Packing A Punch - Dilip Piramal & Family VIP & WINDSOR MACHINES Worth: Rs 334 cr

VIP

Headquarters: Mumbai
Market Cap: $ 24.062 million
Revenue: $ 116.363 million
Earnings: $ 4.334 million


Second behind to Samsonite as the world's largest manufacturer of luggage, VIP Industries is India's biggest name in suitcases. Its brands include VIP, Alfa, Footloose, and Buddy. It also has distribution rights in India for Delsey products.

Dilip Piramal & Family
VIP & WINDSOR MACHINES Worth: Rs 334 cr

When ace investor Rakesh Jhunjhunwala picks up stake in a company, you are likely to seriously consider investing in it and, more often than not, you will hit the bull’s eye. Of late, the stock of VIP Industries has been making headlines for the interest shown by investors such as Jhunjhunwala and Ramesh Damani. Last month, Jhunjhunwala added 1.34 per cent stake to take his total holding in VIP Industries to about 6 per cent. “They saw potential in our company and invested, and are extremely happy today,” says Dilip Piramal, chairman of VIP Industries, whose stock price jumped 10-fold over the past 16 months — from Rs 33.80 on 31 March 2009 to Rs 365.30 on 12 July 2010. During the same period, Piramal’s personal wealth also swelled from Rs 41 crore to Rs 450 crore.


 

Piramal says this stellar growth is the result of a strategy shift last year. “We had increased prices of our mass premium product (VIP brand); the strategy didn’t work. In fact the competition ate into our market share. Last year we repositioned our brands, which gave us very good results,” he says.

The results were tangible. VIP overtook Samsonite’s American Tourister last year in the mid-segment market. The company’s revenues and profits also improved. It reported a net profit of Rs 50 crore in FY2009-10 against Rs 9 crore in the previous year, and revenues of Rs 636 crore against Rs 525 crore. “In any given year, if the sales go up by 15 per cent with the overheads remaining the same, the net margin can increase by 30-45 per cent,” says Piramal, who credits the company’s growth to his daughter Radhika, who took over as managing director on 1 May 2010. “Long-term planning, adapting to situations and the ability to carry managers along with her have been her strong points,” says Piramal, a music buff who is now busy selecting 100 songs for Saregama for a collection of CDs to be launched this Diwali.


By this year-end, VIP plans to become debt-free. Last year, it brought down debt from Rs 135 crore to Rs 85 crore and in the first quarter of FY2011, it further reduced it to Rs 35 crore. The company earns 90 per cent of its revenues from the domestic market, with the major chunk coming from the mass segment. It has 350 exclusive retail outlets, of which 125 are company-owned. “Our approach has been mostly through the franchise model. But if dealers aren’t willing to open franchises in certain regions, we open our own stores,” says Piramal.


Despite buying premium luggage maker Carlton of the UK six years ago, VIP had not launched the brand in India as it was offering Delsey at the top-end. “The premium segment being quite small, we felt it did not make sense to have two brands,” says Piramal. “But with the termination of the contract with Delsey, we plan to introduce Carlton in India.”


Piramal hints at getting into other lines of business, but doesn’t give details. However, the market seems to have already sensed it. No wonder the stock is still attractive despite trading at a PE (price-to-earnings) multiple of 21 times on a one-year trailing basis. Jhunjhunwala seems to have got this one right, too.

(This story was published in Businessworld Issue Dated 26-07-2010)