Vip Industries Safari Industries And The Dawn Of The D2c Era The Spotlight Ft Rahul Dani

TITLE: VIP Industries, Safari Industries and the Dawn of the D2C Era | The Spotlight ft. Rahul Dani CHANNEL: Krish Kothari DATE: 2025-04-28 ---TRANSCRIPT--- VIP has been one of the flag bearsers of the luggage industry like the father of the luggage industry going at his 15% kagger profitability was largely there because of the entire idea of focusing on in-house manufacturing which now has turned into his biggest weakness as well. Safari has been a classic case study for a lot of NBA colleges. I think what Sad Ja has done I think it’s phenomenal. I’m trying to figure out what the real secret sauce is. Something particularly special that he has done. Is it going to become a victim of its own success in the sense that it has inadvertently laid out a road map for how to build a luggage brand in India? It’s not going to be easy for someone to come and disrupt it at the ground level. If you and me decide okay let’s go and set up a luggage company and we will target the mass guys. It’s going to require huge amount of investments from us in terms of spending on advertisement, building capacity, building dealer base, getting the right product in the right space. It’s not at all easy for us. What about the luggage industry allowed so many new entrance to come in? I have great respect for them. The D2C brands kind of focus on the fashion part rather than, you know, just the utility part of it. These new companies, I’m not getting specific ones, but in general, do they actually make money or is it just all boring? Is the Hello and welcome to the spotlight. I’m Krishqatari. In today’s episode, we cover VIP industries, safari industries, and the really fascinating luggage space in India. To do that, I’m joined by Rahul Dani of Monach Network Capital. We cover first VIP industries, safari industries, the histories, how they became the giants that they are and we also look at the new age companies that have entered the space and how they’ve disrupted the luggage industry in India. We hope you enjoy the conversation. As always, nothing this video on this channel is investment advice nor a recommendation to or not to buy, sell or hold any security. We’re happy to partner with the 01 media network to bring you interesting and useful insights from the world of business and investing. So go ahead and like, subscribe and hit the bell icon. So Rahul tell me how did VIP start? What’s the origin and history of the company? So uh quite interesting you know VIP has been one of the flag bearsers of the luggage industry. Uh you know so-called they were the first brand to introduce luggage in India. Uh it started off way back in 1968 with a a company called Plast which was a subsidy of Blue Plast Limited. You know Blast was basically more into plastic molds and molding molded you know equipments and all of that. Uh is is it is when Dilip Paramal decided to kind of get away from the family business completely. Uh he led that to AJ and his other brother take over the entire family business. concentrated more on uh blue class and the idea was to kind of get to a stage where he can you know introduce India’s first premium luggage and that’s when he started off in 78 is when it actually officially kicked off and you know since then they’ve changed their name to VIP industries uh Dilip Paramal was at the forefront of driving that uh so a couple of things what Dilip Paramal did was you know he kind of focused a lot on manufacturing in-house house uh and that’s something which has been key I think that comes from his uh parentage heritage you know the piras always known for manufacturing and all of that so they kind of he stuck to it he set up a plant in nasi he set up a plant in Nagpur which have now been Nagpur plant is now shut down but the idea was always to kind of manufacture inhouse you know which he thought would be the biggest mo for uh the luggage industry and his heritage with mold and molded furniture and molded um uh units. It kind of given gave him an advantage in that sense. Also, what actually took place was you know at that time Indian economy was pretty much shut to foreign companies. So there was no uh foreign players in the market. So it was a wide wide market for them to capitalize on and there was not a single brand which was there. Right. So he saw that space he did a fantastic job by manufacturing in a house and he kind of built it through u and that’s the story of VIP and Dilipl you know I would say is like the father of the luggage industry right now uh at that stage and you know he’s he’s done a remarkable job with what he has kind of built in uh right now and is is VIP still the largest company in India in the luggage space? So VIP is still the largest uh player in the luggage industry uh pure revenue terms because uh you know what Daramal has very well uh articulated and done is that you know he has kind of diversified into lot of different brand segments which kind of focus on different needs of consumers. So that’s I think the biggest advantage what he did was you know not just focus on one brand he kind of made it into a a six seven brands which kind of made VIP what it is today and is the largest brand in India uh is the largest luggage player in the country though in terms of pure brand sales Safari would be higher because Safari has just one brand but as a whole Saf VIP is the biggest brand in the luggage industry. Yeah, and it’s interesting that they have they have multiple brands within the same company and we’ll get to that in a second. But can you just give some headline numbers in terms of you know revenue, profitability, all of that just to get a better sense of the scale of the company. So VIP roughly does about 2500 crores of revenue. Post pandemic uh all these companies had seen a fantastic growth because you know travel was was at a boom after pandemic. So you know numbers look good. uh margins are about close to 15 14 to uh 12 to 15% of what they were making. Uh you know if you look at the company’s margins historically they have reached as high as 18%. That’s largely because you know the lip pram’s largest strength was in-house manufacturing and the kind of steps he took to kind of preserve that you know uh going to Bangladesh and such events were were very very good at that stage which led to super margins at 18%. Of course they’ve come off a little bit but they do close to 12 12 and a half% AITA margins on a stable basis and of course they do close to 50 kres of pack with great working capital. Um it’s only optically this year uh numbers have not looked that great because you know which was like manufacturing which was the strength of the company which has kind of put them a bit back and has turned into a bit of weakness with certain situations what’s happening in Bangladesh and demand moving to a certain segment of luggage uh that’s really impacted them but you know they have been a consistent performer in the stock market uh in terms of revenue a bit growth they’ve been a darling and for lot of mutual mutual funds as well. Uh you know we’ve got a lot of ACE investors. You know we had the late Rakkesh and Jinala as well who was invested in stock. Um at one point I think they had they had a fantastic mutual fund holding NFI holding which now has kind of come off but you know they have been uh they have done done well. They have created an enormous amount of wealth as well for a lot of funds and individuals. So yeah roughly about 2500 crores in topline um 12% a bit is what they do and 50 54 kores of PAT. If you look at the larger part of the history, they were kind of growing at 15 20 15% kagger profitability was there. Uh and again profitability was largely there because of the entire idea of focusing on in-house manufacturing. So that has been VIP’s biggest strength which now has turned into his biggest weakness as well. If you go back in history, you speak to any of the small retailers who were kind of selling VIP luggage, they have made a massive money uh you know they were very very happy with the brand