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V I P Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '23 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. Snighter Albuquerque from Adfactors PR. Thank you, and over to you, sir.
Thank you, Jacob. Very good evening to everyone, and welcome to the Q4 and FY '23 earnings call of V.I.P. Industries Limited. From the senior management, we have with us Mr. Anindya Dutta, Managing Director; and Ms. Neetu Kashiramka, Executive Director and 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 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. Dutta.
Good evening, everyone. Thank you for taking out time for this earnings call. I'm happy to share the results with all of you for quarter 4 and for the overall financial year. I am sure you would have got a copy of the results and the presentation that we had uploaded. As you would see in that, we have continued our growth momentum for the year. Quarter 4 witnessed a revenue growth of 27% over the same quarter last year. And for the overall year, the revenue growth was at 61%. And when we compare that to even the base year, which is FY '20 pre-COVID, the growth stood at a good 22% for the year. I would say that overall a very good bounce back for the business post the setbacks of the pandemic. And I think more importantly, we have emerged much stronger in our fundamentals.As you would see, gross margin for quarter 4 saw the impact of both what we have been talking about our fundamental cost efficiencies that we have been driving quite hard through the year, along with the much-awaited softening of all input costs. Gross margin for quarter 4 stood at 58%, a gain of almost 800 basis points sequentially and about 4.6% gain compared to the same quarter last year. The gross margin for the full year stood at 51%.An efficient cost -- fixed cost management led the flow-through of the efficiencies generated in direct cost into our EBITDA. EBITDA for the year stood at 15.8% at INR331 crore. We had to take the final hit of the future group outstanding, the charge-off in terms of doubtful debt was about INR23 crores for the year, without which our underlying EBITDA for the year would have been at 17%.We also had an unfortunate incident of fire that raised one of our factories in Bangladesh. While it has a full insurance coverage for the quarter and for the year, we have booked an exceptional loss of INR47.2 crore on account of the loss due to fire. Therefore, the PBT before exceptional loss was INR41 crore and INR229 crore for the quarter and for the year, respectively. And the final PBT post the exceptional loss stood at INR197 crore for the year and a loss of INR6.4 crore for the quarter.I think to summarize the performance for the year, it was a great success in accelerating, not only the revenue growth, but gaining back share in value segment and more importantly, driving transformational changes in our supply chain, which has and will continue to yield superior cost efficiencies for the future. As we have highlighted before, our own manufacturing has scaled up very well, both in India as well as in Bangladesh. We have invested approximately INR100 crore in manufacturing CapEx during the year and we plan to further invest INR200 crore in the current financial year to build our own manufacturing capacities keeping in mind the demand for the next couple of years.Not only in the back end, but we have also significantly strengthened our go-to-market and channel operations. Our exclusive business outlets have crossed the 500 mark in FY '23 and this is significantly ahead of what we had prior -- pre-COVID. And we continue to have aggressive plans to take this to as high as 800 EBOs during the current financial year. Our traditional trade distribution has crossed the 1,200 town mark in FY '23. And we intend to continue our penetration and driving effective coverage to a target of covering all 50,000 population towns by the middle of next financial year.When it come to the modern trade channel, we all know that it had a huge setback due to the closure of the future group accounts, but only the channel covered for the loss of stores during the year and made up for the growth through other chains, but now with all the closed stores being fully operational under the Reliance banner, we will stand to have an advantage.When it come to the e-commerce channel, where we seem to have a competitive gap, I'm happy to share that we have initiated an accelerator program. We have gotten on board BCG, one of the best consulting firms in the field to build for us the right capabilities and muscles in an accelerated way for the future.When it comes to our power brands, I think each of our luggage power brands in the respective segments have done very well, we have invested behind them during the year. And if you would have noticed more recently, we have started strengthening our Caprese brand, which is in one of identified future growth area, both in terms of its product portfolio, as well as its engagement with consumers.Looking forward, with the strength that we have built and a good demand environment, I am confident that the team at VIP will deliver consistently fast-paced and profitable growth.With this, I conclude my opening remarks and open the floor for questions.
