V.I.P. INDUSTRIES LTD (VIPIND) Q2 FY23 Earnings Concall Transcript

V.I.P. INDUSTRIES LTD (NSE: VIPIND) Q2 FY23 Earnings Concall dated Oct. 21, 2022

Corporate Participants:

Anindya Dutta — Managing Director

Neetu Kashiramka — Chief Financial Officer

Analysts:

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Jinesh Joshi — Prabhudas Lilladher — Analyst

Nihal Jham — Nomura — Analyst

Ankit Kanodia — Smart Sync Investment Advisory Services — Analyst

Akhil Parekh — Centrum Broking — Analyst

Harsh Shah — Incred Capital — Analyst

Jaiveer Shekhawat — Ambit Capital — Analyst

Jignesh Kamani — GMO & Co. LLC — Analyst

Unidentified Participant — — Analyst

Presentation:

Operator

Ladies and gentlemen, a very warm welcome to the VIP Industries Limited Q2 FY23 Earnings Conference Call. From the senior management, we have with us today Mr. Anindya Dutta, Managing Director; and Ms. Neetu Kashiramka, Chief Financial Officer. [Operator Instructions]

I now hand the conference over to Mr. Anindya Dutta, Managing Director of VIP Industries Limited. Thank you, and, over to you, sir.

Anindya Dutta — Managing Director

Thank you. Good evening, everyone. Thank you for taking out time for this earnings call late in the evening. And at the outset, apologies for our upload of the presentation as well as the results. We just about finished the Board meeting and that caused the delay. However, I am hoping that you would like the presentation that we’ve sent across to you more. It’s detailed than what we’ve shared in the past.

Having said that, I think it’s quite a delightful moment to announce really good set of results for Quarter 2. This is somewhat what I think the whole organization is working towards. This may be one of the milestones that we wanted to achieve in terms of the all round result that the organization has been able to put forward.

We see — we saw revenue grow about 56% year-on-year. Why year-on-year important now because somewhere from Quarter 2 last year things have started to normalize. However, even if you were to look at it from the base year point of view, which is FY20, the growth rate for the quarter has been 25%. The flow through of the revenue with a healthy gross profit at about 48% has been normalized through a good fixed cost management as we had a good profit — resulting profit as well with a PBT at about 10% and an EBITDA at 14.8%. All key metrics that we see has gone through a very positive uptick as far as the quarter performance is concerned.

If you want to talk a little bit detail on the revenue and as you will see in the presentation shared, I think all channels and equally brands and categories have worked very, very well. Generated — and all the physical channels generated retail and modern trade has done extremely well as well as e-commerce also. Specifically talking about some of the key shifts that has happened in that channel level, I think what we were pursuing in terms of increasing our retail outlets, our exclusive retail outlets in the market has really work for us. As of Quarter 2, we were still lower than the corresponding quarter in FY20 in terms of total number of retail outlets, however the total revenue in retail has seen a growth, which means that our store throughput has been extremely good.

I just wanted to share some numbers with all of you. We are today at about 413 stores operational, end of Quarter 2, and we have almost about 45-odd in pit out. So that takes the tally to about 458. We should definitely have this number to be more than 500 by the end of the year. The same number was about 485, exclusive stores in the corresponding quarter in FY20. The mix is quite different. We have majority of this new stores that we are reopening or opening after the — after where where we have reached in terms of the lowest, that was about 355 stores. All the new stores are franchisee stores, majority of them are franchisee stores.

The other highlight, I think worth mentioning here is modern trade. Modern Trade, we had a big, I would call a headwind in terms of Future Group not active and in terms of the 432 stores they had even in Quarter 2 only, a fraction of that was operational. I think we’ve done a great job in making sure that the demand that was lost in — because of the Future Group shutdown has been caught very well in all the other modern trade chain stores as well as in retail or MBOs in the same catchment area. And from our internal estimates, modern trade has surpassed the budget and the internal estimates that we had for the quarter and it has resulted in a growth despite this, of about 22% over the base year. So both, likewise all channels have done extremely.

[Technical Issues] Able to leverage the buying season, therefore the usually, Quarter 2 is almost one-third the annual sale in e-commerce because of the big properties that are there in Quarter 2, big days and festive buying. We’ve done very well there and have done a significant — the growth numbers are almost double of the base year as of this year Quarter 2.

I think the one more key highlight here worth mentioning is international business. We’ve been pursuing, not in a big mega strategy but to more to make sure that where we were present and in geographies where we could get a — in road, we’ve started to get that. Middle East has worked very well for us, as well as many several about new countries, about seven, eight that we, have been able to open in H1. The international business in first half of the year stands at 5% of the total business. This was about 2%, 2.5% in the pre-COVID era.

When I talk about brands and categories, I think both the — big news there or heartening news, rather, there is. While value Aristocrat has been on a run, the premium and mid premium brands Skybags, VIP and Carlton has joined in and in Quarter 2, it was very heartening to see all these — all the three brands growing on the base numbers of FY20. So, not only our strength — our renewed strength in value, but I think our past strength in the mid premium segment has come back in its full play as far as Q2 is concerned.

