Safari Industries (India) Ltd

(Bheeshma Sanghani, PhD) #23

Incremental Return on Equity is a very encouraging 22% for Safari. Up from 7% in in 2015 to 22% in 2017. They have been doing a good job in allocating capital.

if the current incremental ROE holds, with addn infiusion of 51 cr in equity , its reasonable one can expect a return of 22% on the expanded equity base.

If convinced about the quality of the business & the quality of the people running it , one could be flexible with the valuation. Its really a subjective call one needs to take.

In the end return expected from your investment should mirror the underlying return on capital earned by the business ( over a reasonably long period of time )


(Bheeshma Sanghani, PhD) #24

Safari and VIP slugging it out

(Bheeshma Sanghani, PhD) #25

(Samir) #26

This is amazing competition. I was looking at one new company which raised PE/VC funding from Accel Partners; the company is

This is innovation and building a competitive edge around with charging points in luggage etc. Pls go through them - while this would be on the higher side from a pricing perspective - not sure where you slot it i.e. against VIP or Samsonite but not against Safari.

It would interesting to see if anyone has discussed the innovation bit with Mr. Jatia in a one on one meeting. If travel (leisure) explodes with increasing discretionary spending which is said to grow 10x in the next 5-6 years this could play out well. But valuations are stratospheric given no differentiation.

Disc: Studying not invested. but interested in the Travel and related eco system potential investments in equity market

(Bheeshma Sanghani, PhD) #27

I was going through the VIP con calls and i must say they are very revealing in their references to Safari. One gets a sense that VIP has neglected to develop the “value” end of the market for all these years and allowed the unorganized players to grow. Now with the entry of Safari in the value segment it seems that VIP management has been broadsided by safari in this segment. This is apparent from first denying that Safari was even a competitor and posed a serious threat

to refering to Safari has " not a major brand"

to finally accepting that Safari is taking market share. Also i dont know what M/s Piramal is refering to when she says Camel. Its Kamiliant. I will put it down to a typo in the VIP transcript.

Some other interesting references to Safari


(Bheeshma Sanghani, PhD) #29

(Bheeshma Sanghani, PhD) #30

good set of numbers from VIP industries.

VIP is a proxy for the indian luggage industry given its market share. Overall , as the VIP results indicate, the luggage industry is doing well.

(ishandutta2007) #31

@bheeshma But topline only grew by 7.99%( ie Rs 311.95 crore as against Rs 288.10 crore in the year ago period.) which shows sales haven’t actually picked up. Isn’t it ?

(Bheeshma Sanghani, PhD) #32

I dont think we can compare sales as revenue in the current qtr has been reported net of GST. However - earnings are comparable.

(Bheeshma Sanghani, PhD) #33

The latest GST circular is available at

It recommends reducing the GST on luggage from 28% to 18%. The specific code in GST that luggage comes under is 4202


This is my first post on VP forum. I have been greatly benefitted in terms of learning from this forum. 2 years back when I started investing and was looking for resources, I came across this forum and fell in love with the depth and the quality of the discussions happening here. Till now I have been a silent observer, learner and now I wish to contribute whatever I could within my capabilities and learn actively. Was avoiding this for a long time thinking, not to dilute the content of this forum.

Hi Bheeshma,
I highly appreciate the depth you have put into this thread and interesting to see the various facets of an organization that you analyze while entering into a stock. e.g. Employees and their past organizations and what school they come from. Hats off to you and other VP members!

I have few questions:
When you say this,

do you mean that Amazon can come up with their own brand and eat up the market share, as it already seems to be happening.
We can see that Amazon has come up with Amazon Basics Hardside Suitcases ( since 5th September, 2017 and some of the reviews, though very few, look good. Con being they are currently offering 1 year limited warranty while the VIP and Safari offers 3 year / 5 year international warranty.
Entry of Amazon into hardside suitcases does indicate that they see this as a good opportunity and would have good margins, but it also would lead to erosion of marketshare for Safari. What are your views @bheeshma ?

