Capitaline

Analyst Meet / AGM 27-May-20

Conference Call

VIP industries

Q1FY21 revenue to be a washout

VIP Industries held a conference call to discuss the results for the quarter ended March 2020 and way forward. Ms. Radhika Piramal- Executive Vice Chairperson, Mr. Sudip Ghose- Managing Director and Ms.Neetu Kashiramka-Chief Financial Officer of the company addressed the call.
Highlights of the Concall

Traveling industry is definitely disrupted due to Covid-19 and therefore luggage industry.

The company is taking cost containment measures aggresively- fixed overheads related to plants, office rents, brand stores, salary cut and reduction in headcount as well. The company has already taken 3% reduction in its cost.

The company has not planned any advertising for the current year except for some smaller efforts on the digital platforms. The company used to spend around Rs 100 crore a year on advertising

The company has also increased its borrowings significantly. The company is in a financially strong position on liquidity despite the complete collapse of revenue

The company anticipates a revenue decline on an annual basis for the year ahead. The company is in a position where 100% of its supplies could come from Bangladesh

Q4FY20 revenue was impacted due to COVID-19. The company witnessed a revenue loss of Rs. 120 crore and impact of Rs. 26 crore to profitability. Q4FY20 would be flat on revenue as well as profit If it is added back. Full year would look like 3% growth in revenue and 4% growth in PBT before exceptional item

Other Expenditure in Q4FY20 is high due to provisions taken for COVID risk

Gross margin improved to 58% in Q4FY20 from 48% in Q4 of last year due to higher procurement from Bangladesh, improvement in Hard Luggage share and reduction in raw material costs

The company finds it extremely difficult for to give revenue forecast going ahead. The company feels that there may be different tiers of demand coming from different places in India, but as long as the four metros or the eight large cities are locked down on red zones, it will be difficult for the revenue to come back

The company expects Q1FY21 revenue to be a washout and definitely expect to experience a loss.

The company targets to reach break-even, or even be marginally profitable in FY21

The company does not find any issues on the raw material side supply side or labor side. The whole issue is demand side and not supply side because it has its own factories in Bangladesh.

The company has modeled its scenarios of revenue from Rs 750 crore to Rs 1500 crore for the current year

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