So with that good set of revenues, and I think as I spoke about our supply chain strategy, our own home manufacturing strategy and our cost controls have resulted in the in the profit that you’re seeing on your — on the results that we have announced. So by and large, a good quarter, and really looking forward to even possibly a better one with much more in terms of consumer impact activity is coming out from — that you would see in the coming quarter. And the presentation that we’ve sent across gives some sneak preview of what we are about to launch for our consumers in Quarter 3. So quite positive about how we see the future from here onwards for the rest of the year.

Thank you on — on the — from the opening remarks point of view, and any questions, please.

Questions and Answers:

 

Operator

[Operator Instructions] We have the first question from the line of Tejas Shah from Spark Capital. Please go ahead.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Hi. Thanks for the opportunity. My first question pertains to [Technical Issues] environment…

Operator

Sir, voice is breaking up on the call. If you could kindly come on the headset more once.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Yeah, is this better?

Operator

Yeah. Little better.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Yes, thanks. Thanks a lot. Yeah, so — hi. My first question pertains to demand environment in general. You have read on the same. As in, we have seen a lot of categories like cars where there was an element of pent up demand, which was very much now in the second half of the last year and even first quarter this year. So are we seeing the pent up still playing out or you’re seeing that the recovery what we are seeing now is more of a sustainable run and the pent up element is actually receding in this phase now?

Anindya Dutta — Managing Director

Hey, hi, Tejas. So, I think it’s a mix of both. And somewhere, I would — it is more middling out. There is a bit of pent up that we are experiencing. However, a large part of this could be sustained. And where I’m coming from in this is definitely the unorganized sector into organized, it seems like, could sustain at least for a much longer period unless something very differently warns as far as the unorganized sector is concerned. So that’s working differently in our sector than any other sector.

Generally, travel and the whole buoyancy on spending and the marriage season is ahead of us in the next half of the year. So, I think quite hopeful and optimistic about the demand environment to sustain the way we are seeing right now.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Sure, sir. Second, on the presentation. First of all, congrats on — and then thanks also for a very detailed presentation. In fact quarter-on-quarter, we are improving on disclosure levels. One theme which I can’t miss out is premiumization, which is very much clear on most of the slides. So if you can elaborate what are we doing exactly on this, and when we’re talking about premiumization, somehow, Carlton is actually not much — has got slide space. So just wanted to understand how are we going about the whole portfolio premiumization and all the all the premiumization initiatives in the existing brands also?

Anindya Dutta — Managing Director

Right. Now, Tejas, I don’t think we should measure it from the slide share point of view in terms of how many slides, what is good, but really premiumization is something that we’ve been driving. One thing we — the starting point is that this is something that we were strong at. It is not a new strength. Value is a new strength, and I think we’re doing pretty well there we’ve started to do pretty well. In terms of premiumization, both from a consumer activation in terms of relation and communication and promotions, all that if you were to look through the presentation and otherwise, that’s most visible. If you go to our stores, you will see all the new launches in VIP and Skybags, there is certain themes that we are working on, which are extremely premium or adding consumer value themes and more, and more products are coming there. In terms of advertising, Skybags is taking it to the next level in terms of how we are connecting with the Gen Z. And also, if you see the whole retail strategy, and I spoke in detail about our we are expanding our exclusive business outlet network, that is also something that is adding hugely to be able to sell that experience to the consumers as well as — therefore sell more premium products. So it’s a 360 degree around this in terms of driving the mid premium and the premium agenda. And it is something that was there and will come back — will continue to be there and in fact, get strengthened going forward.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Sure. And VIP Highlander, is this just a collection or we have launched a flanking brand along with the mother brand there?

Anindya Dutta — Managing Director

The — it’s a — the Highlander — every product has a name. So in the presentation, it’s there but it’s not going to be something that will be advertised to the consumer. It’s VIP product, it is designed with an SUV in mind. In a way, this is the rugged looking, macho looking bag that you would like to believe that taking it with you and answer to the image that you would want to portray. So that’s the theme behind what VIP wanted to bring to the consumer. And as we call it, it’s a all-terrain luggage. And if you see, every component of that, whether the handles, whether the wheels and whether the whole composition has to be build — has built to sustain more tougher environment and a tougher terrain as they’re calling it.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Great.

Anindya Dutta — Managing Director

So it’s not a new brand launch, Tejas. It is a VIP…

Neetu Kashiramka — Chief Financial Officer

New range.

Anindya Dutta — Managing Director

Range.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Yeah, looks very classy though. Congrats on that. So, last one on business part, on market share, and we have been transparent there also in sharing the detail there, so should we believe that the worst is behind in terms of losing market share, and we should somewhere bottom-out here and then start gaining market share from here on?

Anindya Dutta — Managing Director

The numbers are saying so. And we strongly believe that. I’ve always said that this is something that we would pursue very, very aggressively, but it’s important to have the terms very clear that I am considering it along with making sure that we have sustained profitability.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Perfect. And two financial questions, if I may. Ma’am have we provided for the Future Group exposure totally in this year, and second, any update on the insurance refund which has…

Neetu Kashiramka — Chief Financial Officer

The Future Group — the Big Bazaar piece are provided fully last year itself. So this year what open exposure we have is on the SLS side, which is the central and the brand store. That also, around 25% is provided. And on the insurance piece, yeah we should get back in quarter — sorry?

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

What could that be in absolute, the exposed — unprovided number?

Neetu Kashiramka — Chief Financial Officer

It should be around INR9 crores.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Okay, Okay. Okay, thanks, ma’am. You were saying about insurance.

