What are the demand trends looking like given that there were lesser wedding dates during the quarter? Has that really impacted your numbers and would it really impact your outlook for FY25?
Neetu Kashiramka: Overall for FY25, our outlook is 1-2% better than industry growth and industry is expected to grow around 12%. But yes, the first quarter where the wedding dates are less, it might be slightly slower. But it should recover in Q3 because a lot of wedding dates are scheduled to happen in the Q3 of this year.
In the quarter gone by, one has seen both your profits and margins come in a little lower than what the street was anticipating. Why is that so and would you say that the past quarter was perhaps the worst of the financial year and y will now only see improvement?
Neetu Kashiramka: Yes, I would say that. One good thing which has happened in Q4 is that our revenue has started to grow in double digits. We have gained 2% market share in Q4 and margins, yes, as said earlier also, we will start to see substantial improvement in margins starting H2 and I still hold on to my margin guidance of 15% for FY25.
In light of that, what is the outlook in terms of your EBITDA margin guidance? How do you plan to reach 18% to 20% over the next 12 to 18 months?
Neetu Kashiramka: Basically that will happen in FY26 – around 18%. So, this year 15% and next year is going to be 18%. So, 2-3% improvement in gross margin and a lot will happen in overheads reduction because today if you see, our overheads are quite high. So, there is a lot of work which is happening or started to happen on the overheads, which will start to show results starting H2 of this year.
So, you would be able to come back on track both in terms of market share and margins, because when we spoke to you last, you said, look, we are reinventing the supply chain, we are reinventing distribution, you want to come back on track, you would be able to gain market share. Are you confident that things would be back on track?
Neetu Kashiramka: Yes, definitely and Q4 results are actually showing that. We have gained 2% market share in Q4 itself and I am quite confident that profitability will also follow based on my guidance given earlier.
What about competition? While you are preparing to gain market share, if I just look at competition, whether it is from the startup sector or whether it is a new competition which is coming in the luggage sector, the landscape is very different. Earlier it used to be only VIP and Safari or Safari and VIP. Now, there are three-four players there.
Neetu Kashiramka: So, yes, competition is quite healthy and tough I would say. But one good thing which also happens now is that this industry had close to 45% of unorganised share, which is coming down and with more and more players coming in the organised sector, I think there is a good trend which will happen, which is unorganised will shift to organised and all the organised player will tend to gain out of that. You have shifted your manufacturing from China to India, that is what you told us last time. What are the implications of that?
Neetu Kashiramka: The implications are already seen because this has happened not today, it has happened two years ago. One, we save on the custom duty, so our margins will be better. Also, the lead times, if I have to do anything from China, it will take six months whereas if I have to do some new product in India, it will take three months. So, actually, it reduces our lead times.Given your current market share, which is around 43 odd percent, tell me what is it that you are targeting for the full year and next?
Neetu Kashiramka: Our market share actually is not 43%, it is around 38% and I am targeting 40% FY25.
What is the update when it comes to Bangladesh? When are you expecting things to normalise over there?
Neetu Kashiramka: In H2. Bangladesh as such today is running at 50% capacity and by H2, I think we should be able to go to 80-90% and whatever changes had to be done, like reduction in the soft luggage, upright capacity to backpack, that is all done and we have also let go of 4,000 people in Q4. The restructuring has already happened. Now, it is all about using the capacity, which will start to happen in H2.
What is the outlook when it comes to e-commerce growth? How much will that form in terms of your overall revenue pie, how do you expect to accelerate that?
Neetu Kashiramka: Currently it is 22% of our revenue. Industry is around 25-27%. By the end of this fiscal, we should be in line with industry. Our share of business should be 25% to 27% from e-commerce.
In terms of the pricing trends, how is that versus some of your peers? What is the outlook when it comes to pricing of some of your new products?
Neetu Kashiramka: Two things, we are expanding both ways and since VIP has brands in various categories, starting from lower end with Aristocrat, then Skybags, followed by VIP and Carlton, we are playing across all the categories.
In the past, our highest price point used to be Rs 10,000 which now has already become Rs 16,000. So, we are expanding both ways. We are also launching a lot of products in Aristocrat as well as Carlton. We are in line with the pricing with competition, Rs 50, Rs 100 plus-minus depending on the features and look and feel of the product.
What is the outlook when it comes to your overall ad spends? How do you see that trending?
Neetu Kashiramka: It should be in the range of 6-7% for the full year.