Tribhovandas Bhimji Zaveri Ltd (NSE: TBZ) Q1 FY23 Earnings Concall dated Aug. 03, 2022
Corporate Participants:
Sandhya Sutodia — Investor Relations
Binaisha Zaveri — Whole-Time Director
Mukesh Sharma — Chief Financial Officer
Analysts:
Rahul — R Consultants — Analyst
Sonali Rao — SR Financial Services — Analyst
Neha Sharma — VK Capital — Analyst
Sagar Shah — Shah Investments — Analyst
Barkha — — Analyst
Presentation:
Operator
Ladies and gentlemen, good day. I am Rochelle, the moderator for this conference. Welcome to the Q1 FY ’23 Earnings Conference Call of Tribhovandas Bhimji Zaveri Ltd., organized by Dickenson World IR.
At this moment, all participants are in a listen-only mode. Later on, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Sandhya Sutodia. Thank you, and over to you, ma’am.
Sandhya Sutodia — Investor Relations
Thank you, Rochelle. Hello. Good evening, everyone. I welcome you all to the earnings call of TBZ Limited for the first quarter of FY ’23. Today on this call, the management of TBZ Limited will be represented by Ms. Binaisha Zaveri, Whole-time Director; and Mr. Mukesh Sharma, Chief Financial Officer.
Before we get started, I would like to remind you all that remarks made today might include some forward-looking statements, and actual results may differ materially from those contemplated by forward-looking statements. Any statements made today on this call is based on our assumption as of date, and we are under no obligation to update the statements as a result of any information or future events.
I would now like to invite Ms. Binaisha Zaveri to make the opening remarks. Thank you, and over to you, ma’am.
Binaisha Zaveri — Whole-Time Director
Good afternoon, everyone. I would like to welcome you to the Tribhovandas Bhimji Zaveri Ltd. earnings call for the first quarter of FY 2023. I would like to thank everyone for taking the time to join us today.
After two years of COVID-induced lockdowns in this period, we had an excellent start to FY 2023 with robust sales in Q1 FY ’23 on the back of the rising demand during the festival, such as Gudi Padwa and Akshaya Tritiya in April and May, respectively. This financial year began with opportunities to expand and grow with all our stores fully operational. To put it in context, Q1 of FY ’23 was the first non-disrupted first quarter in the last three fiscal years. This quarter also saw a continuation in consistent footfall growth with new customer walk-ins increasing Y-o-Y. Several strategic marketing activation programs helped the performance.
To begin with, around 12% of dormant customers returned to our winback campaign, indicating the result of a resilient demand. To increase our footfall and conversion rate, we also implemented brand-centric marketing campaigns in both the gold and diamond category. Our extensive digital advertisement also helped to increase store footfall. Through these numerous activities, TBZ maintained the prominent position as a top jewelry retailer that offers jewelry for every occasion, including wedding and everyday use.
Furthermore, the government’s mandatory hallmarking has helped us to better compete with payers in the unorganized sector. As an established and renounced brand, we have been selling hallmarked jewelry for a very long time, so there’s nothing new in regard with TBZ hallmarking. Customer preferences for branded jewelry remained stable, giving us a distinct advantage. Other factors such as the strength of our brand and the breadth of our Kalpavruksha scheme and our adaptability to market dynamics have put us in a strong position to absorb driving demand. Going forward, we will also concentrate in increasing customer engagement, generating healthy profits and acquiring new customers.
We believe in our strong position to capitalize on the increase in customer spending in the coming months. We are laying the ground work for our strategy of emphasizing modern design, consumer-friendly tech interventions and a well-trained and highly motivated sales team. We are well placed to take advantage of the upcoming festive and wedding seasons.
I would now like to hand — give the call over to Mr. Mukesh Sharma, our CFO. Thank you very much.
Mukesh Sharma — Chief Financial Officer
Hi. Good evening, everyone. I would like to begin with the operational highlights for the quarter one. We have done the first quarter achievement of the numbers of INR579 crores vis-a-vis same quarter last year of INR193.7 crores, which is a whopping 200% rise in the sales number. We have done the — we have achieved the gross margin of INR60.5 crores vis-a-vis same quarter last year of INR23.2 crores, which is a very healthy growth of 161% over the same period last year.