Neetu Kashiramka — Chief Financial Officer

Yeah, so the insurance piece is in the last leg of final survey report. So we should get that in Quarter 4.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Okay. That’s all from my side. And Happy Diwali to the whole team there.

Neetu Kashiramka — Chief Financial Officer

Same to you. Thank you.

Anindya Dutta — Managing Director

Thank you, Tejas. Happy Diwali.

Operator

Thank you. We have the next question from the line of Jinesh Joshi from Prabhudas Lilladher. Please go ahead.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Thanks for the opportunity. I have a question on exports I mean, post COVID, I believe that many countries are looking into diversify their supply chain from China. So in that context, which other countries can emerge as a probably alternative destination apart from India, and do we have any structural advantage vis-a-vis those countries like countries like duty benefits et cetera? The reason I’m asking this is because our current export share is approximately 5% odd, but we’ve planned to scale this up over the next couple of years. So, any thoughts on that?

Anindya Dutta — Managing Director

Yeah, so Jinesh, definitely, we would like to scale it up going ahead. And there is definitely a huge opportunity. It’s just not a duty or advantage that we are only looking at. I think being a good manufacturer ourselves, cost effective manufacturer would give us a right to success in markets which are buying from China. So yes, over a period of time being competitive to China in manufacturing would be the key that would get us access to international markets. So, that’s what we are pursuing.

As of right now, yes, we had seen some low hanging fruits which we have initiated, but obviously, the bigger opportunities will be in the larger markets with — of U.S., Europe, Canada and so on and so forth where the higher quantum of luggage sale happens, would entail. But some of these markets will be equally difficult to enter from a branded point of view. So, I think it’s too early for me to talk in any more detail other than what is the opportunity in terms of how we will go about it. Maybe, once we are ready, we will talk about — I’ll talk about how we are going to approach it or when we have started approaching it, we will talk about it.

As of right now, our strategy on international is to make sure the market we were present before, we go deeper into the market. For example, we’ve had a huge jump in UAE alone where our penetration into — at a store level into all the modern trade chains have gone — have gone through a big big change in the last eight to nine months post COVID, and that itself has brought us a benefit good enough to get us a growth over base — pre-COVID base. So, almost twice, double R, more than double R turnover [Indecipherable] Very small base but I think what I’m trying to say is that that focused strategy, creating a go-to-market approach in a particular market and going deeper is working, and that’s what we’re doing right now till we have reached to a stage where we kind of look at a wider strategy.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Sure, sir. Sir, second question is on your gross margins profile. PAT, this quarter, I think we are at about 48% odd, and in 1Q we were at about 50%. So, there is some erosion in gross margin on a sequential basis, but I mean, given the fact that raw material prices have subsided and the freight cost is also cooling off, I mean can you give us a fair estimate of what could be the gross margin expansion in second half vis-a-vis what was the average number in first half, and that we the operate in.

Anindya Dutta — Managing Director

I will give you in the way you’ve asked the question without giving — I can’t give you specific numbers for the future, but what you said was absolutely right that the cost — the raw material cost and the freight cost was possibly at its peak in Quarter 2, and it can only — and it is only going to go down from here. How much exactly in Quarter 3, how much in Quarter 4, where it stabilizes is a matter of crunching the numbers, but I’ve always kept that our gross margin profile that I would want to keep it is around between 50% and the 52% and the aspiration is to make sure that we take it to 55% and hold it, but we would always want our ship to be within that — between these two rails, two guardrails of 50% and 55%, and keep working on our market share and growth given this margins, we kind of try and bring it to that — within that range.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Sure. One last question from my side, I mean, if I look that the brands by revenue mix which we have given the time around, the share of Aristocrat has risen from about 22%-odd to 37% and the share VIP and Skybags has declined a bit when I compare it to the pre-COVID base. Now, we had given the growth in the mass segment is expected to be higher than the economy or seasoned segment. I mean, does it mean that rising share of Aristocrat from thereon would essentially mean a lower gross margin profile for us because essentially this product commands a lower margin. So, just wanted to understand this bit from your side.

Anindya Dutta — Managing Director

No, I think absolutely a right question and the answer lies in the current gross margin also. So, if you see the table has shifted from 22% to 37% in Aristocrat’s favor despite the inflation that we are talking about now, compared to any base year that you want to compare. The gross margin erosion is not not there. So therefore this is what I was talking about that we would like to play the value market share gain in a manner that we have we have done the cost reductions to fight this game better. So all our own manufacturing, upstream integration, all that is helping us towards this approach where we would possibly increase Aristocrat’s salience, which will help us gain market share but it will not cause us to erode our margins commensurately.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Okay, sir. Thank you so much.

Anindya Dutta — Managing Director

Thank you.

Operator

Thank you. We have the next question from the line of Nihal Jham from Nomura. Please go ahead.

Nihal Jham — Nomura — Analyst

Yes, sir. Good evening. Am I audible?

Anindya Dutta — Managing Director

Yes, you are.

Nihal Jham — Nomura — Analyst

Yeah. So a couple of questions from my side. First, given the data of increasing distribution versus FY20, in Tier 4 and 5 towns, is it right to relate the improvement in market share and the consequent increase in Aristocrat and Alpha to that aspect that maybe that’s a key driver to you, these assets happening of us increasing our top line in this segment and also increasing our market share?

