Vaibhav Global Ltd (VAIBHAVGBL) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Vaibhav Global Limited Q2 FY '27 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Deepali from Arihant Capital Markets Limited. Thank you, and over to you, ma'am. Please proceed.
Deepali (Arihant Capital Markets Limited): Thank you. Thank you. Good evening, everyone, and thank you for joining us on Vaibhav Global Limited earnings conference call for the Q2 and H1 FY '27. We have with us, Mr. Sunil Agrawal - Managing Director; Mr. Nitin Panwad - Group CFO; and Mr. Vivek Jain - Head of Investor Relations. We will begin the call with the opening remarks by Mr. Sunil Agrawal on the business operations, key initiatives and broad outlook, followed by discussion on the financial performance by Mr. Nitin Panwad, after which the management will open the forum for the Q&A session. Before we get started, I would like to point out that some statements made or discussed on today's call may be forward-looking in nature and must be viewed in conjunction with the risks and uncertainties that we face. A detailed statement and explanation of this risk is included in the earnings presentation, which has been uploaded and shared with you all earlier. The company does not undertake to update these forward-looking statements publicly. I would now like to invite Mr. Sunil Agrawal to make his opening remarks. Over to you, sir.
Sunil Agrawal (Vaibhav Global Ltd): Thank you, Deepali. Good evening, everyone, and thank you for joining Vaibhav Global Limited's Q2 and H1 FY '27 Earnings Conference Call. I hope you have had the opportunity to review our results and investor presentation. Q2 was a quarter of transition and an important one. During the quarter, we completed two of the major operational projects, the migration of all our retail websites to Shopify Enterprise and the consolidation of our UK 4 different sites into single headquarters. Both are now behind us. They came at a near-term cost which I will quantify, but they leave us with a simpler and more scalable business as we enter the seasonally important second half. What the new platform unlocks? I want to spend a moment explaining why we made the move to Shopify, as the costs of this transitions are visible in current quarter, while the benefits will build over coming quarters. This was a conscious and considered strategic decision, keeping our long-term commitments and business objectives in mind. First, we now operate one platform across all our six retail brands. A feature built once can be deployed in every market, so we can move faster and at lower cost. Second, we have a unified view of our customers across TV and digital, built on first-party data, which supports better personalization, higher repeat purchase and greater customer lifetime value. Third, the platform integrates natively with modern marketing technology and AI tools, which are scaling our advertising creatives, product descriptions and SEO content. Fourth, we expect a lower long-term technology cost than our earlier legacy platform. And finally,
Sunil Agrawal (Vaibhav Global Ltd): Let me be specific about that cost. When we spoke in August, we flagged some initial disruption as we moved off of our legacy platform. The stabilization took longer than we had planned and affected traffic and conversions across all four business units where we made this transition. Based on our internal assessment, the revenue impact in the quarter was approximately USD 2.8 million or around 2.8 percentage point of growth. This is also why digital share of B2C revenue moved down by around three percentage points compared with Q1. At the same time, in the UK, we consolidated four warehouses and two studios into a single site. This temporarily took some inventory offline and had a modest impact on sales. What gives me confidence is how the underlying model performed in the tougher consumer environment. Retail volumes grew approximately 2%, driven by strong demand for our lower price point items. Customers are clearly seeking value. And because we design, source and manufacture much of what we sell, we can meet that demand and still expand gross margins, which rose by close to 197 basis points this quarter. Revenue for the quarter grew 7% to INR 938.4 crores, with reported growth supported by a weaker rupee. Gross margin expanded by approximately 197 basis points to 65.5%. EBITDA was INR 76.2 crores, down 13.6% with a margin of 8.1% compared to 10% in Q2 last year. Our EBITDA could have been 2% higher where the same were not accounted due to reduction of 100 basis points related to Shopify and UK warehouse migration and 30 basis points related to lower forex gain than last year, and remaining due to higher volume growth resulting in higher shipping costs. For the first half, revenue grew 9.7% to INR 1,855.4 crores and EBITDA rose 9.5% to INR 178.2 crores. The decline in quarterly profitability is mainly mainly related to operating leverage in the US and UK due to transition. We see these pressures as transitional. Sustainability and community impact remain embedded in our business model. VGL's ICRA combined ESG rating further improved to 75 from 72 two years ago, rated Strong. Through our Your Purchase Feeds program, more than 119 million meals have been distributed to date, and we now serve approximately 56,000 meals every school day, up from 55,000 a year ago. We remain committed to our long-term ambition of 1 million meals per school day by FY 2040. The Board has declared a second interim dividend of INR 1.5 per equity share, following the first interim dividend of INR 1.5 per share in Q1 FY '27. Our capital allocation approach continues to balance investment in growth, shareholder returns and balance sheet strength. Outlook. On guidance, we want to be transparent and prudent. We are taking taking into account the migration impact in Q2, the UK consolidation, a weaker UK consumer and the upcoming US midterm election. We now expect revenue growth of 7% to 9% in FY '27 compared with our earlier guidance of 9% to 11%. While the ongoing platform transition has impacted near-term growth, we believe the investments and structural improvements underway will strengthen our digital business and create a more scalable foundation for sustainable growth. Looking ahead, we remain confident in our ability to return to 9% to 11% revenue growth in FY '28, supported by our new digital-first platforms, enhanced
Sunil Agrawal (Vaibhav Global Ltd): marketing capabilities and greater operational efficiency. The transition to Shopify is a strategic step towards achieving this objective, positioning us to accelerate digital growth and drive sustainable, profitable growth over the medium term. We expect FY27 EBITDA margin to be broadly in line with FY26, compared with our earlier expectation of 50 to 100 basis point of expansion. We believe this is the right call and it does not change our medium term view. A unified digital platform, proprietary brands, lab grown diamonds, and our vertically integrated operating model positions us for for for stronger customer engagement, better quality of growth, and improved profitability. With that, I will hand over to Nitin to take you through financial performance in more detail. Over to you, Nitin.
