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V I P Industries Ltd
Earnings Call Analysis
Q2-2025 Analysis
V I P Industries Ltd
V.I.P. Industries Limited reported an impressive volume growth of 18% for Q2 FY '25 and 14.4% for the first half, despite revenue value growth being flat. The company's market share has improved significantly, currently at 40% among three organized players. The performance was heavily driven by e-commerce channels, which grew 54%, while institutional sales also saw substantial growth above 40%. However, traditional channels faced challenges due to aggressive pricing by competitors during significant sales events.
Overall revenue growth was impacted by low uptake from traditional channels due to deep discounting from e-commerce competitors. V.I.P. Industries successfully reduced their inventory by INR 174 crores over the past six months, suggesting effective management strategies. The reduction in slow-moving inventory is crucial for ensuring profitability as the company aims to liquidate a remaining inventory of INR 180 crores.
While V.I.P. Industries reported a sequential improvement in gross margins by 80 basis points, there was a year-on-year decline of 1000 basis points. The gross margin is expected to stabilize around 50% by Q4, driven by strategic initiatives such as focusing on higher value brands and improving product realization. The EBITDA margin aims to reach 12% by the fourth quarter, showcasing the company's intent to reverse current profitability pressures.
The management indicated strong demand indicators are emerging, with festive seasons and wedding dates approaching in Q3, which should positively influence sales. The ongoing transformation, including operational improvements via initiatives with BCG, is expected to yield benefits starting from Q3 FY '25. The improvements across various areas are set to enhance profitability as benefits from initiatives will start reflecting in the financials.
V.I.P. Industries is strategically shifting focus towards its premium brands, V.I.P. and Skybags, in response to market conditions and competition. Achieving a gross margin improvement of 800 to 1000 basis points for these brands will greatly enhance profitability in the future. Management outlined plans to grow the premium segment from 54% to 60% within the next few quarters, together with tightening pricing discipline to prevent aggressive discounting from e-commerce players.
The company is targeting a reduction in debt from INR 580 crores to approximately INR 400 crores by the end of FY '25. This target points toward a healthy focus on sustainable financial management. As part of its cost management strategy, the company is addressing warehouse expenses and inventory holding costs which had bloated due to high inventory levels.
The competitive landscape remains challenging, with B2C players entering the market and applying pressure on prices. Management acknowledged the risk of shrinking profit pools but remains confident that a combination of better inventory management and brand focus can stabilize margins. Additionally, future inventory reductions will help shift focus back towards profitability rather than only market share gains.
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Ladies and gentlemen, good day, and welcome to the Q2 and H1 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. A very good afternoon to everyone, and welcome to the Q2 and H1 FY '25 Earnings Call of V.I.P. Industries Limited. From the senior management, we have with us Ms. 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, Mr. Neetu Kashiramka.
Good afternoon, everyone. Thanks for joining the call. We just announced our second quarter results yesterday. So before we get into the revenue and profitability, I would like to give you 2, 3 highlights, which are the positives for the quarter and H1.
So basically, in past 6 months, we have been able to reduce our inventory by INR 174 crores. Also, our market share has improved. So 2 quarters ago, our market share between 3 organized players [indiscernible]. Today, it stands at [ 40. ] And for this quarter, we are yet to get the numbers, but I'm quite confident that even this quarter, we will gain some market share.
Moving on to quarter 2 P&L performance. While revenue value growth remained flat, volume growth stands at 18% for the quarter. And for H1, it is at 14.4%.
Moving to quarter 2 P&L performance. So overall, revenue growth for the quarter was muted, mainly due to low uptake from the traditional channels due to aggressive pricing by e-commerce during Big Billion Day and GOAT sales. If you have to talk about channel wise performance, e-commerce continued to do a good performance at 54% growth. Off-line channel, as I said, was under pressure, institution again, showed a 40% plus growth for quarter 2 and similar for H1 as well. International business mainly supported due to underperformance of key countries in Asia and GCC. So our major sales actually in the international market is to these 2 continents and therefore their growth is under pressure and so for us.