Anindya Dutta — Managing Director

No, it’s one of the factors. It is — does not — cannot be correlated one is to one. I think, if you see, our better traction in e-commerce would also help corroborate the fact that — that’s also been selling a lot of value that’s also as a higher share of Tier 2, Tier 3 towns. So, I think many factors comes together to make sure that value, as a segment, works for us. It’s product, it is pricing, it is distribution, which is general trade as well as distribution, which is in accessibility, which is through e-commerce. So, it’s a mixed gain.

Nihal Jham — Nomura — Analyst

Sure, sir. And just a related question to that was that looking ahead, is your expectation that the value segment is expected to see a much higher growth versus the mid premium and premium segments in the future, as an industry, I mean, not for you, specifically.

Anindya Dutta — Managing Director

So the industry has been growing more in the value side. And for the organized players, the value will grow faster going forward because of the unorganized to organized shift as well. So yes, value will continue to grow faster than the mid and the premiums segment.

Nihal Jham — Nomura — Analyst

Sure, Just a last question on the Caprese. So there, our share is still — to come back to preCOVID. What are the incremental drivers that will drive us because our plans in that segment is in well [Indecipherable] and what are the integrals, we’re taking to achieve that?

Anindya Dutta — Managing Director

I didn’t — I couldn’t hear the last part. Can you repeat?

Nihal Jham — Nomura — Analyst

Yes in terms of Caprese, our plans are very aggressive. So what are the incremental steps we are taking now post COVID in terms of driving the share of that business or the overall topline in that segment higher?

Anindya Dutta — Managing Director

There are several. Once again, from our product point of view, there is a lot that is up in store for us going forward. The presentation has some hint of what we are getting into in Quarter 3. Also from a distribution point of view, whether it is e-commerce, we are supremely active, and what we are activating now is physical channels as well, both in modern trade in chains like Shoppers Stop and all the lifestyle chains as well as some exclusive outlets, is something that we are experimenting with right now. Largely, the mall kiosks and things like that. But these are all in the foundation stage right now, and what you will see us basis this, we will formulate something which is supremely more bigger and aggressive in the coming year, and that’s where we will start seeing more aggressive numbers as well as plans.

Nihal Jham — Nomura — Analyst

That’s helpful. Thank you so much, sir. Wish you all a very Happy Diwali. Thank you.

Anindya Dutta — Managing Director

Thank you.

Neetu Kashiramka — Chief Financial Officer

Thank you. Same to you.

Operator

Thank you. We have the next question from the line of Ankit Kanodia from Smart Sync Services. Please go ahead.

Ankit Kanodia — Smart Sync Investment Advisory Services — Analyst

Yeah, thank you for taking my question and congratulation on good set of numbers. First of all, I would just echo one of the other participant’s comment that thank you so much improving the quality of your presentation quarter-on-quarter. So, that really helps us in getting more understanding about the business and the industry.

So my first question is in terms of, as we see that if I — if my understanding is right, Q2 is generally not your — from a relative perspective, Q2 is probably the worst quarter for you, right?

Anindya Dutta — Managing Director

Yeah.

Ankit Kanodia — Smart Sync Investment Advisory Services — Analyst

And giving — given the kind of — maybe a point of — some sort of pent up demand plus some sort of like we are entering into the marriage season and all, I just wanted to understand how are we placed in the capacity front? How much of it is — right now, what is the capacity utilization, and how easy or difficult or what time does it take to ramp up our capacity if required?

Anindya Dutta — Managing Director

Yeah, no, I think it’s a very valid question and that gives me the opportunity to talk about that we are continuously investing behind increasing our capacity. As we speak, both in Quarter 2 and now, we are putting in good percent of — good amount of money to increase our capacity in India, in Nasik and in Bangladesh. We have just about now decided, I’m not talking about the money, but we have invested to increase our capacity on our existing base by about 25%, which should help us cover for our growth next year, and we are continuously doing this exercise. And maybe early next year, we would look at the subsequent year and continue to expand the capacities is required. So this is something that is definitely on the radar and it’s happening as we speak. And we will ensure that we have that the — we have the in-house capacities as well as our network of outsourcing as and when it is required is more than the demand that we are envisaging for ourselves.

Ankit Kanodia — Smart Sync Investment Advisory Services — Analyst

Thank you. Sure. And next question is on one of the slides, I think slide number 33, so where we have mentioned about the market share of VIP against the other two organized players. So we have mentioned about till Q1 FY23. Is it fair to assume we did at the similar level in Q2 as well? Ot it has made some changes there?

Anindya Dutta — Managing Director

No. See, that’s the difficult part to estimate, and I would be kind of doing a projection here, but given that sort of results, I am hopeful that if not gaining, we would hold it at this level.

Akhil Parekh — Centrum Broking — Analyst

So just a follow-up, sir, if you look at pre-COVID levels, we were around 50% and post COVID, right now, we are at 43%. So, how do we look at it and…

Anindya Dutta — Managing Director

I think that 50% is an aberration of that particular quarter. If you look back in the previous quarters, it’s hovering around 45% on an average, for a year. So, I think our rightful share and where I would want this organization to be is at a 45% plus, and having done that share in luggage, I would like to make sure that we focus on newer and more growth areas which are more in the adjacent areas which adds more faster top line growth and overall business growth.