The EBITDA margin earned in the Q1 FY ’23 is INR18.7 crores vis-a-vis INR80 lakhs loss in the same quarter last year. The EBITDA margin stands at 3.2% in the Q1 FY ’23 vis-a-vis 0.4% negative EBITDA margin in the same period last year. The PAT earned during the FY — during the Q1 FY ’23 is INR2.9 crores vis-a-vis INR9.1 crores loss during the same quarter last year. The PAT margin stands at 0.5% in the Q1 FY ’23 vis-a-vis negative 4.7% same period last year.
Now we can open the session for the Q&A.
Questions and Answers:
Operator
Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Rahul from R Consultants. Please go ahead.
Rahul — R Consultants — Analyst
Hello, am I audible?
Operator
Yes. You are, sir. Please proceed.
Rahul — R Consultants — Analyst
Yes. So, I just want to know like what would be our ideal advertisement expense as a percentage of sales in normalized level? Or rather let me ask it in a different way, like what is our advertising spend target for next two years?
Mukesh Sharma — Chief Financial Officer
Hi. Rahul, very interesting question. Marketing costs, if you see in the TBZ, it’s in the range of between 2% to 3%. But it always varies quarter-to-quarter, seasonality to seasonality. Specific for next two years, it is very difficult to predict today because marketing is a combination of the competition and the market situation, the various festivals which falls into a different period in India, Diwali may fall in some different period in this year, maybe next year, it will be a different month. And the festive moves around within the month.
So quarter-on-quarter, the marketing spend will also see that in terms of the percentage to the sales. On the yearly basis, we would like to maintain the same percentage of the spend linked to our revenue. So if the revenue increases, the absolute number may keep on increasing. However, the percentage will be maintained at the same level.
Rahul — R Consultants — Analyst
Okay. And my second question is like as we understand that diamond jewelry has high margins, so what could be the triggers for growth in that part of jewelry? And how can we see increased share in the overall revenue pie?
Mukesh Sharma — Chief Financial Officer
Yeah. So, it’s a market-driven force that decides the percentage. As an organization, we would not like to leave any opportunity untapped in terms of sales in the gold jewelry or be it in the diamond jewelry. Yes, you are right in terms of saying that the diamond jewelry has a higher margin percentage, but the number of customers buying the diamond jewelry and the customer buying the gold jewelry are completely different.
However, we are very conscious about it. But if you see the data in terms of the percentage of the diamond in sales, it is going into the same ratio. So as our gold jewelry sales are increasing in the same proportion our demand jewelry sales is also improving. But you’re right in terms of the margin percentage is much better in the diamond jewelry segment. And we are — we know about it, and we will be working to improve the sales on that category.
Rahul — R Consultants — Analyst
Okay. And my last question is, last time when we were on a call, same investor call, management mentioned about the inventory turns. Can we know what are the current inventory turns for diamond and gold?
Mukesh Sharma — Chief Financial Officer
Rahul, inventory turn will always be different for different quarters and different months. For every festive, we have to stock up the inventory and the after festive, the sale is to trade with — the inventory numbers are different. When you see the balance of those inventory are on a particular benefit date. But internally within the organization, we keep on working on the inventory turn on the different month, different periods, and it’s a continuous activity.
To come specific to your numbers, the inventory turns are around two for the Company in the gold jewelry and around 1.3 in the diamond jewelry, which is current numbers as of now. However, it’s a continuous activity in terms of the improvement. So we are very conscious about the inventory holding. You must have seen benefits that the inventory movements are there. We are constantly working towards improving the number on the inventory turns.
Rahul — R Consultants — Analyst
Okay. Thank you.
Operator
Thank you. Our next question is from the line of Sonali Rao from SR Financial Services. Please go ahead.
Sonali Rao — SR Financial Services — Analyst
Hello, am I audible?
Operator
Yes, Ms. Rao. You are audible. Could you please switch to your handset if you’re on speaker phone.
Sonali Rao — SR Financial Services — Analyst
Just a minute.
Operator
Thank you.
Sonali Rao — SR Financial Services — Analyst
Okay. Am I audible now?
Operator
Yes. Please go ahead.