Value segment continued its growth trajectory, which was driven by e-commerce sales. Lower end continues to grow better, however, 50% of the portfolio still is premium and mid-premium. Carlton actually showed good growth. So premiumization agenda on the back of Carlton is showing a positive response. V.I.P. also grew. Skybags is a brand which did not show a positive growth, mainly on account of lower mix of backpack. In case of ladies handbag, Kiara collection did well. And now we are going ahead in ladies handbag with GT expansion. I think going forward, this will definitely show good growth.
[indiscernible] again, continued to be the fastest-growing category contributing to over 60% of the organization overall revenue. If you look at gross margin, I think this is where the major pressure was. However, sequentially, it grew by 80 bps. But if you look at year-on-year, there is a dip of 1,000 basis points, mainly on account of brand mix and channel mix, also coupled with softer in inventory reduction, and lower production in Bangladesh. And EBITDA was impacted due to lower GCs and other expenses was higher, mainly account of warehousing costs because of high inventory.
I understand that the transformation journey as we spoke is showing slow visible improvements in spite of a lot of work happening across each area. I'm quite confident that results of these initiatives will start to be visible starting quarter 3 and more so improving our profitability for H2 as promised earlier as well.
If I have to talk about demand indicators, it looks fine with festival around and also upcoming wedding dates, which also looks to be very strong in quarter 3 and a part in quarter 4.
We are steadfast in our transformation journey, successful results of which will start showcasing in the upcoming quarters. Bangladesh factory is now running full fledge, and from quarter 3 onwards, it will also start showing profits. New launches of backpack for the new upcoming season is also on track, and hopefully, this will start giving better results to our revenues. Some of the initiatives to also launch some products in V.I.P. and Skybags start to increase gross margins. The multiple initiatives, which are happening across each area specifically to improve our gross margins, I think it will start to see in quarter 3 onwards. With this, I conclude my opening remarks and open the floor for questions.
[Operator Instructions] The first question is from the line of from Tejash Shah from Avendus Spark Institutional Equities.
My first question is as you called out in your opening remarks also, we have clearly made good progress in gaining market share. But it does come at the cost of profitability, even in this quarter on y-o-y basis [indiscernible]. So how do you plan to manage this balance between kind of gaining market share versus going back to our gross margin profitability?
So 2 things. One, we have taken certain falls for selling at a lower price mainly because we were stuck with used stocks. It's not that we want to do this on an ongoing basis. Second, our trust on V.I.P. brand will start to increase. So that is the another initiative which we are doing, so that our margins can improve. So the gross margin difference between Aristocrat and the V.I.P. is more than 800 basis points. So slowly, you will see that our focus is more on V.I.P. versus Aristocrat, especially in off-line channel.
So, if I have to narrow down the problem statement, there is a certain proportion of slow-moving inventory, which we are liquidating at slightly lesser margin. And that inventory is largely pertaining to Aristocrat and Alpha while that is done only it, margins should revert back. Is that the right understanding? .
Yes, you're perfectly right. And as I had promised, our gross margin should definitely be around 50%.
Okay. So there is one visible change in our mix is also channel-led margin chunks, which is definitely online and institutional businesses are now having higher [indiscernible]. So do you see that fourth quarter [indiscernible] economics of this channel will change? Or the contribution in the overall revenue will change or go down, hence, will margins will go back to normal level?
It's a mix of both quarter 2 generally is a high e-com quarter because all these Big Billion Days and GOAT is schedule here. And quarter 2 is always high on e-commerce. However, H2 will be -- as a percentage of overall saliency, e-commerce share will come down in quarter 3, quarter 4. But we are also having initiatives whereby our e-commerce margin has to improve, and that's also some work in progress.
Okay. And this pressure on pricing, are we the source or are we responding to competitive pressure because we had some slow moving inventory. Hence, we are cutting prices that is dragging down margins for the industry? Or we are responding to some competitive pressure?