Ankit Kanodia — Smart Sync Investment Advisory Services — Analyst

Right. Sir, and when you spoke about in one of the participant’s question that the unorganized-organized shift, like, what we did, what we witnessed during the COVID period, as in, the unorganized sector was hit far more hard compared to the organized sector because — probably because of the strength of the balance sheet, if I’m not wrong. Now, if we say something like we are heading towards a recession in U.S. and UK. Right now, India continues to be looking at strong demand, but say, if we get something like that in India or something greater in India, is it fair to assume that again during this period also, the unorganized sector will be hit harder than the organized sector, or do you have some other view?

Anindya Dutta — Managing Director

I think there a lot of scenarios and within which you are building, but underlying thing is that yes, in the future, the environment for unorganized sector will not be as conducive as it was in the past. And I think the chain started happening more from the GST. The COVID and the China situation brought — made it more acute. It will possibly ease out a bit from where it was, the worst situation last year same time, and even now, maybe it will ease out a bit but really speaking pre-COVID and going forward, I think there will be a different scenario where the organized player, for various reasons, will have slightly more advantage than what it had before COVID.

Ankit Kanodia — Smart Sync Investment Advisory Services — Analyst

In that sense, do we expect more new competition entering the sector, and how do we look at — apart from the top three players — incumbents, do we look at more competition in the organized sector, and how do we look at that space in that sense? From the competition perspective.

Anindya Dutta — Managing Director

If you look at globally, I think the biggest player is here, and there has been some consolidation that has happened. So really speaking, there are not really large players outside the country who’s yet to enter India. So therefore, yes, there will be — and this is a place which is, barring the top three players, the list is very long, it’s quite fragmented. So the there is endless list talk brands and players that is there and there are continuously many coming because the entry barriers are not that high. So that’s always have been the case, and may continue to be more. But to that extent, unless you have a proper supply chain, it is not as easy today possibly to come out because it’s not that you go out and buy some products and you can create a brand and launch it in this thing. You would need to have a little bit more structured approach for a completely new entrant to enter the category in India. So some bit of discouraging maybe, but largely it’s a fragmented industry, and I expect newer — smaller, newer competition to continuously keep attempting or entering the category.

Ankit Kanodia — Smart Sync Investment Advisory Services — Analyst

Sir, one last question. In the — as you mentioned earlier that the value segment is growing much faster than the other segments, and one of our competitors is predominantly driven in the value segment. Are we also trying to focus more on that or we’ll continue to have our strategy of focusing on all the — the whole range of brands which we have?

Anindya Dutta — Managing Director

Absolutely, the second one as you said. We are obviously keeping all competition on what’s understanding, what they’re doing understanding, their strengths and the opportunities that we have in the market in terms of where we could kind of pursue something against competition, but largely, we are having with our own agenda that we have built and our agenda is some strong what opportunities we have with consumers, how can we service consumers better. And that’s the starting point. And everything else follows from there.

Ankit Kanodia — Smart Sync Investment Advisory Services — Analyst

Thank you. Thank you so much, sir, and all the best for the rest of the year, and Happy Diwali to all of you. Thank you.

Anindya Dutta — Managing Director

Thank you, and same to you.

Operator

Thank you. We have the next question from the line of Harsh Shah from Incred Capital. Please go ahead.

Harsh Shah — Incred Capital — Analyst

Hi, sir, Hi, ma’am. [Technical Issues] Thank you for that. [Technical Issues] between [Technical Issues] so basically, in this quarter you’ve kind of [Technical Issues] very good number on top line. And last quarter, you did kind of sustain that, you have an aspiration of 18% [Technical Issues] EBITDA margin in [Technical Issues], right? So my question was that….

Neetu Kashiramka — Chief Financial Officer

E can’t hear you. You’re not audible. Your voice is breaking.

Operator

Requesting the participant, Mr. Shah, if you could kindly come closer to the mic.

Harsh Shah — Incred Capital — Analyst

Hello? Can you hear me now? Am I audible?

Operator

Yes, it’s little bit better now.

Harsh Shah — Incred Capital — Analyst

Yeah, so basically my question was about the interplay between margins [Technical Issues] And if we were to look at this quarter, we have done fantastically well terms of top line, but however last quarter we did talk about an aspiration of 18% to 20% EBITDA margin in the second half. So how do we look at that piece, right? Do we kind of — I mean, how do [Technical Issues] Do we have a bucket share or do we have a hard target achieving that 18%, 20% margin?

Anindya Dutta — Managing Director

So, I think we need to see the margins with a slightly longer period in mind for the full year, and I think from a strategy point of view and where we are pursuing, both market share and margin, we have a good balance in our mind, how we are pursuing. And I would repeat again that we are trying to find the ammunition to fight the market share game, and that is not profit, but cost reduction, and that’s how we are inspired. That’s our agenda is. Now, in this quarter, you are right, this is our peak inflation quarter, and it’s also by seasonality, our lowest revenue quarter, therefore absorption of that revenue across all cost is lower and so on and so forth. So, I think the ambition of 18% going up to 20% continues, and that’s something that we will keep driving. There’ll be one-off quarters where it will not be on those lines, and therefore some other quarters will possibly — will make us to get the year to be at that particular number. That’s what I would like to position ourselves as.

