Concall Summary: VIP Industries Ltd Q4FY20

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Business Overview

  • Revenue for the quarter at Rs 317 crores vs Rs 437 crores YoY
  • PAT for the quarter at Rs 10 crore vs Rs 25 crore YoY
  • ROCE for full-year improved to 25% as compared to 22% last year on account of improvement in working capital
  • Inventory at Rs 451 crores vs Rs 527 crores YoY; Debtors at Rs 267 crores vs Rs 299 crores YoY
  • Borrowings at Rs 32 crores vs Rs 86 crores YoY

Participants

  • Spark Capital
  • Nirmal Bang
  • Alpha Capital
  • Motilal Oswal Asset Management
  • Tokio Marine
  • Naredi Investment
  • Prabhudas Lilladher
  • Nippon India
  • Lucky Investment

Concall Highlights

  • VIP has increased its borrowings and there are no challenges on account of liquidity
  • Leisure travel likely to be bouncing back earlier than business travel
  • VIP can run the business profitably with very low volume
  • Company has lost revenue of Rs 120 crore and PBT of Rs 26 crore due to this COVID in Q4
  • Gross margin has improved to 58% from 48% in the corresponding quarter last year due to higher procurement from Bangladesh, increased contribution of hard luggage and lower raw material cost
  • During Jan-Feb 2020 VIP made PBT of Rs 38 crore, which is higher than Q4FY19; but the company has reported revenue of Rs 32 crore in the month of March and Loss of Rs 27 crore
  • A large number of stores are in malls which are all closed due to lockdown
  • Company has guided revenue range of Rs 750-1,500 crores for FY21
  • Company has taken many steps which will reduce cost by around 30%
  • VIP spends around Rs 100 crore on advertisement but this year company won’t spend any on advertisements, only a very small amount will be used on digital platform
  • Earlier, the company used to procure 60% from China and 10% from Bangladesh and rest from the domestic market; but going forward procurement from Bangladesh can increase up to 80-90%. During Q4FY20 Bangladesh contributed 55%
  • Bangladesh plant procure 90% raw materials from China
  • VIP has increased its borrowing sanctioned limit to Rs 220 crores from Rs 100 crores
  • Company has made a provision of Rs 8.5 crores during this quarter for receivables
  • VIP has no contractual labor for Bangladesh plant; while for India 50% is contractual
  • Backpack season will move to August-September from April-May this year as school season will start from August onwards
  • Samsonite had around 300 stores and they are closing 100 outlets. VIP has 250 EBO and will shut 50-100 stores. Per store revenue for Samsonite is double than VIP
  • E-commerce contributes around 10-15% currently for the luggage industry but in the next three years contribution will increase to 30%
Also Read on FinMedium:  Concall Summary: Apcotex Industries Q4FY20

Image source: Company website

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Karan Sharma
The Concall Summary Guy | CFA | Investor
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