I think we are doing this for our soft luggage liquidation. However, in the other area, which is hard luggage also, there is a pricing pressure, which is we are reacting to multiple things. It's not only one thing. But see, there is also a lot of B2C players which are coming into the market, right, and starting to sell. Now all these players have enough money to burn, which we don't have. So that's where we are a little bit playing on the pricing.
Just to add what MD said, where the competition becomes intense, price is the 1 point which plays a larger or in minds of the consumers, and it impacts the most to the organized and the incumbent players. So this is the outcome of that, what we are seeing. But I'm sure that over a period of time, the industry or the players may see a consolidation and things comes to a level playing field among the remaining players in the industry.
Also, as I told, we want to focus more on V.I.P.. So even if I reduce a little bit price on V.I.P., that is better because my realization will be higher and profitability will be higher.
Mam, my question is largely around that with 40% plus market share. The pricing discipline should come from us -- and the B2C players that you called out, I still think that there'll be less than 5% market share overall. So in respond, and then most of those peers are actually very at different price point, perhaps competing with Carlton on the price point. So I was just wondering that, in fact, just to -- we also picked up from media means that 1 of the competitors also kind of indicated that the market leader is kind of very aggressive on pricing and that's shrinking the profit pool. So I was just trying to understand that once we are done with this whole pressure on slow-moving inventories, should we think that -- should we be a very normal margin expansion for us and the industry at large? .
Yes. You're right, that is what we have been doing.
And then last one, you also called out inventory holding costs for last 4, 5 quarters after a drag on overheads. So we have done a phenomenal job on reducing inventory in the last 3, 4 quarters. So have we reached to a stage of inventory where the holding cost will go back to the normal level? Or is it still at the higher end?
One more quarter to get to the normal level.
The next question is from the line of Jinesh Joshi from PL Capital. .
Adam, I have a question on our channel mix. So if I look at e-com with the 45% share, we have done really well in this quarter. But if I look at our share of GT and MT at about 11% and 18%, it is at a 5 years ago. And you mentioned in your opening commentary that aggressive pricing in online is impacting our -- taking the off-line trade. So just wanted to understand the thought process behind this move because essentially, this has created a channel contracted team. So what's the thought process behind such kind of aggressive pricing in the online channel? And how do you plan to resolve it?
So 1 aggressive pricing on the e-commerce channel is not done by us. It is done by the portals. So 2, 3 things we are doing. We are going to give additional warranty for offline players. Second, we are also looking at having a pricing run dry, especially for V.I.P. brands on online portal. Otherwise, we don't sell to the online portal the V.I.P. products. So these are 2 big initiatives which we have taken to reduce this conflict, channel conflict. And so the share is actually reduced because the last 15 days, they almost did not buy because of this. And then we met everybody, we have sent letters and we have made these 2 changes with which they started buying from the first week of October.
But Madam, the portal is governing the price. And if it is discounting heavily, then obviously, your brand equity takes a big hit. So what are our thoughts on that? And I mean, do we have some plan in place that from 3Q onwards, this will not...
It will be a pricing run rate for V.I.P. and Skybags, which is our premium brand. They cannot sell below particular MOP. A similar thing which had happened some 3, 4 years back in the mobile industry, I think that's where we are heading towards. And we are already in talks with them to give this to us in writing before we sell going forward.
And furthermore to add quarter 2 is earlier said, it's a e-comm great quarter. That's why you're seeing the higher share of business. If I look into the YTD H1, it is going around [ 20 to 25 ] in line with what the industry presence have in new e-commerce portals. We would like to maintain those kind of revenue share. And our objective is to have all channels working in however, not growing at the cost of the others.
Got that. One last question from my side. So if I look at our inventory liquidation in this quarter, it was at about INR 40 crores, and this is lower than what it was in the previous quarter. Now given the pileup that we have, especially on the top level side, can you quantify what is the current slow-moving SL inventory on the balance sheet. And by when can we expect the full liquidation to happen?
So the entire liquidation as said, we need 1 or maybe 1 more quarter to look into it. In terms of the overall inventory, INR 50 crores got reduced in this quarter too, especially. Largely, we have to manufacture some of the items because of the e-com specific scales, Otherwise, when liquidation would have been much on a higher side. .
