V.I.P. Industries Limited (VIPIND.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon, and welcome to the Q1 FY '26 Earnings Conference Call of V.I.P. Industries Limited. [Operator Instructions] Please note that this conference is being recorded. I would now hand the conference over to Ms. Devyanshi Dave from Adfactors PR Investor Relations team. Thank you, and over to you, ma'am.

Thank you. A very good afternoon to everyone, and welcome to the quarter 1 FY '26 Earnings Call of V.I.P. Industries Limited. From the senior management, we have with us Ms. Neetu Kashiramka, Managing Director; and Mr. Manish Desai, Chief Financial Officer. Before we begin the conference call, I would like to mention that some of the statements made during today's call may be forward-looking in nature and, hence, may involve risks and uncertainties, including those related to the future financials and operating performance of the company. I would now like to hand over the call to Ms. Neetu Kashiramka for her opening remarks. Thank you, and over to you, Ma'am.

Good afternoon, everyone. Thank you for joining the call. We announced our first quarter results for FY '26 yesterday. Let me start by commenting on the operating environment. India's travel sector continues to be on the growth trajectory. Leading hotel chains have reported encouraging occupation data. Domestic air passenger traffic has also held on to sustainable growth. India's travel boom is also replicated in the continuous new entrants in luggage and travel allied industries. As mentioned in my previous quarter as well, competitive intensity continues in the sector, especially in the lower end of the market, and more so in e-commerce channels. Multiple new entrants have been establishing exclusive partnership with major e-commerce portals, leaving established players with a hard bargain. On the other hand, some of the established brands in the value segments are also becoming more aggressive through reduced pricing to gain market share. Coming to our quarter performance. For the first time in 5 quarters, volume growth has become a concern for us along with value. This is mainly on account of e-commerce secondary sales, which reported a sudden drop since the beginning of the quarter. This, in turn, impacted our primary sale drastically, a channel which was giving us higher double-digit growth, actually degrew by 17%. We have definitely taken some immediate corrective actions on the same, and are hoping to see revival in quarter 2, which is a big quarter for e-commerce channel. Moving on to the profitability. Some onetime costs have pushed down our margins for the quarter. Without impact of these onetime nonrecurring items, our gross margin stood at 48%, and EBITDA margin is at 10%. Without the impact of these one-offs, we continue to report sequential improvement both in gross margin as well as EBITDA. In addition to our onetime expenses, this EBITDA margin also has an expenditure of recent mega marketing brand, which we conducted in April and May. I would further like to highlight that despite a double-digit degrowth in revenue, we have been able to hold an adjusted EBITDA of 10%. This reflects our structural efforts on cost and expenses. Further, Bangladesh capacity utilization in the quarter was upward of 80% and generated operating profits of INR 8 crores versus a loss of INR 11 crores in quarter 1 last year. Our sustainable premiumization strategy continued to show green shoots, with Carlton reporting a double-digit growth in quarter 1. Hard luggage continued to be on the growth trajectory. We've always been committed to presenting best-in-class offering to our customers as is visible in all our new launches, which has been showcased in our presentation. In our endeavor to be a one-stop solution for travel, we continuously strive to address customer challenges. Lost luggage is a key concern for many consumers. To tackle the same, we are about to launch a first time in industry smart bag tags. Select purchases from house of V.I.P. brands will get a QR-enabled luggage tag, making travel stress-free for all our consumers. Irrespective of quarter 1 challenges, we all know that V.I.P. is still a household name and the most reliable brand in the category due to its quality, which will definitely help us gain market share going forward. Thank you and open for questions.

[Operator Instructions] The first question is from the line of Tejash Shah from Avendus Spark.

From your numbers, it appears that saliency on modern trade and e-commerce both has declined. You partly addressed the e-commerce part in your opening remarks. But anything specific that you can call out on both these channels? And are you more concerned about the demand at consumer end? Or is it more to do with competitive intensity in both of these channels?

I think it has more to do with competitive intensity. There is no issue on the consumer demand per se. And both these channels are having a similar issue of lower price point. Like bags are getting sold at INR 1,100, cabin luggage at INR 1,100.