[Operator Instructions] The first question is from the line of Tejash Shah from Avendus Spark.
My first question pertains to demand sentiment. So if I see historically, our 4Q growth -- our 4Q number usually tracks somewhere around 95% to 100% versus 3Q, and this is pre-COVID I am talking about. And even if I see numbers of some of the hotel companies who have just reported numbers or airlines, 4Q actually did better than 3Q for most of these travel-oriented companies. So I just wanted to know how should we think about demand in our sector and how should we think about it going forward in first half of this year?
So I think the demand environment, Tejash, continues to be good. Everything that we track in terms of the lead indicators for demand have been looking good and continues to do so. So from that point of view, going forward, I think we will have the right environment for growth. There is a talk of overall a bit slowdown in the economy, but equally, there has been talk about if it's getting negated in many sectors. So while we could say the jury is still out, at VIP, we are pretty confident about the demand environment, as well as our preparedness to make sure that we tap that.
Sure. And second on gross margin, so very noticeable improvement both sequentially and Y-o-Y. How should we think about gross margin in FY '24?
Tejash, I think I have maintained this that we are targeting to make sure that we are anywhere between 53% to 55% always, that's the intent. While the sequential gain has been very good for the quarter, but I think the competitive environment could emerge in a way where we want to balance margin, growth and market share in a way that it works for all the 3 points. And therefore, my guidance would be around 53% to 55% that we will pursue -- continue to pursue.
And what would be that for EBITDA?
So the translation of that to EBITDA should be anywhere between 17% to 18%, thereof, yes.
Sure. And are we done our provision for doubtful debt on future group? Or has anything left still to be done in FY '24?
No, I think it is done now.
Sure. Okay. And ma'am, we had some claim, too, for the previous fire that we had, it was pending. Have we got that money?
We haven't got that money.
Any update on this?
So, we are trying to get it, hopefully, it should come in next 2 to 3 months.
Okay. And last one on Caprese, if I may. When I look at our own presentation, what we have released and you spoke about Caprese as our next growth driver. I just wanted to see -- I just wanted to understand how are we placing the brand? So at one point, if we are tying up with global brand names like Disney and Emily in Paris kind of franchisee. And then when I do channel check, I find Caprese getting much more GT-oriented or slightly kiosk-led modern trade strategy. So I just wanted to understand, are we making it much more mass-oriented brand? Or are we want to actually go EBO and premiumize the brand from here on?
So the go-to-market strategy will follow. When I say go-to-market in terms of what you said in channel and in, in-stores. But fundamentally, the brand is positioned to be in the premium segment, right, but not in the luxury or super-premium segment. Yes, in the previous 2 years, we had possibly going or was tending towards making it more mass, but my strong belief is that, there is a huge market and an opportunity in what we call a premium. So between INR2,000 to INR4,000 ASP kind of a bracket is what we are looking at to play in.
The next question is from the line of Jinesh Joshi from Prabhudas Lilladher.
I have a question on the fire incident. Sir, basically how long will it take for the operations to fully resume at our Bangladesh plant? And secondly, if you can also quantify what is the extent of business loss that we have had in 4Q because of this incident?And one follow-up, which I have is with respect to our performance on the top line front. If I look at our top line, despite a sequential fall of about 14%, our other expenses are up by about 4% even if I adjust the future group provision of about INR12 crores odd. So I just wanted to understand what is driving this inflation? And is there an element of one-off here?
Do you want to take the last question?
Yes. So basically -- I'll take the second part of the question. On the expense side, since our revenue -- if you see quarter-on-quarter, this quarter was the lowest, and therefore, operating efficiencies have not kicked in. And the second part is, on the INR12 crores of provision for doubtful debts. So those are 2 things, which has made other expenses higher.