uh with the kind of products that are being launched by VIP. So uh you know they have grown very very well in the past. It’s just that the last couple of years has been a bit of a struggle for them. But you know we’re quite hopeful that things might change in the future for them as well. It’s interesting you you spoke about this that the sort of manufacturing le growth the company has had essentially since day one right can you talk about how when we look at the numbers and look at the company and actually analyze it where do we see the advantages of that manufacturing electro sure so uh you know um so like I said you know they were the first one set up a manufacturing plant in India in ink and then they went to uh other places in India which they’ve shut down but what they did strategically was in 2011 and 2013 is when they decided to go to Bangladesh. So Bangladesh was a gamecher in in a lot of sense and like the biggest downfall as well for VIP right now. But what happened is it in 2013 is when India and Bangladesh had a free trade agreement. China and Bangladesh had a free trade agreement. So a lot of manufacturing and of course cost of labor in Bangladesh is way way cheap as compared to anywhere else. And at that time so if you look at the luggage sector overall there are two types of luggages. One is your hard luggage and soft luggage. Hard luggage is pretty easy to make you know it’s like you know put it in a mold it’s ready. But soft luggage it’s hand work you know it’s it requires labor. U so that never really worked in India because of the cost. So uh what VIP decided to do was in 2012 in 2013 was to go to Bangladesh set up a manufacturing plant in Bangladesh for soft luggage and as we speak today they have close to eight plants in Bangladesh which is dedicated to soft luggage and what that did was in 2014 when is when they got their manufacturing going in Bangladesh uh you saw margins really pick off you know they reached a peak of 18% at at one stage is when Bangladesh was contributing meaningful amount and this was probably just 2 years before we hit we were hit with pandemic because demand was completely towards soft luggage and VIP was able to kind of get good pricing better advantages compared to people who were largely sourcing. So earlier what used to happen they would kind of source the soft luggage from China and that would be majority of what was coming in but with Bangladesh coming in what used to happen their sourcing from China kind of reduced about 10 to 12%. You know certain premium products which are only made in China was are still being made in China but the majority of soft luggage was kind of moved towards Bangladesh and soft luggage at that point became close to 60 70% of the overall revenue. So that led to margin improvements that led to profitability coming in and that’s when you know VIP was looked at wow you know this company has hit it they’ve got the thing right they’ve gone to Bangladesh perfect Bangladesh India free trade agreement China getting a free agreement with Bangladesh as well it’s a lot of raw material float floating in from Bangladesh and India of course was was very kind to Bangladesh at that time so it it was like a perfect recipe for for VIP to kind of uh build upon And you know at at that at that stage you we thought you know uh if the demand does continue towards the softer luggage part uprightes or backpacks I think VIP would have been uh a dominant force with as to what they are right now but uh it was a very very interesting clever move which he got it right. I think that also has to do with uh with Radika Paramel as well. You know when she came on board is when she also decided you know we got to go to Bangladesh we got to do a lot of new offerings new age offerings and they’ve always been very very smart. So if you look at how VIP is also spent an advertisement you know over the last few years they are probably one of the few brands which kind of had celebrity endorsements you know you know name it from your cricketers your your film stars to to new age actresses coming off today. So they’ve always realized that in in India a formidable uh brand endorsement works in your favor. So they did that they were spending four 4 and a.5% of revenue on advertisement which was very very good at that time and you know in 2017 when they hit the peak of 18% you know we thought this is uh you know this is when you’re going to see VIP at the entire new um new light but uh unfortunately things did not work out for them after that right and and having that manufacturing inhouse capability gives you a better gross margin which allows you to spend more on these absolutely so gross margins if you still look at it till probably last year VIP was still making the best gross margins in the industry. That’s because of the entire manufacturing units which was there with them is just that now that things have gotten a little bad but otherwise they were still making the best gross margins. They were still better in AITA. They were better in inventory because you know if you have your own manufacturing you don’t really have to go and source too much and keep inventory with you. You know you can it you can use it tailor it to your advantages. So uh you know that worked really well for them. uh and uh that’s where they were you know that’s how uh the brand was kind of built up to where it is right now like we mentioned earlier there’s a number of brands within VIP so can you can you just you know some of just mention some of the larger brands and also why did they follow that sort of system of having multiple brands within the same company so uh if you look at VIP stable you know they have about five brand five to six brands uh which kind of cater to different pricing points so there is Alpha and Microsoft which kind of caters to the uh the the lower side you know the mass premium category. Uh then there is VIP and Skyback which is slightly more uh slightly more premium in nature. Um and that’s kind of got to do with the premiumization trend in the country overall. You know you know we did see uh the country as a whole kind of getting away from you know mastig products. you know you would you don’t see anyone traveling with a suitcase anymore you know those old suitcases you see people now in that time they would want like trolley bags and all of that so VIP was one of the first ones to kind of introduce trolley bags in India as well you know the two trolley bags the two the two wheeler the four-wheeler so they kind of got that you know consumers with with the earning with with their salaries and you know with their uh spending capacity going up they would want to focus on premiumization so they got them a mid premium brand and then what they did was they got a luxury brand not a luxury brand but a slightly higher ASP brand called Carlton as well which they kind of acquired uh and got the global licensing as well. Uh so they had about four or five brands which are doing pretty well. So if you look at in terms of revenue um as of now the mass brand which is Aricrosoft is the largest contributor for them which is probably about a thousand odd kores because the demand is right now towards mass segment uh and also what they did was uh when Radika Pamul came on board she decided to kind of uh enter the women’s handbag segment with Capri so that was also an interesting move and I think in the long run this can still play out pretty pretty well Because if you look at the Indian market, there’s not a single brand which kind of caters to the woman handbag segment as much as what Capracy does. There’s not a branded player. There are these guys like accessories who do some bags and there’s high design but no one does affordable baggage and that’s where Capracy kind of came in. Uh vibrant colors, vibrant design. uh again you know she she worked with lot of endorsements uh celebrity endorsements right from Tara Satara right now Kiara Adwani at one stage as well so that was a good move though it it never really picked up because at the price point which she was still offering there were a lot of other players at there as well right so she does about 82 kores 85 kores from capries right now but it’s largely if you look at the brand concentration 35 5% of my revenue would come from my mast segment with Alpha and Microsoft. 