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VIP Industries Is Finally Turning Around. Can It Restore Margins And Market Share?
VIP Industries has begun to show early signs of a recovery after a prolonged decline in sales, but the luggage maker remains loss-making as it works through the impact of an inventory clean-up, pricing pressure and weaker online sales.
Revenue rose 3% year-on-year to Rs 578 crore in Q1FY27, ending seven consecutive quarters of decline. The improvement followed a sharp reduction in excess inventory, lower channel stock and the launch of more than 80 new products. However, the company reported a net loss of Rs 54 crore in the quarter, compared with Rs 13 crore a year earlier, while gross margins remained below their earlier levels.
The recovery follows a major restructuring after Dilip Piramal and his family sold a controlling 31.9% stake in VIP Industries for Rs 1,763 crore, or Rs 388 a share, to a consortium led by Multiples Private Equity and Mithun Sacheti, founder of CaratLane. The transaction closed in December 2025 after the company appointed a new CEO in September.
Market Share Loss
VIP’s market share fell to about 29% as of Dec. 31, 2025, from more than 40% earlier, as competitors such as Safari Industries gained ground. The company struggled to keep pace with changing customer preferences, particularly the shift towards hard luggage.
That left VIP with a large amount of slow-moving inventory across distributors and retailers. The lack of pricing controls across brands and channels also led to increased competition between its own brands and heavier discounting, putting pressure on margins.
The new management team, which was largely in place by Q4FY26 and Q1FY27, focused first on clearing the trade channel rather than attempting to address every issue at once.
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Inventory Clean-Up
VIP slowed primary sales and dealer billing while distributors and retailers worked through old inventory. The company absorbed Rs 123 crore of one-time provisions for obsolete and slow-moving stock in FY26 and provided Rs 40-50 crore of support to help trade partners liquidate legacy inventory.
Active SKUs across the portfolio fell by about 25%-30%. Net inventory declined by more than Rs 226 crore to Rs 472 crore in Q4FY26 from Rs 698 crore a year earlier, while gross inventory fell to 28 lakh units from 45 lakh units.
Channel inventory, which had exceeded 90 days in September 2025, fell to 60 days across channels before normalising at 75 days by Q4FY26. The clean-up came at a cost, with VIP reporting a net loss of Rs 338 crore in FY26 compared with Rs 69 crore in FY25.
Revenue Returns
The first signs of recovery emerged in Q1FY27. Revenue grew 3% year-on-year after seven straight quarters of decline. The pace of contraction had already narrowed during FY26, from 18% in H1FY26 to 10% in H2FY26.
The core offline retail business, including Caprese, also improved, with the decline narrowing from 11% in H1FY26 to 3% in H2FY26. Q1 growth was concentrated in June after a slower April and May.
Management has indicated “strong growth in Q2FY27”, according to the company update.
More than 80 new products launched across categories contributed 50% of Q1FY27 revenue. Gross margin recovered to 41% in Q1FY27 from 29% in Q3FY26 and 37% in Q4FY26.
VIP has also introduced Minimum Operating Price guardrails across channels for its VIP and Skybags brands. Management said the framework would improve pricing discipline, support margins and protect brand value. The company also reversed Rs 12.3 crore of inventory provisions in Q1FY27 as its inventory position improved.
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Profitability Remains
The margin recovery is incomplete. Gross margin in Q1FY27 remained below the 45% recorded in Q1FY26, with management attributing some of the pressure to higher raw material costs, particularly polypropylene and polycarbonate.
EBITDA loss narrowed to Rs 7 crore, or a 1% margin, in Q1FY27 from a Rs 73 crore loss and a negative 17% margin in Q3FY26. In Q4FY26, the company had reported an EBITDA loss of Rs 78 crore, with a negative 18% margin.
The improvement at the operating level has not yet translated into net profit. VIP’s Q1FY27 net loss widened to Rs 54 crore from Rs 13 crore a year earlier.
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Online Channel
The recovery remains uneven across channels. Offline retail has stabilised as lower channel inventory and a newer product mix support sales. E-commerce remains under pressure from discounting and price competition.
The online channel declined 36% in H1FY26 and another 34% in H2FY26. Management expects pricing discipline and the new product portfolio to support a recovery, although the online business is expected to take longer to normalise.
VIP’s turnaround therefore remains at an early stage. The company has reduced legacy inventory, tightened pricing, refreshed its product range and returned to revenue growth, but it still needs to restore profitability and regain market share.
Management expects stronger growth, market share gains, stable margins and operating leverage from FY28. Motilal Oswal expects the business to become fully stable by H2FY27, with double-digit revenue growth and profitability in FY28.
VIP trades at 2.3 times price-to-sales, below its five-year median of 3.6 times and Safari Industries’ current 3.5 times. A sustained recovery in revenue, market share, margins and profitability would be needed to narrow that gap.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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