. But I've always that our gross margin profile that I would want to keep it is around between 50% and 52%, and the aspiration is to make sure that we take it to 55% and hold it.
But we would always want our ship to be within that between these 2 rails -- where 2 guardrails of 50 and 55 and keep working on our market share and growth. Given this margin, we kind of try and bring it to that -- within that range.
Sir, 1 last question from my side. If I look at the brand-wise revenue mix, which we have given this time around, the share of Aristocrat has risen from about 22% or 37% and the share of time has declined a bit when I compare it with the pre-COVID. Now going ahead, given the fact that growth in the masks segment is expected to be higher than the economy or season segment. I mean -- does it mean that the rising share of Aristocrat from hereon would essentially mean a lower gross margin profile for us because essentially, this product commands a lower margin so -- just wanted to understand this a bit from your side.
No. I think absolutely -- and the answer lies in the current gross margin also. So if you see the table has shifted from 22% to 37% in Aristocrat favor, despite the inflation that we are talking about now compared to any base year that you want to compare. The gross margin erosion is not there. So therefore, this is what I was talking about that we would like to play the value market share gain in a manner that we have done the cost reduction to fight this game better. So all our own manufacturing upstream integration, all that is helping us towards this approach where we would possibly increase Aristocrat salience which will help us gain market share, but it will not cause us to erode our margins commensurately.
We have the next question on the line of Nihal Jham from Nuvama.
Yes, am I audible?
Yes, you're.
Yes. Sir, a couple of questions on my side. First, you've given the data of your increase in distribution versus FY '20 in Tier 4 and 5 towns. Is it right relate the improvement in market share and the consequent increase Aristocrat and Alfa to that aspect that maybe that's a key driver to these aspects happening of us increasing our top line in these segments and also increasing our market share.
No, it's 1 of the factors. It does not -- cannot be correlated one is to one. I think if you see our better traction in e-commerce would also help corroborate the fact that that's also selling a lot of value, and that's also as a higher share of Tier 2, Tier 3 towns. So I think many factors comes together to make sure that value as a segment works for us. Its product, is its pricing, it is distribution, which is general trade as well as distribution, which is accessibility, which is through e-commerce. So it's a mix [indiscernible].
Sure, sir. And just a related question to that was that looking ahead, is your expectation that the value segment is expected to see a much higher growth versus the mid-premium and premium segments in the future as an industry, I mean, not for you specifically?
So the industry has been growing more in the value side. And for the authorized players, the value will grow faster going forward because of the unorganized to organized shift as well. So yes, value will continue to grow faster than the mid and the premium side.
Sure. Just a last question on Caprese. So there, our share is to come back to pre-COVID. What are the incremental drivers that will drive that because our plans in that segment remain very aggressive and what are the increment [ steps ] we are taking to achieve that?
I didn't -- I couldn't hear the last part. Can you repeat?
Yes. In terms of Caprese our plans are very aggressive. So what are the incremental steps we are taking now post-COVID in terms of driving the share of that business or the overall top line in that segment higher?
There are several. Once again, from a product point of view, there is a lot that is up in store for us going forward. The presentation has some hint of what we are getting into in quarter 3. Also from a distribution point of view, whether it is e-commerce, we are supremely active. And what we are activating now is physical channels as well, both in modern trade in chains like Shoppers Stop and all the lifestyle chains as well as some exclusive outlets is something that we are experimenting with right now.
Largely the mall kiosks and things like that. But these are all in the foundation stage right now and what you will see as basis this we will formulate something which is supremely more bigger or aggressive in the coming year, and that's where we will start seeing more aggressive numbers as well as plans.
Wish you have a very happy Diwali.
We have the next question from the line of Ankit Kanodia from Smart Sync Services.
Congratulations on a good set of numbers. First of all, I would just echo 1 of the other participant's comment that -- thank you so much for improving the quality of our presentation quarter-on-quarter. So that really helps us in getting more understanding about the business and the industry.
So my first question is in terms of as we see that -- if my understanding is right, Q2 is generally one of your -- from a relative perspective, Q2 is probably the worst quarter for you, right? And given the kind of maybe a point of some sort of pent-up demand plus some sort of -- like we are entering into the marriage season and all. I just wanted to understand how are we placing the capacity front. How much of it is right now, what is the capacity utilization? And how easy or difficult or what time does it take to ramp up our capacity, if required?