And are those players making money according to assessment or they are losing money as we speak?

According to me, they will be losing. And some of these are new entrants. They have just entered. Some of them have actually had -- I think, exclusive partnerships with some of the portals. So they are like only available on that portal. So that's actually a volume game.

Okay. And off-line modern trade, some of the other category players have called out that one large player is kind of consolidating it's presence in terms of stores. So did you also face any of this?

Yes. Same thing, actually.

Okay. Okay. And ma'am last, despite all the challenges and controversy, Carlton actually did well in the quarter. So is it largely the primary sales which got booked and will have some follow-up effect later? And how should we think about future of that brand now?

So Carlton is never only primary because 80% of the Carlton revenue comes from our stores, which is direct billing to consumer. So there is no big primary per se. So Carlton, whatever sales is actually sales to the consumer. So there is no after effect. However, in July, we had some disruption because of that judgment. I hope you must be following it. So there was a judgment whereby we will refrain from selling from 1st July. And then that order got -- I think we started selling from 1st August. So 30 days, we were not able to sell Carlton.

Okay. And where do we stand on that now?

So as of now, we are still -- the legal battle is on. But yes, the restriction on selling has been removed. But still it is in the court, so we'll have to wait and watch.

And I'm not sure if Mr. Piramal and Radhika are on the call, but please convey my congratulations on building one of India's most iconic luggage brand. Wishing them very best as they pass on the battle now.

Yes, definitely.

The next question is from the line of Shirish Pardeshi from Motilal Oswal.

On Slide 18, you have given the value and revenue split. I was more curious if you put together modern trade and e-commerce. And if I go back to your commentary 5 minutes back that we have lost volume. What percentage of volume comes from these 2 channels put together? Is it substantially very high?

50%? Close to 50%.

Okay. And this is -- this volume loss is primarily in the lower end of the luggage or it is across?

It is lower end. Absolute lower end where actually we did not exist, but now we are coming there also. So that's where it is. So we are going to have some play with Alfa. We have one brand called Alfa. We are going to fight this battle through Alfa.

And within that 50%, this lower end would be again substantial?

Yes. Yes. 90% of our revenue on e-commerce is actually Aristocrat.

Okay. And the second question on the old inventory and this -- what is the status today? And maybe -- on the insurance claim, I could see something, but what is pending and what is that we can expect by when we get -- we will get the insurance claim back?

Sorry, you're referring to a Bangladesh one?

Yes.

Yes. So Bangladesh, I would say that we did receive close to INR 7 crores in this last quarter, and we are hopeful of getting further into the quarter 2. However, if I look from the claims submission perspective, the collection even with the future one will fall around 50%. The balance also we are aggressively pursuing with them, and hopefully, by the next 6 to 7 months, we are expecting to collect all our legitimate due from the insurers.

So after that, the INR 30 crores pending.

Okay. That's helpful.

There were 2 parts to the question, right? Insurance and...

Insurance only. Right, Shirish, it was only for insurance, right?

Inventory. He asked about old inventory.

Yes. So sorry. What was your question regarding the old inventory?

How much is left now as on June 2025?

So I would say that if I look from the compulsion of the basket perspective, it will be somewhere between 15% to 18%, which we are pursuing for liquidations in the coming quarters.

And we have taken a INR 15 crore provision also in this quarter 1.

Considering the velocity of the sale, we did take provisions. And what numbers I'm showing, what I just told you about it, that's what we are targeting to liquidate as well.

[Operator Instructions] The next question is from the line of Jinesh Joshi from PL Capital.

Yes. My question is pertaining to the inventory provisioning outlook. I mean you mentioned that in this quarter, we took a provisioning of about INR 15 crores. And I think if I remember right, I think the last quarter, that number was about INR 5 crores. And in response to previous participant's question, you mentioned that the old inventory sitting on the balance sheet is about 15% to 18% of the total basket. Yes, so basically, the question is, given the quantum is 15% to 18%, should we expect a further provisioning going ahead? Or I mean, have all the approvals being taken care of?