6% comes from Carlton and rest comes from basically your VIP and Skyback which is like the mid premium segment for them you know unfortunately I think with VIP in the last 5 years things probably haven’t gone according to plan and it’s it’s interesting that things haven’t gone according to plan at a time when generally travel and all of that has sort of boomed. So, so could you just give a sort of lay of the land in terms of what’s happened, what’s gone wrong. So, uh, you know, like I said, you know, VIP is the oldest brand, right? So, they had been there for about 30 40 years. What they knew was to make luck sell. And at that time, um, there was no e-commerce, there was no modern trade as much. So, their mentality at that time was that people in India would still go to stores to buy luggage. they will not really move online and you know online is maybe just the phase which will probably pass out. So their focus has always been let’s let’s focus on general trade which is great for the company perspective as well because they have a lot of company own company operated stores as well and franchisee stores. So they kind of said you know company own company operate store franchisee general trade gives me better margins better ROIs let’s just focus on that we will see how it how to do with e-commerce later and you know modern trade that strategy in the hindsight did not really work too well for them because probably till we got till to co and this has been a problem where VIP has has been facing uh not just right now but even in if you look at 201617 when e-commerce was also just about to come on you saw a lot of brands on on e-commerce getting massive discounts. VIP tried to do that. You know, they tried to go e-commerce but they could not really balance it out in that sense because 70% let’s say 60% of my revenue were coming from general trade. Now if I’m giving General Trade a price of 3,000 rupees as MRP and if I’m going on e-commerce and selling at 1,500 rupees, my general trade guys are not going to be happy. And that’s exactly what took place for the longest time for VIP was that they couldn’t get or get couldn’t get the maths right. How to keep them happy, how to keep ecom happy. So, you know, ecom was about 9% for them for the longest amount of time. It’s now that they’ve realized that no, we kind of got to go there. So, they hired Boston Consultancy Group to kind of revamp the entire ecom for them. And also what what really took place was uh post pandemic and post GST implementation. I think GST was a bigger kicker for the luggage industry as a whole because the unorganized were completely impacted because of GST. So what happened post GST was lot of demand moved from your uh linking road guys to you know shops. So the unorganized market completely went for a a toss you know you know people were stopped people stopped buying luggages from there uh and that demand kind of move towards the mast segment you know really so your alphaoft which were not really the focus area for the company because at one time the company was thinking great you know India super GDP growth per capita income going up who is really going to buy a mass brand you know they’re going to probably look at uh a VIP or a Skyback or a Colton in that sense. But what happened was the larger population moved towards you know moving from unorganized to organized. they kind of went towards the masterage brand and that’s where VIP got a little bit caught out was that the focus was not really there to you know focus and develop that brand and also what happened was moving when you move from uh unorganized to organized a lot of demand also went towards hard luggage and while VIP was was great at soft luggage so that’s where they kind of were not able to kind of capitalize on the entire trend and of course channelwise they got impacted market because not being on ecom in a larger way was a a bad decision for them. And of course, you know, not focusing towards towards the mass segment was again a downfall where Safari just came in sweep the entire unorganized market and uh that’s the history for them. So they they’re trying to do the right steps now, you know, because if you still look at as of today, Alpha Microsoft now contributes meaningful for them. Um, ecom penetration has increased about 25% of revenue. They they have redesigned the stores. You know, earlier the stores did not look appealing for anyone to walk in. You know, it was just like luggage stack stacked with no proper placement. So, it gave you like a daddy feeling, you know, when you went to the store. Okay, you’ve come. This is not like an attractive store for you to even buy something. So, things have changed now. They’ve they’ve changed the way they place their luggages. uh focus on e-commerce. Of course, Boston Consultancy Group, they’re charging them a bomb, but I think they they have done the right steps there as well and uh they’ve kind of got it right in keeping their general traders happy and e-commerce happy. So now is when they’ve done a bit better job, but they kind of lost out on distribution and the mast segment completely and that’s been the biggest downfall for VIP industries. You mentioned Safari. We’re going to get to them in a minute, but just to sort of put a bow on the discussion on VIP that I mean there’s a lot of talk right now that you know they’re looking to sell and presumably it’s either private equity player or one of the incumbents who buys them out. So do you think that anything is materially going to change? Are they going to be able to reclaim market share or is it just now they’re just a waiting game until they’re sold? So uh again you know VIP one more reason where they’ve also struggled is that they’ve had a a plethora of management changes you know Sudha came on board he was there for about 4 to 5 years came took his position of course Radhika being the daughter she wanted a better state so Sri Jatya worked off and did what he had to do and then there were two three other guys who came on board uh the last guy I think an Aner Dataro was there and now the CFO who was the earlier CFO uh she’s leading the charge. So you know that’s one of the reason as well that you know they there was a lot of management changes as well. So realigning of focus was also not great at that point because someone would come in they would have their thoughts then someone else came in they would have their thoughts and they left they left they came they left it at least with what me too Kashiranga who’s who’s come on board right now I think what she’s doing is um you know she’s she she’s going about in the right manner a first let’s let’s reclaim market share so her first idea was kind of let’s get to market share gains then let’s get to profitability because the end goal and I think this has been um uh has been called out by uh on one of the conference calls as well that if if the company does have to sell eventually they’re looking for a good valuation for a good valuation there has to be good numbers so um so there are a lot of talks and I my my hunch is that there will be some movement in this but for before that there are a lot of steps which you know Nitu has to get things right and I think she’s doing about the right matter classic cases focusing on let’s say alpha shutting down um not shutting down moving Bangladesh more towards hard luggage you know they they let go a lot of labor force in Bangladesh they took that one time hit uh which was strategic in nature but that’s going to lead to huge cost savings for them and that was necessary this was required she did that steps uh so she she took the difficult decisions which I think the other guys could not take where you know shutting down units in Banglad and letting go of labors and you know Bangladesh was going to a lot of labor unrest as well but they still somehow managed to let let a