“Bags packed, dreams soaring high, India’s luggage market takes to the sky”.
Over the last decade travel has seen a boom. Especially, after COVID the travel sector has seen a massive surge that has inherently contributed to the rise in demand for Luggage and Trolley bags. Today we will be discussing one such company which stood out in the race and took over the market share of the behemoth of Luggage and Accessories market, VIP Industries. Going ahead we will be discussing Safari Industries.
Industry Overview
The Luggage & Bags market in India is on an upward trajectory, with revenue set to hit US$15.04 billion in 2024 and a projected CAGR of 5.21% through 2028. This surge is fueled by India’s burgeoning middle class and their growing wanderlust, driving demand for premium travel gear. While non-luxury items are expected to dominate in 2024, the industry is ripe for expansion across all segments.
With per capita revenue at US$10.43 in 2024, there’s ample room for growth as incomes rise and travel becomes more accessible. Manufacturers and retailers stand poised to capitalize on this evolving market, catering to diverse consumer needs in both premium and affordable categories.
Company Overview Of Safari Industries
Safari Industries, a prominent player in the Indian luggage market, specializes in manufacturing and trading luggage and related accessories. Founded in 1974, the company has established itself as a leading brand in the travel gear sector, catering to diverse consumer needs.
Safari’s product portfolio encompasses two main categories: hard luggage and soft luggage. The hard luggage line, primarily crafted from PolyPropylene (PP) and Polycarbonate (PC), is manufactured in-house at the company’s state-of-the-art facility in Halol, Gujarat. This vertical integration allows Safari to maintain stringent quality control and respond swiftly to market demands.
The soft luggage range, made from various fabric materials, is largely imported, enabling the company to offer a wide array of styles and designs to meet evolving consumer preferences. Safari’s product lineup includes suitcases, backpacks, duffel bags, and travel accessories, catering to both budget-conscious and premium segments.
Competitors
VIP Industries, established in 1971, is India’s leading luggage manufacturer and retailer. Headquartered in Mumbai, the company employs over 6,000 people. VIP has dominated the Indian luggage market for decades, offering a wide range of products across various price points. Its brand portfolio includes VIP, Skybags, Carlton, Aristocrat, and Caprese.
Despite recent challenges from competitors like Safari, VIP remains a market leader with its extensive distribution network, strong brand recognition, and diverse product range. The company’s long-standing presence and reputation continue to be significant assets in the competitive luggage industry.
Safari VS VIP
Safari Industries has steadily eroded VIP’s market dominance in the Indian baggage business over the previous five fiscal years, demonstrating an impressive growth trajectory. This spike can be credited to Safari’s strategic initiatives, led by Sudhir Jatia, the company’s chairman and managing director, who, ironically, is a former VIP director.
Safari’s success stems from a multi-pronged approach:
- Market Expansion: Safari targets the mass market, capitalizing on India’s growing middle class and their increasing travel aspirations.
- Product Diversification: Safari has expanded its product range, introducing new luggage designs and venturing into backpacks and laptop bags.
- Distribution Network Enhancement: The company focuses on strengthening distribution channels, ensuring better product availability and market penetration.
- Innovation: Under Jatia’s guidance, Safari prioritizes product innovation to keep pace with changing consumer preferences and travel needs.
- Brand Building: Consistent marketing efforts have increased Safari’s visibility and appeal among consumers.
Key Factor for Competitive Edge
Safari’s early adoption of e-commerce has created a significant moat, enhancing its competitive edge in the luggage industry. With 20-25% of its FY23 revenues stemming from online sales, compared to VIP’s 16%, Safari has demonstrated superior adaptability to changing consumer shopping habits. This foresight has diversified Safari’s sales channels and positioned it favorably to capture the growing digital-savvy consumer base. Thus, potentially outpacing traditional market leaders in the evolving retail landscape.
These concerted efforts have enabled Safari to steadily eat VIP’s market share, positioning itself as a formidable competitor in the industry. The company’s agility and responsiveness to market trends have allowed it to outpace larger competitors, gradually reshaping the market landscape.
