Luggage demand to recover in 1HFY27: Motilal Oswal; VIP, Safari top picks
Motilal Oswal believes demand is likely to recover with the onset of the holiday and wedding season, and has maintained a 'Buy' rating on VIP Industries & Safari Industries, citing a positive outlook
Sirali Gupta Mumbai Discounting in India’s luggage industry has moderately increased across online and offline channels, even as demand has softened in the near term and competition has intensified—especially in offline exclusive and multi-brand outlets—according to Motilal Oswal Financial Services' report based on channel checks with distributors and industry experts.
The brokerage believes demand is likely to recover with the onset of the holiday and wedding season, and has maintained a ‘Buy’ rating on
VIP Industries and
Safari Industries, citing a positive outlook for the first half of FY27.
Discounts climb; competition intensifies
Channel checks indicate discounting has risen to around 70 per cent on e-commerce and 50–60 per cent offline on a quarter-on-quarter (Q-o-Q) basis. Competitive intensity has increased in offline channels, while newer brands such as Mokobara, Delsey Paris, and Nasher Miles are also offering steep 70 per cent online discounts, the note said. It added that the past quarter saw the overall industry grow in high single digits, but average selling prices (ASPs) appear to be trending down, keeping Q4 growth expectations broadly stable sequentially.
VIP: Weak quarter, but turnaround expected from FY27
VIP reported a 9.4 per cent year-on-year (Y-o-Y) decline in revenue, which the brokerages attributed to heavy discounting—particularly on the Carlton brand amid trademark litigation—along with intense competition in modern trade/general trade and lower realisations.
Despite the near-term pressure, Motilal Oswal expects VIP’s performance to improve under new leadership backed by multiples private equity, helped by product refreshes and premiumisation. It expects VIP to deliver double-digit volume growth and high single-digit revenue growth in FY27, with margin recovery supported by inventory normalisation and a better product-channel mix.
Safari: Volumes strong; margins seen rebounding in Q4
Safari’s revenue rose 15.7 per cent Y-o-Y, supported by 20 per cent Y-o-Y volume growth, with the offline channel up 22 per cent while e-commerce growth lagged at 12–15 per cent, the brokerage noted. It added that competition to chase volumes has led to elevated discounting both online and offline, weighing on margins in Q3.
However, it expects Earnings before interest, tax, depreciation and amortisation (Ebitda) margins to bounce back to 13.5–14 per cent in Q4, as promotional intensity normalises and as the company gears up for new product launches planned for March 2026.
Safari has also approved a ₹500 crore qualified institutional placement (QIP), with ₹300–350 crore earmarked for FY28 capex and the balance likely for merger and acqusition (M&A)—focused on profitable global brands with in-house manufacturing. Separately, analysts flagged Safari’s licensing agreement with Carlton Retail to use the ‘CARLTON’ brand for a 20-year term, renewable for another 20 years, with fees linked to either a fixed amount or a percentage of net sales.
The brokerage maintained ‘Buy’ on Safari Industries with a target price of ₹2,600
Outlook
Overall, Motilal Oswal remains constructive on the sector, expecting demand to improve into H1FY27, while cautioning that elevated promotional activity and competitive intensity could keep profitability under pressure in the near term—especially if discounting remains high across channels.
Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.
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