good chunk of labors go moving towards hard luggage where you know where the industry is moving towards hard luggage where she did that as well you know she focused on hard luggage um focused on collection so if you go to a VIP store today you will see a a big difference you know people were are more welcoming the collection is much much better. Uh what she also did was she let go of people with luggage. She got in people with no baggage in her team. You know, she got in people from FMCG to run the marketing and the thought process kind of changed though is that you know the jury is still out on her. Uh I think we’re still very early. Um she still needs to walk the talk in that sense. But it looks like you know she’s going about the right manner and it’s if the stake sale does happen I think it’s it’s good for the industry and I think Dip Piran has made it quite clear that uh I think Radhika has no intentions of further going ahead with this brand. Um and if if this ego stake still does happen and my ar and our hunch is that it would largely be some of the private equity guys who would kind of get in because you know they would not want to sell the brand in pieces right because there might be certain uh players who might just be interested in one or two brands not the entire thing but a private equity it it works pretty pretty well for them uh you know someone who can just come and take it and rework the entire uh management and distribution system everything would works that would be fantastic. I think that that’s that’ll be the best outcome for the industry as a whole right now because you know industry is also facing a lot of issues uh which we’ll talk about it later but uh I think we should see something sooner than later in that sense. You’ve sort of given me a good segue into Safari industries and you you mentioned Sud Jata who of course initially was with VIP and then started. So so what’s that? Sorry tell me the whole origin story of Safari and what made it what it is today. too. Safari has been um I think it’s a classic case a case study for a lot of NBA colleges. I think what Sadi Jatya has done I think it’s phenomenal you know I think I would say after Dipl he’s he’s like the torchbearer for the luggage industry uh start of his career in ac of course VIP industry is he knew what marketing the distribution strength and where to source what to source from uh in he started off in 2007 2006 at VIP um you know 5 years He was instrumental getting the manufacturing units right, getting the distribution right, getting going to China, opening offices in China, Hong Kong, all these places, getting the right distributors for for products, then getting developing Bangladesh as well to bit of a channel. So he he was a genius when when it came to sourcing. It’s unfortunate his journey had to end in 2011 with with VIP industries but that’s when he decided you know hey what I I’ve learned what I had to learn there’s one company in the luggage space which was a number two player with just a 3% market share at that time 3 to 4% market share at that time which is completely loss making and that’s a challenge that she wanted so he went and acquired Safari Industries let the old promoters go off and he then uh got the basics right. If you look at what he did was uh Safari industries focused on one particular segment which was the mast segment did not really go ahead and create too many different brands he did not want to do that he had one particular brand which was Safari he said let’s just focus on one brand let’s just grow Safari and what he did was he grew Safari well in the meanwhile he went and acquired few brands as well which is Genius Genie and their their uh the lower end of the brand as well which he went been acquired not a big acquisition as well uh focused on marketing initiatives started spending a bit on marketing uh developed inhouse manufacturing facility which was again focusing more towards hard luggage but he did not really go to Bangladesh and say let’s go and set a manufacturing plant in Bangladesh he knew sourcing he knew where the right guys in China he knew what the right guys in Bangladesh were he also knew that company his strength his size cannot really go and maybe set up a manufacturing plant so did not do that. He went to China. He got good luggages coming in from there. Went to Bangladesh, developed good vendor base, center marketing and you know he developed a great team in house as well. And today if you look at where Safari is, they are the fastest growing luggage brand in the country. M uh in terms of profitability they have seen huge leaps and bounds because of his efforts and which was what a 3% market share today is at a sub 32 33% market share postco things have changed for them drastically and that they are at they’re just at the prawl of gaining more market share from other players. So I I would say Sabata has been instrumental in in whatever he’s done in the industry and for Safari but just focus on doing the right things you know marketing getting the right distribution guys focusing on manufacturing of hard luggage did that job fantastically and today they are where they are you know in that sense do you think a large part of that was do you think they were just a lot better at um online sales is that a big part of the story so again you know very very very interesting you know what what VIP did not do well was what Safari did extremely well. So they focused on ecom, they focused on CSC channels, they focus on modern trade. They knew that you know 1,500 rupees is not something which for lang probably go to stores and buy went to e-commerce went to flipkart went to Amazon’s and at that time Amazon flipkart was also looking for great tie-ups. So if you look at their journey up to about 25 30% of my revenue comes from ecom um and then general trade modern trade all being equal in that sense and then you know CS channels but the way he was able to capitalize on e-commerce is something which changed the entire industry no one thought you could sell a luggage online but hey this guy did it pretty pretty well and that’s when we decided okay we also got to get move towards that and kind of get to ecom but safari was was I think pioneers in that sense when it comes to selling luggage on online and he did it remarkably well and still is doing it remarkably. I think if you go to Flipkart and Amazon I think he would be one of the first two sellers. I think the top sellers for luggage industry would be probably Safari Safari industries and that’s that’s how he’s built up you know he doesn’t need to focus on company owned company operated stores didn’t really care about didn’t really care about that time he knew his time would come to have company owned company operated stores first thing let’s just build let’s let’s let’s gain market share what this does is if you’re today at a 30% market share you know and you’re growing your market share it’s very easy for you to then pivot you know they’re kind of go into little bit of luxury because you developed that brand. Now let’s say for example you had someone who was buying a luggage at linking your card you’ve gone you’ve converted him to go from there to a store buy luggage for 1,000 rupees buy a safari now that guy again maybe you know with the cycles going down 2 years downline goes in again to the same store he then he’s already bought lak,000 rupees last year most likely he would probably upgrade he was like aa what is new is there some new technology which has come up new color new design. So what he did was after a certain point he pivoted he he launched two new brands which is urban jungle and safari select which cater to premium categories okay and he started focusing on company on company operating stores and not too many doesn’t want to have like you know 500 coming up coming up like 100 stores 150 200 stores because they work as a great advertisement for them you know have them in great location so he has in Delhi airport uh right before you catch a flight you can see a refresh correction of Safari which now VIP is also following