Vakrangee LtdQ3 FY20IT - Services

Vakrangee Ltd

Q3 FY20 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 2

→The company aims to grow from 10,000+ operational outlets to 25,000 outlets by FY2021 and targets 3,00,000 operational stores by 2025.
→Achieving 25,000 outlets is seen as a milestone that will bring economies of scale and strong pan-India brand awareness.
→Strong operational growth has been witnessed with an increase from 3,504 outlets in FY2019 to over 10,000 in FY2020.
→The company expects higher absolute EBITDA with stable margins (15-16%) as store count increases to 25,000.
→COVID-19 impacted H1 FY2021, but outlets provided essential services, improving brand visibility during lockdown.
→Post-pandemic normalization is expected to drive improved business growth momentum.
→Expansion plans include leveraging new services like telemedicine and exploring agri-produce trade through the franchise network.
→The robust franchisee model and ongoing partnerships improve scalability without the need for debt.

Margin guidance

Category 3

→The company provides operational guidance but does not give financial guidance.
→Strong operational growth observed: from 3,504 outlets in FY2019 to 10,000+ operational NextGen outlets as of FY2020.
→Target to reach 25,000 operational outlets in FY21 with strong visibility.
→Sustainable EBITDA margins expected to remain between 15-16% long term, with higher absolute EBITDA as store count increases (Reply 3, Page 13).
→Profit After Tax (PAT) increased by 182% in FY2020 due to normalized gross margins and cost control, signaling improved profitability.
→COVID-19 impacted H1 FY21, but services were operational and brand/store awareness increased, positioning for improved future financials (Page 12).
→Franchisee profitability improving with faster break-even of 18-24 months due to new Kendra models (Page 9).
→Long-term vision to scale store rollout leveraging economies of scale and brand awareness to meet growth targets (Reply 5, Page 14).

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Fundraise plans

→Vakrangee Ltd stated that they have an asset-light franchisee-based network business model.
→The company is adequately resourced to scale its network without the support of any debt.
→No mention of current or planned fundraising through debt or equity was made in the provided transcript.
→The company leverages a strong balance sheet to support vendors but did not indicate any new fundraising plans.
→Thus, as per the AGM transcript, there are no current or future fundraising plans through debt or equity disclosed.

Order book

The transcript does not explicitly mention current or expected orderbook/pending orders in precise terms. However, relevant information related to operations and scale-up includes: - Over 10,000+ operational NextGen Vakrangee Kendras as of FY2020. - Approximately 24,000+ outlets are currently under onboarding, with around 15,000 expected to become operational within the next 6 months. - The company has prepared software and hardware procurement for another batch of 25,000 Kendras, indicating readiness for large-scale rollout. - Franchisee network scaling is ongoing to achieve long-term targets of 25,000 operational stores (short-term) and 3,00,000 stores by 2025. - Supply chain management and vendor support are in place to meet hardware requirements despite COVID-19 challenges. No direct figures on orderbook value or pending order monetary terms are provided in the transcript.

Capex plans

Yes

→Vakrangee has secured software and hardware procurement for another batch of 25,000 Kendras, ensuring supply chain stability and pricing advantage (Page 9).
→The company is exploring new business opportunities leveraging its NextGen Vakrangee Kendra network, including potential roles in farm produce trade and distribution following the new Farm Bill legislation (Page 10).
→Vakrangee is expanding its NextGen Kendra network with over 10,000 operational outlets and 24,000+ outlets under onboarding, targeting 25,000 operational stores in FY21 and eventually 3,00,000 by 2025 (Pages 5, 14).
→Partnership with Union Bank of India to provide collateral-free loans under the Union Mudra Scheme to franchisees, supporting franchise expansion (Page 8).
→Capital expenditures focus on scaling the franchise model without debt, indicating strategic investment in organic growth (Page 10).

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