Detailed Rationale

Crisil Ratings has downgraded its ratings on the bank facilities and commercial paper of VIP Industries Ltd (VIP) to ‘Crisil A/Negative/Crisil A2+’ from ‘Crisil A+/Negative/Crisil A1’.

 

The rating action factors in the higher-than-anticipated decline in the revenue and profitability of the company and the expectation that performance over the medium term will remain below previous estimates. This, in turn, constrains the financial risk profile, affecting the key debt metrics. In the first nine months of fiscal 2026, revenue declined by 16% on-year to Rs 1,422 crore from Rs 1,684 crore in the corresponding period of the previous fiscal owing to rising competition from players across all channels with e-commerce platform, contributing ~30% of revenue, seeing the highest impact. Revenue has grown to Rs 454 crore in the third quarter of fiscal 2026 from Rs 406 crore in the second quarter of the fiscal driven by better demand planning besides  festive and wedding demand, but remains lower than the revenue during the third quarter of fiscal 2025.  Volumes growth on year was witnessed during third quarter of fiscal 2026; however, the weak first half of current fiscal resulted in volume degrowth in first nine months of fiscal 2026 in comparison to corresponding period of previous fiscal. The company has been in the transitionary phase with new promoters and management (Multiples Alternate Asset Management [Multiples]) taking charge with stake acquisition of 31.9% completed in December 2025.

 

In the third quarter of fiscal 2026, the company sustained operational loss owing to weak gross margin and provision of Rs 54 crore for slow-moving inventory. It booked Ebitda (earnings before interest, tax, depreciation and amortisation) loss of Rs 159 crore in the nine months ended December 31, 2025 (includes provisioning of Rs 122 crore built over three quarters of fiscal 2026), as against positive Ebitda of Rs 76 crore a year earlier. The company is expected to report operating loss in fiscal 2026 as well, along with revenue degrowth of 13-15%. Despite the loss, liquidity remains supported by monetisation of non-core assets and liquidation of inventory. The company has monetised two assets in the third quarter of fiscal 2026 and has plans to monetise one more asset in the near term, the timely fructification of which will remain monitorable.

 

Revenue growth will likely remain modest in fiscal 2027 in mid-single digits and thereafter increase at 13% per annum over the medium term. This growth will be supported by new launches as well as implementation of various strategies to improve visibility across channels, such as strengthening the channel partner network. Operating profitability, though lower, will gradually recover owing to various cost-saving initiatives including but, not limited to, optimisation of supply chain network, value engineering, scale-based sourcing plan and monitoring of retail stores for sustainability and profitable growth. While these measures will result in improvement in operating profitability and reduction in net loss in the near term, overall profitability will remain lower than expected. With modest profitability, the debt protection metrics are expecteed to remain constrained in the near to medium term.

 

Crisil Ratings expects debt to decrease marginally in fiscal 2026 with reduction in inventory. The debt will remain elevated over the medium term to meet the working capital requirement and capital expenditure (capex) for maintenance as well as capacity additions amid modest profitability. The company identified three non-core assets for sale with market value of Rs 116 crore (book value of around Rs 5 crore), out of which it has completed the sale of two assets, realising net profit of Rs 63 crore in the third quarter of fiscal 2026. Networth in the short-term will be impacted because of the net loss but given the company’s plan for monetisation of the non-core asset, the impact of the loss is likely to be partially mitigated.

 

The consortium led by Multiples, along with co-investors, has taken over 31.89% stake in VIP through a two-tranche deal of Rs 388 per share. The acquisition, which began in July 2025, was finalised with 5.89% stake purchase in September 2025 and an additional 26% equity shares via open offer in December 2025. Crisil Ratings will continue to monitor the company’s strategy and financial policy under the new management. Also, timely support is expected to be extended by the new promoters, should the need arise.

 

The ratings continue to reflect VIP’s established brand in the luggage industry, which is underpinned by diversified product and revenue profiles, The ratings also consider moderate financial risk profile, benefitting from the absence of major long-term debt, and possible support 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 diversified product range and strong distribution network

VIP holds dominant position in the Indian luggage industry, and caters to mass and premium segments. 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 handbags for women (3%). It has products across premium (Carlton), mass premium (VIP, Sky bags) and value (Aristocrat, Alfa) categories, and thus caters to a larger spectrum of the luggage industry. Furthermore, it 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% as on December 31, 2025, which has declined from over 40% earlier. All channels including general trade, modern trade, retail trade and e-commerce were impacted. Improvement across sales channels with recovery in market share will remain monitorable.