where they’ve opened one in T2 Bombay so you know Safari got things right focused on uh mass stage then kind of pivoted towards luxury segments for in terms of distribution kept it to ecom kept it to modern trade now kind of pivoting to company own company operated stores as well but not to a large extent and that’s been a great success for them and you know they they’ve always gone about in a very systematic manner increasing capac capacity um you know so they do have a plant in India they have two plants now in India uh one in Hel and one in Japur which they recently set up so they kind of changed with the demands and we saw hard luggage getting sold great we’ll do hard luggage we saw poly PC luggage is getting sold more as compared to PP luggage we’ll do PC luggage so they just kind of went with the dial you know they said okay what is selling more what do people want more this is what they want great I’ll sell them that PP works better for me because I don’t have to import PP because PP and PC are basically uh crude derivatives but I’m getting one in India and other from outside India so I will not kind of hear that. So he got things very very he got things right. Focus on distribution got the manufacturing as well right increased manufacturing units in a in a very very collaborative manner. Setting up a new plant is all in a very very systematic manner. Uh distribution also focus from ecom now to going to general trade and then going to company on company stores. So it’s been a a fantastic journey the way they’ve gone about it. So clearly one of the advantages that they had was they were like you said very fluid and flexible in terms of you know moving with the diet right but the minute you start investing heavily in manu your own in-house manufacturing it at some level hampers your ability to do that so I mean do you think they are at risk of repeating some of VIP’s mistakes not not necessarily because the way Safari increased manufacturing was you know they they would hit 80% % uh at utilization level set up a manufacturing plant and what they’re doing is that they they’re not really doing soft luggage manufacturing you know soft so you know industry dynamics have completely changed so what was ear 70% soft luggage and soft luggage meaning your soft upright which is basically your you know those big bags has now moved to hard luggage upright hard luggage upright is not a labor intensive you need moles put it in manufacturer Great comes out perfect and we focus on PC again PC is polycarbonate which is made very well available in India not polyropane it comes from Saudi Arabia so he focused on PCI and PP both developed both very very well meaningfully 50 for 50% in hal in Jaipur which is completely PC he can change however he wants to in terms of PCP however you see raw material where the demand is going to and for certain certain part let’s say premium products. He knows that India is not good in premium products. Uh in terms of manufacturing, Bangladesh is not good in manufacturing premium luggage. Go to China, have good vendors from China, get it to India for premium products. So he he’s very cognizant of the fact that what he wants to manufacture, where he wants to manufacture, how he wants to do it. It’s it’s not going to make sense if he does like a backpack manufacturing because that’s labor intensive. You know, we still getting things from Bangladesh. There are a lot of vendors in Bangladesh would still do that job work go there get it up you develop a certain part of it but you know he’s been very very sharp with the capital allocation in that sense you know develop and these these manufacturing units give them great asset turns you know you know do 50 60 kores he could do like a 500 400 crores revenue as well so he’s he’s focused in the right manner he doesn’t want to do a lot in that sense but develop in-housing manufacturing for just hard luggage you know when soft luggage demand comes we’ll see what to do So as of now things have worked pretty pretty well. I don’t see him probably struggling in the way he is because see VIP set up entire in Bangladesh. Now that require a huge amount of capitalics. Then you kind of shut those guys off. You know we let the labor force go. Now you’re converting that into hard luggage. I’m still going to get it from Bangladesh. Bangladesh India still have treated agreement. So why not just develop good vendors? So I tell them listen I’m going to source 100 K worth of soft luggage from you and my bill you know when I want inventory I’ll pick it up that vendor is happy you know that you know uh he’s going to pick up that much and Sil Jaka is known for it you know he’s known to have that vendor and that connect with the senders uh in terms of shop owners you know he would go down to your church kit store and all that and all those stores meet with them he would meet the vendors uh keep them happy as well you know So he’s always known to be that kind of person. So I think that’s really worked in his favor and I think that will always work in his favor. Um that’s the reason why we see a lot of good private equity money also going into Safari. Uh you know so that’s also helped them. So I don’t I don’t see capital allocation for them to be a challenge. I don’t see them doing something very stupid and put up a soft luggage manufacturing plant in India or something like that. So they they’ve been very very smart in the entire allocation strategy of so you know I’m I’m just I’m trying to figure out what the real secret sources because I get it it’s a combination of a number of things but there has to be something particularly special that he has done or maybe not done maybe that is as what he’s not done is as important as what he’s done because to go from essentially nobody to now broadly speaking match you know the big sort of 800 lb gorilla in the in the industry there has to be something particularly interesting or special that you’ve done like it can’t just be as simple as oh I shook hands at the chase store right there something far beyond that of course so this is also got to do with a lot of things where VIP also did not do um and what Safari got right so I think the magic source for Safari has always been getting the right product at the right time available so he clearly saw that we are going to see so you know it’s not you will not really go to primization straight away. For primization to happen, you got to move from an unorganized industry to an organized industry, right? You still had 60% of demand was unorganized about 6 7 years back. So that needs to first come to organized demand then you can talk about primitization. So what he did nothing doing I’m going to focus on sell can I sell a,000 rupee luggage? Can I get a,000 rupee luggage? Can that consumer who’s buying from the unorganized guy and move to the organized thing? He got that right. He did that very very well. Focus on one brand. You know, you know sometimes you know the chewy chef spoil the recipe. Similar with VIP. What VIP had the problem with VIP was that they had so many brands. Then where do you focus now? Alpha and Microsoft don’t give me good margins. Safari VIP give me great margins. Carlton of course gives me great margin and capacity gives me good margin. Now as a company point of view I would want my profitability to be great but Safari was opposite. He’s like okay profitability will come let me grow let me get the demand from these unorganized guys first. So he did that very very well. So I think the biggest I think the the biggest success and and the secret sauce for Safari has been focusing on Safari just one brand and focus on the unorganized the organized guys get the get the guys from uh the other market like to go to a store let them go to a store let them buy lage then you kind of work towards I think that’s been a hallmark of him and also you know with your one brand you don’t need to really spend a significant amount on Iman just focus on one brand, focus on digital brands and all of that. He got the things right there. So I would say the biggest success for him and the the