The task is hardly easy – Kashiramka is VIP’s third managing director in as many years.
Also, VIP’s margins have slumped to 9% and the company is sitting on a large pile of inventory, escalating costs. With the Piramal family unlikely to step in and take charge, the business also faces a succession challenge.
Mint had reported in October that promoters were looking to sell the business, which currently has a market capitalization of ₹7,674.63 crore. That plan, however, has been put on hold as the company focusses on improving its margins, before it comes back to the market seeking a better valuation, a person with knowledge of the matter told Mint.
The company, with its array of sister brands including Aristocrat, Skybag, Caprese, and Carlton, alongside its flagship, VIP, has been battling a gradual erosion of market share, revenue, and key personnel to both long-standing competitors and emerging startups.
Yet, Kashiramka, with her conservative Marwari family upbringing, knows the value of a good hustle, and with over 27 years as a finance professional, she has been keeping a tight rein on costs.
“This organization is on the verge of transformation,” Kashiramka, who was named managing director on 15 August 2023 and formally took over on 14 November, said in an interview with Mint. “There are a lot of challenges when it’s a legacy organization; every cost will have a bulge.”
“They (promoters), anyway, want to sell this company, right? But my view is that I should be allowed at least three years for this transformation. So, minimum three years I have before they sell at a great valuation,” Kashiramka said.
This means, she needs to make sure the organization “stays relevant”, grows profitably and attains margins aligned with the industry.
“But it’s a legacy organization and it is like taking a U-turn of a large ship, like a Titanic. That’s the challenge,” she noted.
As such, 50-year old Kashiramka, who was previously offered the top position at VIP before officially assuming it last year, has emerged as a valuable ally for the Piramals. Dilip Piramal, 74, is the chairperson of VIP Industries while his daughter Radhika Piramal, an Oxford and Harvard Business School graduate, is the vice chairperson, and based in London.
With a clear plan to elevate Ebitda (earnings before interest, tax, depreciation and amortisation) margins to 15% by FY25, Kashiramka has a three-year goal of reaching 20%, which is closer to VIP’s historical benchmarks.
Her strategy? Cutting costs, shifting to an asset-light model, and quicker product launches.
Market share and product mix
VIP’s biggest problem is no secret – it has steadily lost market share over the last decade to entrenched rivals such as Samsonite, Safari Industries as well as new age D2C brands such as Mokobora and startups like Acefour Accessories. Many of these brands are now led by former VIP chiefs.
In a span of five years, VIP’s market dominance has waned from 48% of the organized market to a 37% share. This means every fourth buyer of branded luggage owns VIP product.
“Can I make it five?,” Kashiramka asked. “It used to be eight, 15 years ago,” she said.
“As soon as I took over, I visited 20 markets…customers are not buying because they feel the product is not relevant for them,” she said.
In response, VIP is steering towards premiumization across its brands, adding features such as USB ports, advanced trolleys, and vibrant colours to capture a diverse customer base.
As per a Nuvama research report, the company has stopped 50 products that were not working.
Kashiramka has brought on board a new designer with the mandate to create new products, “something the industry has not seen before”.
VIP is targeting 15–20% CAGR in revenue over the next three to five years. In FY23, the luggage maker clocked a revenue of ₹2,082 crore, up 61% year-on-year.
Kashiramka is exploring new product domains, including backpacks and duffels, aiming for a significant shift in VIP’s product mix towards a more even distribution between luggage and non-luggage items. For now, 75% of VIP’s business comes from luggage. While luggage replacement cycle has come down to two to three years, backpacks are replaced annually by most, she said.
Over the next three years, she expects the revenue split to change to 60-40 in favour of luggage.
“Major raw materials consumed in manufacture of hard luggage are polypropylene and aluminium. Any substantial rise in their prices will adversely impact the company’s margins and hence profitability. However, the company has been taking price increases and changing their sourcing from low cost countries India and Bangladesh versus China earlier, which will lead to structural gross margin improvement,” a Nuvama research report dated 24 March said.
The report added that the company has held two vendor meets and addressed many issues.
VIP’s other major problem is its inability to correctly forecast trends.
Soft luggage has become a major headache for VIP with the company sitting on ₹400 crore worth of inventory, because demand suddenly dropped. It used to sell 250,000 pieces of soft luggage per month until six months ago, but now it is down to 50,000.
To cut costs, VIP has laid off 4,000 workers in the last three months at its Bangladesh factory, which makes soft luggage.
The bigger loss, Kashiramka says, is that the halt in production in Bangladesh has resulted in a monthly loss of ₹2 crore to ₹3 crore. “Currently, I have twice the normal inventory, which is driving up my warehousing expenses. Once I’ve reduced inventory to normal levels, my warehousing costs will halve,” she said.
Kashiramka now aims to repurpose the Bangladesh plants towards the production of diverse luggage types, including backpacks and duffels.
The future
Moving forward, the company plans to pivot away from its traditional manufacturing-heavy approach. The future strategy emphasizes bolstering research and development efforts and launching innovative products, rather than heavy investments in manufacturing infrastructure. For expansions in hard luggage, Kashiramka is considering manufacturing operations closer to key markets, aiming for a distributed production strategy that minimizes capital expenditure and reduces freight costs.
“We were more focussed on back-end earlier rather than the front-end which was a key mistake,” she said.
Kashiramka also anticipates substantial growth in the direct-to-consumer (D2C) and e-commerce sectors, setting a target to increase the company’s online sales to approximately 25% within the next 2-3 years.
“In fact, only 6% of our revenue was coming from e-commerce pre-COVID, and today it is 20%,” she said.
Over the next five years, Kashiramka also wants VIP to transform from just a luggage manufacturer to a business that also sells related products. “When you go and buy a (piece of) luggage, there are lots of other things which you need (if you are) travelling; you need some pouches, you need some other carriers, everything should be available with (VIP),” she added.
The company’s struggles in declining margins and shrinking market share have reflected in its stock price, which has fallen by over 25% in the past two years. That said, investors now appear to be placing their hopes on turnaround strategies.
“On fruition, the revival strategy is likely to result in market share gains while Ebitda margin is likely to improve to 15% from 2HFY25E once warehousing, freight and accelerated spends on e-com stablilize,” a Prabhudas Lilladher report dated 28 March said.
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