Nitin Panwad (Vaibhav Global Ltd): Thank you, Sunil, and good afternoon, everyone. I will take you through the financial and operating performance for the second quarter and first half of FY27. Revenue from operations grew 7% year-over-year to INR 938 crores. Retail revenue grew 5.3% to 867.5 crores and B2B revenue grew 32% to INR 70.9 crore. Currency was significant tailwind. The rupee weakened approx- approximately 9% against the US dollar, resulting overall 1% degrowth in terms of constant currency basis. In US, revenue grew 4.3% to INR 500 crore in rupee terms and declined 4.1% in constant currency. The shift towards value is clearest here. Unit rose 4.8% while the average selling price was 8.4% lower as consumer moved to lower price point. Digital share was 44% of revenue and EBITDA margin was 5.7%, reflecting sales deleverage of our investment in connected TV, OTT, app based advertising to extend our reach beyond linear TV. Our vertical integrated supply chain continues to help us mitigate the impact of tariff. For the first half, US EBITDA grew 24.9% to INR 86.6 crore with margin up 102 basis points to 8.4%. The UK had a most challenging quarter. Revenue grew 2.3% to INR 257.2 crore in rupee terms, but declined 7% in constant currency. Three factors were at play: the platform migration, temporary product unavailability during the warehouse consolidation, and a noticeably weaker consumer sentiments. UK inflation rose to 3.5% in September driven by a higher fuel cost, non-food retail sales were almost flat, and in October consumer confidence recorded its sharpest monthly fall since 2020. As households had back ahead ahead of Autumn budget, discretionary category such as our, feels this first. Over time, the India-UK FTA offer further upside through lower duties, sourcing flexibility and margin improvement. Europe excluding UK delivered a strongest underlying growth. Revenue rose 18.3% to 110 crores and 8% in constant currency terms, led by 11.5% in units growth. Shop LC Germany grew 5.8% and Mindful Souls grew 12.7% year-over-year. The first-half loss narrowed to rupees 0.7 crore from 6.6 crore of a year back, and a Germany remain on track to continue positively to the group profitability in FY27. Our B2B business delivered another strong quarter with revenue up 32.4% to INR 70.9 crore. Digital revenue was 367 crores, up by 5.6% year-over-year into rupees terms and declined 4.2% in constant currency because of the Shopify migration. With the transition complete, we expect digital to return to
Nitin Panwad (Vaibhav Global Ltd): earlier growth trajectory and we continue to work towards our target of digital share at 60% of B2C revenue by Q4 FY27. Lifestyle products contributed approximately 40% of B2C revenue and we continue to work towards a medium-term objective of 50% shares. Budget Pay accounted approximately 35% of retail revenue. It remains an important affordability tool, supporting conversion and accessibility, particularly for higher-value purchases. In-house brands contributed 57% of B2C revenue, and the lab-grown diamond share rose to 12% of total retail revenue from about 10% a year back, strengthening our differentiation and pricing power. Under our 4R framework, we reach more than 127 million households with approximately 687,000 unique customers on trailing 12-month basis, and 360,000 new customers acquired over trailing 12 month, 38% retention, and an average of 23 pieces per pieces per customer buying per year. Group gross margin improved by approximately 197 basis points to 65.5% from 63.5% in Q2 FY26, supported by vertical integration, in-house brands, and growing share of lab-grown diamonds. The first half gross margin was 65.5% compared to 63.6% in H1 FY26. EBITDA was Rs. 76.1 crore with a margin of 8.1%, lower by 193 basis points year-over-year despite the gross margin expansion. The movement reflects the retail sales deleverage during the platform transition. The first half revenue increased 9.7% to Rs. 1,855 crores. EBITDA increased 9.5% to INR 178 crores with a margin of 9.6%, and profit after tax increased 10.1% to 98.1 crore with a growth of 15% year-over-year. Moving to our balance sheet, as of September 30, 2026, our net cash stood at Rs. 186 crores compared to 279 crore of March '26. This reduction is mainly related to seasonal inventory build-up and capex related to UK warehouse migration of Rs. 36 crores. The ROCE stood at 22% and ROE at 18%. As Sunil mentioned, the board has declared the second interim dividend of Rs. 1.5 per equity shares. Our capital allocation remained disciplined with priority given to digital growth, proprietary brands, lab-grown diamonds, Germany's progress towards profitability, and profit-led operating performance, operating improvement. To conclude, Q2 was a quarter which we absorbed the cost of necessary changes. We complete our platform migration and UK consolidation, expanded gross margin by 197 basis points, grew volume in difficult consumer environment, delivered strong B2B growth, and continued to strong constant currency growth in Europe. With a heavy lifting done, our focus through the second half is seamless customer experience in digital platform, customer acquisition, increase repeat, and efficiency improvement in UK operations. Thank you. We can now open the floor for questions.
Moderator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Moderator: Ladies and gentlemen, we'll wait for a moment while the question queue assembles.
Moderator: The first question is from the line of Kaushik Anjwal from HIA Associates. Please go ahead.
Kaushik Anjwal (HIA Associates): Thanks for the opportunity. Firstly, I just wanted to ask Sunil ji, what are the top priorities for us in coming festive season? And also, can you also throw some light on FY '28 how we can leverage maybe AI and get more revenue through that? Please, on these two, can you just share?
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