secret sauce for the focus is on Safari, not build one more brand at that time or go premium too quickly. I think that’s been the the biggest success. Yeah. And and it’s interesting from what what I get from what you’re saying is that he in fact maybe somewhat counterintuitive counterintuitively at the time picked the unorganized sector as his opponent rather than VIP. Absolutely. That you know that I mean why fight the big guy and then go after the easier opponent. So you know what used to happen there’s already Samsung. So once let’s say the luggage industry opened up Samsung also enter India. Samsung has been someone who’s always gone acquired you know wherever they’ve gone. right now. So you look at if you look at their their most premium ranges 2 and all that they were acquired you know so is a different different giant to fight with. So you’ve had VIP fighting Samsung in terms of you know Samsung was VIP, Samsung was VIP you know we want market share from each other but there was a big class which no one really focused on and that’s where Safari was and Safari is like okay you all fight that premium second but India is going to be a story where you’re going to see the you know people’s uh earnings improve over time salaries increasing over time so they are going to move from year to year and at that time also Very interestingly what happened was the replacement cycles kind of shortened as well. So imagine if you buy a,000 rupee bag today you’re okay to let use it for 2 years and change it correct but if you buy like a 6,000 7,000 your heart’s still going to be it’s going to hurt you a little bit. Do I want to change it after 2 years you know maybe not for the larger public it’s still it’s still going to hurt them right but 2,000 rupees if I have to change it in 2 years I’m okay with it. So that’s where he realized that these two guys are focusing on the wrong side. They want Samsung of course would never do mass premium and this they loan to you know and they do have one brand but it’s not even meaningful in that sense but he realized that VIP is fighting Samsung for premiumization okay let them fight it out I’ll focus on and that’s why he did and that’s why he kind of feel and he is where he is today it’s just another example right in India I guess price is the ultimate thing it’s such a price sensitive market you today try increasing piles of 15 might feel it’s where the r the these guys are they they feel the pinch you know it’s not going to probably feed us you know we might crib about it but he will still pay what it is but for those guys it’s going to pinch them a lot as soon he realized that and he focused on that he still focused on that I don’t see that he would really move from you know a mast to a premium premium brand because he does realize that today still 30% or 40% is still unorganized there’s still someone who still has go into the shop for the first time. So, I’m still going to focus on that, but I will pivot towards luxury, but I’m not going to, you know, break my head over it that if Urban Jungle doesn’t reach a certain milestone, you know, they they they launched Urban Jungle, they shut it down, they again relaunched it. So, he’s very very smart. He knows Urban Jungle is not going to make him money in that sense. It’s it’s good for topline growth and that’s what’s very smart. VIP realized that if I focus on VIP said that I want to focus on uh VIP and Skyback to gain revenue and gain margins you cannot have it both ways in the country unfortunately um but Safari is very very clear focus on one thing develop premium but I’m not going to go compete with a to me or do something ridiculous in that sense sure sure and and you know it sort of the question I have with Safari is that is it at some level and maybe it’s already happened but maybe it will happen more in the future that is it going to become a victim of its own success in a sense that it has inadvertently laid out a road map for how to build a how to build a luggage brand in India true and so do you think that they have inadvertently created their own competition because there’s such an obvious temple to now copy so it’s not going to be easy you know luggage if you look at the characteristics of the luggage industry they’re largely equal body in nature you know you don’t see it’s not going to be easy for someone to come and disrupt Ed at the ground level, you know, maybe at a premium premium level at a super premium, it’s pretty easy to do that. But for someone to create, let’s say, you know, if you and me decide, okay, let’s go and set up a luggage company and we will target the masses, it’s going to require huge amount of investments from us in terms of spending on advertisement, building capacity, building dealer base, getting the right product in the right space. It’s not at all easy for us to do. So you if you’re looking at competition and you know we can probably discuss that later as well but if you see competition there’s no one really who has still probably come in the mast segment you know we still seeing the guys who have entered they still kind of want to focus on the premium or the semi premium or the luxury segment. No one really still wants to go to that bottom pyramid where where Safari is and they know that you know it’s not an easy job to convert someone who’s already been a Safari guy to move to you know XY Z brand at that level. So I I don’t really see them struggling in that sense. I don’t see competition of course competition will keep coming on board but um I don’t see the mass seed segment to being disrupted to a certain to a large extent you know you don’t see you will not really see a demart you know which is a value retailer in that sense setting up a luggage manufacturing company it could work well for him but he’s he’s happy selling a safari product there so I don’t see someone coming in there uh I see people coming in the premium side but I don’t see that segment really being uh hurt that much by knowing new entrance. So you know they they are the first movers in that in in that sense. I don’t see anyone coming there. Uh very very difficult to build a brand in India and done that in that sense and especially when you’re just targeting the mast. So not not it’s not likely that you would see someone just you know relying someone just coming on and saying I’m going to go do luggage today and then do not not possible for them. The last I would say five seven years clearly has seen a massive influx of new brands. Clearly there was room for some amount of disruption because so many new players have come in and some of them have actually done quite well. Can you explain to me what about the luggage industry allowed so many new entrance to come in and what surprises me is that I would have thought that the incumbents would have been a little more brutal in terms of defending the market share but somehow it doesn’t seem to have worked out. It’s a great question and you know at Monach we recently did a challenge check as well. We found some really interesting developments as well there. So let’s look at luggage, you know, let’s look at maybe from our parent point of view. Luggage was either blue, black, simple, there’s no USB charger, there’s nothing there, there’s no coffee putting thing and all of that. No charging and all of that. It was simple. Luggage was meant for being luggage in that sense. You know, there was blue black luggage. Keep it, use it for 5, 10, 15 years. That’s about it. there was no innovation which really came on board at that time but the the new guys you know the the D2C brands which came on on board uh I have great respect for them what they’ve done as that they they saw that there is a set of class of people who don’t look at luggage as a luggage today they look at it as a fashion they they they want options they want to stand out you know when they go to an airport they would you know you want to be that person with a neon bag you know or or something which is when you see nowadays you see people driving those bags you know so they they want to stand out the gen Z the millenniums they