The aftermath of the pandemic breathed new life into India’s travel and wedding industries, igniting a revival in the luggage market. Riding this wave was Safari Industries Ltd, now India’s second-largest luggage company. However, for market leader VIP Industries Ltd, the journey was less smooth.
Once the unrivaled leader, VIP saw its market share shrink, its inventory bloat, and debt levels rise sharply. The result: a stock price crash to a 52-week low of ₹248 on 7 April 2025, a far cry from its peak of ₹775 in April 2022.
In an attempt to arrest the slide, VIP embarked on a massive restructuring drive. The fruits of that labor are now starting to show. As of 27 May, the stock had rebounded 43% to ₹355.40. Yet, the road ahead remains challenging as VIP eyes a full-scale turnaround by FY26.
When Market Leadership Becomes a Liability
VIP’s earlier dominance was rooted in its leadership in the soft luggage segment. However, changing consumer preferences tilted demand towards hard luggage—a transition VIP was slow to adapt to. Consequently, VIP found itself saddled with ₹916 crore worth of inventory as of March 2024, of which nearly ₹300 crore was soft luggage, unsuited to the evolving market.
Rather than offloading this stock aggressively, VIP opted for a cautious approach, banking on the relatively new inventory finding buyers at regular prices. This backfired, exacerbating financial strains:
Financial Metrics
FY23
FY24
Revenue (₹ crore)
2,082
2,245
Net Profit (₹ crore)
152
54
EBITDA Margin (%)
16%
9%
Net Debt (₹ crore)
122
485
Working Capital Days
89
135
Margin erosion and bloated working capital painted a grim picture. VIP’s net profit plunged 65%, while net debt quadrupled to ₹485 crore.
Competitors Capitalize on VIP’s Missteps
While VIP grappled with excess soft luggage, rivals like Safari and Samsonite pivoted swiftly to hard luggage. Safari’s market share surged from 25% in 2020 to 32% in 2024, while VIP’s fell from 47% to 38%.
Another sore spot was e-commerce. New-age brands, adept at online channels, seized market share as VIP lagged behind. The combination of inventory overhang, operational inefficiencies, and competition eroded VIP’s dominance.
The Reset: A Structural Overhaul
Realizing the need for radical change, VIP enlisted the Boston Consulting Group for a strategic overhaul. Key measures included:
Product Realignment: Shifted focus to hard luggage, now 60% of the portfolio.
E-commerce Expansion: Online sales now contribute 31% to revenue, growing 40% YoY.
Financial Snapshot
FY23
FY24
FY25
Revenue (₹ crore)
2,082
2,245
2,178
Gross Margin (%)
51%
53%
46%
EBITDA Margin (%)
16%
9%
4%
Net Profit/Loss (₹ crore)
152
54
-69
Working Capital Days
89
135
106
Net Debt (₹ crore)
122
485
367
The reset caused short-term pain—margins collapsed, and VIP posted a net loss of ₹69 crore in FY25. However, leaner inventory and cost-cutting measures laid the groundwork for recovery.
Early Signs of Stabilization
VIP’s restructuring efforts are starting to bear fruit:
Inventory Discipline: Working capital days reduced to 106.
Debt Reduction: Net debt down by ₹118 crore to ₹367 crore.
Channel Mix: E-commerce now 31% of revenue.
Category Focus: Hard luggage forms 60% of revenue, soft luggage trimmed to 16%.
Furthermore, warehouse rationalization is underway, with 400,000 sq.ft. already vacated and more in the pipeline. These moves should boost margins starting FY26.
Premiumization: The New Growth Mantra
Looking ahead, VIP is doubling down on premiumization. The plan includes:
Brand Focus: Push Carlton, VIP, and Skybags brands.
Premium Mix: Grow premium brand contribution from 54% to 60%.
Selective Expansion: Open 50 stores in top 14 cities, emphasizing profitability over volume.
E-commerce Strategy: Maintain a 30% online revenue share with premium product focus.
This strategic pivot aims to help VIP outpace the 12% industry growth rate by 1-2 percentage points.
Valuation: Room for a Rerating?
Currently, VIP trades at a price-to-sales multiple of 2.4x—significantly lower than Safari’s 6.3x. While the operational reset is promising, a sustainable rerating hinges on margin recovery and a return to profitability.
If the restructuring gains traction in FY26, VIP could be poised for a meaningful comeback, restoring its dominance in India’s fast-evolving luggage market.
