VIP Industries held a conference call on 24 January 2023 to discuss the results for the quarter ended Dec'22 and way forward. Mr. Anindya Dutta- Managing Director and Ms. Neetu Kashiramka – CFO of the company addressed the call.

Highlights of the Concall

• Q3FY23 revenue reported an all-round growth across all brands and channels at 32% (volume growth of 25%) compared to Q2FY22 and 22% over base FY20 (base volume growth of 18%)

• General trade formed 24% of total revenues in Q3FY23 (22.5% in Q3FY22) while retail trade formed 11.3% (11.4%), modern trade 29.2% (33.5%), Ecommerce 12.5% (13.5%), CSD CPC 11.5% (10.1%), Institutional 7.6% (6%) and International 3.9% (3.1%)

• Brandwise Carlton formed 5.6% of total revenues in Q2FY3 (5.2% in Q2FY22) while VIP formed 23.1% (22.5% n Q3Fy22), Skybags 29.5% (30.6%), Aristrocat with Alfa 38.2% (38.6%) and Caprese 3.6% (3.1%)

• The company has increased its town penetration by 80 more town in this quarter standing at about 942 towns. The company aims to be in every town which is 50,000 plus population

• The company currently has 443 EBO out of which around 160 is company owned and 283 is franchise owned. The company plans to cross 500 EBOs by end of FY23. Pre covid the highest count was 485.

• Modern trade had faced some challenges in Q1 of FY23 due to future group issues whcih is still there. However the company is seeing good grwoth in modern trade without the future group. And in addition to that by the end of December a large part of the future group stores that got shut has started coming up. Around 235 smart bazar have come in against 279 big bazar earlier by end of December 2022. The company expects good business to come in from these stores

• Ecommerce is doing quite well but the company thinks it has still not reached its full potential. International business is also doing good.

• Currently 72% of volumes in Q3FY23 was supplied by its own manufacturing facility in India and Bangladesh which has been the highest ever ratio reported in any quarter.

• The company own manufacturing capacities has increased 65% since pandemic.

• The company has planned capex for FY23 at Rs. 100 crore post which capacity enhancement would stand at 80%. Capex at both Bangladesh and India stands at Rs. 50 crore each. The company would add almost 200,000 square feet of manufacturing space this year alone.

• Gross margin is inching up with sequential improvement of 1.3% mainly on account of favorable raw material prices & ocean freight. Gross margins also improved year-on-year by 0.5%.

• Ebitda margin decreased mainly due to increase in advertisement cost and provision of Rs 6 crore towards Future group.

• The company expect positive demand environment to continue in the coming quarter. It sees higher demand in tier 2, tier 3 and downward cities.

• The company expects effective tax rate of 18-19% in FY23 and 19-20% in FY24.

• The company expects a better margin environment going forward in the coming year. The overall commodity and raw material prices are softening along with ocean freight rate. The company expect sustainable gross margin to be around 50-53%.