Harsh Shah — Incred Capital — Analyst

Okay. So sir, basically the priority is on gaining market share, right? I mean, if you were to prioritize between gaining market share and achieving the marketing targets, we will set our priority to gain market share, right?

Anindya Dutta — Managing Director

As of today, if you have to — if you ask me to choose only one between the two, as of today, yes, it is market share.

Harsh Shah — Incred Capital — Analyst

Typically, a higher market share results in level of margins would be better than… You are right. Gaining high market share while maintaining profitability is what one would like to deliver. Okay, okay. Thank you so much, sir, and Happy Diwali to you and ma’am.

Neetu Kashiramka — Chief Financial Officer

Thank you.

Anindya Dutta — Managing Director

Thank you.

Operator

Thank you. We have the next question from the line of Jaiveer Shekhawat from Ambit Capital. Please go ahead.

Jaiveer Shekhawat — Ambit Capital — Analyst

Sure. Thanks. Thanks a lot for taking my question. Good evening, gentlemen. Firstly, can you tell me the volume recovery versus the pre-COVID levels, and also, how it would be across say, your value mass premium and premium segment?

Anindya Dutta — Managing Director

Volume recovery was also pretty good. Underlying volume growth was about 13%, 14% overall for the category in this quarter over the base quarter of FY20. And obviously, this was, like the value trend is showing, it is more higher given the value segment than in the mid premium. But overall, it’s about 13%, 13.5%.

Jaiveer Shekhawat — Ambit Capital — Analyst

Got it. And given the amount of revenue that you have achieved already in second quarter, I mean would you update your revenue items of about INR2,000 crores for FY23?

Anindya Dutta — Managing Director

Yes, I don’t see any reason why in the remaining quarters it will go down from the guidance that we had earlier given. So whatever has happened till now should stretch us to that limit. But yeah, I mean, I’m not fixated on the number, but directionally, it is getting better from when we started the year with, for sure. It could be even better than that.

Jaiveer Shekhawat — Ambit Capital — Analyst

Understood. And sir, any update on the Walmart contract, you would like to share about?

Anindya Dutta — Managing Director

I am not very sure where this is coming from. I have not spoken about this — which Walmart contract are you talking about? This has — actually, I had some other question somewhere before also but — is there a reference to this?

Jaiveer Shekhawat — Ambit Capital — Analyst

I think this is what we have picked up from our channel checks itself, but what do you have any update about any negotiations that are already underway?

Anindya Dutta — Managing Director

No, there is nothing much to talk about there. We are obviously in our — from OEM point of view, we are interested in possibly taking up a few, but it has to be only the larger accounts or bigger. That’s how we’re seeing it right now. And in that context, one of the illustrations or example could be Walmart. And we — our — the team is in touch with various — across, not only them, but across many other such larger potential customers. But that’s about it. There has been no discussions beyond that, which is worthy to talk about here.

Jaiveer Shekhawat — Ambit Capital — Analyst

Sure. And sir, one more question on your margins as well. I understand what you have guided in terms of your gross margin where you’d like to achieve it, but say given where — what we’ve seen with the crude oil prices happen as well, so they have corrected from as high as about $120 per barrel in June to about $90, currently. So purely from a RM pricing standpoint, what kind of GM expansion should we expect in the coming quarters because of that?

Neetu Kashiramka — Chief Financial Officer

I think we already answered that question, right?

Anindya Dutta — Managing Director

It is positive. I can’t tell you an exact number which is what is happening but I think it’s also important to see there are — there is a cycle in which we buy our raw materials, especially for soft luggage and all other continents which are the lead time — which makes any benefit or inflation that happens today, result into the business at a time later than — next three months or five months. So, to that extent, if there is something reducing right now in the environment, we will not get the benefit in the immediate quarter. So that’s where we are. So yes, when that reduces eventually, that will flow into the business in — maybe in five to six months’ time.

Jaiveer Shekhawat — Ambit Capital — Analyst

And sir, were there any price hikes further post the March hike?

Anindya Dutta — Managing Director

No, absolutely not.

Jaiveer Shekhawat — Ambit Capital — Analyst

Is that because probably customers are not willing to absorb further price hike or do you see no need to do that?

Anindya Dutta — Managing Director

We didn’t see any need. We had a strategy which we put in place in terms of our pricing and the cost reduction which that we wanted to do within our operations. So, and we are on track with that. So, it’s moving on the plan, so we don’t need to react in any way as far consumer price increases is concerned.

Jaiveer Shekhawat — Ambit Capital — Analyst

Mr. Anindya, if I may just sneak in another question on Uppercase. I mean we have looked at the new launches that they’ve done. So, looks quite fashionable and also 2,500 day warranty, and very attractive price points for soft luggage. So what’s your reading of the situation. I mean do you see the e-commerce space getting more intensified?

Anindya Dutta — Managing Director

Undoubtedly. I think e-commerce just makes the accessibility to consumers really easy and fast. You’ve got to spend a lot of money. If you burn cash, you will be able to get not only eyeballs, but also transactions. So — and definitely, something that we’re watching out on, whether it is Uppercase or players like Mokobara or there are many such players who are spending money with a range that is listed on the marketplaces. So we give it its due importance and we’re tracking it and making sure everything that we need to do to benefit our parts, we are taking those actions.