Out of the INR23 crores doubtful debt, INR12 crores was [indiscernible] only.Coming back to your earlier question on the fire incident and the impact of that on the business. So firstly, I'm sure you know, but to reiterate, this is one of the factories that we had, one of the 8 factories that we have in Bangladesh. Undoubtedly, the whole operation of this factory ceased after the fire because it was raised to the ground literally. But we have very quickly covered that with a couple of things. One, an outsourcing stopgap arrangement for -- within India. And also within Bangladesh what was in the pipeline to create future capacities was -- which was to kick in slightly maybe few months later was accelerated and we have started those capacities in Bangladesh. So this factory in itself will take time to come back to be rebuilt. But in lieu of this, the space that we had -- another factory that was coming up has been made operational. There was a momentary issue in terms of supplies for about 4 to 6 weeks, but that has been covered now. And therefore, the impact of that, in all practical terms, have been minimized in terms of the -- in terms of any revenue loss because of the factory production being shut -- that one factory production being shut.
Sure, sir. Got it. One last question from my side. I believe recently one of your peers entered into the premium category by making a soft launch on a D2C platform. So what steps are we taking to ensure that we compete effectively in this category? And also given that the entry of this player, can it lead to a significant price realignment in the premium segment? Or do you believe that the operating dynamics of the mass category are completely different and hence, the strategy to compete on price may not work in the premium segment? I just wanted your thoughts on this bit.
No. I think there are very aggressive and robust plans in the mid-premium and the premium segment that we have under the VIP, Skybags and Carlton brand. So brand plans, along with what we are wanting to do in terms of channel and go-to-market, I think they both come together to make sure that we have a strong points as far as the premium segment is concerned -- our mid-premium and premium segment is concerned. I'm cognizant of the fact that D2C and e-commerce opens up an area of easy entry for newer competition to come in. And that's why as I said in my opening remarks, we have decided to leapfrog as far as capability and competencies are concerned on e-commerce, which is, not only what we see as marketplace e-commerce, but also as a D2C business by VIP. So that's something that we have on the cards. So I'm not -- while we keep a very strong watch on competition and the progress that is happening in the overall industry, but there are effective plans to make sure that we counter any kind of competitive buildup that happens.
One last bookkeeping question. This INR200 crores of CapEx guidance which we have given for FY '24. Can you break it down between soft and hard?
That would be at this stage, I think we can come back to you. But it is both in manufacturing sites, as well as the plant and machinery for that.
But 70% is soft luggage.
Yes. So the larger part is soft luggage here in terms of the investment that will go in. And I'm including -- when I say soft luggage, we include, not only uprights, but categories like backpack and DFTs as well.
[Operator Instructions] The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.
First of all, Neetu, congratulations for being promoted as ED.
Thank you so much.
So my first question is, in the opening remarks, you mentioned about BCG being appointed to accelerate our market share on the e-commerce front. Is it possible to quantify in terms of milestones, where do you want to reach in terms of market share? What is the timeline, et cetera, et cetera?
I'm sorry, Buddhadev, this is a little too premature to get down to that level of specifics. But I would want to reiterate that the objective, obviously, is finally going to be strengthening our market share, but the focus is usually on building fundamental competencies to become, I would say, best in the class as far as e-commerce operators and e-commerce business capabilities are concerned.
Okay. On the backpack side, you mentioned you are planning to sort of invest in manufacturing. A few of your competitors have launched aggressive pricing on the backpack, I mean, below INR1,000 MRP. So are we also looking at aggressively entering the segment given that the TAM for this is very high?
Short answer is, yes. We are looking at backpack for ourselves to be a very large growth area in the coming years, including the current financial year. So we're going to see the category in a much more holistic way across the spectrum of both pricing as well as various usage -- consumer usage of backpacks, right, in terms of all segments within backpack. And that's why the commitment and the investment behind manufacturing it ourselves, as well as continue to source it from India as well as China.
Okay. And lastly on Caprese, just wanted to have your thoughts in terms of what is the milestone in terms of number of EBOs, shop-in-shop, et cetera. How are you positioning this brand?
