Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil A+/Negative/Crisil A1’ ratings on the bank facilities and commercial paper programme of VIP Industries Ltd (VIP).

 

The ratings factor in weakening of the business and financial risk profiles, as reflected in continuing sluggish revenue and significant decline in operating profitability during the first half of fiscal 2026. This, in turn, impacted VIP’s financial risk profile, materially moderating key debt metrics. During the first half of fiscal 2026, revenue registered 18% degrowth on-year to Rs 968 crore on account of competition from players operating on electronic commerce (e-commerce) platforms. Besides, the company has been in a transitionary phase with new promoters and management recently taking charge of operations. Weak gross margin and provision of Rs 68 crore for slow-moving inventory led to operating losses of Rs 82 crore in the first half of fiscal 2026. Operating profitability is expected to recover in the second half of the fiscal due to better demand expected during the wedding and festive seasons, as well as initiatives taken by the management, including liquidation of old stock. Nevertheless, the company is expected to report operating losses for full fiscal 2026, along with revenue degrowth of 14-16%. However, due to astute working capital management and focus on recovery of receivables and liquidation of inventory, sufficient liquidity is estimated to be made available, limiting the need for any major increase in debt. Besides, liquid surplus of Rs 44 crore as on September 30, 2025, and unutilised bank lines of 35% will also support liquidity.

 

Revenue is expected to grow annually at 10-15% over the medium term, supported by new launches as well as focus on improving both primary and secondary sales through various customer and channel focused strategies including strengthening the channel partner network, among other initiatives. Operating profitability will also gradually recover owing to various cost-saving initiatives including but not limited to optimization of supply chain network, value engineering, scale-based sourcing plan and close monitoring of retail stores for sustainability and profitable growth. While such measures are expected to result in improvement in operating profitability and reduction in net losses next year, overall profitability will remain lower compared to earlier estimates. With modest profitability, debt protection metrics are expected to remain constrained in the near to medium term.
 

Crisil Ratings expects debt levels to remain elevated to meet the working capital requirement amid modest profitability. It may be noted that the company has identified non-core assets for sale with market value aggregating Rs 116 crore (book value around Rs 5 crore). If it materializes in the current fiscal, it will support the overall financial risk profile and liquidity. Networth in the short-term will be impacted because of the net level losses, but given the company’s plans for monetisation of non-core assets, the impact of losses is expected to be partially mitigated. Timely monetisation of non-core assets at envisaged valuations will remain monitorable.

 

On July 13, 2025, VIP announced that its promoter group, led by Mr Dilip Piramal, had entered a share purchase agreement to sell up to 31.89% of total equity to a consortium led by Multiples Alternate Asset Management (Multiples) along with co-investors--Samvibhag Securities Pvt Ltd, Profitex Ventures LLP and Siddhartha Sacheti--at a consideration of Rs 388 per share. The first tranche of transactions comprising acquisition of 5.89% stake was completed in September 2025. Furthermore, the Multiples-led consortium, basis the shareholders’ agreement executed in July 2025, has been categorised as the promoters of the company including for nominating directors. The second tranche of acquisition of 26% equity shares through open offer from public shareholders, at the price of Rs 388 per share /Dilip Piramal group entities is under process and expected to be concluded in the third quarter of fiscal 2026. Crisil Ratings will continue to monitor the development particularly regarding changes in ownership structure, strategy and financial policy along with engaging with the new management. Crisil Ratings also expects the new management will be able to bring in funds to support VIP, at short notice, should the need arise.

 

The ratings continue to reflect VIP’s established brand in the luggage industry, which is underpinned by a diversified product and revenue profile. The ratings also consider moderate financial risk profile, benefitting from the absence of major long-term debt, and possible support available from the new promoters. These strengths are partially offset by large working capital requirement and exposure to intense competition from organised and unorganised players, which has also impacted the operating margin.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of VIP and its subsidiaries, given the common nature of business.

 

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, supported by a diversified product range and strong distribution network

VIP holds a dominant position in the Indian luggage industry. Its brands cater to the mass and premium segments of the demand pyramid. The company has a diversified range of products, priced across a wide range. It derived around 60% of revenue in fiscal 2025 from upright hard luggage, followed by upright soft luggage (16%), backpacks (13%), duffel bags (8%) and ladies’ handbags (3%). In addition, it has products ranging across the premium (Carlton), mass premium (VIP, Sky bags) and value (Aristocrat, Alfa) categories, and thus caters to a larger spectrum of the luggage industry. Furthermore, VIP has a strong distribution network with nearly 14,000 points of sale in India, across 1,400 towns. The company continues to have market share of 29% in the first half of fiscal 2026, which has, however, declined from over 40% earlier. However, during the first half of fiscal 2026 all channels were impacted. Going forward, improvement across all sales channels with recovery in market share will remain monitorable.

 

Moderate financial risk profile

The financial risk profile has moderated from comfortable levels maintained in earlier years, due to weakening profitability over fiscals 2024, 2025 and 2026. Networth declined to Rs 462 crore as on September 30, 2025, from Rs 614 crore as on March 31, 2025. Despite operational losses, the company is expected to maintain debt levels largely in line with fiscal 2025 owing to improving working capital management. Gearing is expected to be ~3 times while other debt metrics are expected to be at sub-par levels. However, absence of material debt obligation provides comfort. Also, no significant capital expenditure (capex) is expected over the medium term, and with improving profitability, debt levels are expected to gradually moderate, slightly benefiting the debt metrics. Any equity infusion will materially benefit the financial risk profile and be monitorable.