 

Expected support from the new promoters

Multiples, along with their co-partners, are expected to extend timely support to VIP, should the need arise. Multiples has invested sizeable funds across a plethora of sectors and has access to funds. While turnaround of VIP’s business may take some time, Multiples remains committed which provides some comfort, given VIP’s moderating financial position. Multiples has access to industry experts and has roped in several senior level executives including the chief marketing officer, who brings expertise from various sectors, to revive the subdued performance. Various strategies are being implemented towards reduction in inventory, cleaning up warehouses, reworking forecasting module and improvement in processes.

Key Rating Drivers - Weaknesses 

Exposure to intense competition

Rising competition from existing players and new entrants across both organsied and unorgainsed market has put pressure on realisation as well as sales volume, as seen in the recent past. In the second quarter of fiscal 2026, the company saw muted growth across all segments (value as well as premium) and channels (e-commerce, general trade and modern trade), but the e-commerce segment was impacted the most. Tough market conditions resulted in decline in market share to 29%. Intense competition and heavy discounting, impacting realisation, have resulted in lower operating margin in the past two fiscals. This, along with provisioning for slow-moving inventory, has resulted in operating loss of Rs 159 crore during the nine months ended December 31, 2025, as against operating profit of Rs 76 crore a year earlier.

Nevertheless, focus on revival of sales with launch of new products will drive revenue growth over the medium term. With recovery in sales and timely liquidation of old inventory, discounts should decline 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 requirement. As an exception, it saw sizeable inventory build-up in fiscal 2024. The company has been consistently making efforts to reduce the inventory which stood lower at Rs 435 crore as on December 31, 2025, from Rs 916 crore as on March 31, 2024. Owing to ageing inventory, VIP provided provisioning of Rs 122 crore in the nine months ended December 31, 2025, which weakened profitability. The company is focusing on further bringing down its slow-moving inventory. That said, reduction in working capital debt, timely liquidation of slow-moving inventory and recovery in profitability will remain monitorables.

 

Modest financial risk profile

The financial risk profile has moderated from comfortable levels maintained in earlier years, owing to weakening profitability over the past two fiscals. Networth will likely remain impacted with continued net losses in the medium term. Despite operational loss, the company is expected to maintain lower debt levels in 2026 compared to fiscal 2025 owing to monetisation of non-core assets and reduction of inventory. However, with lower profitability over the medium term, debt will increase to cover the working capital requirement and annual capex. Gearing is expected to remain high over the medium term, with other debt metrics remaining sub-par. However, the absence of material debt obligation supports the financial risk profile. Equity infusion will benefit the financial risk profile and will be monitorable.

Liquidity Adequate

The working capital facility was utilised ~60% on average over the six months through January 2026. Liquidity in the near term will be supported by unencumbered cash surplus of Rs 114 crore as on December 31, 2025, and unutilised working capital lines. In the absence of positive cash accrual in the near term, the working capital requirement or capex will likely be funded through borrowing and cash surplus. Furthermore, sale of one non-core asset (worth ~Rs 53 crore) is pending, which should aid liquidity post monetisation. The new promoters are expected to extend timely support to VIP, should the need arise.

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 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 efficiency.
• On the social front, gender diversity is higher than peers (with ~12% female employees and ~46% female workers). Its attrition rate was ~17% in fiscal 2025, in line with peers.
• Regarding workplace safety, tThe company reported nil lost-time injury frequency rate among employees and workers.
• Its governance structure is characterised by a board of eight members, comprising ~50% independent directors and ~38% women directors, split in chairman and CEO positions along 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 subdued profitability, constrained by fall in realisation and volume owing to intense competition, provisioning for slow-moving inventory and elevated expenses from excessive inventory build-up. Furthermore, the financial risk profile has weakened owing to continued losses and recovery is expected to be slower-than-anticipated. Timely receipt of proceeds from sale of balance 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 8-10% on sustained basis, supported by a ramp up in volume and cost-control initiatives.
• Significant equity infusion by the new promoters leading to improvement in the financial risk profile marked by improved adjusted gearing (excluding lease liabilities), also leading to improvement in key debt protection metrics

 

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.

 

In September 2025, Multiples, along with co-investors--Samvibhag Securities Pvt Ltd, Profitex Ventures LLP and Siddhartha Sacheti--took control of the company and had been classified as promoters with stake of 5.89% as on September 30, 2025. In the third quarter of fiscal 2026, Multiples completed the acquisition of the balance 26% stake from the Dilip Piramal group/public shareholders.

Any other information: Not applicable