So right now in the immediate term, in the short term, we're going to make sure that we become a dominant e-commerce player in Caprese, that's the first milestone of -- from a go-to-market point of view. In fact, even prior to that we wanted to go back to the drawing board and work on our product portfolio, our positioning, our sourcing, and therefore, the price points and all that, I think a large part of that having been done or at least we are feeling now at a good space there, we are taking the sole strategy and the fight into the market now, the first milestone will be e-commerce and D2C.In fact, for your knowledge, today, capresebags.com is fully functional. We've had a lot of teething issues, all that has been now behind us. It's a brand -- it's a website, that's doing, I would say, good business to begin with, everyday hits are high. So these are early stages, but that's the long-term vision and the commitment there. And thereafter, we will also look at creating an experience on ground with our products and our brand, which would mean EBOs and concept stores. But I can't give you more specifics on that side in terms of number of stores there. But there is things that are getting built there and maybe in subsequent quarters we could come back to you with more specifics on how we're going to look at Caprese. But the larger growth of Caprese on to overall business in VIP, I would think it would be visible more in the next financial year. This financial year would be more strengthening the foundation, creating the fundamental strengths that is needed to really get into a very fast-paced growth going ahead.
So fair to say this year will be driven mainly by backpacks and growth on the premium side of your portfolio?
That's right. And I think value will continue to grow because of the unorganized sector yielding into organized, and I think that will continue to remain almost with the similar amount of tailwind as much as it was in the previous year. So, really speaking, what will happen is, value will continue to grow, premium and mid-premium will join the bandwagon, right, and backpack is far more unorganized than in the luggage sector. So there the unorganized sector and overall growth of the category itself is very high and we got to just play it right in this segment.
The next question is from the line of Piyush Khandelwal from Bank of India Mutual Fund.
So firstly, on this BCG expense that you mentioned. Can you quantify, I mean, how much would be the amount and this is for how long?
Well, I can't share right now expense related to this, but the engagement will continue for almost the full part of the year, about 10 to 11 months, so it will cover almost the full part of the year. And they are going to partner us through the journey of building the capability, as well as converting them into execution during the year.
All right. Understood. Now my second question on this with this increase in, in-house manufacturing that we are doing, will there be any kind of further more efficiency on the working capital side that we can see? I mean, right now we are operating at, what, 90 days that you mentioned in your presentation. So any kind of further working capital efficiency that we can see because of this in-house manufacturing?
Yes. Definitely, we are looking at 15 days of further reduction on the overall working capital. So 75 days.
And this is, I mean, by '25, '24, 2, 3 years?
In next 18 to 24 months.
All right. And this will be majorly due led by hard luggage or, I mean, soft luggage?
This is going to be across. Yes. It is in the mix of the business that it has and it will follow that. So our manufacturing footprint is increasing with our projected mix of business between hard and soft. And we are setting up facilities, keeping in mind what we project as a demand. And therefore, all -- the impact of those will be visible in the same proportion of how the demand will be.
Understood. And this 300 EBOs that we have outlined for this FY '24. I mean, will this be a franchisee led or mix of FOFO and COCO?
It will be a mix, but majority of this would be franchisee led.
Around 80%, 85%?
Yes. Right now, we are going with a mix of about 75%, 25% intended mix. But we'll have to split with the year as we go along.
Understood. Got it. And sir, in your opening remarks as well you mentioned about this demand. If you can highlight, I mean, what kind of expectations you are looking for the industry growth, let's say, over next 2 to 3 years given this luggage sector, especially doing well versus other consumption sectors? So just wanted to get the sense on the growth rates for the industry.
I think the underlying growth rate of the overall industry would be about 8% to 10%. But the organized sector will have an accelerated demand and that's the assumption and expectation. So I think the organized sector will be at about anywhere between upwards -- slightly upwards of 15% is what we are expecting to continue for the next few years.
[Operator Instructions] The next question is from the line of Nihal Mahesh Jham from Nuvama.
Sir, one question was, you highlighted at the start of the call about the seasonality part and the fact that the quarter was good. Generally, is it that there is any change in terms of how we look at Q3 and Q4? Only reason I'm asking that is because this quarter we saw many more weddings in terms of the wedding calendar which is ideally supposed to be a driver for the business. So just from that angle if you want to comment? And if there is a change in the way the seasonality of the business is going to play out in the future?