Yes. No, I think it's a very valid question and that gives me the opportunity to talk about that we are continuously investing behind increasing our capacity. As we speak, both in quarter 2 and now we are putting in a good percent of -- a good amount of money to increase our capacity in India, in Nashik and in Bangladesh. We have just about now decided I'm not talking about the money, but we have invested to increase our capacity on our existing base by about 35%, which should help us cover for our growth next year, and we are continuously doing this exercise. And maybe early next year, we would look at the subsequent year and continue to expand the capacities required.
So this is something that is definitely on the radar, and it's happening as we speak. And we will ensure that we have the in-house capacities as well as our network of outsourcing as and when it is required is more than the demand that we are envisaging for ourselves.
And next question is on 1 of the slides, I think Slide # 33. So where we have mentioned about the market share of the VIP against the other 2 organized players. So you have mentioned about till Q1 FY '23. Is it fair to assume it is at a similar level in Q2 as well or it has some changes there?
No. See, that's the difficult part to estimate, and I would be kind of doing a projection here. But given that sort of result, I am hopeful that if not gaining, we would hold it at the level.
So just a follow-up. Sir, if you look at pre-Covid levels, we were around 50%, and post-COVID right now we are at 43%. So how do we look at it? And...
I think that 50% is an aberration. Right of that for this particular quarter, if we look back in the previous quarters, it's hovering around 45% on an average for a year. So I think a rightful share and where I would warn this organization to be at is at a 45% plus. And having done that share in luggage, I would like to make sure that we focus on newer and more growth areas, which are more in the adjacent areas, which adds more faster top line growth and overall business growth.
Right. Sir. And when you spoke about in 1 of the other participants question that the unorganized ordinary shift like what we did -- what we witnessed during the COVID period as in the unorganized sector was hit far more hard compared to the organized sector because -- probably because of the strength of the balance sheet, if I'm not wrong.
Now if we say something like we are hearing about a recession in U.S. and U.K. Right now, India continues to be looking at strong demand. But say, if we get something like that in India as well, some jitters in India. Is it fair to assume that again during this period also, the unorganized sector will be hit harder than the organized sector? Or do you have some other views.
I think there are a lot of scenarios within which you are building. But the underlying thing is that, yes, in the future, the environment for unorganized sector will not be as conducive as it was in the past. And I think the chain started happening more from the GST. The COVID and the China situation brought -- made it more acute. It will possibly ease out a bit from where it was the worst situation last year same time and even now, maybe it will lease out a bit. But really speaking, pre-COVID and going forward, I think there will be a different scenario where the organized player for various reasons, will have slightly more advantage than what it had before COVID.
In that sense, do we expect more new competition entering the sector and how do we look at -- apart from the top 3 players, incumbents, do we look at more competition in the organized sector? And how do we look at that investment from the competition?
If you look at globally, I think the biggest player is here, and there has been some consolidation that has happened. So really speaking, there are not really large player outside the country who is yet to enter India. So therefore, yes, there will be -- and this is a place which is barring the top 3 players, the list is really long. It's quite fragmented. So there is endless list of brands and players that are there and there are continuously many coming because the entry barriers are not that high.
So that always has been the case and may continue to be more. But to that extent, unless you have proper supply chain, it is not as easy today possibly to come out because it's not that you go out and buy some products and you can create a brand and launch it in this thing. You will need to have a little bit more structured approach for a completely new entrant to enter the category in India. So some bit of discouragement maybe, but largely, it's a fragmented industry, and I expect newer, smaller, newer competition to continuously keep attempting or entering the category.
Sir, 1 last question. In the -- as you mentioned earlier that the value segment is growing much faster than the other segments. And 1 of our competitors is predominantly present in the value segment. Are we also trying to focus more on that? Or we continue to have our strategy of focusing on all the whole range of brands, which we have?
Absolutely. The second one, as you said, we are obviously keeping all competition on watch, understanding what they're doing, understanding their strengths and the opportunities that we have in the market in terms of where we could kind of pursue something against competition. But largely, we are over with our own agenda that we have built and our agenda comes from what opportunities we have with consumers, how can we service consumers better, and that's the starting point and everything else follows from there.
All the best for the rest of the year and happy Diwali to all of you.
We have the next question from the line of Harsh Shah from InCred Capital.
[indiscernible] in between margin -- so basically, in this quarter, you've kind of [indiscernible] very good set of number on top line. And last quarter, you did a kind of question that you have an aspiration of in [indiscernible] in the second half of the year [indiscernible]. So my question was that...
We can't hear you. You're not audible. Your voice is breaking.
Mr. Shah, if you could kindly come closer to the mic.
Am I audible?
Yes. Audible a bit now.
