Detailed rationale

Crisil Ratings has reaffirmed its ‘Crisil AA-/Stable/Crisil A1+’ ratings on the bank facilities of Safari Industries India Ltd (SIIL; part of the Safari group).

 

The rating continues to reflect the established market position of the group in the Indian luggage industry and its strong financial risk profile. These strengths are partially offset by increase in competitive intensity and exposure to volatility in raw material prices and foreign exchange (forex) rates.

Analytical approach

For arriving at the ratings, Crisil Ratings has combined the business and financial risk profiles of SIIL and its fully owned subsidiaries— Safari Lifestyles Ltd (SLL) and Safari Manufacturing Ltd (SML). This is because these companies, together referred to as the Safari group, are in the same business with operational synergies and a common management.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key rating drivers - Strengths 

Established brand in the luggage industry: The organized Indian luggage industry is oligopolistic in nature, with a few large players dominating the market. Safari is one of the largest and most established luggage brands domestically, with a strong brand recall. A pan-India distribution network, comprising over 150 plus company-owned company-operated outlets (COCO), further strengthens the group's market position, enabling it to reach a wide customer base across the country. The group's established product portfolio, which caters to a diverse range of customer needs, also contributes to its market leadership. The company continues to launch new stores, aiming to cater to both high-end and mass-scale segments, and expand its reach in emerging markets. This strategic expansion is expected to help the group to maintain its market share and strengthen its brand presence. Moreover, Safari's strong brand recall and customer loyalty, built over the years, provide a competitive advantage, allowing the company to command a better pricing for its products. With its established brand, extensive distribution network, and strong product portfolio, Safari is well-positioned to maintain its leadership in the Indian luggage industry over the medium term. Additionally, the company's focus on digital marketing and e-commerce is expected to further enhance its brand visibility and reach, allowing it to tap into the growing online market and stay competitive in an evolving retail landscape. Overall, Safari's established brand and strong market position provide a solid foundation for future growth and expansion.

 

Strong financial risk profile: Lower total outside liability to adjusted networth (TOL/ANW) ratio of 0.38 times as on March 31, 2025, on a healthy networth base of Rs 952 crore represents strong capital structure. Liabilities mainly consist of term borrowings and will be repaid in June 2027. Financial risk profile is expected to remain strong with healthy net cash accrual. Debt protection metrics are comfortable indicated by interest coverage ratio of 104 times for FY 25. Overall financial risk profile should remain healthy over the medium term

Key rating drivers - Weaknesses 

xposure to volatility in raw material prices and forex rates The company's profitability is susceptible to fluctuations in raw material prices, which account for 55-60% of its operating cost. The prices of raw materials can be volatile and are subject to global market trends. Any sharp increase in these prices can have a significant impact on the company's operating margin. The Indian rupee's fluctuation against the US dollar and other major currencies can affect the company's import costs and, in turn, its profitability. Furthermore, the company's reliance on imported raw materials makes it vulnerable to global supply chain disruptions, which can also impact its profitability. The company's inability to fully hedge its forex exposure and raw material price risk can lead to significant fluctuations in its operating margin, making it challenging to maintain profitability. Additionally, the company's high dependence on imported raw materials also exposes it to risks associated with changes in global trade policies, tariffs, and regulations, which can further increase the volatility in raw material prices and forex rates.

 

Intense Competition from Legacy and New-Age Players thus impacting operating profitability: Safari group is exposed to intense competition from both legacy players, such as VIP Industries Limited and Samsonite South Asia Private Limited, and new-age players. The value and mass-premium segments (Rs 4,000–Rs.8,000 Average Selling Price) have been particularly affected, with new-age players providing more features and design customization at competitive price points. Safari has entered the premium segment under brand names- Urban Jungle & Safari Select to counter the new age brands. However, with expectations of a better pricing environment going forward, group’s operating profitability is likely to improve, mitigating the impact of intense competition on its margins.

Liquidity: Strong

Bank limit utilisation was low at around 12% on average for the 12 months through March 2025. The company is expected to generate healthy cash accrual. In addition, it will cushion liquidity. The current ratio was healthy at 3.15 times as on March 31, 2025. The company had high cash and equivalents of around Rs 228 crore as on March 31, 2025. Low gearing and moderate networth support the financial flexibility and provide the financial cushion available in case of any adverse condition or downturn in the business.

 

ESG Profile

Crisil Ratings believes Safari Industries Limited Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile.

 

Safari Industries Limited has continuously focused on mitigating its environmental and social risks.

 

Key ESG highlights

• Share of renewable energy (RE) in overall energy consumption rose at ~8% in fiscal 2025, from 2% in fiscal 2024. This has also resulted in a 1% y-o-y fall in Scope 1 and 2 emissions intensity to ~7 tCO2e per Rs crore of revenue
• The company has set a target to achieve 25% renewable energy share in total energy consumption across all manufacturing plants by fiscal 2028 and 20% reduction in energy intensity by fiscal 2028 from its fiscal 2024 base
• Lower-than-the-peer-average intensities of water withdrawal (~15 kl per Rs crore revenue), and hazardous waste generation, coupled with ~100% waste recycling rate in fiscal 2025. The company is striving to achieve zero waste to landfill certification at one of its manufacturing sites by fiscal 2026
• On the social front, gender diversity is higher as compared to peers (at ~12%). Further, it reported, nil Lost time injury frequency rate (LTIFR) among the workforce coupled with entire workforce being trained on skills upgradation, in fiscal 2025
• Adequate Board strength, with ~63% of them being independent directors, high average attendance of independent directors at Board and committee meetings (~90%), and ~100% investor complaints redressal rate

 

There is growing importance of ESG among investors and lenders. The commitment of Safari to ESG principles will play a key role in enhancing stakeholder confidence and access to capital markets

Outlook Stable

Crisil Ratings believes that the business risk profile of the Safari group is expected to be benefitted by a strong distribution network and robust positioning in the mid- to lower segment of the market.

Rating sensitivity factors

Upward factors:

• Sustained revenue growth, while maintaining market share, supported by ramp-up in enhanced capacities and improvement in the operating margin to above 15% (post lease adjustment) resulting in high accrual of more than Rs 250 crore
• Maintained strong financial risk profile and steady increase in liquid surplus, supported by healthy cash accrual and continued moderate capex

 

Downward factors:

• Subdued revenue growth and low operating margin leading to net cash accrual of less than Rs 150 crore
• Stretch in the working capital cycle or large, debt-funded capex or acquisition weakening the financial risk profile

About the group

SIIL was incorporated in 1980 by Mr. Mehta and family. The company was taken over by Mr. Sudhir Jatia in 2012. It manufactures and sells luggage under the brand Safari. The manufacturing unit is in Halol, Gujarat and Jaipur, Rajasthan . SIIL is listed on both Bombay Stock Exchange and National Stock Exchange.

 

SML was incorporated in November 2021 as a wholly owned subsidiary of SIIL. SML has a manufacturing unit in Halol, Gujarat.

Any other information: Not applicable