Rockingdeals Circular Economy Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Margins exploded on better deals and Barter: Gross margins improved ~1,800 bps and EBITDA margins ~1,000 bps, driven by better brand deals and the newly launched Barter vertical. Management refused to anchor expectations, saying margins could fluctuate anywhere from 14% to the highest.
• Revenue growth is 50% YoY, not a QoQ degrowth: Management pushed back on sequential comparisons, citing a 35:65 H1:H2 seasonality split driven by Diwali and Christmas. The full-year target remains at least 100% growth.
• The B2C pivot is accelerating: B2C contribution jumped from 1-3% in FY24 H2 to 20% currently, with a stated ambition to flip the mix to 80% B2C within an unstated timeline by opening ~100 franchise stores over two years.
• Fabindia is the marquee brand win: Rockingdeals is Fabindia's exclusive off-price partner, a relationship management calls one of its biggest brand associations. A pipeline of 20-plus further brand tie-ups sits behind it.
• What to watch next quarter: Whether the H2 seasonal surge materializes at the scale needed to hit 100% full-year growth, the pace of franchise store openings, and whether the e-waste license arrives to unlock the refurbishment vertical.

The Margin Story: Structural Shift or One-Off?

• The headline numbers: Gross margins improved ~1,800 bps and EBITDA margins ~1,000 bps, per an analyst's math. Management attributed the jump to better deals from brands, improved reach, and the newly launched Barter vertical delivering great margins.
• Barter as a margin driver: The Barter vertical has been "very, very exciting" and growing exponentially, though a deal with NewJaisa last year was one-off and not repeated this year.
• Management refuses to anchor expectations: Asked whether the ~24% EBITDA margin should be the base going forward, management said margins could go up, down, or stay the same depending on brand tie-ups and commitments, and declined to give a specific number.
• The inventory model supports higher margins: The business buys opportunistically (e.g., air conditioners in winter for summer sale at 20-30% margin) and holds inventory for slow rotation at higher margins. Winter wear collected over the year is now "totally flying."
• PAT-level floor offered instead: Management committed to a minimum 10% PAT margin as a worst case, adding "it will work much higher," but sidestepped a request for a fair-case EBITDA range.

Aman Preet: "It could be anywhere between 14% to whatever is the highest. I mean, I will not give you a number on that."

Seasonality and the 100% Growth Target

• The QoQ optics problem: Revenue showed a sequential decline that management insists is not degrowth. The liquidation industry runs on a 35:65 H1:H2 split, with Diwali, Christmas, Q3 and Q4 carrying the weight. Comparing H2 of last year to H1 of this year is "not the right comparison."
• The full-year bet: Management reiterated "at least 100% for sure" growth for this year and a 100% CAGR "for sure," with a plan for more than 50% top-line growth over the next 2-3 years.
• The gap question went unreconciled: An analyst noted that H1 performance implies only 30-35% growth and asked how 100% full-year growth squares with that run-rate. Management answered "it'll be the same" and "at least 100% for sure" without bridging the gap. [24-25]
• Consumer sentiment is a heads-I-win-tails-I-win dynamic: If products sell well, more inventory enters the seconds and refurbished category. If they sell poorly, excess inventory is available at great liquidation prices. Management framed this as a structural hedge.

Aman Preet: "The people who are not able to move it, they'll be giving great deals to just liquidate their inventory. And that is the reason why we feel that it's a win-win for us on both the way."

B2C Transformation and Store Rollout

• The mix shift is underway: B2C contribution moved from 1-3% in FY24 H2 to 20% currently, driven by group company mergers bringing stores under the same entity. The stated target is to reverse the 80:20 B2B:B2C split to 80% B2C.
• Franchise-led expansion, no debt: The plan is to open about 100 franchise stores over the next two years across the country, with at least 20 in the Northeast alone. Management explicitly ruled out raising debt or equity to fund this, since stores will be partner-funded.
• Northeast is outperforming: Northeast operations are doing better than North and better than expectations, with customers "accepting with open arms." A new warehouse-cum-retail store opened in Guwahati three months ago.
• Mumbai and Himachal stores opened in the last 2-3 months, adding to the B2C footprint.
• Events vertical launched: A new events vertical has started and done "very, very well," with customers coming in great numbers. [20-21]

Aman Preet: "I would love to I mean, as my brand name, Rockingdeals, I would say it's going rocking."

Brand Partnerships and the Moat

• Fabindia is the flagship win: Rockingdeals converted Fabindia with a tie-up and brand agreement updated at the Stock Exchange. Fabindia's excess inventory will be available at Rockingdeals, and Rockingdeals is their only off-price partner. Fabindia is not opening its own factory outlets. Management called this one of the biggest brand associations signed since the last call.
• Other partnerships secured: Bajaj Electricals for over two zones, rights for Skechers, Hindware, Marshall, Dyson, and Boat, plus preferred partner status with FabIndia. Agreements are also in place with Puma.
• A pipeline of 20-plus brands sits behind these wins, though management did not answer how many of the previously announced 20-brand pipeline have been converted.
• Trust is the entry barrier: Management argued there is no other brand in India doing this business for a long time. The most crucial thing is trust that products are original, genuine, and sourced from brands. Brands want a channel where discounted inventory does not reach their regular retailers and spoil the distribution model. Rockingdeals sells to end customers and partners who use the products, so it does not disrupt distribution.
• The market is 99% unorganized: Management estimated India's off-price retail market is 99% unorganized and 1% organized, with Rockingdeals as the only organized player.

Aman Preet: "There is no other brand, brand per se in India, which has been doing this for a fairly long time. In this line of business, the most crucial thing is the trust."

New Verticals and International Expansion

• Dubai entry in motion: Rockingdeals is setting up a company in Dubai to enter agreements with Middle East e-commerce companies for excess inventory and certified refurbished supply. The biggest e-commerce websites in the region have been inviting Rockingdeals to supply to them and to liquidate their excess and customer returns.
• Furniture vertical started and has already seen great sales.
• IT and Telecom vertical restart planned: Rockingdeals will partner with global brands that want them to sell their inventory.
• FMCG vertical restart planned: Products closer to expiry, paused earlier, are being brought back due to great customer traction.
• E-waste license applied for: The company has applied for the e-waste license and expects it "very, very soon." They are already refurbishing inventory under existing e-waste norms.
• Joint venture with UTC Digital Technologies: Rockingdeals holds a 58% stake in an entity focused on reverse logistics, trading, and refurbishment.

Cash Flow, Inventory Risk, and Competitive Position

• Cash flow from operations is negative and will stay that way: Profits are reinvested into inventory as the company opens more franchise stores. Since the company is growing at 100% each year, the increase in inventory is not less than internal accruals, making positive cash flow from operations difficult for at least a year or two.
• Inventory risk is managed by experience: The company has learned from mistakes over a very long time. The formula is buying at the right price, grading at the right price, and selling at the right price. The team is the most experienced in the country, with the first employee still working for them.
• No bad debts: The business is mostly cash and carry with maximum payment time of one month. Management stated they have never had any bad debts. [22-23]
• No peers at scale in India: Management sees no one doing this business organizedly at this scale in India. On global peers like Poshmark and Brands For Less, the ambition is to be "much, much bigger than all of these companies combined," citing India's hunger for deals.
• No inorganic growth planned: Management declined any plans for acquisitions or inorganic growth.

Aman Preet: "India, once people do get to know that, looking at the economy that we are in the hunger for deals that we have as being Indians, we see ourselves much, much bigger than all of these companies combined."

Guidance & Commitments

Key Metrics