Jaiveer Shekhawat — Ambit Capital — Analyst

Sure. Thanks a lot for answering my questions. Happy Diwali.

Anindya Dutta — Managing Director

Happy Diwali.

Operator

Thank you. We have the next question from the line of Ankhil [Phonetic] Parekh from Centrum Broking. Please go ahead.

Akhil Parekh — Centrum Broking — Analyst

Hi. This is Akhil here. Thanks for the opportunity. Sir, first question is….

Neetu Kashiramka — Chief Financial Officer

Sorry, you are not clearly audible.

Akhil Parekh — Centrum Broking — Analyst

Better now?

Operator

Mr. Ankhil [Phonetic] Parekh, if you’ll come on your headset, it’ll be better. Your voice breaks up in between.

Akhil Parekh — Centrum Broking — Analyst

Is it better?

Anindya Dutta — Managing Director

Yeah.

Operator

Yes.

Akhil Parekh — Centrum Broking — Analyst

Okay. Sir, my first question is in other consumer categories what we are observing, the value segment is [Technical Issues] while the mid premium and premium segments are doing well, while on the contrary in luggage, over last few quarters, the trend is the other way around. So my question is, is it because the unorganized segment is struggling from a standpoint we of supply chain issues, and that’s why the branded players including us are gaining market share or is it the brand salience of the organized player is organically actually growing over last few quarters, and that’s where the market share gains have happened from unorganized to organized?

Anindya Dutta — Managing Director

No. I think what we need to understand when you’re comparing with any other category, the penetration of that category in India today. If it is highly penetrated category, then it’s very different from our industry and our category where the penetration is not there. And as and when more — new consumers, first time buyers, non-buyers for many years, as they come in, in the lower economic strata, as well as the town classes and all that, I think that is what is driving growth for value for money product range in this industry, and that is possibly bigger a source of growth than this all unorganized to organized. So that is growing and adding to that, for the organized players, the shift of unorganized, which is not able to meet that consumer demand with the same economic advantages that the organized sector used to have before. That is building into the organized space. So, I think the underlying source is penetration that is increasing in India, and therefore it is not temporary, it is going to be sustained for a good amount of time going forward because luggage as a category compared to many other categories, is not that penetrated. The usage of this, let’s say, in our middle class household Is largely when it is a location like a marriage and all that. The travel in India, occasional holidays and all that is prevalent at a certain economic and a certain social strata above that. And India is becoming more and more prone to indulge itself in traveling, better — more spending in marriages and all that, kids going out of their homes and studying in other cities, these are the bigger drivers which will drive the consumption of travel products and things like luggage and bags, and that’s the big opportunity going — continues to become bigger as an opportunity going forward.

Akhil Parekh — Centrum Broking — Analyst

Sure, sure. So this was helpful. So, essentially what we’re saying is, probably this trend is more sustainable and might not be sort of a one-off thing.

Anindya Dutta — Managing Director

Absolutely. And could be better than — the overall category and industries that you are comparing with, this may have — when you compare categories across, what consumers use, this will possibly have a more sustained growth overall for the industry than comparable or other categories.

Akhil Parekh — Centrum Broking — Analyst

Got it. And sir, mid premium, premium segment has started to — has started seeing goof traction. So is is it coordinated with opening up of — late opening up of international travel, and that’s why we are seeing more traction now? Yes, absolutely. And not only that, overall, I think, this segment has started a little late in terms of the leisure holidays and buying of products after that. So this is– this is definitely very, very robust right now in terms of this consumer segment starting to spend on travel and all other consumption cohorts that we cater to. There is an underlying demand which was always there. It has just got activated, may have got activated with a little bit delay than the value or the other part of the category. Sure, sir. Got it. This is helpful. Second question is on the international…

Operator

Mr. Parekh, I would request you to kindly come in the queue for follow-up questions.

Akhil Parekh — Centrum Broking — Analyst

Okay.

Operator

We have the next question from the line of Jignesh Kamani from GMO. Please go ahead.

Jignesh Kamani — GMO & Co. LLC — Analyst

Thanks for the opportunity. Just wanted the annual sales. For last year, it was mentioned that close to INR180 crores to INR200 crores was [Indecipherable] And out of this, close to INR100 crores [Indecipherable]. So just wanted to know what was the quantum of selling this quarter and other…

Anindya Dutta — Managing Director

Sorry, I don’t think I’m able to follow you.

Jignesh Kamani — GMO & Co. LLC — Analyst

Yeah, so it was mentioned in the guidance that close INR100 crores annual saving is possible because of the COVID related, you can say, all the cost and all, which is permanently sustainable, so which is INR25 crores in quarterly saving. So what was the actual saving happened in this quarter, for the first half because of all the cost control you did last year?

Anindya Dutta — Managing Director

You’re referring to a INR100 crores — I think the calculation and leading it to this quarter, we might find it difficult to answer exactly in what we’re saying. But, I think we need to understand in a way that whatever cost reduction we did as a — as one — with one stroke when COVID happened, and we said, some of it will come back when business come back. I think that has come back. And whatever we said at that point in time, we would not yet come back whether it was head count or some structural costs like offices and when terms of exclusive business outlets, all that has not come back. And those are the numbers I was sharing that we have not added while our total EPOs have gone up from — one second, I’ll give you the — out total EPO’s have gone up from, let’s say, 365 to 413. Only 4 have gone up in company owned stores. Rest everything has gone in franchises. So this is just a illustration of the fixed costs in rentals has not gone up. And therefore, we have retained it while the business has come back, and the exclusive business outlets is throughputting now a growth over even the base year.

