The 24-year-old became the club’s second deadline day signing when he joined in a £4.4million move from Caen.
Guilbert will return to the Ligue 1 outfit for the remainder of the season, before heading to Villa in the summer.
Boss Smith, who went to watch Guilbert in person before committing to the deal, believes the club have signed a player with huge potential.
He said: “We want players we can develop and add to their market value. We thought he would be a bargain in the current market today.
“A young player who is playing regularly in the French top league.”
Smith went to watch Guilbert in Caen’s 1-0 defeat to Marseille earlier this month and liked what he saw, despite the former Bordeaux man getting sent-off after just 51 minutes.
He joked: “The first yellow was a little harsh. He will be a good signing for us.
“When he comes to Birmingham he will be Fred Gilbert! But for now, he’s Freddie Guilbert.
“He’s a young player who was highlighted to us by our French scouting team as well as (sporting director) Jesus Garcia Pitarch.
“He’s one for the future of the football club.
“It’s important that we’re planning for future as well not just now. He’s got an awful lot of potential and a lot of development in him.”
Explaining the reason for Guilbert returning to France for the remainder of the season, Smith said: “It was part of the agreement with Caen.
“They’re fighting a relegation battle and want to keep their best players,
“We just felt that we were okay to let him stay there and play until the end of the season. He can brush up on his English skills, too!”