V I P Industries Ltd
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Q1-2026 Earnings Call
AI Summary
Earnings Call on Aug 7, 2025
Volume & Revenue Decline: V.I.P. Industries saw both volume and value declines for the first time in five quarters, with a 17% drop in e-commerce primary sales driving a 12% overall revenue decrease.
Competitive Pressure: Management attributed weak performance mainly to heightened price competition, particularly from new entrants in lower-end and e-commerce segments.
Margins Impacted by One-offs: Gross margin was 48% and EBITDA margin was 10% after adjusting for one-time costs and inventory provisions; reported margin was lower due to INR 15 crore inventory provision and INR 10–11 crore other one-off expenses.
Channel Challenges: Both e-commerce and modern trade channels faced headwinds; e-commerce accounts for nearly half of volume and is dominated by lower-priced products.
Premiumization Progress: Premium brand Carlton delivered double-digit growth, even as the lower-end segment faced the most pressure.
Inventory & Debt Reduction: Inventory reduced by INR 20–22 crores (net of provision) this quarter, with continued focus on further reductions; debt remained flat versus March 2025.
Bangladesh Turnaround: The Bangladesh facility’s capacity utilization exceeded 80% and swung to an INR 8 crore operating profit from a loss last year.
The company is facing increased competition, especially in the lower end of the market and through e-commerce channels. New entrants are selling at very low price points (e.g., INR 1,100 for cabin luggage), often via exclusive partnerships with major e-commerce portals, making it difficult for established brands to compete on price. Management believes these new entrants are likely losing money in a bid to gain volume.
Both the e-commerce and modern trade channels saw declines this quarter. E-commerce, which typically contributed strong double-digit growth, experienced a 17% drop in primary sales due to a sudden slowdown in secondary sales. Modern trade was affected by consolidation among large retail chains, reducing store numbers.
EBITDA margin was reported at 10% after excluding one-off costs, while gross margin was 48%. One-time expenses, including a INR 15 crore inventory provision and INR 10–11 crore other exceptional costs (mostly legal and professional fees), pressured margins. Despite a double-digit revenue drop, management emphasized maintaining double-digit adjusted EBITDA margin as a structural effort.
Inventory reduction is an ongoing focus, with a net decline of INR 20–22 crores this quarter. About 15–18% of inventory is older stock, for which provisions have been made. Management expects most slow-moving inventory to be liquidated in the coming quarters, particularly during the festival and gifting season, and does not anticipate further major provisions unless sales velocity drops.
The company's premiumization efforts are showing results, with the premium brand Carlton achieving double-digit growth despite industry headwinds. However, 80% of the market (and the company's revenue) comes from lower-priced products, so the company is also planning to strengthen its position in that segment through the Alfa brand.
The Bangladesh facility showed significant improvement, with capacity utilization above 80% and a swing to INR 8 crore operating profit from an INR 11 crore loss in the same quarter last year. Insurance claims related to Bangladesh are ongoing, with INR 7 crores received and about INR 30 crores still pending collection.
Management remains focused on inventory and debt reduction targets for FY '26. There are no major CapEx plans this year, only maintenance spending. Given an upcoming shareholder transition, management is refraining from detailing future strategic changes, but remains confident in the strength of the V.I.P. brand.
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?
So let me tell you, chief, it all depends upon the -- how I -- in case of raw material, how are we putting into the liquidation -- utilization. And in terms of the FG, how I'm putting on the sale on the liquidation side. Or -- forget about the liquidation, the sale of the -- those inventories.
Based upon those velocity of going on the range and the SKUs in the categories, the provision has been decided. And looking into the quarter 2, which is the festival peer and the gifting peer, we are reasonably sure that we should be able to liquidate most of the slow-own inventories and will not require to make any additional provision.
But it all, as I said, we do measure out the velocity and then take appropriate call in order to carry out the provision books of accounts.
Got that. And when you provide for it, I mean, does it technically imply that is this inventory predominantly will get sold below cost, is that...
No. We never sold at below cost. Even during COVID, we were sitting with more than 1 year inventory, still we never sold below cost.
Then in that case, what is the provision facility?
So basically, the provision will mean that there is a risk to that extent, and therefore, I'm providing. If -- let's assume there is a hypothetical example, if there is a INR 50 crore of inventory sitting with us, slow moving, if -- let's assume in a quarter, I sell all that INR 50 crores, then the INR 15 crores will get reversed.
So basically, the time it takes to liquidate and taking into the past, what the trade is reflecting, the provision gets swapped out. So just to give lead to the example of what MD said, out of INR 50 crores, and we would go as a range-wise and category-wise, I'm finding that the percentage of sales in the quarter for the inventory more than 1 year, falling short of the threshold what we agreed. Those differences or [ data ] gets provided on a cost basis.
That doesn't mean it is a loss already. It is just a anticipation -- in anticipation to be more conservative we are providing.
Understood. Understood. And madam, beyond the inventory provisioning number of INR 15 crores, I think you have also stated in our PPT that there was some one-off costs which may be in other expenses. So if you can specifically call out what is the quantum and the nature of this cost?
