Travel growth to drive luggage makers' revenue by 15% in FY24: CRISIL

The growth in margins and top line are aided by a 20% fall in prices of key raw materials -- polypropylene, polycarbonate, and polyamide, it said

Steady growth in tourism and corporate travel and preference for premium products will drive luggage sales in the current fiscal, helping manufacturers clock a 15 per cent growth in revenue, according to a report.

This will be on the back of a 40 per cent rise in luggage makers' revenues in 2022-23, the report by Crisil Ratings said on Wednesday.

Consumers' preference for hard luggage has driven up operating efficiencies and improved capacity utilisation of luggage makers in the organised sector, which will help expand their operating margin by 150-200 basis points year-on-year to 16 per cent this fiscal, the report said.

 

The growth in margins and top line are aided by a 20 per cent fall in prices of key raw materials -- polypropylene, polycarbonate, and polyamide, it said.

Raw material prices, largely driven by cost of crude, comprise 40-45 per cent of the cost for luggage makers, the report, which is based on 90 per cent of the organised luggage market, stated.

Crisil Director Jaya Mirpuri said in the last five fiscals, the market share of hard luggage has shot up to 55 per cent from 33 per cent.

Fragmented unorganised sector largely imports soft luggage from China, Mirpuri said, adding that they have been hit by supply-chain disruptions and implementation of the goods and services tax.

According to Rushabh Borkar, an associate director at the agency, apart from doubling capacity, organised manufacturers are set to ramp up retail presence by 35-40 per cent, which would involve a capex of Rs 700 crore this fiscal.

While this will increase their debt levels, overall capital structure and coverage metrics will not be impacted because of improved cash accruals, he said.