AceVector Limited (ACEVECTOR) Q2 2027 Earnings Call Transcript

Good day, everyone. All participant lines will

remain in listen-only mode during the presentation, followed by a Q&A session. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference or meeting is being recorded. I now hand over the conference to Mr. Rishi Junjanwalla from IIFL. Over to you, sir.

Thank you. Good morning, ladies and gentlemen. On behalf of Ace Vector Ltd. and IIFL Capital, we welcome you all to the company's Q1, Q2, and H1, FI27 earnings conference call. Joining us today are Mr. Kunal Behl and Mr. Rohit Bansal, co-founders and joint managing Just as a disclaimer, today's conference call may contain forward-looking statements reflecting the company's current views and expectations. These statements are subject to risks and uncertainties and do not represent guarantees of future performance. I now invite Thank you,

Rishi, and a very warm welcome to everyone joining us for our first earnings conference call. This is a very important milestone for us, and we are very pleased to begin this dialogue with our investors and the analyst community. We look forward to using these interactions to share our progress, discuss our priorities, and answer your questions. For our inaugural call, we thought it would be useful to do a one-time audio-visual presentation that introduces our business in greater detail and gives you a glimpse of how our platform is built around the needs of our consumers. Today, we will spend a little more time on Snapteam, taking you through the business, its performance, and our priorities ahead. We will also cover key updates on Unicommerce. As a publicly listed company, Unicommerce shared detailed updates through its regular disclosures. You can refer to its earnings call held yesterday and the earnings materials on its website for further details. We will also be happy to answer questions on Unicommerce during the Q&A.

Let me begin with Ace Vector.

We have two main businesses, Snapteam, which is a value-focused e-commerce marketplace, is connecting consumers with sellers offering affordable fashion products, and Unicommerce, an AI-first e-commerce enablement platform that helps brands and retailers to manage their business operations efficiently in an increasingly complex business environment. Both businesses share three core principles. First, asset-light operations, without the need for investing in infrastructure development. Second, strong operating leverage, a lean fixed cost base that allows growth in scale to translate into improved profitability. And third, a clear focus on building sustainable, profitable businesses. I will now hand over to Achim to take you through the details of the Snapdeal business, following which Kapil will share more about the Unicommerce business.

Thank you, Kunal, and good morning, everyone, on the call. To start with, Snapdeal's purpose and vision is to democratize trendy fashion for a billion Indians by being the platform of choice for trendy, quality, and value fashion for the aspiring consumers of India. We'd like to show you a short film on why we believe in this opportunity. Snapdeal is building the go-to online fashion destination for Indian value shoppers. The Indian fashion market is broadly divided into three distinct price segments. At the lower end of the spectrum is the entry-level clothing segment below the 300-rupee price point. The target consumers here are at the bottom of the affordability spectrum, with many of them having recently moved from used clothes to buying their own new clothes for the first time. These customers are seeking the lowest price option for their clothing needs. At the top end is the branded fashion segment above the 800-rupee price point targeting the brand-conscious affluent customers. And then there is the last middle, targeting the aspirational buyers who are seeking trends, quality, and value all at the same time. They can afford to trade for better quality than offered by entry-level clothing, but aren't willing to pay the premium of the brands. This is the value-conscious segment within the 300 to 800 rupee bracket that Snardin serves distinctively. Customers are young, aspirational shoppers, with Gen Z constituting nearly

two-thirds of our new customers in H1 and growing in prominence over the last four years.