Yes, yes. So basically, my question was more about the interplay between margins and so if you were to look at this quarter, we have done a fantastic best in terms of top line but however, in the last quarter, we did talk about an aspiration of 15% to 20% EBITDA margin in the second half. So how do we look at that piece, right? do we can -- I mean, how do we look at an interplay, do we see market share? Or do we have a hard target of achieving that 18%, 20% margin?
So I think we need to see the margins with a slightly longer period in mind for the full year. And I think from a strategy point of view and where we are pursuing both market share and margin, we have a good balance in our mind how we are pursuing. And I could repeat again that we are trying to find the ammunition to fight the market share gain and that is not profit, but cost reduction and that's how we are inspired that's how our agenda is.
Now in this quarter, you are right, this is our peak inflation quarter and it's also by seasonality, our lowest revenue quarter, therefore, absorption of that revenue across all cost is lower and so on and so forth. So I think the ambition of 18% going up to 20% continues, and that's something that we will keep driving. There will be one-off quarter where it will not be on those lines. And therefore, some other quarters, we possibly will make up to get the year to we have that particular number. That's what I would like to position ourself as.
Okay. So sir, basically, the priority is on gaining market share, right? If you want to, I mean, prioritize between gaining market share and attaining the margin target, we will give priority to gaining market share, right?
As of today, if you have to -- if you ask me to choose only 1 between the 2 as of today, yes, it is market share.
Particularly higher market share with the same level of margins would be better than having that...
You're right. Gaining higher market share, while maintaining profitability is what one would like to deliver.
Happy Diwali to you and ma'am.
We have the next question from the line of Jaiveer Shekhawat from AMBIT Capital.
Firstly, can you tell me the volume recovery versus the peak over levels? And also, how would it be across, say, or value mass premium and premium segment?
Volume recovery was also pretty good. The underlying volume growth was about 13%, 14% overall for the category in this quarter over the base quarter of FY '20. And obviously, this was like the value trend is showing, it is more higher in the value segment than in the mid-premium. But overall, it's about 13%, 13.5%.
Got it. And given the amount of revenues that you have achieved already in second quarter, I mean, would you update your revenue guidance of about INR 2,000 crores for FY '23?
What do you want? Yes. I don't see any reason why in the remaining quarters, it will go down from the guidance that we had earlier given. So whatever has happened till now should stretch us to that limit. But yes, I mean, I've not fixated on the number, but directionally, it is -- it is getting better from what we started the year with for sure. It could be even better than that.
Understood. And sir, any update on the Walmart contract you would like to share about?
I am not very sure where this is coming from. I've not spoken about this, which Walmart contract are we talking about. This has actually has come as a question somewhere before also. But -- is there a reference to this?
I think this is what we have picked up from our channel set itself -- but would you have any update about any negotiations that are already underway?
No. There is nothing much to talk about there. We are obviously in our -- from an OEM point of view, we are interested in possibly taking up a few, but it has to be only the larger accounts are bigger. That's how we are seeing it right now. And in that context, one of the illustrations as an example, could be Walmart. And we are -- the team is in touch with various across, not only them, but across many other such larger potential customers. But that's about it. There has been no discussions beyond that, which is worthy to talk about here.
Sure. And sir, 1 more question on your margins as well. I understand what you've guided in terms of your gross margins, where you would like to achieve it. But say, given where -- what we have seen with the crude oil prices happen as well. So they have corrected from as about $120 per barrel in June to about $90 currently. So purely from an RM pricing standpoint, what kind of a GM expansion should we expect in the coming quarters because of that?
I think we already answered that question, right?
It is positive. I can't give you an exact number, which is what is happening. But I think it's also important to see -- there is a cycle in which we buy our raw materials, especially for soft luggage and all other components, which are the lead time, which makes any benefit or inflation that happens today result into the business at a time later than in next 3 months or 5 months.
So to that extent, if there is something reducing right now in the environment, we will not get the benefit in the immediate quarter. So that's where we are. So yes, when that reduces, eventually, that will flow into the business and maybe in 5 to 6 months' time.
And sir, were there any price hikes further post the March hike?
No, absolutely no.
No. Is that because probably customers are not willing to absorb for the price hikes? Or do you see no need to do that?
We didn't see any need. We had a strategy, which we put in place in terms of our pricing and the cost reduction that we wanted to do within our operations. So -- and we are on track with that. So it's moving on the plants, so we don't need to react in any way as far as consumer price increase is concerned.
Mr. Anindya, if I may just sneak in another question on upper case. I mean we have looked at the new launches that they have done. So looks quite fashionable and also their 2,500 day warranty and very attractive price points or soft luggage. So what you're reading of the situation? I mean do you see the e-commerce space getting more intensified?
