VIP Industries : Luggage

Q2 FY25 Concall Summary
Business Updates

• In past six months the inventory has reduced by Rs 174 crores and market share has improved from 36% to 40%
• Volume growth was at 18% yoy for Q2 FY25
• Ecommerce continues to perform well with over 50% growth while traditional offline channel continues to under perform
• Hard luggage continues to be the fastest growing category with over 60% of overall revenues contributed from this category
• The Bangladesh factory is running well and should come in profit from Q3 onwards

Participants

Avendus SPARK

PL Capital

Centrum Broking

Investec

Sunidhi Sec

B&K Sec

QnA

• The inventory was liquidated at a lower cost because it was old inventory
• Going forward will focus disproportionately on brand VIP which has 800 bps higher gross margin than Aristocrat
• There are a lot of new D2C players entering the industry and they have a lot of money to burn which incumbents don’t have
• One more quarter of inventory woes remain post which will return back to normal
• For offline channels will give additional warranties and especially for VIP brand will keep pricing discipline even on online portals
• The quantum of slow moving inventory in soft luggage along with back packs and duffel bags is around 7 lakh units with value of around Rs 180 crores
• Modern trade has seen some de growth while ecommerce channel has grown much faster
• In H1 volume growth is 8% while value growth is 0% and this difference will narrow quite a lot in H2
• For FY25 clean up of the inventory is a must otherwise it will entail additional warehousing costs and also lead to a risk of inventory write off
• Once inventory liquidation is complete will focus more on profitability
• The BCG project is a 15-month project and two waves are over and currently in the third wave and the additional two waves will happen post the current one. This project should lead to a benefit of Rs 250 crore to the bottom line
• The insurance companies have not yet indicated anything much on the Bangladesh claim and small amounts are coming every quarter with Rs 5 crore expected in Q3 as well