Safari Industries (India) Ltd

(Bheeshma Sanghani, PhD) #44

Hi @mmvravindra

The latest rating is available on BSE announcements page from CRISIL. I guess it moved to CRISIL from India ratings.



Crisil highlighted the risks regarding import raw material prices,

is there any index to track the raw material prices?

Also, recently I heard that ban on imported scrap (plastic and paper etc.) due to environmental concerns by China govt may lead to increase in the raw material prices


While manufacturers are trying to make (push) better / customer oriented products, there will be some resistance to change from others in the value chain who doesn’t seem to benefit currently from it.

On one hand there is news about:

On the other hand:


Some more competition:

This weekend, I saw strolley bags from Princeware at Star Bazaar.
Most of them were soft luggages.

(Bheeshma Sanghani, PhD) #48

Good set of results from safari

(Bheeshma Sanghani, PhD) #49

Reply to my RTI filed with the canteen stores dept wrt to luggage sales of past 5 years

Some broad observations

VIP has a share of 37% in the overall CSD sales of luggage in the past 5 years while Samsonite share is 44% ( Samsonite + Bagzone ). Safari comes in third at 17%.

55% of Safaris sales come from CSD while 25% of VIP sales come from CSD. Cum sales value of Safari sales from 2013 to 2017 is 1107.2 cr while cum sales from CSD data is 611.3 which computes to 55%. The high proportion of CSD sales gives Safari revenue stream a certain level of stability albeit with lower margins ( the CSD realization is Rs 1814 unit for Safari while VIP is at Rs 2016 per unit - i.e 10% lower ).

Over time one can expect the same product mix from Safari to be similar to VIPs at 25% CSD to 75% non-CSD. Non CSD has higher margins so a margin expansion from this point onwards is a likely event. Already Safari clocked a 11.87% operating margin in Dec17 quarter while the same is 12.18% for VIP suggesting that this shift is in motion. A better product mix should bring down the receivable to sales % which is high for Safari at 17% to the VIP levels of 9%.

The net margin of VIP came in at 7.95% in the Dec Qtr while Safaris stood at 6.55%. I expect the equity turnover ratios for Safari to be a bit better than VIP’s due to lower prices. In 2017, the equity turnover ratio for VIP was 3.12 while Safari was at 3.55. The net margin for VIP in the Dec qtr came in at 7.96% while Safaris came in at 6.55%. The net margin of Safari is likely to be lower than VIPs due to the price differential however the higher turnover ratio will more than compensate for it. I expect the equity turnover ratio to be 4 for Safari and 3.5 for VIP giving both of them the same ROE levels of 26 - 28% going forward.

Earnings retention is likely to be higher for Safari while a much lower for VIP as its a more mature organization. This will create different growth rates with Safaris being much higher than VIP ( a fact that is reflected in their PE ratios )


(Bheeshma Sanghani, PhD) #51

There is a typo error in your link. Thanks for sharing

(asterix) #52

I have been analyzing safari for last few days and I must admit that I learned a lot more from this thread than other sources put together. I had a doubt on the preferential allotment to the Malabar entity. I was trying to understand why the company decided to go for preferential allotment way. The price of the transaction is same as the closing price of the day and there is no premium.
Moreover, why didn’t the company go in for a loan of 51Cr as the interest rates were going down in H2 2017 rather than equity sale?

Any pointers to understand this would be very helpful. Thanks in advance.


(Bheeshma Sanghani, PhD) #54

(Growth_without Debt) #55

Is Samsonite India listed company?

(Kitam Ranka) #56

Nice coverage on Safari’s journey so far, it’s increasing market share, product portfolio, comparison with VIP and data on the luggage and tourism industry.

(Vijay) #57

A holding company with part ownership is listed.

(Growth_without Debt) #58

What’s name of holding company

(Vivek) #59

Tainwala Chemicals and Plastics they own 10% in Samsonite

(Bheeshma Sanghani, PhD) #60

Sumeet Nagar (Malabar Investments) on Safari

Why did you bet on the business of Safari?
In India, the aviation industry has just started. We are still 1/10th the size of China. So, there is a long way for this industry to grow. People always debate over investing in airlines. But this is a great way to look at the ancillary sectors. As people travel by air and they want to make sure that they are carrying nice bag, so they will buy a nice luggage and take it with them. Then there is tourism, both domestic and internationally which is increasing. There are the drivers of growth for the luggage industry. Also, weddings. Many of these drivers are helping the industry grow at something like mid-teens year after year.
Then you have extra bonanza in the form of backpack. This is the second order effect of the two-wheeler revolution that happened in this country in the last two decades. So, people started travel more by two-wheelers, they realize that unlike the old Bajaj scooters that could put things in front but in motorbike there is no space to take things in. So, the only way to take it was from backpack. Suddenly, over the period of last 5-10 years, the number of backpacks is actually rising rapidly. If you look at numbers of backpacks today, the are an order of magnitude more than what was in 10-15 years ago.

