This Jhunjhunwala favourite takes a big Covid hit, may lose half its sales

Leading manufacturer of luggage and travel accessories VIP Industries on Tuesday said it might take a 50 per cent hit on its top line in FY21 due to a bleak demand environment for its products following the Covid disruption.

The coronavirus pandemic has brought the travel & tourism industry to a grinding halt, denting VIP Industries’ March quarter sales by Rs 120 crore. The company reported a 28.4 per cent year-on-year (YoY) drop in consolidated net sales at Rs 311.30 crore against Rs 435 crore in the year-ago quarter. Profit for the quarter fell 72.2 per cent to Rs 9.5 crore from Rs 26 crore in the year-ago quarter.

The company believes the negative impact on sales will continue all through FY21. “We expect sales for 2020-21 to be around 50 per cent of FY20 topline. We are trying to reduce fixed overheads to the best possible extent to protect the bottom line,” the company said.

For the financial year ended March 31, the company posted net sales of Rs 1,718 crore and net profit at Rs 112 crore.

Prabhudas Lilladher said discretionary spending post-Covid is expected to remain weak, resulting in a prolonged demand slump.

VIP Industries’ manufacturing facilities remain shut since March 22 due to the nationwide lockdown. They are yet to resume operations.

The company’s stock is widely tracked by investors on Dalal Street, as ace stock picker Rakesh Jhunjhunwala holds over 5 per cent stake in it.

Latest shareholding data available on exchanges showed Jhunjhunwala bought an additional 2.85 lakh shares in the company in March quarter, taking his total stake to 5.31 per cent from 5.11 per cent earlier.

The scrip is down 47 per cent on a year-to-date basis till June 1, while the benchmark BSE Sensex is down 19 per cent for the same period.

Analysts say there is a strong correlation between growth in the travel and tourism sector and demand for luggage bags. The loss of three months of global travel in 2020 would directly hurt the airline industry, cruise ships and hotel industry and indirectly the luggage industry.


“This impact would depend on how long the epidemic lasts and could be exacerbated by measures to restrict travel. Once the outbreak is under control, it would take up to one year for the tourism sector to return to normal levels. This is a big downside risk to our estimates for VIP’s FY21 and FY22 numbers,” Kotak Securities said.

The brokerage, however, maintaining a ‘buy’ rating on the stock with a price target of Rs 295.

Mumbai brokerage IDBI Capital last month came out with a ‘buy’ rating on the stock with a price target of Rs 275. It projected a 29 per cent drop in sales for VIP Industries in FY21.