The domestic luggage industry continues to grow on the back of strong consumer demand on account of increase in travel for holiday, wedding and business. Luggage companies like VIP Industries Ltd have been contributing to this growth through sustained brand presence on mass and digital media. With consumer focused advertising campaigns, new product launches and innovative distribution schemes, the luggage companies are attracting consumers of all age levels, ranging from school and college kids to business and general holiday traveller. The country is seeing increasing disposable income, increasing fashion consciousness and high aspiration levels and hence Indian travel by way of holidays, business and weddings have risen dramatically over the years, giving rise to travel expenditure. Luggage and accessories are now becoming status symbols, helping wider acceptance of fashionable and high end luggage. A couple of decades back, preference for hard luggage by consumers was normal. Hard luggage is now seeing a decline in sales. New categories such as soft luggage and polycarbonate uprights and backpacks have registered tremendous growth across all geographies due to a change in consumer preference towards the convenience of light and wheeled travel products. Schoolbags, backpacks and handbags have seen the fastest retail growth in the last few years, suggesting an increasing affinity of consumers towards youthful categories. Over the years, sales distribution points have become modern with the advent of e-commerce and convenient shopping formats. These hypermarket channels are witnessing strong growth, suggesting changed preference by Indian customers. One of the major luggage companies in the country is VIP Industries Ltd. It was established in 1971 and is a leading luggage maker operating in two segments: luggage, bags and accessories and furniture. It has famous brands like Carlton, VIP bags, Skybags, Aristocrat and Caprese in its portfolio. The product range includes trolleys, backpacks, laptop bags, travel accessories, vanity cases, briefcases and short haul bags. VIP is also Asia’s number one luggage manufacturer, with manufacturing facilities in Haridwar, Nashik, Nagpur and Jalgaon. The company has set up a soft luggage manufacturing facility in Bangladesh to reduce dependence on China, which is facing rising labour costs and tough environment norms. Going forward, VIP expects sourcing of soft luggage from China to fall and indigenous products to rise, aiding improvement in margins. With the company doubling the capacity of its Bangladesh unit in the next few months, margins are set to improve and add to its bottom line. As per industry estimates, the luggage sector is expected to grow at a CAGR of over 11% in the next couple of years and VIP should benefit immensely. The VIP stock had a stellar 2017 run in the Indian stock market and analysts are still quite bullish on it and feel that the stock can appreciate by over 25% in the next one year from the present levels.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.