In addition, 80% of our sales come from outside metros, reflecting the larger India opportunity in value fashion. Talking about the Snapdeal proposition in further detail, there are three distinct pillars of our strategy. FashionX, CustomerX, and CreatorX, with the X denoting the AI-first approach we have taken in enabling each of these pillars. Through FashionX, we offer wide and trendy fashion at value prices with a focus on quality and curation. Through CustomerX, we offer an AI-powered shopping experience that enables delightful discoveries and engagement for our customers. And through CreatorX, we enable influencer-inspired content discovery and regional demand generation to our creator network. With FashionX, fashion categories now constitute nearly 68% plus of our business. With 91% year-on-year growth in our active fashion listings, reaching nearly 95 lakh listings in H1, our fashion envy has grown by a healthy 31% year-on-year in H1. The other core element of our proposition is curation and quality management. We curate sellers from some of the top quality fashion manufacturing hubs of India. As sellers come on board, our AI albus helps with initial screening and scale up with support of customer feedback and ratings, reviews, and returns information. Only those sellers whose assortment stays above a minimum quality threshold of the platform are allowed to prosper further, while others are disabled via AI algorithms. Even on an ongoing basis, these algorithms ensure that no active seller operates below the desired quality threshold. This has resulted in a consistent 4 out of 5 star product ratings over the last 3 years, along with a healthy ratings on Google Play Store and Apple App Store for SnapList. The final lever for FashionX is our stellar enablement and growth engine powered by AI tools. As an example, our AI agent, SnapList AI, provides for fast catalog onboarding, image and catalog enrichment, and listing quality check and corrections. This has resulted in a 90% reduction in our catalog onboarding time and 2x growth in our active seller base in the last one year. Moving on to our second pillar, Customer X. We have built a portfolio of AI agents that help shoppers discover and buy better, as well as ensure higher success of deliveries, starting with inspiration and discovery. Second, StyleMatch AI agent tailors fashion discovery to each shopper's face and behavior by building personalized storefronts. As you can see on the right, there are distinct product feeds offered to different customer personas. This has resulted in 81% plus of orders influenced by AI power discovery on the platform. Second is our simplified search experience. Our Snap and Shop agent allows customers to take any image that they may have pinned or saved from social media or otherwise to find similar-looking products across colors, patterns, and styles. This is a popular search method among gently shoppers, driving four-row-plus monthly product discovery views using image searches on the platform. Our conversational search agents enable customers to search in natural language using voice or longer text queries with vocation preference. AI contextualizes these natural language queries to provide the most relevant results fitting the customer's intent. Take a look at this exam. A pinpoint AI agent enriches customer addresses with typos and limited information using geolocation data to reconstruct a better quality address, improving the delivery success rate. The Retina AI agent flags orders with high risk of returns or suspected fraud. In the last 12 months, we have had 32 lakhs of such high-risk orders blocked by the agent before shipping itself. Lastly, on Customer X, we have our Support AI agent, FIA AI, that supports buying and transaction queries, As of now, nearly 89% of our support queries are resolved by SIA AS agent.

To illustrate the experience, we'll play this short audio clip recording for you.

Good morning, everyone, and welcome to the call.

Thank you.

We'll move on to our third pillar,

Quader X. Through our creator network, Snartreel Play Clan, we offer relatable regional fashion content to inspire discovery, build trust, and drive purchases. We have recently partnered with YouTube Shopping to add more fuel to this engine. We are rapidly scaling our creative content muscle that's already garnering 15 crore-plus video views across YouTube and Instagram and built a large active community of 1.1 crore-plus followers across our social handles.

Moving on to our business model.

Snapdeal is an asset-light, zero-inventory, 100% third-party logistics-led supply chain business. We offer 0% commission to our sellers, enabling them to provide the best price-value equation to our customers. The platform maintains a healthy contribution margin of 10% of NMV, with a nearly 400-rupee ASP. This results in a healthy unit contribution margin of 40 rupees on every order. This, along with a highly optimized fixed-cost business, provides for a strong operating leverage with growth. Coming to our performance, as I mentioned earlier, fashion NMV grew by 31% year-on-year in H1. App-delivered units grew by 23% year-on-year. Overall delivered units grew by 16%, while the overall NMV grew by 10%. Now, the overall growth looks slightly moderate due to a shift in festive timing from Q2 last year to primarily Q3 this year, which is also why we are seeing a very encouraging growth in October, with the first 15 days seeing a unit growth of 60% year on year. Both are customer-based and their purchase frequency has been rising steadily. In H1, we saw a 12% year-on-year growth in annual transacting customers to cross 1.3 crore customers, while the purchase frequency grew by 11% to 4.1 orders per customer. The good news is the progression in purchase frequency is across customer cohorts. Existing customers are placing orders more frequently over time, As visible on the chart, moving from left to right, the frequency is going up, as you can see, supported by a sharper value fashion focus and improving platform shopping experience. In addition, newer customer cohorts are placing more orders in their first year, as is evident by moving from top to bottom over the years on the chart, demonstrating stronger engagement from the outset. Also, the purchase frequency of our top 10% customers has grown from 13 times a year in FI24 to 17 times a year in FI26, indicating the potential ahead for the platform. To conclude, our growth flywheel is pretty straightforward. By continuing to improve our trendy value fashion curation and AI-powered shopping experience, we drive higher purchase frequency from our repeat customers. With nearly 80% of our volumes driven by repeat purchases. This growth in volumes creates a large contribution margin pool backed by a healthy unit contribution margin of 10%. We take a part of this pool and reinvest it in our brand and creator network to acquire new app customers, which over time become repeat customers, fueling the flywheel further. To sum it up, we are very excited to build India's go-to trendy value fashion destination for the aspiring fashion-conscious shopper and heading in that direction with focus and with shortening. Thank you for hearing me out. I will now hand it over to Kapil to take us through the Unicommerce business update.