Sonali Rao — SR Financial Services — Analyst
Okay. First of all, congratulations for the results, and thanks for allowing me to ask questions. I have three questions, which I’ll shoot one by one. So the first question is, what would be the ideal step to be taken by the management to improve the gross margins relatively? And as an internal assessment, was the ideal gross profit margin TBZ should have versus stable earnings growth?
Mukesh Sharma — Chief Financial Officer
Okay. So Sonali, there is no ideal scenario in terms of the gross margin percentage. It again depends on — gross margin is a combination of what discount you run during different festivals, how much inventory you are looking to sell during the full price and during the discounted period. The quarter-on-quarter, the gross margin number defers because of the different festive periods. You see during the quarter one of financial year ’23, we have achieved a gross margin of 10.4%, whereas the same quarter it was 12% last year.
Last year was even a lockdown period. So the gross margin numbers are different. The Q1 FY ’23, there were different campaigns which we have run during the FY ’23, [Indecipherable] and Akshaya Tritiya festival. And because of those discounts, gross margin has come down. So it’s actually the input margin, however, we are maintaining, the numbers when we achieve, the output margin may differ from a quarter to quarter.
So there cannot be idealistic scenario that we will end up at so and so gross margin though we have internal targets. Obviously, we work with those targets in terms of achieving the margin, but it will be very difficult to pinpoint a particular gross margin to be idealistic in a business.
Sonali Rao — SR Financial Services — Analyst
Okay. Okay. So there’s a follow-up question to that. The question would be seen in last two years, we have rationalized certain costs, thanks to COVID. However, we have seen some costs are coming back to the system again. So how will investors should see a margin touch tree?
Mukesh Sharma — Chief Financial Officer
Cost — you are talking about operating costs?
Sonali Rao — SR Financial Services — Analyst
Okay. Hello?
Mukesh Sharma — Chief Financial Officer
So I’m asking, you are talking about the operating costs?
Sonali Rao — SR Financial Services — Analyst
Yes, operating cost.
Mukesh Sharma — Chief Financial Officer
Yeah. So look, if you compare with financial year ’20-’21 or ’21-’22, which is really a period due to the COVID, there was a lot of disruptions which has happened. Those numbers may not be exactly comparable with the current financing years. So if we see the numbers in line with the pre-COVID period, we are actually catching up in terms of the revenue, in terms of the EBITDA margin, in terms of the cost as well with the same period of pre-COVID period.
So it is more or less in the same line. Cost will always vary with the revenue percentage. So actually, the variable costs will go directly in line with the revenue numbers. So absolute numbers when you see, you’ll see a huge jump into the absolute number, but when you put in your perspective with the revenue percentage, the cost may remain in the same range bound.
Sonali Rao — SR Financial Services — Analyst
Okay. Okay. And I have one more question. On growth front, I would like to understand what has been the growth volume year-on-year and quarter-on-quarter in terms of grammage[Phonetic] of gold?
Mukesh Sharma — Chief Financial Officer
Yeah. I think we have achieved a very handsome — if you see, from a grammage perspective, the quarter one, we have done the sales of 600 kg approx. in the gold vis-a-vis same period, if you see, last year, it was around 50% of that volume. A similar situation in the diamond sales as well. So in ’21-’22 and ’22-’23 may not be exactly comparable numbers because of the COVID situation. Even if you compare the previous quarter, there has been a huge jump of 20% in the number achievement.
Sonali Rao — SR Financial Services — Analyst
Okay. Okay. Thank you.
Mukesh Sharma — Chief Financial Officer
Thanks.
Operator
Thank you very much. [Operator Instructions] Our next question is from the line of Neha Sharma from VK Capital. Please go ahead.
Neha Sharma — VK Capital — Analyst
Hello, am I audible?
Operator
Yes, you are Ms. Sharma.
Neha Sharma — VK Capital — Analyst
Yeah. Sir, can you please elaborate on which quarter of the year the Company would be having the maximum inventory and which quarter can we see the liquidations or the sale of buildup of the inventory?
