The D2C tea brand based in Delhi, Vahdam Teas, has witnessed considerable betterments in its earnings over the fiscal year 2024. The company was successful in reducing losses by a remarkable 68%, to the tune of ₹17.7 crore from ₹55 crore seen in the previous fiscal year. So, the move showcases Vahdam’s strategic efforts toward betterment of unit economics while flying in a competitive market landscape.
PC: Indian Retailer
In FY24, revenue from operations for Vahdam Teas grew by 10.6% to ₹225.2 crore, compared with ₹203.6 crore in FY23. It seems that the growth pattern shows the best response from the market, as the company continues to directly source premium tea and spices directly from farms and estates across India. Vahdam sells its products in the local market as well as in international markets, such as the USA, Canada, and Europe.
The majority of Vahdam’s operating revenue, 99%, comes from product sales. The United States is the largest revenue contributor. The US market accounted for 68.5% of total operating revenue, which increased by 12% to ₹154.2 crore. Revenue from India increased by 18% to ₹14.84 crore. Europe and other regions contributed ₹37.4 crore and ₹18.8 crore, respectively, and grew steadily at 5-6%.
Effective cost management has helped the company narrow its losses. Vahdam reduced its total expenses by 4.7%, from ₹265.5 crore in FY23 to ₹253 crore in FY24. Advertising expenses saw significant cuts, falling by 18.9% to ₹50 crore. Freight and forwarding charges declined by 7% to ₹68 crore. Despite significant increases in material cost at ₹47 crores, employee benefits surged by 18.4% to ₹29 crores as the company focuses on retaining talent, but balancing overall costs.
Despite the decrease in losses, Vahdam Teas still faces challenges, as shown by its negative Return on Capital Employed (ROCE) and EBITDA margin, which was at -13.2% and -4.26%, respectively. The firm’s expense-to-earning ratio was recorded at ₹1.12, which means that the firm is still working to balance its cost with earnings.
As of March 2024, Vahdam had ₹142 crore in current assets, which includes ₹83 crore in cash and bank balances. This solid financial position will serve as a cushion for future investments and growth initiatives. The company has raised a total of $39 million in funding to date, with notable investors including Fireside Ventures, Sixth Sense Ventures, and IIFL Asset Management.
Vahdam Teas reflects an effective set of business and operating strategies. This is evident in a dramatic reduction of losses and sustainable growth in revenue. The emphasis of the company on premium products, direct sourcing, and appeal to consumers mainly in international markets is a critical aspect. Moving forward, in order to capture increasing demand for quality tea and spices, it has the competitive edge to refine cost structures and widen its market share. The positive financial trends suggest that the brand is on a good path to becoming profitable and further improving its competitive position in the global tea market.