The quantum is close to around INR 10 crores to INR 11-odd crores. And this is comprising of many heads. We'll not like to spell out very clearly on this front. But these are the one-off and nonrecurring in nature.
Legal and professional.
Sure. One last question from my side. I think in the last call, we had mentioned that for FY '26, we are planning an inventory reduction of about INR 150 crores and a debt reduction of approximately INR 130 crores. So is it possible to kind of call out what kind of reduction have you achieved in 1Q? Or maybe if you can just share the inventory or debt number as of 1Q, that would be helpful.
In our presentation actually...
So I would say that in terms of the inventory reduction, it was around INR 20 crores to INR 22 crores. I'm talking about the net of provision. Otherwise, if you add the provision, it goes INR 35-odd crores. And in terms of debt reduction, we remain at the level of March 2025. But we have not moved out our deal on the FY '26. We are still hopeful that we should be able to control or reduce the inventory and debt at a targeted level.
[Operator Instructions] The next question is from the line of Madhuchanda from MC Pro.
My name is Madhuchanda Dey. So my question is to Neetu ma'am. Ma'am, you have been mentioning about this in your previous conference calls as well. But is the change in consumer behavior pattern, the replacement cycle has shortened and the ownership of luggage has increased, people are going in for low-ticket luggage. And that seems to be playing out as you were referring to the competition at the lower end. So how does this fit in with your strategy of premiumization that you have been referring to all along?
So there are 2 things which are happening in the country, okay? One, especially in our industry, one, there is a premiumization which is playing out, which is already visible because Carlton has grown by double digit. However, the lower end. But if you see the population of our country, 85% of the people fall in the lower category, and that is where the growth which we are seeing in that end is much larger than what we can see on the top end.
But as a base premium is definitely growing faster or equivalent to what is lower end is growing. But the lower end is 80% of the market.
I mean, what you're suggesting where the competition is hitting you hard is in the e-com channel. Do you think the e-com channel. Do you think this e-com channel is predominantly that bottom 80%?
Not only e-commence is what I said 80% of the revenue today is coming from the lower end of the spectrum, maybe product below INR 3,000 is where -- so these products are not only sold on e-commerce. It is sold across.
Do you see V.I.P. kind of revamping the entire portfolio in light of this? Do you see a need for...
Actually, I -- yes. So I would like to refrain too much of a future-looking statements in this call, mainly because we are in the transition phase where shareholder change is going to happen soon. So there might be some strategy changes and therefore, we are not talking -- I will refrain myself from talking on too much of a futuristic strategy, et cetera, on this call.
[Operator Instructions] The next question is from the line of Prerna Jhunjhunwala from Elara Securities.
I just wanted to understand the margin for this quarter at around 4%. Given this quarter is largely married season and where premium sales also take a good jump, do you think that margin should have been better in this quarter as compared to our past performances? Like in last year same quarter, we were at 8%. And this year, we are at 5%. So I'm suspecting...
So if you see the adjusted EBITDA, it is 10%, because inventory provision is not something which is a normal time we keep doing every month or every quarter. And there were some other expenditures. So if I remove that, our margin was 10%. Also understand our revenue has a degrowth of minus 12%. So in spite of a minus 12% degrowth, if we are able to generate an adjusted EBITDA of 10%, it is better.
Otherwise, if -- let's assume I would have done a flat revenue, then this margin would have been almost 12% to 13%, 4% better.
Okay. And I missed your initial commentary. Why would we have a degrowth in this quarter, given that last year's same quarter was also weak?
Mainly because of competitive intensity. I actually narrated it during my opening remarks, still I can repeat. So mainly because we had a big primary reduction in our e-commerce channel because the secondary is that e-commerce channel degrew mainly because of new entrants into the marketplace. So luggage was sold at INR 1,100 at the lower-end cabin size, which impacted our secondary and therefore, primary did not happen. And for the first time, our e-commerce channel after 8 or 9 quarters had a degrowth. That impacted our first quarter in a big way.
Okay. And ma'am, I also noticed the share of modern channel weakening in this quarter. What could be the reason for the same?
Because a lot of -- so one of the large chain is actually consolidating and reducing the number of stores, which has impacted our overall modern trade share.
Okay. Okay. And will that impact continue?
We'll have to wait and watch.
Okay. There's no indication from the large chain that you're talking about of any further consolidation as of now?
No, not yet.
Okay. And any CapEx plans for the year that you would want to call out?
Nothing major. It will be maintenance CapEx.
Maintenance CapEx, okay. And any color on Caprese? Any movement over there on demand and on supply perspective?
So as of now, it is maintaining its saliency. Nothing big. We have enough other matters. This actually is something where focus is less because of the other challenges.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Manish Desai from V.I.P. Industries Limited for closing comments. Over to you, sir.
Yes. Good afternoon to all of you, and thank you for attending the call. I hope that we have been able to answer all your observations. If there is still left out anything, we are there to answer you or we are there to connect with you. Thank you, and have a very good evening.
Okay. Thank you.
Thank you. On behalf of V.I.P. Industries Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.