But can you quantify what is the slow-moving SL quantum currency that we have?
SL quantum in terms of the value numbers are the value-wise, we are getting around almost 5 lakh units, [indiscernible] luggage upright. And if I take the backpack and duffle also to some part of it, maybe around put together all units will come around 7 to 8 lakh units together. .
Sir, I want the value number, sorry. Because if I remember right, that quantum was INR 300 crores sometime back. And in the last quarter, we did a liquidation of about INR 80 crores, so what is the current quantum?
So current quantum would be somewhere in the range of INR 180-odd crores, [indiscernible].
Sure. And in that context, I mean especially our debt levels, which is at about INR 500 crores, even we have about INR 180 crores, which is yet to be liquidated, and this would mean that the working capital requirements will be high. Will we still be able to reduce our debt by about INR 250 crores that we had stated in our earlier call?
So if you recollect the earlier conversation, we plan for INR 100-odd crores of reduction. And out of that, we read on INR 35 crores. So we are on the track. And hopefully, we'll meet our targets. We hopefully to go see the INR 100 crores, but INR 100 crores is given what we are targeting right now [indiscernible] .
Okay. So we should at about INR 400 crores in terms of debt by end of FY '25?
Yes. If I net of the investments, what you see in the balance sheet, it will again further give you enough cushion for me to play around all this.
Sure, sure. and all the best. .
I'll come back to you on the numbers in 2 minutes.
Yes, that INR 180 crores, if you can clarify [indiscernible].
The next question is from the line of Shirish Pardeshi from Centrum Broking.
Just 2 questions. In the beginning, you mentioned that 18% volume growth in Q2. Can you quantify the number of pieces we have sold? And specific question here is that if I look at the contribution from the e-commerce is 45% at this time. So what is the volume contribution from e-commerce and margin fleet? .
Overall sales volume is INR 44 lakhs .
It's a 4.4 million units on the overall volume for the quarter 2, registering a growth of around 18%. And if I were to go on because average selling price between MT and e-comm largely remains the same. So it goes as per the revenue growth or the revenue mix we have in terms of the volume as well.
So you're seeing similar numbers for volume also?
Slightly [indiscernible] because my empty has didn't do so well, it has slightly a degrowth, whereas e-comm has given a growth of 45%.
The second question on the overall momentum, as Neetu, you mentioned that second half [indiscernible] for e-commerce will be lower, but then in that respect, how the second half volume growth and the revenue growth looks like for you?
So basically, today, if you see our volume growth is 18% versus the value growth of 0. In case of second half, I'm confident that our volume growth and value loan difference should not be 18%, but it should be around 8% to 10% -- between 8% to 10%.
And if that is true or if it happens, what kind of margin -- gross margin, you already mentioned that you will maintain?
I mentioned that quarter 4 gross margin should be 50%. .
Okay. No, I'm coming on the operating margin because right now, when you look at the margins are collapsed, I'm sorry using this word. But then you know what are the things that the back end we are doing. So at least if you believe that 50% mark you have achieved in terms of revolutionizing the entire the front end and the back end. What kind of operating margin we should build in, in second half?
So are you talking about the gross margin or the EBITDA margin?
The gross, Neetu already clarified 50%, but I'm talking about EBITDA.
EBITDA margin of 12% for the quarter 4.
Second half, I said Neetu .
So second, it's a journey we have to progress. So probably from the 0% of EBITDA margin will move around [indiscernible] quarter 3, and you'll find a significant jump getting into the quarter 4. [indiscernible] most of the initiatives we started in the results out of it.
So there for the follow-up here is that what are the drivers? What are the top 2, 3 things which will help you to achieve this number?
So 1 improvement in realization then -- which will in turn also add to the gross margin. So gross margin improvement of 5%, which we spoke about. Then every line item in the cost we have already worked upon and everything to come into the P&L it takes 3 to 4 months. So that is where it is. So warehousing, people, then what is the other big one [indiscernible] line actually.