Thank you, Achim. Good morning, everyone. I'll take you through how Unicomment serves as the backbone for e-commerce brands and retailers by providing end-to-end automation across the entire e-commerce value chain. Our focus is on helping brands and retailers sell more, fulfill orders better, and be operationally efficient. We are a one-stop shop for e-commerce enablement, spanning marketing automation, operations automation, and logistics automation from order creation to delivery. ConvertWay is our marketing automation stack, driving higher conversions through messaging. UniWare drives operational efficiency by real-time order of station and technology to manage warehouses. And Shipway helps with courier aggregation and automating logistics operations. AI is pervasive across all three business units with Catalyst AI in ConvertWay enabling AI voice calls to engage with shoppers. We have a robust client base of 8,500-plus clients across UniWare, Shipway, and Convertway, Our platform is sector and scale agnostic. We work from fashion to beauty, from health and nutrition to home services, and a lot more. Our clients range from a large enterprise processing 5 million orders a month to a SMB processing only 500 monthly orders. We also have international clients across the Middle East and Southeast Asia with presence across six countries outside of India. Coming to our financial performance, Unicommerce continues to demonstrate a combination of growth, profitability, and operating leverage. For H1FI27, revenue grew 15% year-on-year to 110.4 crore rupees compared with 96.3 crore in H1-FI26, delivering consistent double-digit growth across both the platforms, UniWare and Shippin. Our is a pure SaaS business model, with entire revenue coming purely from platform usage. Our pricing is usage-linked, that is, our customers share for the number of transactions they process through our platform. Given that we charge per transaction, we are inherently set up for growth in line with the growth of e-commerce transactions in the country. Over the last three quarters, we have stepped up investments in our products, people, and market reach to support our next phase of growth, which reflects in adjusted EBITDA moderation compared to last year. But this has helped lay a strong foundation, which gives us the confidence of delivering 15%-plus growth in UniWare and 20%-plus growth in Chippewa from quarter-four FY27 onwards. We also expect the pace of incremental investments to moderate in the second half of the year, ensuring that we demonstrate higher profitability and stronger operating leverage in H2 FY27. We are very excited about the growth flywheel we have been able to build in our business. The continuous profitability and strong operating leverage generated by our business directly funds our product innovation. By continually expanding our AI capabilities and platform use cases, we drive new client acquisitions as well as deeper cross-sell and up-sell opportunities across our existing customer base. The reinvestment cycle ensures that Unicommerce remains the premier AI operating system for commerce. With that, I'll hand it over to Rohit to talk about the overall H-Picture synergies.

Thank you, Kapil. At H-Picture, at a group level, we see very strong energies across both businesses, which help us leverage our group structure better. It starts with shared expertise of corporate functions, functions like finance, legal, HR, which provide both the businesses access to best-in-class talent. Secondly, it also provides strong cost synergies, as most of our contracts are negotiated at a group level, providing the benefit of cost efficiencies and scale efficiency to both the businesses. We have a luminary board chaired by Mr. Lars Kamath and Mr. Akhil Gupta, who has been on our board for over a decade, and will follow best if you ask the world's characteristics. I now hand it over to our CFO Bharat to talk about our financial results.

Thank you, Rik. Turning on to our consolidated financials, we delivered healthy revenue growth in H1FH27, with revenue from operations of 285.5 growth, up 17% year-on-year. Adjusted EBITDA loss has slightly increased. For Q2F527, revenue was 151.2 crores, up 17% year-on-year from 129.3 crores. Adjusted EBITDA loss of 8.6 crores against loss of 2.2 crores in Q2F526. Our focus on profitability is visible sequentially, a disability loss narrowed by more than 50% from Q1, from about 18.3 crores to 8.6 crores, even as we absorb festive marketing spends in the quarter. I know, I hand it over to Rohit.