Just so that I've got your question right, you're talking about the wedding calendar for quarter 1?
No. For Q4 FY '23, there were many more wedding dates in Q4 '23 versus Q3. So maybe the expectation was that the revenues that we end up clocking should have been similar, just based on that being one of the drivers to the business.
Well, we can correlate data here. But in our understanding, Q3 had more wedding-related purchase that we usually experience. So it is more the festive season and the wedding which kind of comes together and that's how we see. The quarter 3 getting -- on the wedding part of it getting more support from the wedding demand.
Understood, sir. But irrespective of that, like if we -- how we look at, say, the 2 quarters play out separately, there is no change in the way you would expect that they play out in the future?
When you ask that question, I just want to say that for the coming year, quarter 3 wedding season looks better than most other previous quarters that we have seen. So we are far away from that, but -- from quarter 3. But this year, quarter 3 will have the peak of festive season, it's slightly delayed than the previous year in terms of Diwali, and the high number of wedding dates that we see for quarter 3 is slightly higher than the rest that we have seen in the past.
Point taken. Just one more question was, while you've alluded to the BCG tie-up. I just wanted to understand something around that. You highlighted about Caprese becoming a dominant player in e-comm and historically you've discussed maybe from the value segment it's not that attractive [ channel ]. At the initial stages, currently, do you have any specific brands of the ones you have which will create a dominant share at this point in time in the online space? Obviously would be the preferred ones to gain share on that channel.[Audio Gap]
And -- sorry, there is a little bit of --. Am I audible?
Yes, sir. You are audible.
Okay. So we are in the process of identifying land and more important areas where we can setup the manufacturing -- a greenfield manufacturing in India.
Sorry, I couldn't hear you clearly. Anindya, if you could please repeat that?
Okay. Let's hope it works now. I would repeat, as I said that the CapEx investment is both in India and Bangladesh. And as you rightly said, it will be a combination of [ green and ] brownfield both in India and Bangladesh. In Bangladesh, in the same SEZ location where we are there. And in India, we are in the process of scouting for the location and thereafter the land that or whichever way we find the right opportunity to establish a greenfield or brownfield in India. It's work in progress right now.
Sure. And will there be any soft luggage expansion in India, as a follow-up to this question?
Yes, there will be. So most likely while we manufacture mostly in Maharashtra, we are going to look at for now up North for putting up a possibly an integrated plant of both hard and soft luggage. But soft luggage will be included in this.
Sure. And as a follow-up, when we look at the top 3 players, so combined capacities as of FY '24 end should be closer to 4.5 crores of annual manufacturing units. So can you talk about the current utilization? And hence, you can also comment on whether we can see a scenario where possibly for 1 or 2 years, it could be extra supply or over supply in the industry?
Well, I can't talk about the industry, I can talk about VIP. And yes, we are building capacities keeping in mind the next 3 years that we will need, and we'll activate the capacities as and when -- whichever year the demand. So we have something called LTCP, long-term capacity planning. That exercise we do once in -- twice in a year and we continuously look at a rolling period of 3 years to say what demand, which location, which part of the country, what categories. And our manufacturing footprint is a -- or the creation of manufacturing facility is an output of that exercise which gives us both what category, what quantity and what optimize locations. So that's how we are progressing. But on your comment of how the overall industry is going to be in terms of capacity and utilization, I would refrain from commenting on that.
Sure. And lastly as a follow-up on manufacturing soft luggage in India. So we have seen a scenario where in 2000 manufacturing shifted to China, in 2015 manufacturing shifted to Bangladesh and now again we're seeing manufacturing shift back to India over the next few years. So if you can comment on the unit economics, how they differ in manufacturing soft luggage in India versus Bangladesh versus China?