Undoubtedly. I think e-commerce just makes the accessibility to consumers really easy and fast. You've got to spend a lot of money. If you burn cash, you will be able to get not only [indiscernible], but also transactions. So that's definitely something that we are watching out on whether it is uppercase or players like Mokobara or there are many such players who are who are spending money with a range that is listed on the marketplaces.
So we give it its due importance and we are tracking it and making sure everything that we need to do to benefit our costs, we are taking those actions in.
Happy Diwali.
We have the next question from the line of Akhil Parekh from Centrum Broking.
Sir, first question is ...
Sorry, you are not clear, clearly audible.
Better now?
Mr. Akhil Parekh, if you'll come on your headset will be better. Your voice breaks up in the between.
Is it better?
Yes.
It is.
Okay. Sir, my first question is in the other consumer categories, what we are observing is right -- the value segment is strategy while the mid-premium, premium segments are doing well, while on the contrarian luggage over last few quarters, the trend is the other way around.
So my question is, is it because the unorganized segment struggling from a standpoint of view of supply chain issues, and that's why the branded players, including us, are gaining market share or is it the brand salience of the organized player is organically actually growing over last few quarters and that's why the market share gains have happened from unorganized [indiscernible].
No, I think what we need to understand when you're comparing with any other category, the penetration of that category in India today. If it is highly penetrated category, then it's very different from our industry and our category where the penetration is not there. And as and when more new consumers, first-time buyers, non-buyers for many years as they come in, in the lower economic stratum as well as the lower town classes along that, I think that is what is driving growth for value for money, product range in this industry.
And that is possibly bigger a source of growth than that's all unorganized to organized. So that is growing. And adding to that for the organized players, the shift of unorganized which is not able to meet that consumer demand with the same economic advantage that we are organized sector used to have before that is yielding into the organizer. So I think the underlying source is penetration that is increasing in India, and that therefore, it is not temporary.
It is going to be sustained for a good amount of time going forward because luggage as the category compared to many other categories, not that penetrated. The usage of this, let's say, in our middle class outsole is largely when it is a location like a marriage and all that. The travel in India occasional holidays and all that is present at a certain economic and a certain social strata and above.
Now that's -- as India is becoming more prone to indulge itself in traveling better, more spending in marriages and all that, kids going out of their homes and studying in other cities. These are the bigger drivers which will drive the consumption of travel products and things like luggage and bags and that's the big opportunity going continues to become bigger as an opportunity going forward.
Sure. Sure. This is helpful. So essentially, what we are saying is probably this trend is more sustainable and might not be kind of a one-off thing basically?
Absolutely, and could be better than the overall category and industries that you are comparing with. This may have -- when you compare categories across what consumers use, this will possibly have a more sustained growth overall for the industry than comparable or other categories.
Got it. And the mid-premium and premium segment has started to -- started seeing good traction. So is it correlated with opening up of late opening up of international travel, and that's why we are seeing more traction now?
Yes, absolutely. And not only that, overall, I think this segment has started a little late in terms of the leisure holidays and buying of products after that. So this is definitely very, very robust right now in terms of this consumer segment starting to spend on travel and all other consumption cohorts that we cater to. There is an underlying demand, which was always there. It just got activated. I may have got activated with a little bit of delay than the value of the other part of the category.
Got it. Got it. This is helpful. The second question is on the international market.
Mr. Parekh you're requested to kindly come in the queue for the follow-up questions. We have the next question from the line of Jignesh Kamani from GMO.
Just on the annual sales last year, it was mentioned that close to INR 190 crores to INR 200 crores, [indiscernible] And out of the [indiscernible] which [indiscernible] quarterly rampage. So just wanted to -- what was the actual quantum of trading this quarter and...
Sorry, I don't think I'm able to follow you.
Yes. So. It was mentioned -- guided towards INR 200 crores annual saving is possible because the COVID [indiscernible] at you can say all the cost control, which is permanently sustainable, so which is INR 25 crores and quarterly savings. So what was the actual savings happen in this quarter or the first half? Because of all the cost control exercise we did last year?
You're referring to INR 100 crores. I think the calculation and leading it to this quarter, we might find it difficult to answer exactly in what we are saying. But I think we need to understand in a way that whatever cost reduction we did with 1 stroke when COVID happened. And we said -- some of it will come back when business comes back, I think that has come back. And whatever we said at that point in time, we would not let come back, whether it was headcount or some structural costs like offices and rentals of exclusive business outlets, all that has not come back.