want to stand out they don’t want they don’t want a luggage just to be luggage in that sense you know they wanted to do more charge your phone all of that so that’s when uh you know while we have great respect for both VIP and Safari in their in their due rides but they never went and really innovated anything they kind of still are still at luggage is luggage you know for the longest time and they still think that is that is the case. But what these D2C brands did was that you know uh like Samu Kabara National Miles what they did was that they said that can we offer some can we offer these consumers can we offer Kish a bag with a charger? Can you offer Krish a bag with uh you know where he can keep his bottles and keep a lot of luggage space. Can you give him different variant colors vibrant colors? That’s what they did. They they decided that okay fine we will enter the luggage space but we will disrupt it to a certain level where today no one’s really focusing too much on they kind of went to the mid to semi-premium segment where they realize that I can get a 4 and a half 5,000 rupee bag from China China of course being China they there’s one entire city which is this luggage manufacturing if you go there you will see luggage with various varieties so they went to China they started getting luggage From there they just went ecom you know they they realized that India is moving towards e-commerce you know everything is moving e-commerce you know Instagram your Twitter went you know the down number of downloads great so they focused on that they focused that we don’t want to build like stores or anything we focus on D2C and just sell online we’ll be happy with that not sell huge quantity sell at least start off with it and that’s how they kind of developed and they have disrupted the market let moubar for that instant I think I have great respect for them. Uh Moo they had about sub 200 K of revenue as of now but they they they started online they got brilliant designs for the country uh brilliant innovations in terms of the the way the bag looks the kind of utility factor it has um great looks great colors as well. So they kind of focused there. They they they they went there. They disrupted the market with giving discounts everything. After point discount stop, they developed a a niche for themselves. They they had they could have potentially sold out as well. You know, there were, you know, some talks where a prominent brand wanted to acquire Bukubara at that point, but they did not sell off and I think that’s was a wise decision. um they uh they got funded and what happened was private equity money started coming in to these guys. So Moabara got funded by private equity. They went they started going the opposite way. They they they disrupted the market online in a certain segment. Now they’re going offline assembly for that matter or national markets for that matter. They realize that you know India is moving towards quick commerce. Can I set a luggage today on quick commerce? Yes, I can. I’ll do that. I don’t want to set up a store or if so the the D2C brands kind of focus on the fashion part rather than you know just the utility part of it. I think that’s that’s been the biggest success for these D2C brands and I think that’s that’s been remarkable because you know what we seeing in the industry as a whole that you know we are seeing that replacement cycles have shortened you know replacement cycles which were like 10 years older you would have your old which would be there for 15 years you would still use it now replacement cycles are 2 years 3 years you don’t want to be snapped with the same luggage more than 10 times you know at the airport you want something great so uh they played on customer minds you know they started offering great products state color utility and they’ve disrupted the market. They’ve been well funded and we still see a lot of D2C brands still entering the country because luggage is you know the the tail the sector tailwinds are huge you know in that sense if you look at their passenger traffic the number of airports number of if you go to any other any country we only see Indians traveling because India has realized that you know we should start traveling and that’s why these D2C brands have come on board and are doing remarkably well we still see a lot of D2C brands still entering the country because a lot of private equity players who have missed out on an opportunity out there in the luggage space are ready to back someone you know they’re ready to back a disruptor and they know that disruption will come in but at the higher level and know where someone like a a VIP is you know the VIP brand it’s not the company where the VIP bag is there’s huge room for them to enter there and sell online because online they don’t have a store they don’t have manufacturing units so they’re just getting from China selling it to India they don’t need to set up manufacturing units till you know let’s see where the duty and everything takes us or you know where if there’s a BIS uh norm which comes in for the luggage industry then you know things might change but as of now we see D2C brands going to China getting good good quality products and s in India I think that’s going to continue you I won’t be surprised if you see three four new brands coming in you know you got Mokubara of course has been great success assembly is there this icon which has come on Ash has come on so you know there going to be there is now a lot of these apparel guys are doing bags as well. There’s Tommy which is doing bags. There’s us polo who’s doing bags. So everyone wants to play the industry. Uh so yeah definitely there’s going to be huge competition when it comes to D2C and that’s what we realized as well when we did we just went on the street to understand what the demand scenario is. Demand has moved online and these D2C brands are are are gaining gaining great market share. But but how does so I’m saying if if the space gets so crowded first of all the economics at some level have to take a hit right can’t the party can’t go on forever but how does any brand actually differentiate itself whether you’re the incumbent or you’re the new guy as far as I can tell prices are broadly similar first of all the the value the supply chain seems to be essentially the same for all right so the cost structure is broadly the same so therefore the only place you’re really is some subjective like you may like one brand’s design I may like the other brand so therefore you buy X and I buy Y but that’s hardly a way to build a business long term right so how do how does anybody actually succeed in this environment so great you know um so let’s for let’s look at what Mubara did for example you know they did online they did online for good couple of years then they realized that online to a certain extent doesn’t work in India we’ll go open shops as well they open three to four shops they got funded by private equity and they don’t just do luggage anymore they’ll do a lot of accessories products But you’re absolutely right there. You know, uh after a certain category is where disruption is going to take place and how and there will be a lot of brands which will just come off and fly off and go go go bankrupt. It’s only going to be like few brands which will be able to survive who have the capital who have build the customer base. You know, you already seen a lot of these DTOC brands gone go off uh already. So it’s going to be it’s going to be a challenge. It’s going to be somewhere where uh the older players will still struggle because they will face heated competition for next two to three years because we still the tailwinds are there because you know till you don’t have a disruption or you don’t have like a a slight slowdown. You’re still going to have a lot of people coming your way. U so the margins what these guys would would probably make at that level. So they’ll have to start defending it, start spending a lot to kind of defend their market share when it comes to these DPC and that’s what we seeing already as of now. But you