The last question from my side on the depreciation and interest cost. What number we should be factoring? Because even this quarter, we have seen a depreciation has increased almost 24% and so then the number double-digit growth in the interest space. So you know the numbers well you are seeing that INR 100 crore reduction, which will happen in that. But what is the interest cost we should build in for the full year and depreciation cost?
So, Shirish interest cost comprises of 2 factors. One thing is my fund-based borrowing which I'm doing from bank. Another thing includes in some of my structure we are financing and bring our vendors as well as from the customer side. On a bank borrowing side, definitely, you'll find a good amount of reduction happening. And in terms of the structure finance, it [indiscernible] assume the same level of interest growing in quarter 3. Quarter 4, you will find a reduction of almost 10% to 12% than what you have seen today in the overall value.
And in terms of depreciation?
Depreciation should remain as because we are expanding on our stores, but I'm sure we are taking certain calls on -- based on the same sales growth of the existing CRL. So you should find the same number, [indiscernible] INR 5 to INR 6 crores, maybe exit March for that month or exit quarter 4 on a higher side.
So just to confirm what you said that if that is the number which you are building. So we'll be able to maintain the profitability what we delivered in FY '24? Or we will still book some loss at the quarter?
FY '24 when I'm saying, EBITDA improvement of 12% on turnover. So I should be able to delivering net result also on a positive -- on a positive one.
And since you asked for the growth, sorry, I missed out on that question, I wrongly interpreted. So on a volume side, the [indiscernible] actually has seen a big growth of 8% on volume and the e-commerce on our volume front has shown a growth of 73% for the quarter.
And Tejash on the inventory side, what you asked the question to me, we have moved around what we had in terms of soft upright inventory of INR 130-odd crores [indiscernible] at less than INR 100 crores in September.
The next question is from the line of Ritesh Shah from Investec.
A very simple question. You did indicate the concern around competitive intensity and by design, we are looking to liquidate the inventory, specifically on the soft target side. If I had to take a 12 to 18 month tenure, what is the thought process on balancing growth and profitable growth? How do you approach it from an incremental ROCE standpoint, broader thoughts would be greatly appreciated, mam?
See, this year, I think all this cleanup of inventory is a must because I can't hold it because my warehouse cost keeps bloating if I keep this inventory. Also, if I keep it for a long, there are chances of having to take some write-offs. And therefore, this was inevitable for me to take this call at this point of time. However, for the next year, I think we don't want to compromise on profitability at the cost of gaining market share. That's very clear for us. But we are 1 or 2 more quarters where I get to a reasonable inventory levels.
Today, also inventory level is INR 700 crores. Once, I reach INR 500 crores of inventory, I think that is where I will start focusing more on profit than market share gains.
Right. And just to press a little bit over here. You indicated profitability is something which we will not compromise. But market share could be a challenge because B2C guys are operating in a different way. So how are we looking to balance the portfolio be from a channel standpoint or from a mix standpoint to ensure that we have profitability and market share, actually, we can actually inch up on that particular variable as well?
When I'm talking about market share, there is no body who is tracking the market share for this industry today. And the way we look at it is 3 company market share, which is a 3 organized players who are listed and the data is available in the public domain. That is one. So basically, market share increase between these 3 players is what we have been talking about.
Secondly, we definitely are looking at increasing our premium portfolio. So today, which is around 54%, my aim will be that to reach 60% over the next 3 to 4 quarters. And that is where the profits will have a meaningful swing because it's a 800 to 1,000 basis point gap between a gross margin for Aristocrat versus V.I.P. or Skybags or Carlton. So that is going to be the strategy going forward, once I'm done away with this high inventory [indiscernible] .
And mam [indiscernible], it will take a quarter or 2 for this?
Yes. Maximum 2 quarters. We are trying to do best in the quarter 3, whatever best we can do in quarter 3.
Sure. And last question, ma'am, if you can just refresh us on how BCG is actually helping us right now. And are all those initiatives already in play or how are you thinking of probably their recommendations? Or is it like we are on the same track? How should we look at that?
