Given that Q1 is always the best quarter for the company, VIP Industries have stocked itself with inventory to the core to be prepared for the demand. But looking at the Q1 sales which is done by 93%, the management now expect this inventory to last for the entire year.
Now, there has been drastic change in the business environment. To cope with the harsh reality, the company is planning to borrow ₹300cr to be prepared for its worst case scenario to meet expenses if current situation prevails.
Amidst the pandemic, the company has started manufacturing Personal Protective Equipment(PPE) kit as well as face mask to atleast have some sort of revenue generation, which is minuscule as of now.
Because of the bleak outlook in terms of revenue generation, the company has reduced 35% its costs via Reduction in Rent, Store Closure, Rationalization in Manpower Cost, Eliminate all discretionary spends but still the 93% drop in revenue was much more to handle. Store owners have been co-operative in terms of reducing the rents or with respect to not charging rent for some period as even their future depends on the survival of their clients.
The company has 250 exclusive brand outlets, of which the company plans to close down 100 of them till the demand comes back.
Also, there was shrinkage in terms of gross margins owing to higher discounts doled by the company.