IGI Logo

We recently interacted with several industry experts, distributors, and channel partners to gauge the latest trends in the luggage industry. India’s luggage industry is estimated at INR170b in CY24 (organized: ~54%) and is expected to grow ~12% in FY27. The top 3 players hold 80%+ market share in the organized market, with Safari & VIP holding twothirds of the organized market. Over the last few years, the industry’s profitability has been pressured due to higher discounting on e-commerce (~40% saliency), though the retail channel saw persistent weakness. Following VIP’s stake sale, we expect improved margin stability across the sector, as the new management is likely to prioritize profitability over aggressive cash burn to chase market share. Recent channel checks indicate that 1) demand picked up in the festive season in Oct/Nov, 2) discounting has moderated sequentially, yet it remains elevated, particularly for VIP, at ~65-70% on the ecom channel and ~50% in offline; however, SAFARI capped its discounts to not more than 50%, 3) inventory levels were similar to 2Q levels, and 4) store managers expect products with new designs to be available in 4Q for VIP. Other players such as Mokobara, Delsey Paris, and Nasher Miles are offering discounts of 60%+ on the e-commerce channel and 40–50% offline. We remain positive on the sector and maintain BUY on Safari & VIP.

Sector update

India’s luggage industry remains an attractive oligopoly (refer to our IC note dated Sep’25) and is estimated at INR170b overall (organized ~54%) with ~12% growth expected going forward. This will be driven by the top-3 players that hold more than 80% of the organized share, with Safari and VIP commanding about two-thirds share. A consumer shift to hard luggage has favored Safari (~75% mix) over VIP (~60% mix with legacy soft inventory), squeezing margins amid D2C discounting pressure that led to VIP’s ~INR5b lossin FY25. After the stake sale to multiple PEs, we assume the new management prioritizes profitability over share-chasing, with sequential discount moderation signaling margin inflection. Hard-luggage pivot, inventory normalization, and premiumization should drive sector stability, underscoring our BUY recommendations on leaders.

VIP: Discounting still on the higher side; expect a turnaround in FY27

* Demand: Channel partners report modest ~5-7% YoY growth for VIP Industries in 3QFY26E, primarily driven by a robust wedding season that provided a seasonal tailwind. Retail sales in recent months have lagged with low-singledigit growth, reflecting softer underlying consumer momentum outside key festive periods. This aligns with broader luggage sector trends where weddingrelated purchases offer episodic boosts amid uneven discretionary spending.

* Promotional activities: E-commerce, contributing ~30% of VIP Industries' sales, continues to see elevated discounting at ~75%, compared to relatively lower ~60% offers from Skybags. The company is running a Buy 1 Get 1 Free promotion on its Carlton brand, limited exclusively to company-owned EBOs. Additionally, VIP offers discounted duffle bags on purchases of INR7,999 or INR9,999. Offline discount levels remain stable and aligned with pre-Diwali trends, with both VIP and Skybags capped at up to 60%. This mix of onlineheavy promotions and controlled offline pricing reflects ongoing efforts to balance volume and margins amid competitive pressures.

* Inventory management: Slow-moving and older inventory is not routed through EBOs; instead, it is liquidated via e-commerce platforms and large distributors. Most stores maintain an average inventory of around 400 units, including approximately 150 large-sized pieces. Inventory is replenished thrice a week, ensuring consistent product availability post-sales. Overall inventory days remain broadly unchanged, with no material improvement observed.

* Customer engagement programs: VIP runs loyalty programs alongside a welcome offer, under which customers receive INR500 redeemable on a minimum purchase of INR5,000. The redemption window has been extended from one month to three months, enhancing usability and likely supporting higher repeat footfall.

* Others: Most store managers mentioned that the company is preparing for new product launches scheduled for the next quarter. The new Managing Director has actively engaged with several store owners and managers, reflecting greater leadership involvement at the ground level to understand real market challenges and drive more responsive decision-making.

* Valuation & view:

VIP is currently navigating a transition phase, with full transformation expected to materialize over the next 6–9 months. The new management is likely to prioritize profitability over aggressive cash burn in pursuit of market share. Key strategic drivers include 1) a celebrity-led campaign to bolster brand recall, 2) product upgrades with differentiated features like the Smart BagTag, 3) store rationalization via closure of low-ROI EBOs, and 4) turnaround of the Bangladesh manufacturing facility. For Q3FY26, mid-single-digit revenue growth is anticipated, driven by the wedding season, with operating margins of 4–6%. Despite near-term weakness, revenue and EBITDA are projected to grow 6.8% and 68.0% over FY25–28E, respectively; we retain BUY with a TP of INR490 (50x P/E on Sep’27E). Risks: local competition, significant rise in input costs, prolonged disruption in the Bangladesh facility.

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412