One more basic question:
For a company like Safari which is already at a PE of 84.31 (took it from Screener), can it turn out to be a multi-bagger going ahead from this point of time? What changes should we look for in the coming quarters to see that this is on the right track ahead?
Which companies should be taken as peers to look at the industry average (moulded plastics / apparel / travel accessories)?
I would like to have views from @The_Confused_Consult also on this industry and this company having seen VIP and Safari for last few decades.

Forgive my ignorance, if I am asking a very basic or stupid question.

Disc.: Initiated a small position to track. Wish to invest more in both Safari and VIP.

(Bheeshma Sanghani, PhD) #35

Hi @uab59

Thank you for contributing and asking questions. I have outlined my basic thesis of investment in Safari in the earlier post. To answer your q/s - Safari doesnt have a big market share to begin with. Its a very small company in the branded space with maybe 2-3% share compared to the biggies ( Samsonite & VIP ). The basic economics of the industry is good with 18-22% ROE achievable.

As mentioned before, Amazon poses a threat of a new entrant offering the same product offered by the other players through Amazonbasics - where it basically takes a popular product and offers it at a lower rate than the other sellers on its site - a concept borrowed from pharma - where one sells generics at a fraction of the cost of its branded players - both are essentially the same molecule.

This can be good and bad - good in the sense that the presence of cloners increases the level of innovation in the industry and new feature adding activities take place - creating a situation where the replacement cycle decreases ( because people want to have the latest product and are willing to pay more for it ) - the industry growth rate increases and creates re-investment opportunities for the company.

The bad obviously is that if there is no innovation and all products are basically the same with different labels - the competition is basically on price and tends to be driven down to the marginal cost of production over time.

So yes, one needs to keep an eye out where the industry is heading.

The key number is the working capital cycle of Safari - which needs to improve and match with VIP. It has been improving and one expects the receivables to come down to VIP levels of 35 days from the Safari level of 60 days.

As far as the PE ratio is concerned - the market cap of safari is 1000 crore and the overall size of the market is roughly 10,000 cr increasing at 10% to 15% per year, so the market is probably valuing the earnings power accordingly.



Thanks a lot for your reply, @bheeshma
This definitely helps me broaden my understanding.

Right now, I would wait with fingers crossed, since I see lot of developments still to happen in the luggage space from smaller value-adds to larger changes;

  1. Identifying your own luggage from far. Customization / Personalization. Currently people are using ribbons of different colours tied to their handle.
  2. Locating and tracking your own luggage digitally. Relevant for multi-flight / international tours.
  3. Ability to be lugged over staircases. Change in design of wheels. People tend to stuff their bags as they have wheels but it becomes a pain when you have to lift it over few steps.

There is one more promising idea which I happened to work on at one of the designstudios using Hardside Suitcases, similar to which if implemented, though niche market, can open up a new opportunity for these companies.
This is a great value for photographers as the equipment they carry is very expensive.
Check and

Like many on this thread, I was also pleasantly surprised to see Safari listed when I saw 3-4 old Safari suitcases and briefcases at my home.
I remember Safari was very popular among my batchmates in Ahmedabad who were moving to US/UK for MS in 2008 as it was offering a good price/performance compared to unbranded or branded premium products and 5 years international warranty. Following them I also bought a large strolley and I am a happy user of that for over 8 years now. Bought one more cabin size strolley for my wife during engagement, which seems to be custom in our community. :slight_smile:


Q2 Results are out:

YoY Revenue growth of 16.17% and PAT growth of 266%
QoQ PAT growth of 7.35%
Looks fine, considering that the second quarter is quite weak compared to other quarters for luggage industry. (referring to below interview link). QoQ degrowth of Revenue can be because of this.

As mentioned by Dilip Piramal, Chairman, VIP Industries, Q2 is usually a weaker quarter for the company. Q1 being the strongest and Q3-Q4 are good. Overall both halves are equal.

@bheeshma Awaiting your views.
Also let me know if I have done the above calculations correctly. I am new to understanding this. Will this industry be considered as a cyclical?

