Arjun Badola

Vip industries(nse:vipind): hang in there

To find my analysis on VIP Industries you can visit my previous article where I have explained about Moat of the company. Here are some points on VIP Industries which I came across…


  1. Management of company has said that they can survive this pandemic even if there is zero revenue for next 6-8 months.
  2. Gross margin increased from 48% (Q4 FY19) to 58% (Q4 FY20). This was mainly due to shifting their production from China to Bangladesh partially. As the plant in Bangladesh is wholly owned by them.
  3. Till now their manufacturing was 60% China, 30% India, and 10% Bangladesh. But now company plans to make it 80-100% from Bangladesh. And for reaching 100% manufacturing from Bangladesh there is no further capex requirement.
  4. They also mentioned that they also have to depend on China sometimes for some special/innovative products.
  5. On importing from Bangladesh company does not required to pay import duties whereas they have to pay 20% import duty on Chinese products. This is a huge competitive advantage.
  6. Further to mitigate risk of dependence on Bangladesh company has manufacturing unit in India. Also they have a office in Hong Kong which can continue buying from China anytime.
  7. Company has received waiver of rent for 60% of their stores, which is quite a good sign.
  8. Demand for hard luggage is on rise and it is good for company as there is no competition from unorganized sector in this segment.
  9. Due to COVID there is rise in general trade. This is beneficial for VIP Industries as their market share is higher their compared to modern trade. But we need to remember this is temporary.
  10. The fluctuation in Rupee is not going to affect VIP Industries for at least 7-8 months as they do not anticipate new orders from China and are well stocked.

Not So Positive

  1. Company has increased their borrowing limit from Rs 100 cr to 220cr. But till now they have utilized on 100cr.
  2. Due to COVID company’s June quarter which is generally their strongest quarter got affected.
  3. Marriage Season got destroyed which used to increase demand for luggage. This season contributes 30% to sales.
  4. School Season got destroyed as everything went online. This season contributes 20-30% to sales.
  5. But it seems that these season would just be postponed and not cancelled as if marriages were planned it wont be cancelled instead just postpone and schools are expected to open by September as per government.
  6. VIP Industries is planning to close around 50 to 100 stores out of their 250 stores.
  7. Company still haven’t received their claim on the goods which lost at Ghaziabad warehouse due to fire. Company has also made a provision for it of around 8 cr.


  1. Company has taken 30% reduction in cost which also includes their decision to not advertise this year as to cut cost.
  2. Central Police Canteen(CPC) had released a list of products which were not Indian and decided to not to sell them in their canteens. VIP Industries products were also mentioned in that list. But immediately that list was taken back and government had put a stay on that list. Even though CPC contributes very less towards their revenue, I think VIP Industries being labelled as Non-Indian product at such times when a movement of boycotting Non-Indian is trending can affect its brand value.
  3. While reading more about the company I realized that Ms. Nisaba Godrej & Mr. Ramesh Damani are non-executive, independent directors in company. It is quite amazing to have such people on board!
  4. This pandemic has given opportunity to the company for focusing on e-commerce and increasing their market share in this channel.
  5. We can also expect the move of demand from unorganized to organized players, temporarily.


It took eight years for the company to set up its plant in Bangladesh. As country is quite behind infrastructurally it becomes very difficult to set up a plant which would be as per their standard of products.

I think this creates a Moat for the company which will keep widening as they further try to expand it.

The time and efforts put by company has started to pay off and it would be different for any other competitor to set up a plant like this in near future.

This Bangladesh plant is full owned by them which means that it is unlikely that VIP Industries would face a supply chain disruption.

This is also a huge competitive advantage! As other peers would be relying on their suppliers for shipment and plan according to their rules.

Another Moat which I found was their Float money.

VIP Industries has Float of around 360 cr: Trade Payable of around 292cr, other Current liabilities of 40 cr, & some provisions and differed tax.

This shows that approx. 30% of their Operating Assets is supported by their Float money.

Disclaimer: I am not a SEBI registered adviser. All the information provided by me are for educational/informational purposes only.