So China is becoming more and more expenses with the wage rate going, and more volatile, and therefore, from our perspective, that's something that we would like to build in terms of our back end ourselves. And this does not -- to manage the volatility and the cost, but it's also about strengthening ourselves to overall be more competitive with China also [ some day ] for sure.In terms of India versus Bangladesh, so there is a trade-off between the logistics cost and the cost of manufacturing in Bangladesh. India is increasingly becoming better in raw material availability and all that, I mean, not immediately, but overall in the longest run. So when I say the North facility, a lot of time -- I mean, it makes sense to service parts of North which is more produced in North versus coming from Bangladesh, so that's the underlying concept of looking at wherever it is more optimized to manufacture to make sure that my cost of -- the total cost of delivery to the consumer has to be optimized irrespective of the source and that leads to the decision of where we should have manufacturing.
Sure. And last question, pardon me if you've answered this earlier, Neetu, but on the insurance received for Bangladesh, by when can we expect that?
So as of now, we don't know because it's a process. But definitely, it should take 9 to 12 months. But we can come on this like exact timing dates maybe in a quarter or so. But as of now, it is in very initial stages.
The next question is from the line of Manish Sonthalia from Motilal Oswal.
[Technical Difficulty]
Sorry, Manish. You are not audible properly. Can you repeat?
I wanted to ask, what would be the peak potential of this CapEx that we have [Technical Difficulty]
I'm sorry, sir. But your voice is getting cut off in between. Could you come into network area, please?All right. The next question is from the line of Akhil Parekh from Centrum Broking.
My first question is like, we mentioned that 70% of the CapEx we'll be doing on soft luggage, while we see that the industry is moving more from soft to hard luggage. And our numbers also reveal the same thing. So any specific reason why we are expanding more on soft luggage instead of hard luggage?
No, when you say soft luggage and hard luggage, it is the uprights, the suitcases that we're talking about. The other categories which are backpack, DF, DFTs and also the part that we do for CSD, which is outsourced, a lot of that is our capacity that we -- when we in-source, we will, one, get a benefit. The other is soft luggage when I said it includes backpack and DFT.
Okay. So it means that larger part of the 70% will go towards the backpacks and the DFTs and all?
Yes, you could put it like that. Yes.
Okay. And second question is on the mid-premium, premium segment, right? As a percentage of sales is still stagnant, if I look at it over last 2 years. And even though the international travel has fully opened up and we see the numbers are coming back to pre-COVID level. So are there any specific reasons why mass category continues to outpace premium, mid-premium segment?
Yes. That is the unorganized sector, which is the -- which the organized sector is kind of getting its growth from. So as the unorganized sector gets into the organized, it is more into in the value segment. So it has a far bigger pool of growth because of the shift. And therefore, what is more important to see would be the growth rates and not the mix between premium and [Technical Difficulty].
Okay. And lastly, are we -- did we see any impact of the heat wave or in terms of demand during the first quarter of this year?
You mean to say as we speak now in this quarter?
Yes, like any negative impact or any slowdown because of the increase in heat wave?
No, I won't -- no, there is nothing that we can correlate to the heat wave as of now on to the demand.
Sure. And if I can squeeze in one more question. Regarding the fire incident, right, if I looked at it last 10 years of [ EPZ ] this is the third fire incident. So are there any specific -- I mean, difficult to comprehend like any lapses on our side why this has been happening a bit frequently than probably what we can expect from a company like VIP?
Yes. No, but fortunately, there is nothing common among them or neither in terms of the practices that we have. The factories have been built in the specifications of all fire safety and best practices, currently there in -- most in almost all our factories and warehouses. So I could only say that these are unfortunate incidents which when we see seems to have a common threat, but it does not.
[Operator Instructions] The next question is from the line of Manish Sonthalia from Motilal Oswal.
I just wanted to understand what could be the peak revenue potential from this INR200 crore CapEx.
Peak revenue potential. Well, one, we got to understand that this CapEx is not for this year or just the coming year. But because there is greenfield projects involved, so this we have a perspective of the next 3 years, including the current year, so FY '24, '25 and '26. But if we were to convert the CapEx, we're putting in right now, the peak that this CapEx and capacity can go is up to about INR3,200 crores to INR3,500 crores.
The next question is from the line of Ankit Babel from Subhkam Ventures.
A couple of questions. Sir, you mentioned organized sector is expected to grow at around 15% plus for the next few years. What would be our growth rate in FY '24 and '25?