Mukesh Sharma — Chief Financial Officer
So Neha, the answer is very straight and simple. Any festive, the bigger festive, you can count 15 days before the inventory buildup start. During the festive, the inventory goes to the peak and the sale happens. And after the festive, inventory gets neutralized. So really, if you see the cost, the inventory and sales go in hand-in-hand in terms of going up and then sales is also going up during those particular periods of festive during the year and then comes in normal ranges. So we really try to maintain the ratio of the stock turns and all so that the absolute volume — value numbers we should not increase the inventory numbers.
Neha Sharma — VK Capital — Analyst
Okay. And sir, one more question. How are we targeting the growth, one in marketing campaign, as mentioned in your presentation? But also, what I see is — what is the inventory mechanism for the same? I mean, what are we chasing as an organization margin or top-line market share, ROE? It could be clear if you could share some our road map to understand in detail.
Mukesh Sharma — Chief Financial Officer
Neha, I think there are too many questions in your one question. I’ll answer one by one. So I think one part is you are talking about the inventory. Obviously, as I answered that the inventory goes hand-in-hand with the festive. We try to maintain the inventory turns. So if we are able to achieve the inventory turn, we are actually maximizing the gross margin. Gross margin, as I said, it again depends on the festive, how the festive go and offers are rolled out to achieve a particular number. We are very conscious about — internally, there are targets which we are very conscious about hitting our particular sales number and then hitting our particular gross margin number.
And we have not listed any of these numbers in this Q1 internally. Coming back to the expenses are also in the same — it relies in the same line of the target whatever we have fixed. And we are very hopeful of achieving at least 30% sales growth in terms of the number what we have achieved quarter-on-quarter. I’m talking about the comparable numbers of the pre-COVID level. So that is what we are seeking currently.
Neha Sharma — VK Capital — Analyst
Okay. And sir, one last one from me. In regards to opening of stores, we have seen addition and deletion in last five years. So now what’s the road map? What are your targets?
Mukesh Sharma — Chief Financial Officer
So we are definitely looking forward to grow the business in the newer markets. We are exploring to open new stores in the next three quarters. So that work is going on currently.
Neha Sharma — VK Capital — Analyst
Okay. Okay. Thank you, sir. That’s it from me.
Operator
Thank you. [Operator Instructions] Our next question is from the line of Sagar Shah from Shah Investments. Please go ahead.
Sagar Shah — Shah Investments — Analyst
Yeah. Good evening. Sir, I would like to understand what component of revenues from Bullion sales, if any? And whether it would be a recurring one, if any?
Mukesh Sharma — Chief Financial Officer
Yeah. Hi, Sagar. Bullion sales is very negligible part of our business. In terms of percentage, if I quote, it will be hardly 2% to 3%.
Sagar Shah — Shah Investments — Analyst
Okay. Okay. Thank you.
Operator
Thank you very much. [Operator Instructions] Our next question is from the line of Barkha[Phonetic]. Please go ahead.
Barkha — — Analyst
Hello?
Operator
Yes, ma’am. Please proceed.
Barkha — — Analyst
So my question is, I see the personnel expenses in ’21, it was INR54 crores. FY ’22, it was INR63 crores. Now if we analyze Q1, it’s INR70 crores already. My whole understanding is when we are not growing on profit front, why is personnel expenses increasing?
Mukesh Sharma — Chief Financial Officer
I think you are right in terms of the numbers. Current year, FY ’23, you have just multiplied the numbers for the four quarters. You’re right, we are at INR17.5 crores in the Q1 in the personnel cost. But if you compare immediately with the financial year ’20-’21 and ’21-’22, it may not be a very comparable number. However, if you see as a percentile to the revenue, you will see the movement is in line. So personnel cost is again catching up at a pre-COVID level because to achieve a particular number, we have to have the similar trend in terms of the man power. And that’s the reason of bringing this number. If you see ’18-’19 number also, our man power costs used to be around INR22 crores only.
Barkha — — Analyst
Okay. Okay. Thank you.
Operator
[Operator Instructions] As there are no further questions at this time, I now hand the floor over to Ms. Sandhya Sutodia for closing comments.
Sandhya Sutodia — Investor Relations
Thank you, everyone, for joining us today for this call. In case you have any further queries, you can get back to us or our coordinates provided in the investor presentation. Thank you so much. Good day.
Operator
[Operator Closing Remarks]