And those are the numbers I was sharing that we have not added while our total EBOs have gone up from -- just 1 second...
[indiscernible] [ 4 13 ]
our total [indiscernible] have gone up from, let's say, [ 3 65 ] to [ 4 13 ] -- only 4 has gone up in company on stores, west everything has gone in franchise. So this is just the illustration of the fixed cost in rentals has not gone up -- and therefore, we have retained it while the business has come back and the exclusive business outlets is throughputting now growth over even the base year.
Because if I take about INR 25 crores annual saving, which is close on 2%, 2.5% of the quarterly EBITDA, but we are not able to see the improvement. So advertisement spend has increased drastically, which has taken an telling has been taken care by that or how is the scenario?
No, I think comparing at a static way of the cost, right? The cost also is going through an inflation, whether it is people cost, manpower cost and all that. So it's not an absolute of INR 25 crores that can be compared like that.
Understood. Sure. Second question on the supply chain side. How is the number of SKU, I can say, in the range, our Bangladesh factory is able to benefit right now? What is earlier -- because in the past, we had an issue where the limited supply chain at the Bangladesh, so we lost some of the revenue, I can [indiscernible].
Absolutely not Bangladesh is able to make not only all the SKUs but our Bangladesh facility is making all the 5 category of bags that we are in, whether it is hard luggage, soft luggage [indiscernible], backpack, duffel-bags and as well as ladies handbags. So in a short period of about 2 years, we've been able to increase the Bangladesh operation not only in total volume, but also in terms of its capability to produce all the categories that we sell.
And therefore, with the categories comes designs and SKUs. So there is -- now it's come up to the level what we wanted it to be in terms of its capability. But as and when we innovate more and more, the number of SKUs and complexity keeps going up, and that is a challenge that would be there in any manufacturing sector, and therefore, there is nothing.
And my last question is still we are importing trolley, right? From different [indiscernible]..
Mr. Jignesh I would you kindly come with a follow-up questions in the queue. We have the next from the line of Madhuchanda Dey.
I have a couple of questions. One is, as you rightly pointed out, some of the secular trends like people traveling more marriage, et cetera, discretionary expenditure which is benefiting luggage, coupled with this trend of shift from unorganized to organized, given all these pieces, putting all these pieces together, what is the expected normal trend of growth for this industry beyond FY '23? Because FY '23 will have a little bit of this pent-up demand, et cetera, et cetera. So not really the number to look at from a long-term perspective. So -- but from a long-term perspective for the next 5 years, what is the kind of growth rate do you see for this organized industry? So that's my first question.
Okay. Well, there is always an element of projection and an assessment of overall economy, how it is growing. It is dependent on the macro situation in the country. But if I was to keep that variable aside, I think getting to about 15% CAGR over the next 5 years for the industry is definitely that's definitive possibility. And I would think it should definitely continue to grow at that rate and maybe a little bit beyond. And this I'm talking about more the luggage segment. I don't think we have a full understanding from our side right now to talk about the whole women's fashion accessory or lady handbag at what kind of growth rate it will have. But more from luggage and backpack, I think this is where we are looking at an industry to definitely grow at.
And now -- and efficient players would have some edge over this growth rate, right? It's -- that's a correct understanding?
That's right. That's right.
Yes. I have just 2 other housekeeping questions. One is on the CapEx. What is the plan for FY '22 and FY '23? And where would your own manufacturing spend sorry, not FY '22, if I stand corrected FY '23 and FY '24. And where would your own manufacturing stand at the end of fiscal '23 and '24?
So I will tell you about FY '23, I think it will be in the order of magnitude INR 100 crores in terms of CapEx -- and purely on manufacturing, we are hovering around 65-odd percent until beginning of this year, and I think we will end up at about 70%, 75% by the end of this financial year by FY '23.
And any outlook on '24?
Too early to say. We will work out the plan. And as I said, the CapEx will be a resultant of the growth that we are going to target, which would be quite healthy and robust. And therefore, what part of that we would like to produce ourselves and what kind of investment would it need from, obviously, plant and machineries one, it could mean facilities and buildings and all that. So when we get there, we'll kind of have our number. We're not in the stage to talk about it right now.
All the best and wish you all a very happy Diwali.
Thank you. That was the last question. I now hand the conference over to Mr. Neetu Kashiramka from VIP Industries Limited for closing comments.
Thanks, everybody, for joining the call. Happy Diwali. In case of any questions, you can connect with us anytime. Thank you so much.
Thank you, and happy Diwali everyone.
Thank you. On behalf of VIP Industries, that concludes the conference. Thank you for joining us, and you may now disconnect your lines.