VIP Industries held a conference call on 21 October 2022 to discuss the results for the quarter ended Sep'22 and way forward. Mr. Anindya Dutta- Managing Director and Ms. Neetu Kashiramka – CFO of the company addressed the call.

Highlights of the Concall

• The luggage & backpacks market in India is estimated to be around Rs. 10,000 crore with organized players constituting around 56% of the market.

• The company witnessed a volume recovery by 13.5% in Q2FY23 as compared to Q2FY20 levels.

• Revenue grew by 56% YoY to Rs 514 crore on account of festive season and re-opening of school and colleges. VIP expects the growth to sustain in coming years due to shift of demand from unorganized to organized sector, higher spends by consumers towards travel activities and marriage season and new product launches

• The company witnessed robust business traction in value added and mid-premium segment such as Aristrocrat, VIP, Skybags, Cartlon. However, the company acknowledged that mass segment is growing at a faster pace than premium segment for the industry.

• Export contribution stood at 5% in Q2FY23 as compared to 2.5% in Q2FY20. Going ahead, focus will be towards Middle East and other larger markets such as USA, Europe and Canada among international markets

• The raw material cost and the freight cost was at its peak in Q2 and the company expects to go down from here. The company wants to keep gross margins between 50% and 52%, and aspires to take it 55% and hold it.

• In terms of channels, EBO's, General trade and E-commerce witnessed higher contributed of around 11%, 18% and 22% to the overall revenue in Q2FY23 as compared to pre-covid levels

• The company mentioned that future group not being active is a big headwind. And in terms of the 432-odd stores they had, even in Q2, only a fraction of that was operational. The company is making sure that the demand that was lost in because of the future group shutdown has been caught very well in all the other modern trade chain stores as well as in retail or in MBOs in the same catchment area.

• The international business in first half of the year stands at 5% of the total business. This was about 2-2.5% in the pre-COVID. The company is pursuing international business to make sure that where it was present and in geographies where it could get a inroad.

• The company will be increasing its manufacturing capacity by 25% in FY23 spread across India and Bangladesh plants.

• The company launched 46 new EBO's (Exclusive Brand Outlets) in H1FY23. 44 new outlets are expected open in H2FY23

• The company expects capex of Rs 100 crore in FY23. Of this, 70-75% funds will be deployed towards in-house manufacturing and remaining towards outsourcing.

• On an average, company commands 45% of market share in luggage industry while they remain confident to hold and increase it in coming years

• The company aims to focus on premium and value added segments which will enable to reap benefits of increase in sales growth backed by recovery in demand

• The management remains confident towards achieving higher profitability on a sequential basis due to operational efficiency, re-opening of schools, colleges and recovery in travel industry.