(Bheeshma Sanghani, PhD) #38

The sales in this years reporting period are net of GST and cant be compared to the previous periods. The main number is the EPS growth which has grown from 0.46 in Sep 16 to 1.69 in Sep 17 - a growth of 267%. Overall an excellent set of results.

The previous two qtrs had seen a growth of 61% & 139% respectively. So by the already high growth standards, this qtr is even higher.

The HY17 EPS is 3.26 & HY16 is 1.41 - a growth of 131%. Basically earnings are roughly doubling every passing year - which is the main reason behind its high PE multiple.

I have provided the logic behind this growth rate - in my earlier post


(Bheeshma Sanghani, PhD) #39


Few days back I happened to visit China HomeLife Expo at Mumbai BEC.

I could see quite a few stalls showcasing strolley bags and other luggage bags. They had a good mix of soft and hard luggage bags.
Some of them had few feature additions like the one shown in the picture below:

While enquiring with one of the exhibitor, I got to know that they were offering hard luggages in ABS (Acrylonitrile butadiene styrene) as well as PC (Polycarbonate) material.

On VIPs website I see an equal mix of PC and PP (Polypropylene) materials in hard luggages, none in ABS. PC is best suited for the application having highest impact resistance. While PP is flexible and lighest, it is most economical out of the three materials being discussed here. Raw material price is almost less than half of PC. So these products must be giving a better margin to VIP.

When I go through Safari hard luggage products (on Amazon), they all appear to be available in PC material, which is good. That means they are offering the best products. I could not see any product page on their website though ( to have a complete idea.

Any idea how much of the unorganized sector is currently being served by Chinese bags? Are Safari and VIP also trading/offering some of their bags from China?

(Ravindra Mutyala) #41
  1. Safari itself import bags from China, see the below “Risks and concerns” from latest annual reports.

  1. Also, see the below extract of credit rating, though it is old (FY15) it is highlighting the major concern.

Latest credit reports are not available as “India ratings” suspended the rating in July 2016.

In FY15 more than 50% i.e 110cr+ revenue came from CSD. One should check how much is this in FY17.

  1. Personally, I have seen N number of brands in Luggage segment, many offer the reasonable quality products at low rates.

  2. Brand recall in luggage bags is very limited as most of the time luggage bag sits idle and hidden in the home, only time to show off the brand is while traveling. In my opinion people buy the branded luggage bags only for the quality they offer.


My last weekend visit to Dmart gave me a chance to check the luggage section also.

From left:
First line (SkyBlue) : American Tourister
Second line (Black) : Kamiliant (By American Tourister)
Third line (Dark Blue) : Safari Bags
Fourth line (Dark Blue and Pink) : Magnum
Fifth to eight line (Turquoise, turquoise, Black and Peacock blue) : VIP and Skybags.

Left half:

Right half:

I was hoping that Dmart audience who is coming there looking for better deals and lower rates would get to see more of Safari bags, but half of the luggage section was dominated by Skybags (VIP). Also Kamiliant (by AT) is competitively priced compared to Safari.

When I interacted with the Safari Sales Rep standing there (He said he was from Safari, when I told him that I wanted Safari hard luggage which was not available there), he gave some good inputs / difference between VIP/Skybags and Safari and contact of a Safari Store closeby. :slight_smile:
Two major customer complaints that he told were that the throwing of bags at Airport (checked in bags) and on luggage carousel broke the external fitting rivets on skybags, while the Safari has this internally. Skybag handles have fibre/plastic spring extension while Safari has metal ones. Also during warranty claims, Safari has a policy of repair or replace while VIP has only repair. (Though this remains to be verified).

I was happy to see a Safari Sales Rep standing there, but was worried with the less visibility of Safari bags.


Thanks for pointing it out @mmvravindra

I found this info later on their website also.
“Safari is in the business of manufacturing and trading of luggage and luggage accessories. There are two broad categories of luggage i.e hard luggage and soft luggage. Hard luggages are mainly made of Poly Propylene (PP) and Poly Carbonate (PC) and manufactured in-house by Safari at its Plant located at Halol, Gujarat. Soft luggages are made of fabrics of various kinds and are mainly imported by Safari.”