So to summarize, thank you. To summarize, we have two main businesses at HBetker. One is Snabby, which is a value-focused e-commerce marketplace focusing on delivering trendy fashion to Gen Z consumers in India, and Unicommerce, an AI-first e-commerce enablement platform that helps brands and retailers manage their business operations efficiently in an increasingly complex business environment. As Kunal had mentioned earlier, both our businesses operate on three core principles of having asset-like operations, which means we have very low infrastructure requirement to scale these businesses. We have very strong operating average. We operate in a very lean, fixed-core space, which allows these businesses to scale with improving profitability. And thirdly, we are very focused on building sustainable, profitable businesses and delivering growth with profitability.

Thank you very much. We will now begin the question-and-answer session. Participants connected through audio call may press star and 1 on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Participants connected through webcast may click on Ask Question on Zoom tab, and accept the prompt and join via Zoom, and click on the raise-hand icon to ask your question. Kindly accept the prompt shown on your screen, unmute your audio, and ask your question. Participants are requested to announce their company name before proceeding with their question. We request participants to restrict to a maximum of two questions at a time.

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Anyone who wishes to ask a question, may press star in one on their test on telephone. Participants connected on the webcast may click on ask a question on Zoom time to ask their question. From the line of Refuge and Junwala, from IFM, please go ahead.

Yes, thank you. Just a couple of questions. Are you able to hear me properly?

Yes, sir.

Okay, great. So, just in terms of, you know, you've talked about investing in, you know, growth in the first half. Just from a perspective of, say, customer acquisition costs or cohort payback, can you comment a little bit on how that is evolving, especially for the newer app customers, and also if you can give some color on repeat purchase economics?

Okay, thanks for asking that question. So, firstly, I'm assuming you're talking about Snapdeal platform. The marketplace sees a very healthy contribution of repeat units. Nearly 80% plus of our volumes are coming from our repeat purchases. Our frequency of customers has been growing consistently. We've seen an 11% year-on-year growth in H1 of our repeat frequency. And as I mentioned on the call, we are seeing this increase in frequency from all customer cohorts, from existing customers as well as from the new app customers who are coming and purchasing every year with us. Our top customers by 17 times a year, and that has also grown from 13 times a year a couple of years ago. When it comes to our new customers, we see a healthy tack, and our payback period is typically between 12 to 18 months on the platform.

Thank you.

And can you spend a little more time, I think you talked about AI-led discovery. Can you talk a little bit about your AI initiatives, where there is demonstrated measurable outcomes and which ones remain in early stage investment phase?

I mentioned, I think we have built a portfolio of AI initiatives through multiple AI agents across our fashion curation, stellar enablement and growth, our platform discovery experience, customer support, better delivery success rates, as well as enabling our creators to find the right products to serve our customers. So it's a plethora of initiatives. Some of the key highlights which I had mentioned earlier on the call, for example, are search initiatives. Conversational search is a pretty popular one where people are typing in natural language queries, as well as writing long keyword queries on the text, which the AI personalizes and finds the right fit for the customers. We're seeing very good traction over there. We're seeing one broad plus monthly conversational intent-driven searches on the platform. Our visual search also is pretty popular amongst our younger customers, where people take pictures and upload on the platform and find similar styles, similar trends, similar looks. That is receiving four broad plus monthly product discovery views from the image search, the snap and shock that we spoke about.

We also, you know, I think we also talked about our SnapList AI agent, which is an AI agent we built to help faster onboarding of sellers. I think that's shown very visible source where our active sellers have doubled year on year. And our sellers now see a 90% reduction in onboarding time. And lastly, I think, I mean, we talked about a few more, but I think our CI AI agent, which handles customer queries, The other important

thing to remember, and that is the unique difference about the platform versus some of the other marketplaces, is that Snapdeal being a fashion-first platform is also a lot more inspiration and discovery-led platform. And the personalization that we offer to the style match AI is a big driver of the customer experience and engagement, which is why 81% plus of our orders are influenced by AI discovery outside of search. And that's a very important point for a fashion platform like ours.

I think one of the other important things is that at least given we are largely selling products which are not well-known brands, these are what we call labels, the whole fashion-buying experience in some ways has to be reimagined. Because consumers don't know these brands and don't know whether this brand will fit them or not fit them. How will it look for them? Because it is not something they have probably experienced before. Hence, AI is a very powerful tool, even on a going forward basis for us, to truly reimagine a fashion buying experience, particularly in an unbranded segment that Snapdeal focuses on. So, suffice to say that this is just a big name. There will be many more similar enhancements and AI initiatives we will have going forward as well.