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Financial Highlights Of Safari Industries
| Financial Year | 2020 (Mar) | 2021 (Mar) | 2022 (Mar) | 2023 (Mar) | 2024 (Mar) |
|---|---|---|---|---|---|
| Revenue (Crores) | 685.87 | 327.98 | 705.17 | 1,211.98 | 1,550.42 |
| Net Profit (Crores) | 30.66 | -20.9 | 22.37 | 125.09 | 175.81 |
| Operating Profit Margin (%) | 11.0% | -2.0% | 8.0% | 16.0% | 18.0% |
| Return on Capital Employed (%) | 17.1% | 15.5% | -6.9% | 13.1% | 37.5% |
| Earnings per share (₹) | 13.72 | -9.34 | 9.99 | 52.76 | 36.9 |
Revenue increased steadily, rising by 126% from ₹685.87 Crores in March 2020 to ₹1,550.42 Crores in March 2024. Net profit also grew significantly, improving from ₹30.66 Crores to ₹175.81 Crores over the same period, despite a loss in 2021.
Operating profit margin showed substantial improvement, fluctuating from 11% in 2020 to -2% in 2021, before recovering and reaching 18% in 2024. Return on capital employed varied widely, starting at 17.1% in 2020, dropping to -6.9% in 2022, then rising sharply to 37.5% in 2024.
Earnings per share demonstrated overall growth, rising from ₹13.72 in March 2020 to ₹36.9 in March 2024, with a peak of ₹52.76 in 2023. This represented a 169% increase over the five-year period.
Key Metrics Of Safari Industries
| Metrics | Safari Industries | VIP Industries |
|---|---|---|
| Market Capitalisation (Crore) | ₹ 10,482 | ₹ 6,708.21 |
| Current Market Price | ₹ 2,054.85 | ₹ 463.95 |
| Price to Earnings Ratio | 60.02 | 193.65 |
| ROCE | 24.71% | 8.49% |
| Promoter Holdings | 45.73 % | 51.75 % |
| FII Holdings | 12.69 % | 7.32 % |
Future Outlook Of Safari Industries
- Market-leading growth: Safari aims to maintain above-market growth by focusing on key channels, categories, and consumer segments driving expansion.
- Supply chain optimization: The company plans to invest in modern ERP, warehousing, and planning technologies. This would enhance supply chain responsiveness and cost-efficiency.
- E-commerce focus: Safari will strengthen its supply chain to meet the unique demands of e-commerce and direct-to-consumer channels.
- Premium category expansion: The company plans to invest aggressively in the premium luggage segment to increase market share and improve pricing.
- Digital advantage: With 20-25% of FY23 revenues from online sales, Safari is well-positioned to capture the digital-savvy consumer base.
- Profitability improvement: Safari is poised for high growth with improving profitability, leveraging its strategic initiatives and strong market positioning.
Price Target
Investec: has assigned a BUY rating with a target price of Rs 2800. According to the brokerage there is enough headroom for the company to grow further.
IDBI Capital: has given a “BUY” on the stock. Although the brokerage has downgraded the stock from its previous price target of 2600 to 2500 owing to its results.
Bonanza: initiated coverage on Safari Industries with a “BUY” rating for a target price of Rs 2,400. The stock is recommended at Rs 2,059.
Conclusion
Safari Industries has shown impressive growth in the Indian luggage market, steadily gaining market share from VIP. Its success stems from strategic market expansion, product diversification, distribution network enhancement, innovation, and brand building. Safari’s early e-commerce adoption has provided a significant edge.
With strong financials and a clear future outlook, the company is well-positioned for continued growth. As Safari adapts to changing consumer preferences and expands its presence in both traditional and digital retail landscapes, it faces both opportunities and challenges in maintaining its growth trajectory and market position.
Questions for viewers: How will Safari’s e-commerce strategy impact its long-term growth? What challenges might it face in the premium segment? How sustainable is its growth trajectory? What other strategies could further increase its market share? Comment below.
Written by Dipangshu Kundu
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