Dilip Piramal on VIP Ind. Q1 results & outlook

“In India it is about, especially in uprights, the market in India or in the luggage market must be divided between uprights which are suitcases, and which are both in hard and soft luggage and then there is backpacks which are essentially soft luggage,” says
Dilip Piramal
, Chairman,

Tell me what aided the improvement in the domestic passenger traffic, the wedding dates, I am guessing all of it would have contributed to your growth and do you think in the coming quarters then the revenue is going to normalise?

Well, it appears so because things are getting back to normal and the first quarter is the largest quarter, it is driven by travel firstly and this is the peak travel season and then there is the marriage season also which in the eastern part of the country is a very strong driver for us, so all these events have happened, and we have had a very good first quarter.

Our margins could have been better because our transition into our own manufacturing as against buying from China had to be accelerated last year because it all happened so suddenly and Covid was so strong and there was so much disruption in China that this transition has been a little bit expensive because we were not geared up for such large manufacturing of our own so many of our input costs have been at higher prices than what they ideally should be.

I think in the coming months or throughout the whole year we will have better control on that and definitely we hope to make some savings there and, of course, the inflationary pressures are there in the external environment, all that depends, costs also depend on that but internally we will be able to make some better savings so I feel that we will be better organised on the supply chain side as the years come or the months go by we will definitely have much better control so I think that is something we can look forward to.

Will you be on target for the 8% to 20% EBITDA margin guidance that you have set out or do you think there is scope that you could better it?

The EBITDA is higher because our sales volume is the highest in the first quarter so as we go down in the next three quarters the sales are slightly lower but even if we stick, even if we can average this it will be very good for the whole year.

The volume growth at 8% was at quite a record high level, going forward what is the target for the entire year as far as the volume growth is concerned?

Covid is not fully gone and there have been so many uncertainties in the last two years that we are not making any statements but, overall, we will be better than our base year which is ‘19-20.

Covid started in March 2020, so we take the base year as 19-20, we will have similar types of improvements.

What is the contribution right now in hard luggage versus soft luggage, what kind of shift are you expecting, and what has been the demand for the bag segment from the school side or wedding season etc.

Let me first tell you between hard luggage and soft luggage the trend is moving towards hard luggage. Today, about 75% is hard luggage in the international markets, I mean we are a very insignificant player in the international market, but I am just telling you the trends which was about 10 years ago was the other way round, 75% of that was soft luggage.

In India it is about, especially in uprights, the market in India or in the luggage market must be divided between uprights which are suitcases, and which are both in hard and soft luggage and then there are backpacks which are essentially soft luggage.

In the uprights the ratio is about 40% hard luggage and 50% soft luggage, or it could be equal also, I am not exactly very clear because there are some divisions which sort of get into both sectors hard and soft.

Our sales have been very good where we fared quite poorly in the backpack segment because that is the area where we suffered most because of this transition between from China to Bangladesh and even our own Indian outsourcing because there are so many designs, and it is a very fragmented market, and we had some loss of market share in that segment.

I see that in a positive way that there is so much scope for us to increase our market share and increase our overall sales.

With respect to market share and the competitiveness with your peers the likes of Safari etc how is that faring, have you been able to increase your market share and what kind of new launches you have in store?

We do not have the figures for our two main major competitors because they have not published their results, but our own feeling is that we have maintained our market share and once we see the other figures, we will know whether we have gained any market share or not.

New launches are there all the time and it is a very sort of a continuous process and we have more than 200 new ranges in a year across the line of our products which is a very continuous process, but we have introduced biometric locking in hard luggage and that is one thing which we have done it for the first time.

Otherwise, new designs and all keep coming all the time, every week there is something or the other and we have such a large range also, we have I think one of the largest ranges in the world, probably the largest range in the world.

Will the closure of Future Group continue to impact further as the majority of stores remain closed amid all these legal proceedings etc that we have been seeing?

No, not really because see Future Group we are not expecting much revenue from that group and I would say 50% of the sales have been taken up by other channels, other stores.

It will only get better, it will not get worse because what has happened has happened with the Future Group and we have taken large write offs, that is all now in the past and going forward we should be getting back those sales from various channels.

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