BCG project is a 15-month project. It is divided into 5 waves, 3-month waves each. 2 waves are over. We are in the third wave, whatever work we have done in the first 2 waves, the result will start from October and then additional third wave, fourth wave and fifth wave. Overall, it's a INR 250 crore benefit to the bottom line project. And we are on track with the projected waves. But as I said, whatever we do in today will take 3 months to come into the P&L.
So now the Wave 1 and 2 benefits will start to come in October. And then Wave 3, we will work now, which the impact will come in quarter 4. And whatever we do in quarter 4, the benefit will come in quarter 1.
And Ma'am possible to share...
[indiscernible] over also .
Correct. Possible to share what was the tangibles that 1 can actually look out in the marketplace as the benefits of a Wave 1 and 2.
So we -- so this project is basically a cost takeout. So improving the realization, reducing the cost -- and each and every line item, basically warehousing, logistics, improvement in the fill rate, people costs, we are also mapping the off structure because if you look at our employee cost versus the employee cost of any other industry, similar industry, we are off. So that's another big thing. And the actions have already happened in September. So the result of that will start to be visible in December, January. So everything has a notice period and by the time we execute it takes 2 to 3 months.
Perfect. Ma'am, can I squeeze in 1 more question?
Yes. But INR 40 crores to INR 50 crores, so I know what you want to know. So INR 40 crores to INR 50 crores of the initiatives will come into P&L this year and more of it in quarter 4 .
So I can talk about 2 visible things what you asked about it [indiscernible] sequential gross margin from June '24 to September '24, which was about 80 basis points. It's a start to have it. Second thing is our employee costs almost remain at the level of June '24, so that's another visible, I would say, about it.
Thirdly, as I said, by MD, it will follow the progressive way what we're according to our project execution.
So next quarter onwards, you will see in each line item the benefits.
That's useful. And then just last question. Anything if you would wish to highlight on the effectiveness of A&P spend, so where that number would be for the full year versus last year? And specifically, anything specific that we are doing to improve the effectiveness of the spend?
The large part of the spend is actually going into e-commerce, which is not something which is great, but that's how that is happening across the industry. And we are definitely wanting to improve the effectiveness by spending more on ATL rather than BTL, but today, a lot is happening on BTL. But I think that we'll be able to do only in the next year. There is enough on our plate for this year.
The next question is from the line of Suryanarayan from Smriti Securities.
Just -- mostly all questions have been answered. .
Could you use your handset?
Some of the questions have been answered. So [indiscernible], you have my -- my question is around the gross margin level. So we are, let's say, last 3 years, average around 51%, and you were down at around 45%. So here, the question is that you have been time and again, you were telling 1 thing. -- that you want to play more on the V.I.P. side and less on the Aristocrat side. But Aristocrat has been an very essential element of V.I.P. So how can we can -- we see the growth of Aristocrat because that is a mass brand. If you can give some color as to how the things will be moving towards -- more towards the V.I.P. or Carlton premium side rather than Aristocrat side, [indiscernible] realizations will improve. And so as the gross margins?
So we are not saying that we will restrict the growth of Aristocrat. We are saying that we will grow more V.I.P. and Skybags. So that is where it will happen. So Aristocrat growth will happen. But today, V.I.P. Skybags is not growing as much as it should grow. That is where we will do more work.
I can give you an example. Today, if V.I.P. -- so a lot of -- almost 30%, 35% of the sales now is happening in 3 [indiscernible]. Now in V.I.P., we are planning that in Aristocrat, I'm selling a 3P set at INR 7,000, and V.I.P. today is 12,000. I might look at selling a V.I.P. 3P set at 10,000. So therefore, I will increase my realization from INR 7,000 to INR 10,000. And that is what the focus will be. And that's how I can get more margins. I just give you 1 example. I cannot discuss too much on my strategy here. But -- similar to this, we are looking at doing certain initiatives, thereby I can improve my realization.
Still some sort of cannibalization impact would be there on a longer-term basis you agree?
Which is fine, which is beneficial for the organization. So if I'm able to extract INR 3,000 more from the same customer, why not?