See, in the core luggage category, we would expect to grow faster than this part because this is the growth rate we are talking about largely in the luggage segment. So maybe we would always strive to gain share, so maybe a few percentage points more is what we will target. But we're also looking at growth areas, which are Caprese and growth areas, which are international in the slightly mid-term to longer-term. So overall, the growth guidance could be ahead of 15% for sure.
But can it be like 20%, 25%?
We would -- the ambition is to grow it above 20%.
Okay. And sir, just wanted to understand your math of operating margins. I mean, in Q4, your gross margins were 58%, but operating margins was around 17% after adjusting to that future group provision. Now for the next year, you are guiding for a similar operating margins as around 17% to 18%, but at a lower gross margin of 54% to 55%. So can you just explain that? I mean, are you expecting any operating leverage or lower other expenses? What will...
Yes. This will be basically due to operating leverage. The [ overall ] will not grow in line with the revenue growth and that benefit will get into the bottom line.
Okay. But Neetu, ma'am, what I could recall was that earlier you -- people were guiding for some 19%, 20% kind of EBITDA margins you were targeting. So that is still on the cards or you're just trying to be conservative here or you feel that 17%, 18% is the normal margin?
See, the mix is changing, right?
Yes. But coming from where we are coming is good to be conservative and deliver better. But right now, if you ask us, yes, that's what we would like to say. But yes, internal ambition would be in the range of what you're saying.
Okay. And lastly, how is the export opportunity? What's your visibility there? I mean, earlier you guys were targeting to be dealing with Walmarts and all those large format stores in overseas markets. But -- so what's the status of that, sir?
No, I think we had clarified few calls back that somewhere this what came into the conversation that we were looking at Walmart and OEM, that's not on the cards. I would like to clarify. But international business more from a branded business point of view is what we are -- what we would want to do. I think we have taken the initial steps and it has worked very well for the last financial year. We had crossed -- if you see even the contribution to the total business, it has grown and internally, we know that we have done our highest ever in international business in FY '23. FY '24 also we will continue to build again strong foundations. When I say foundations, we are more looking at instead of expanding many markets, we're trying to go deeper into the markets that we are present in, looking at having more than a foothold, maybe a worthwhile market share in some of these markets and to invest in those markets to grow market share. That's the Level 1 strategy.In the horizon 2, as far as international business is concerned, we would then look at European and U.S. markets, but may not be in this financial year, FY '24, but we will prep for that so that we could have a big growth impetus coming from international business in FY '25.
[Operator Instructions] The next question is from the line of Jigar Jani from B&K Securities.
In your presentation, you have mentioned that your capacity will increase in FY '24 to 2,150. So just wanted to understand this is only for the brownfield CapEx or this is the total expansion that will come online after this CapEx?
This is our own manufacturing, which includes greenfield and brownfield. But this is not third-party, this is our own manufacturing numbers that we have put there on the presentation.
Also this is expansion initiatives. So basically, what will happen is, some of the capacities will start in the next year. For example, that we are building and then finally by the time the commercial production starts, it will be the next year, so which is FY '25.
Okay. So by FY '25, we expect to have this own manufacturing capacity in place?
Correct.
This capacity getting operational will be in FY '25, yes.
It will be staggered.
Okay, understood. And ma'am, could you highlight what is the current capacity utilization in the 1,400-odd capacity that you have?
Currently, the capacities are almost 100%.
So, out of this 1,400 [indiscernible].
Not the 1,400, because the 1,400 is not fully got commissioned as of now. And that's why we had put those capacities. But going forward we would add about 80% to 85% capacity utilization is how we have built the capacity. The capacity plan is done keeping in mind 80% to 85% utilization and rest is the headroom for peak season.
Thank you. That was the last question for today. I now hand the conference over to Ms. Neetu Kashiramka from V.I.P. Industries Limited for closing comments.
Thanks, everyone, for joining for this call. And in case you have any other questions you can connect. Thank you so much.
Thank you. On behalf of V.I.P. Industries, this concludes this conference. Thank you for joining us, and you may now disconnect your lines.