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Analyst Meet / AGM
08-Aug-20
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Conference Call
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VIP industries
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Expects Q2FY21 demand to be similar level of Q1FY21
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VIP Industries held a conference call on August 06,2020 to discuss the results for the quarter ended June 2020 and way forward. Mr Dilip Piramal – Chairman, Ms Radhika Piramal – Executive Vice Chairperson, Mr. Sudip Ghose – MD and Ms Neetu Kashiramka – CFO of the company addressed the call.
Highlights of the Concall
- Prime focus of the company for Q1FY21 was cost rationalization. The company achieved reduction in fixed overheads by 35% by reduction in rent, store closure, rationalization in manpower cost and eliminate all discretionary spends. Overall Expense is down from Rs.160 crore last year to Rs. 75 crore in Q1FY21
- The company has also shut 100 (out of 250) exclusive stores which can be re-opened as and when demand improves.
- Q1 revenue impacted due to COVID-19. Revenue was at 7% of last year June quarter at 40.3 crore. Revenues were near zero in April and May while June saw some pick-up
- High other income is due to impact of IND AS 116 – 14 crore because of rent waivers, reduction and store closure and Insurance claim of Kerala flood Rs. 1.9 crore
- Gross margin plunged 816bps YoY to 42.3%, mainly due to higher discounts and high mix of India-produced goods sale rather than Bangladesh. It expects gross margin to improve as production from Bangladesh has restarted.
- Bangladesh subsidiary reported nil sales this quarter.
- Demand has been disrupted in Q1FY21 and the company expects that Q2FY21 demand to be at a similar level as Q1FY21. Q3FY21 could see a pick up depending on spread of virus and no further extension of lockdowns.
- A part of this demand is expected to remain pent-up and the company should have a clearer picture by Q3FY21 as demand for bag packs picks up with schools opening up.
- The company is not facing any issues on the supply side. However, demand remains slumped. It believes current level of inventory should suffice for the year.
- The company has offered distributors schemes to reduce channel inventory.
- VIP has also increased its presence across e-commerce and been more flexible in negotiating terms and conditions with operators. The company is also investing in a larger e-commerce team to cater to the same.
- During the quarter, the company entered into production of masks and should also launch face shields soon, as it has the manufacturing capability for the same. The company expects revenue from this business to be around Rs 5-10 crore during the year. The company has ventured into a new distribution channel of pharmacies for the same and is working on new merchandising solutions as well.
- VIP is not planning to incur any advertising spends in FY21, barring minimal expenses on digital
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