Okay. And second thing is your payables have reduced. So I am expecting that maybe you could be getting kind of bigger bargain bags on supply chain people. So what is the scenario going forward, whether it's sustainable reduction in the payable will be continuing so that we will be getting more discounts and that will be on the raw material side. So that will be [indiscernible] ?
Basically, [indiscernible] during March, we were very high on debt and inventory. And we did not pay our creditors on time. However, we have started paying them on time now. So it will be in the same range if you have to calculate by number of days. .
Okay. And you earlier said that around INR 200 crores. Now you are reducing the figures to INR 100 crores of reduction in the total date for this year?
[indiscernible] said for sure, we can do better.
INR 580 crores, we had a date as on March '24. [indiscernible] INR 100 crores given by reduction by March '25, a minimum reduction was [indiscernible].
And regarding the Bangladesh claim, it has not -- it has come very little. So -- when can we expect measures? So are you -- just if we can indicate which quarter whether the insurance companies have given any indications?
They have not given any indication, we have been following up, and we are getting a small amount. Quarter 3 also, we are expecting INR 5 crores further. We know the political scenario in Bangladesh. So I don't want to give me everything at once. I may not get this also. So today [indiscernible].
[indiscernible], we had to suffer a loss of around INR 7.5 crores, so because of the political uncertainty in the Bangladesh are we faring such kind of losses in a bigger way in case of [indiscernible]?
[indiscernible] We have been in talks with the insurance company almost every 2 weeks somebody from my office is visiting. It's a big focus area for us. And that is why we are getting at least those small, small amounts.
So at least you have to appreciate that despite this kind of under situation, [indiscernible] another INR 5 crores what we discussed is in the pipeline. And hopefully, the entire line should set in the next maybe 8 to 12 months down the line.
And now that you are seeing it in the Bangladesh operations. Just last question, sir, if [indiscernible]. Bangladesh now the operation is fully there. So whether the manpower growth will be increasing because the reports were saying that the wave hike costs are there. So is there any chance of rising the [indiscernible] cost?
No. So we have reduced our capacities already there. In fact, we want -- at this point of time, a little bit reduction only, [indiscernible] from where it is today.
The next question is from the line of Jigar Jani from B&K Securities.
[indiscernible].
Your voice is not very clear [indiscernible].
Yes. So what I was asking was on gross margin side, I believe that the gross margin guidance we were giving for FY '26 was 55%. So this would be more exit FY '26?
Should exit [indiscernible]. We said quarter 4, we will find such kind of improvement. And we are still talking in FY [indiscernible] quite possible.
Full year FY '26, we should be able to do 55%.
Yes, yes.
And sir, if you could just give me some color on this [ INR 190 ] as of other expenses. What is the split of this broad numbers of this [ 190 ] of other expenses in the quarter? And what number can you expect in Q4? Because I believe Q3 still it will remain [indiscernible] at similar levels because of the inventory that we are carrying. But Q4, given that we have that initiative with BCG also running in and you will see some benefits growing in. So what could these numbers...
[indiscernible] presentation.
So we did give some kind of breakup in the presentation what we did, what we have uploaded. If anything [indiscernible] unanswered there, we can have a separate call on this. .
Sure, sir. And what would be your guidance for this? I mean how do we see these numbers panning out in Q3 and Q4?
So as I said, we are target to reach EBITDA 12%. So every cost structure has to undergo revisiting and optimizing it. So we'll not give you head-by-head what we have in mind, but keeping trust on that of 12% EBITDA, what we are driving for. .
Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Manish Desai from V.I.P. Industries Limited for their closing comments. .
Yes. So thanks, everyone, for participating in this call. I'm sure that some of the answers or some other questions would have remained unanswered, we are just a phone call away, leaving aside in the next 3 years because we have certain work to do it. But I'm happy to answer each one of your call, and I'm thankful of your continuous support to the company, and we are hopeful of doing in line with our projections and expectations what [indiscernible]. Thank you very much, and have a nice -- great day for all of 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.