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Motilal Oswal Bullish on Indian Luggage Industry
Motilal Oswal Financial Services (MOFSL) has issued a positive report on India's growing luggage industry, currently valued at approximately ₹170 billion in calendar year 2024. The brokerage forecasts a robust growth rate of around 12 per cent annually until fiscal year 2027. MOFSL highlights that the organised segment, which constitutes about 54 per cent of the market, is highly consolidated. The top three players control over 80 per cent of this segment, with Safari Industries and VIP Industries being the leading entities.
Industry Challenges and Opportunities
Despite the promising growth trajectory, the sector has experienced pressure on profitability in recent years. This has been attributed to aggressive discounting tactics, particularly on e-commerce platforms, and a general weakness in the traditional retail channel. However, the outlook is improving, with MOFSL anticipating enhanced margin stability. This is expected to be driven by a moderation in discounting activities and a strategic pivot towards profitability, especially noted following recent management changes at VIP Industries.
VIP Industries: Navigating a Transition
VIP Industries is currently undergoing a significant transition phase, with a full transformation anticipated within the next 6 to 9 months. The new management is prioritizing profitability over market share acquisition through aggressive spending. Key strategic initiatives include a celebrity endorsement campaign to boost brand recall, introduction of innovative products like the Smart BagTag, optimization of exclusive brand outlets that offer low returns, and a turnaround plan for its manufacturing facility in Bangladesh.
VIP Industries Financial Projections
For the December 2025 quarter (Q3FY26), VIP Industries is projected to achieve mid-single-digit revenue growth, supported by the wedding season demand. Operating margins are expected to be in the 4-6 per cent range. Over the fiscal years 2025 to 2028, revenue is forecast to grow at a Compound Annual Growth Rate (CAGR) of 6.8 per cent, with Earnings Before Interest, Taxes, Depreciation, and Amortisation (Ebitda) expected to surge by 68 per cent. MOFSL has maintained a 'Buy' rating on VIP Industries with a target price of ₹490, based on 50 times September 2027 estimated earnings. Key risks identified include increasing local competition, rising input costs, and disruptions at the Bangladesh plant.
Safari Industries: Consistent Performer
Safari Industries is expected to demonstrate strong performance, outpacing the broader luggage industry. Over FY25–28E, revenue, Ebitda, and Profit After Tax (PAT) are projected to grow at CAGRs of 16.0 per cent, 24.6 per cent, and 26.4 per cent, respectively. Growth drivers include higher capacity utilization at its Jaipur facility, which has the potential to generate ₹10 billion in revenue when fully utilized, alongside margin recovery, expansion of its premium product offerings, and a steady addition of 4-5 exclusive brand outlets monthly. Gross and Ebitda margins are anticipated to improve to approximately 47 per cent and 15 per cent, respectively.
Safari Industries Financial Projections
For Q3FY26, Safari Industries is likely to report mid-teen revenue growth, buoyed by the wedding season. Operating margins are expected to remain above 15 per cent. Motilal Oswal has reiterated its 'Buy' rating on Safari Industries, setting a Discounted Cash Flow (DCF)-based target price of ₹2,700, valuing the stock at 50 times September 2027 estimated earnings. Risks highlighted include heightened competitive intensity and any resurgence in sector-wide discounting.
Impact Rating
8