VIP Industries held a conference call on 02 February 2022 to discuss the results for the quarter ended Dec'21 and way forward. Mr. Anindya Dutta- Managing Director and Ms. Neetu Kashiramka - Chief Financial Officer of the company addressed the call.

Highlights of the Concall

• Q3FY22 was one of the best demand environment since the pandemic started. With COVID well under control, travel came back in a big way. The airline passenger traffic was at its highest since April 2020. Compared to the same quarter of 2019, airline passenger traffic was showing a recovery of 85%. In fact, from travel point of view, some destinations like Goa or religious destinations like Tirupati Shirdi, Varanasi, et cetera, actually had higher traffic than the pre-pandemic levels.

• Q3FY22 revenue growth was at 120% over Q2FY22 Sep quarter. Hard Luggage constitutes 48% of total revenue for this quarter.

• Q3FY22 Gross margins after netting of other income is 49% as compared to 47% in Q2FY22 mainly due to price increase and mix in favour of VIP & Skybags

• Q3FY22 employee cost is at Rs. 50 crore against Rs. 44 crore in Q2FY22, increase is mainly due to increments effective October 1, 2021, additional workers at Bangladesh and special onetime incentive to employees

• The company was very happy to see revival not only in travel but also in celebrations and weddings and reinforced its confidence of demand coming back to where the pandemic disruption left.

• While the business environment was conducive in Q3, it's been a roller coaster ride for the industry of because of the pandemic waves. It's was quite challenging for the business constantly dealing with the ups and downs. The company mentioned that in current wave of covid impact on the business seems to be much lesser without any government-imposed lockdowns or other restrictions.

• The company is witnessing severe inflation in all our input cost materials, from plastics to metals to polyester yarns aided by higher ocean freight and logistics costs.

• Raw materials, on an average, witnessed about 13% inflation compared to the same quarter of the previous year. The company took a price increase of 4% in mid of November and half the quarter saw some recovery of realized of the margin impact due to the price increase.

• The pandemic disrupted the supply chain of the company in a big way. The company took the opportunity of the disrupted period to build its supply chain back in a way that gives it much better control upstream and by doing own manufacturing. In the long run, this will help it not only unlock cost efficiencies better but will also make it cost leader and also improve its speed to market.

• The company sees hard luggage as a proportion to the total luggage segment going higher in line with the global trend fueled by the hygiene factor during pandemic. The company has around Rs 36 crore in increasing its capacities in hard luggage and this is across the sites in India and Bangladesh.

• EBOs are happening through the franchisee route. The company has signed up for about 45 such outlets in Q3FY22 on a base of 220 franchise outlets. The company expects its EBO (exclusive brand outlets) to reach around 460 by FY22.

• Bangladesh contributed to about 45% of total sales in 9MFY22.

• The company expects its own manufacturing share to total sales to increased from 40% to 65-70% post expansion while imports from china which was as high as 50% in FY20 will come down to 10% in the coming year.