Thank you very much.

Participants on vAudiobridge, may press star in one to ask the question. Next question is from the line of Avin. Kindly announce your company name and proceed with your question.

Avan, can we accept the prompt?

Unmute your audio, announce your company name, and proceed with your question. Yes, sir. Go ahead. Sir, sorry to interrupt. Your audio is not clear. Can you speak through the handset, please?

Yes, sir. Can we speak through the handset, please?

Yes. Thank you.

Hello. It's very good.

Is your question complete? Or is there anything?

I am working with my office. We have 10 members. We have all online shopping. We have recommended them. But now, we have to request them. We have to request them.

Thank you. Thank you.

Thank you.

Participants on the audio bridge may press star and one on their test on telephone to ask your question. Participants connected on the webcast may click on Ask Question on Zoom tab and accept the prompt and join via Zoom and click on raise an icon to ask your question. Next question is from the line of Ankur Pant. Can you announce your company name and proceed with your question?

Hello, this is Ankur from IIFL. Am I audible? Yeah, go ahead. Yeah, sir, my first question is that although Snapdeal is in multiple categories and obviously fashion is the biggest category with 65 to 70% of NMV, There was a lot of focus and emphasis that you laid on the fashion category in particular. So, is it that this would be the clear propeller as we go forward? Is there a shift in strategy where we are prominently focused only on fashion and the BPC and home and general merchandise are taking a backseat as of now? How are you looking at this?

Sure. Thank you for asking that question. It's a good question. We have seen a very strong growth in the fashion business for us by 31% year on year in H1, as you would have heard on the call. In the last Q3, last year, we had accelerated our fashion category even further by scaling up our assortment, our fashion buying experience, which has resulted in this continued progress in the fashion business, where our share of fashion business has moved from 57% last H1 to 68% plus in this fiscal year, H1. Our entire business is built around three primary categories, fashion, home, and beauty and personal care. We expect the portfolio of this category share to be largely in the same ballpark that it is today. And the overall business we expect to continue to grow in 30s as we move forward.

I think one more thing to add here is that, you know, if you look back to the origins of e-commerce, even 10, 12, 13 years ago, when branded e-commerce took off, you first had the horizontal selling all categories emerge. And then after that, verticals emerged. And there was a lot of disbelief in the early days of e-commerce that cannot vertical. What is the need of a vertical e-commerce platform when a lot of the merchandise is available on horizontals? But over a period of time, the verticals have demonstrated successfully in the branded space that they can offer a much more purpose-built experience to a consumer looking for products from only that category. We feel that in the value segment, we are on that same path, where while there may be horizontals in the value segment, We believe that verticals in the value segment, particularly around fashion, because that constitutes for a large portion of value commerce, purpose-built fashion-buying experience platform like ours will only gain in salience. The same way we saw purpose-built branded fashion platforms gain in salience about starting 10 years. And hence, we believe that we are at an important moment in time in this market with a business that is, with a platform fully built out, with a large fashion assortment, with very steady and healthy growth rates of 31% year on year in our fashion business. We feel we are well positioned to capitalize on this growing and large opportunity.

Sure. Thank you. And my second question is that you've highlighted that the festive season had some impact on the growth, the fact that festive season has been pushed to Q3 27 this time. So if you could provide any quantification around what would have been the likely impact because of this on the overall growth, that would be very helpful.

Yeah, I think the best way to look at it is when our Q3 results are out, to look at Q2 and Q3 together. But the early indicators, as I mentioned on the call, is that in the first 15 days of October, year on year, we have seen a 60% volume growth on the platform. So it's a healthy start. And once the results are closed, by the end of the quarter, we'll have a full picture on how it could look like.

Sure. That would be all from my side. Thank you so much, and all the best.

Thank you. Thank you. Thank you very much. Next question is from the line of Neil Bell from Asian Capital.

Please go ahead and proceed with your question. No response from the participants.

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As there are no further questions, I now hand the conference over to Bharat sir for closing comments.

Thank you everyone for joining the call today. We hope you have been able to address your queries. For any further queries or clarifications, please reach out to us at investrelations at acevector.com. Thank you once again and have a good day. Wishing everyone a very happy Diwali in advance.

Thank you very much. On behalf of Ace Vector Limited, that concludes this conference and IIFL. Thank you for joining us and you may now leave the meeting. Thank you all.