1 week ago
VIP Industries Faces Two More Loss-Making Years Despite Revenue Recovery
VIP Industries makes luggage, but it has been losing money.
Its sales recently started growing again after seven quarters of decline.
However, the company still lost more money because materials and other costs became expensive.
It also spends heavily on advertising to compete with other luggage brands.
A brokerage says some costs, such as professional fees and miscellaneous expenses, could be reduced.
Other costs, including freight, employee expenses and outsourced work, may be harder to cut.
Making more luggage in its own factories could eventually improve profits.
The brokerage expects losses to continue through FY27, with near break-even results projected for FY28.
VIP Industries’ revenue rose 3% year-on-year to Rs 578 crore in Q1 FY27, its first annual growth in seven quarters.
The company’s Q1 FY27 net loss widened to Rs 53.6 crore from Rs 13.1 crore a year earlier.
Higher raw-material costs, discounting and competition pressured margins, while EBITDA turned negative at Rs 11.2 crore.
A brokerage expects revenue to grow 9% annually, but projects adjusted losses of Rs 187.1 crore in FY27E and Rs 6.9 crore in FY28E.
The brokerage retained its Sell rating, citing limited cost-saving potential and challenges in restoring gross margins.
- Who
- VIP Industries, its new management team led by Managing Director Atul Jain, and the brokerage assessing its finances.
- What
- VIP Industries is seeking to restore profitability after two years of losses while facing competition, discounting and elevated costs.
- Where
- VIP Industries operates manufacturing facilities in Nashik and Bangladesh, while competitor Safari Industries has facilities in Halol and Jaipur.
- When
- The discussion covers Q1 FY27 results and projections for FY27E and FY28E; Atul Jain became managing director on 23 September 2025.
- Why
- Profitability has been pressured by aggressive competition, discounting, higher raw-material costs, freight expenses and a relatively high operating-cost structure.
Brokerage concerns
Company recovery signals
Revenue momentum
Brokerage concerns
The brokerage expects growth but says higher sales may not quickly translate into earnings because competition and input costs remain challenging.
Company recovery signals
VIP Industries reported its first year-on-year revenue growth in seven quarters and guided for higher growth in Q2.
Cost reduction
Brokerage concerns
The brokerage sees limited room to reduce employee, job-work and advertising expenses, with only moderate potential in freight and rentals.
Company recovery signals
The company has completed much of its inventory-optimisation exercise, has a new management team, and may benefit from lower professional and miscellaneous expenses.
Path to profitability
Brokerage concerns
The brokerage projects an adjusted loss of Rs 187.1 crore in FY27E and Rs 6.9 crore in FY28E and has retained its Sell rating.
Company recovery signals
The brokerage acknowledges that higher in-house manufacturing could structurally improve gross margins, while recent revenue growth suggests an early operating recovery.
Key facts
- Q1 FY27 revenue
- Rs 578 crore, up 3% year-on-year and 33% quarter-on-quarter.
- Q1 FY27 net loss
- Rs 53.6 crore, compared with Rs 13.1 crore in Q1 FY26.
- Q1 FY27 EBITDA
- A loss of Rs 11.2 crore, versus a profit of Rs 24.7 crore a year earlier.
- Projected revenue growth
- The brokerage expects a 9% compound annual growth rate over the next two years.
- Projected gross margin
- 42.5% in FY27E and 46% in FY28E.
- Projected adjusted loss
- Rs 187.1 crore in FY27E, narrowing to Rs 6.9 crore in FY28E.
- Brokerage view
- Sell rating retained with a target price of Rs 246.
Sources
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