VIP Industries held a conference call on 03 August 2023 to discuss the results for the quarter ended June'23 and way forward. Mr. Anindya Dutta- Managing Director and Ms. Neetu Kashiramka – Executive director and CFO of the company addressed the call.

Highlights of the Concall

• Overall revenue growth at 8% during the quarter. However underlying revenue growth, excluding a one-time Institutional order in the base quarter (Q1FY23) is 12%

• Volume growth stood at 10.5%

• The offline and online (trade channels) cumulative growth is at a healthy 17%

• CSD revenues was impacted exceptionally in the quarter due to a large scale range refreshment driven by CSD, expected to bounce back strongly going forward

• Gross margins impacted sequentially mainly on account of hampered production at its Bangladesh facility and unfavorable brand & channel mix.

• General trade formed 27% of total revenues in Q1FY24 (28% in Q1FY23) while retail trade formed 9% (11%), modern trade 30% (26%), Ecommerce 13% (10%), CSD CPC 10% (11%), Institutional 6% (9%) and International 5% (5%)

• Brandwise Carlton formed 6% of total revenues in Q1FY4 (5% in Q1FY23) while VIP formed 20% (25% in Q1FY23), Skybags 29% (30%), Aristrocat with Alfa 40% (35%) and Caprese 4% (4%)

• The company experienced a significant slowdown of demand growth during the quarter compared to the fast paced growth that it had experienced in the last financial year.

• Air travel continued its growth momentum but the differential demand growth in quarter one comes from the wedding season. The wedding season apparently was significantly subdued both on account of the number of dates and possibly spends. Also, the demand cord could be muted because of the replacement cycle of the category with significant upsurge in luggage going in the previous year when travelled opened up fully post pandemic.

• The company also had a very challenging situation at its Bangladesh facility post the loss of one of its large factories due to fire. All alternate arrangements to rectify the supply chain could only partially fructify towards the end of the quarter. The company continues to have headwinds in streamlining its supply situation from Bangladesh.

• The disruption at Bangladesh not only resulted in short supply of some of its key ranges in soft luggage, which impacted the VIP and skybags revenues for the quarter, but also the lower production has unfavorably impacted its profit margin due to the under absorption of the manufacturing overhead at Bangladesh.

• The company mentioned that about 30 to 35% of the revenue comes from new designs every year

• The company is hopeful of getting 12-15% revenue growth in FY24 but a lot depends on how the demand environment really unfolds going especially in the festive season. It also expects gross margin of 50-56%. The company is expecting Ebitda margin of 16-17% in FY24.