 

Possible support from the new management

Multiples, along with their co-partners, have material financial flexibility to infuse funds into VIP, should the need arise. Multiples invested sizeable funds across a plethora of sectors and has access to funds. This provides some comfort, given VIP’s moderating financial position.

Key Rating Drivers - Weaknesses

Exposure to intense competition from organised and unorganised players in the luggage industry

Rising competition from existing and new entrants has put a downward pressure on realisations as well as sales volume, as witnessed across past several quarters. While the second quarter of fiscal 2026 witnessed muted growth across all segments (value as well as premium) and channels (e-commerce, general trade, modern trade); the majority impact was in e-commerce platforms. Tough market conditions have resulted in gradual decline in the company’s market share to 29%.  Stiff competition and heavy discounting, impacting overall realisation, have resulted in lower operating margin in recent years. Coupled with provisioning for slow-moving inventory, this has resulted in the company incurring operating loss of Rs 82 crore during the first half of fiscal 2026 against operating profit of Rs 47 crore for the corresponding period of the previous fiscal.
 

Nevertheless, the focus on revival of secondary sales and launch of new products will drive revenue growth over the medium term. With recovery in sales and timely liquidation of significant amounts of old inventory, discounts are expected to gradually ease over the medium term, thereby benefiting the operating margin.

 

Large working capital requirement

The luggage industry is working capital-intensive on account of large inventory maintained through several stock-keeping units. As a result, gross current assets (net of cash) have been historically high at over 150 days. However, the company has been able to prudently align its inventory with payables, to limit incremental working capital expenses. As an exception, it witnessed substantial inventory build-up during fiscal 2024. The company has been consistently making efforts to reduce the inventory, as reflected in lower levels to Rs 591 crore as on September 30, 2025, from Rs 916 crore as on March 31, 2024. Due to ageing inventory, VIP has provided provisioning of Rs 68 crore in the first half of fiscal 2026, which weakened profitability. The company is focusing on further bringing down its stock levels. That said, reduction in working capital debt, timely liquidation of slow-moving inventory and recovery in profitability will remain monitorable.

Liquidity Adequate

The working capital bank limit was utilised at ~65% on average for the six months ended October 30, 2025. Liquidity in the near term will be supported by unencumbered cash surplus of Rs 44 crore as on September 30, 2025, and unutilised working capital lines. In the absence of positive cash accrual in the near term, any incremental working capital requirement or capex requirement will likely be funded through borrowing and cash surplus. Furthermore, the company has identified some non-core assets worth Rs 116 crore, which should aid liquidity after monetisation. The promoters may infuse funds in the company, if needed.

ESG Profile

The environment, social and governance (ESG) profile of VIP supports its already strong credit risk profile.

This sector can have a significant impact on the environment owing to high water consumption, waste generation and greenhouse gas emissions. The sector’s social impact is characterised by health hazards, leading to higher focus on employee safety and wellbeing and impact on the local community, given the nature of operations.

 

VIP has continuously focused on mitigating its environmental and social risks.

 

Key ESG highlights

• In fiscal 2025, the company reported lower-than-peer average intensities of energy consumption (~7.6 megawatt-hour per Rs crore of revenue), Scope 1 and 2 emissions (~5t CO2e per crore of revenue) and hazardous and non-hazardous waste generation, aided by several measures taken to improve process efficiencies
• On the social front, gender diversity is higher as compared to peers (with ~12% female employees and ~46% female workers). Its attrition rate stood at ~17% in fiscal 2025, which was in-line with peers
• Regarding workplace safety, the company reported nil lost time injury frequency rate among both employees and workers
• The company’s governance structure is characterised by a board of eight members, comprising ~50% independent directors and ~38% women directors, split in chairman and CEO positions coupled with a high investor complaint redressal rate (~100%). It also has extensive disclosures.

 

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

Outlook Negative

The negative outlook reflects the substantial moderation in profitability, driven by a contraction in both realisation and volume, due to intensified competition, provisioning for slow-moving inventories and elevated expenses resulting from excessive inventory build-up. Furthermore, the financial risk profile has deteriorated owing to losses and recovery is expected to be slower than anticipated. Timely receipt of proceeds from the sale of non-core assets and the liquidation of inventory, along with a gradual recovery of operating margin, will remain monitorable.

Rating sensitivity factors

Upward factors

• Significant and sustained growth in revenue, driven by an increase in market share and operating margin recovering to 10-12% on sustained basis, supported by a ramp up in volume and cost-control initiatives
• Improvement in the financial risk profile with improvement in adjusted gearing (excluding lease liabilities), also leading to improvement in key debt protection metrics
• Strengthening of the financial risk profile due to equity infusion by promoters

 

Downward factors

• Significant moderation in business performance or further decline in market share with continued operational losses, resulting in weakening of key debt protection metrics
• Debt levels remaining high due to continuing stretch in the working capital cycle or large debt-funded capex, leading to continued weak capital structure and debt coverage indicators

About the Company

VIP was incorporated under the Dilip Piramal group, as a wholly owned subsidiary of Blow Plast Ltd (BPL) in January 1968. In fiscal 2007, BPL was merged with VIP, following restructuring within the group. The company manufactures hard luggage in India and markets hard and soft luggage sourced from India, China and its Bangladesh subsidiaries. VIP is one of largest players in the luggage industry in India.

 

During September 2025, Multiples, along with co-investors--Samvibhag Securities Pvt Ltd, Profitex Ventures LLP and Siddhartha Sacheti--took control of the company and have been classified as promoters with current stake of 5.89% as on September 30, 2025. Acquisition of the balance stake (26%) from the Dilip Piramal group/public shareholders through open offer is under process.

Any other information: Not applicable