know given that the tailwinds are there, we will still see a lot of these brands come and go. Um and it’s a matter of time till till just it’s going to be maybe two or three would survive and the rest will just fly off. I’m I’m now thinking from the perspective of VIP and Safari that they have they obviously have no choice but to start defending market share and competing especially in VIP’s case more online absolutely why don’t those incumbent companies just create spec brands just focus on online who can directly compete with the national miles of the world and therefore then if they have offline brands so then they don’t have this you know issue of oh the general trade guy is getting a different price from the online guy so why don’t they just have that differentiation within their own company. So, D2C brands uh or are we talking? No, no, I’m saying so, so take VIP’s case for example. Okay, there’s multiple brands in the company. So, you mentioned earlier that a big problem they faced was that if they sell at price at say 100 rupees in general trade but to compete online they have to sell the same thing for 80. Absolutely. So, which creates there’s a fundamental conflict in that. So why doesn’t VIP or I’m using VIP as an example but any incumbent say that okay I am creating a new brand whatever that name may be and that brand is a pure online brand designed specifically to compete with the national miles and mobas of the world. So we are seeing that um not necessarily in VIT’s case just maybe in Safari’s case. So urban jumping for example when they started off was just an online brand they realized again there’s emp as well you know they they’ve seen moasta you know if you’re selling premium let’s just sell online premium works very pretty well and we’ve seen that in a lot of categories as well recent footwear as well you know let’s just do online let’s not do anything offline for a long time so Safari is doing that with Urban Jungle for the longest time they were just selling it online and not on their stores now they decided to go the opposite So lot of lot of brands are realizing that but it it doesn’t work for like someone like a VIP or Samsungite to just have one brand for the online guys because a that would take away too much bandwidth for them um you know they their wise and they’re they they’ve worked in such a manner that it it it’s more beneficial for them to just kind of you know be there or just acquire someone or if there’s an acquisition opportunity I think Sapsson Knight would just be the first one to go and acquire any of these uh these new buys, you know, if they had to. But it doesn’t I don’t think they they will have that bandwidth to really go and just create an online online brand. Um and I think that’s why these D2C companies have D2C brands have really capitalized is they they focus on the channel and they know that channel is the most important thing to sell luggage. You know, if I can be available on Amazon’s top 10 searches, great. Can I take cash one for 2 years, 3 years? Yes, if I am backed by private equity, I can or after a certain point as well, I need to make money is then you know when you see the the the the good guys will probably survive and the other guys will just probably fly off. So, but it’s very difficult for a VIP and Samsung just to have a D2C brand. It’s going to take too much of their bandwidth and each of them are kind of fighting their own battles. You know, with VIP’s case, it’s completely different. With Samsung is, you know, just protecting the luxury or the premium market share. uh and for and for Safari they they’re going about it in in a certain manner where they they went to premium they went online and now they’re kind of going the same way by selling it in their stores as well. So it’s an interesting play you know how these brands survive but um you you will be see a lot of you will see a lot of disruption in next two years in the luggage space you will see the margins what safari and all these guys making will be impacted you will see it I don’t see revenue being impacted to a large extent I still see topline grow continuing for all these guys maybe a short-term phenomenonment where where there’s heavy discounting which is going on right now but maybe couple of years down the line you will see uh just slightly coming off and then again taking off. But do these new companies I’m not getting into specific ones but in general do they actually make money or is it just all born it’s all cash. So as long as so but the minute that tap is turned off at all. Absolutely. So the the moment the private equity guy realizes that hey that this is it we’ve done in what he had to do we need to start making money and we we already seeing certain cases where certain brands are not discounting too much and doing side. Uh then they realized that we had to we we’ve done cash burn to a certain scale is now we have to really look at ROIs and we have to look at returns. We got to stop doing discounting. Now there are few brands which are doing that and it’s only the new guys who are still trying to disrupt the market are giving heavy discounts and all of that which will they’re trying to disrupt the market online as well but uh there will be a time and we are already seeing that you know we did few checks recently we’ve seen that many of these D2C brands have stopped discounting to a certain extent and that’s that’s the right way to go about it right but it doesn’t help when you have your largest player discounting as well you know so you know So that’s where a bit of a challenge. So last question again a very sort of broad canvas question which is what is the luggage space in India actually look like say 5 10 years down the line. Are there is it that eventually we have to come back to this igopolistic sort of situation. So there may be a lot of ups and downs along the way but eventually we come back to square one or do we continue as we are? Absolutely. I think 5 years 6 years down the line we will come back to where we are. It’s you know we’ve seen disruption in many markets you know but it’s only the few or the old brands which have survived and I think in luggage as well I I still see um VIP being where it is I see Safari where it is Samsung and maybe you can have engine of one or two more brands would kind of consolidate and I think maybe a lot of these brands would get acquired or they become a part of a different product category you they start doing luggage as one of the art products but I honestly feel that luggage industry in the next five next two years we’ll see a lot of disruption in terms of these new players coming in but 5 years 6 years down the line it’s going to be the large guys who would survive and maybe one or two more entrance which will come in but I don’t see like you know the oligopolistic nature changing to that extent because think of it till till when you going to get from China right you you beyond the point you have to think about manufacturing in the country and that’s when you will start realizing it’s not easy to do that and that’s when these brands would probably just shut up shop you know we had a great journey we got money from Shark Tank all these places but you know now it’s it’s it’s not our cup of tea to do this right right no I mean fascinating stuff it’s it’s a really interesting space and I mean there’s 101 things going on the most interesting space because you know it’s it’s got direct link with your travel and all of that Um and something which you use every day, right? So you see that every day and you’re shown your shoulders. So absolutely it’s it’s one of the the best places to be as well luggage industry. Few ups and downs here and there, but I think in the long run you will see uh this to be one of the the the interesting spaces to be. Yeah. Got it. No, but R, thank you so much. Thank you for taking the time. It was fantastic talking to you and thank you for sharing all your insights and experience for having us. Thanks for giving Monarch an opportunity to present our our thoughts. It’s been lovely. Absolutely. Thank you.