Jignesh Kamani — GMO & Co. LLC — Analyst

Because if I take about INR25 crores annual savings from 2%, 2.5% of the quarterly EBITDA, but I’m not — we are not able to see the improvement. So, advertisement spend has increased drastically which has taken a bit? So, I think, has been taken care by that or how is the scenario?

Anindya Dutta — Managing Director

No, I think, you’re comparing at a static way of…

Neetu Kashiramka — Chief Financial Officer

FY22

Anindya Dutta — Managing Director

The cost, right? The cost also is being inflation, whether it is a people cost, manpower cost, and all that. So, it’s not an absolute of INR25 crores that can be compared like that.

Jignesh Kamani — GMO & Co. LLC — Analyst

Understood. Sure. Second question on the supply chain, sir. How is the number of SKU, you can say, in the range of our Bangladesh factory is able to manufacture right now? Because in the past, we had a issue where the — because of limited supply chain at the Bangladesh, we lost some of the revenue in India.

Anindya Dutta — Managing Director

Absolutely not. Bangladesh is able to make not only all the SKUs, but our Bangladesh facility is making all the five category of brands that we are in, whether it is hard luggage, soft luggage of price, backpacks, duffel bags and as well as ladies handbags. So in a short period up about two years, we been able to increase the Bangladesh operation not only in total volume but also in terms of its capability to produce all the categories that we sell. And therefore, with the category it comes designs and SKUs. So there is — now, it’s come up to the level what we had wanted it to be in terms of its capability. Yes, but as and when we innovate more and more, the number of SKUs and complexity keeps going up and that’s iss a challenge that would be there in any manufacturing sector, and therefore there is nothing.

Jignesh Kamani — GMO & Co. LLC — Analyst

Thank you. Last question is, still we are importing the trolley, right, from…

Operator

I would you to kindly come with follow-up question in the queue.

Anindya Dutta — Managing Director

Sure. Thanks a lot.

Operator

We have the next question from the line of Madhuchadan Baig. Please go ahead.

Unidentified Participant — — Analyst

Yeah. Hi. I have couple of questions. One is, as you rightly pointed out, some of these secular trends like people traveling more, marriage et cetera, discretionary expenditure, which is benefiting luggage, coupled with this trend of shift from unorganized to organized, given all these pieces, putting all this together, what is the expected normal trend of growth for this industry beyond FY23, because FY23 will have a little bit of pent up demand, et cetera, et cetera. So not really the number to look at from a long term perspective. So but for a long term perspective, for the next five years what is the kind of growth do you see for this organized industry? So that’s my first question.

Anindya Dutta — Managing Director

Okay. Well, there is always that element of projection and an assessment of overall economy, how it is growing. It is dependent on the macro situation in the country, but if I was to give that variable aside, I think getting to about 15% CAGR over the next five years for the industry is definitely a — definitive possibility. And I would think it should definitely continue to grow at that rate and maybe a little bit beyond. And this, I’m talking about more the luggage segment. I don’t think we have a full understanding from our side talk about to talk about the whole women’s fashion accessory or ladies handbag, at what kind of growth rate it will have. But more from luggage and backpacks, I think this is where we are looking at an industry to definitely grow at.

Unidentified Participant — — Analyst

And you, and efficient players would have some edge over this growth rate, right, that’s a correct understanding.

Anindya Dutta — Managing Director

That’s right.

Unidentified Participant — — Analyst

I have just two housekeeping questions. One is on the capex. What is the total capex plan for FY22 and FY23, and where would your own manufacturing stand — sorry, not FY22, I stand corrected, FY23 and FY24, and where would your own manufacturing plant at the end of fiscal ’23 and ’24?

Anindya Dutta — Managing Director

So, I will tell you about FY23. I think it will be in the in the order of magnitude INR100 crores in terms of capex. And purely own manufacturing, we are opening around 65 odd percent, till beginning of this year, and I think we will end up at, about 70%, 75% percent by the end of this financial year by FY23.

Unidentified Participant — — Analyst

And any outlook on ’24?

Anindya Dutta — Managing Director

Too early to say. We will work out the plan, and as I’ve said, the capex will be resultant of the growth that we are going to target which would be quite healthy and robust, and therefore, what part of that we would like to produce ourselves and what kind of investment would it need from — obviously plus plant and machinery is one, it could mean facilities and buildings and all that. So when we get there, we will kind of our number. We will not — we’re not in a stage to talk about it right now.

Unidentified Participant — — Analyst

Okay. Thanks a lot, all the best and wish you all a very Happy Diwali.

Neetu Kashiramka — Chief Financial Officer

Thank you.

Anindya Dutta — Managing Director

Thank you, and same to you.

Operator

Thank you. That was the last question. I now hand the conference over to Ms. Neetu Kashiramka from VIP Industries Limited for closing comments.

Neetu Kashiramka — Chief Financial Officer

Thanks everybody for joining the call. Happy Diwali. In case of any questions, you can connect with us anytime. Thank you so much.

Anindya Dutta — Managing Director

Thank you, and happy Diwali everyone.

Operator

[Operator Closing Remarks]