So, that transition is happening. From buying very basic simple backpacks, people are moving to more sophisticated better-quality backpacks which are branded backpacks. All the three players Samsonite, Safari, VIP, all are taking advantage of that. This is a very early stages of happening. Thanks to GST and preference of getting better products, we are seeing unorganized to organized conversion happening in backpack. So, the organized backpack may grow up to 30-40 percent year-on-year. That’s the massive tailwind which the branded players have. Industry is growing at 15 percent year-on-year.

That kind of tailwinds can allow companies to do a lot. Generally, we always tend to invest in industry leader because they are the ones who are most advantaged, have better economics. But in select cases we have picked a number 2 or number 3 player when we find that they are hungrier, they want to grow more, they have something unique and as a result they are able to take market share away and grow faster. We have seen the same thing happen for Sera, they are number 3 market player and solely getting market share. You are seeing same thing happening in luggage industry.

Safari was a number 3 player, it was a distinct number 3 and many years it was languishing. From 2002-2012, there sales didn’t grow but the industry was growing. So, they were losing market share. In 2012, Sudhir Jatia came and took over the company. Sudhir came with lot of experience. Before he took over Safari, he was CEO of VIP, and before that he ran Aristocrat which was acquired by VIP. So, he is the most experienced person in the industry.

He is the one person who knows the industry inside out, whether it is product design, product procurement, manufacturing, distribution. He knows it, he has lived through it. He wants to grow this and make it into much bigger brand and much bigger company. When you come with that hunger, you can see that the company which was flat for 10 years has been growing at 30 percent annualize in the last 5 years.

In last few quarters, it has also started showing in their margins.
It is always bound to happen. There is an operating leverage that comes in a company. When you have a countrywide distribution, there is a lot of costs involved with it. Once you cross a certain level, your margins will start improving and that’s what you have seen in the last few quarters that operating leverage has started to play out.

Do you think this can improve further?
It can improve further. If you look at VIP and their margins, they are still much higher than Safari. When VIP was this size of Safari, the margins of Safari were still lower and now they are catching up and caught up to that level. If they keep growing at 25-30 percent, you will continue to see margins inch up.
If the company is growing at 30 percent, then it is able to increase its margin. Your bottom line can increase quite rapidly. That’s the example of a company where the industry is growing. It is a concentrated industry. So, globally in any country or any region, you only find 2-3 players.

Even in India, the three branded players control 90 percent of branded business. The reason is because it needs lot of space. If you have five different products, with three different sizes, then you have hard and soft luggage, suddenly, you have 30 different luggage and you have to put somewhere.

No shopkeeper will give you that space unless your product sells. So, the branded players have a deep advantage in this space. That’s why globally this industry is very concentrated in any region or country that you go through.

So, you bet on the promoter quality because of the change in management, as well as the growth in the industry at a nascent stage.

So, the industry provides the tailwind. It provides a good backdrop, but then you need somebody who is able to harness that, and I think Sudhir is able to do this well. When you see this type of growth and passion coming from the CEO and see energy across the organization, it galvanizes everybody. It also attracts the better talent of the company too. Over time you build up better and stronger team which can deliver stronger growth in future. That story is playing out for Safari.

source :

(Vivek) #61

Huge buying is seen in VIP Industries by promoters at these levels, not sure if its based on the tailwinds that the sector is having , if thats the case safari also will be benefiting from it.! IN april itself promoters have bought 7.5 lakh shares plus

(Marathondreams) #62

Promoters would buy their own company shares if they feel it is undervalued. Not sure this means all companies in this sector would do well. Safari has already moved up more than 50% in last few weeks,maybe due to this reason.


Results are out!

QoQ revenue growth of 15.32%
YoY revenue growth of 19%

QoQ PAT growth of 14.84%
Almost PAT growth of 100.1% for Q4FY18 vs Q4FY17
Overall YoY PAT growth of 117.59%

EPS has again doubled this year.
@bheeshma Awaiting your thoughts and comments.