Safari Industries (India) Ltd Management Discussions

A. Industry Structure and Developments:

The past few years have seen a sustained period of strong growth for the organised sector. At a significantly higher base of consumers, the industry growth has tempered down last year in line with the overall economy. Several structural factors continue to have a positive long-term impact on the industry. The trend towards travel becoming one of the top areas of discretionary, spend continues to strengthen. This has also been helped by increasing air-travel penetration into Tier 2 & 3 cities in India. Large capital investments by Airlines in fleet expansion have picked momentum during the last year, as overall infrastructure improvement for Roads and Railways continues. Marriages remain a large driver of luggage sales and with a young demographic profile in the country, this factor will continue to fuel growth.

Over the last few years, consumer preference has been shifting definitely from soft luggage to hard luggage. In the last year, this transition has culminated into hard luggage becoming the dominant category in the Upright Luggage segment. This has resulted in a transition of the category from being import-based to becoming local manufacturing driven. Over the next couple of years, the new-age branded players are also expected to follow this trend towards localised manufacturing. Several unorganised sector players have already started local manufacturing focussed on of_ine channels.

Exclusive Retail channel has seen significant expansion for the industry with several new age brands as well as legacy players increasing investments to drive brand visibility and improved mid-premium mix. In E-commerce channel, while the addition of incremental channel users has slowed down, it continued drive good overall growth by focussing on higher order conversion rates. Quick-commerce channel entered the category during the year with good success and is expected to be a key growth driver in the coming years. The demand in of_ine channels remained muted during the year.

The overall long-term outlook for the organised sector remains very robust with continued growth in travel, increasing preference for branded luggage, growth in school and office going population.

Company Development:

The Company continued to grow ahead of the market led by a well-defined portfolio catering well to diverse consumer needs and strong go-to-market strategy. Safari brand has been adjudged as the ‘No. 1 Luggage Brand in India in revenue terms for the second successive year (Source: Euromonitor International Limited; Personal Accessories 2025ed; Luggage category; gbn; all retail channel, value rsp terms; 2024 data).

Anticipating continued growth on the hard luggage category, the Company has commissioned a new greenfield integrated manufacturing plant for polypropylene and polycarbonate zippered hard luggage in Jaipur, Rajasthan under its wholly owned subsidiary i.e. Safari Manufacturing Limited. It has further scaled up manufacturing capacity in manufacturing plants based in Halol, Gujarat.

The Company has been expanding its presence in the mid-premium segment with rapid scale up of Urban Jungle, a casual premium brand focussing on the youth. The brand has expanded from its initial offering of zippered hard luggage to backpacks, as well as travel accessories. To cater to the increasing discernment in consumer tastes at the premium end, the Company has also launched a new sub-brand Safari Select in the mid-premium segment with a semi-formal design approach.

The Company has continued to expand its of_ine presence in prestigious high footfall locations in selected markets through exclusive retail stores. This channel has been instrumental in increasing consumer traction for its premium offerings of Urban Jungle and Safari Select. This will help drive long-term consumer equity and advocacy through an integrated approach that focussed on superior brand experience.

During the year, the Company invested in enhancing its back-end capabilities to develop a more efficient and future-ready supply chain. Large integrated tech-enable warehousing facilities have been established in both its manufacturing locations, while consolidating several smaller warehouse locations.

B. Opportunities and Threats:

The industry has seen a sharp structural shift towards hard luggage at competitive pricing. The Companys investments in expanding its hard luggage capacity have positioned it to drive significant overall growth via this category. It will be imperative for the Company to continue to assess and plan for such shifts in consumer tastes and trends in the future.

A significant portion of the Companys Backpack category supplies are still dependent on imports. To de-risk against potential geo-political and macro-economic uncertainties, the Company is rapidly building a larger supplier base within India with all necessary capabilities.

The entry of several new players focussed on the mid and premium end of the market has created more consumer interest in the category with expansion of style, colour and brand choices. This is expected to help drive category expansion at the premium end and presents an opportunity for the industry to tap into increasing affluence and discernment of the Indian consumer. Capitalising on this opportunity will need aesthetic and functional innovation as well as building strong consumer brands. The Company is investing on Urban Jungle and Safari Select in this segment.

The Company has built a strong position in E-commerce channel with consistent focus and investments. The E-commerce landscape is changing fast with the advent of Quick-Commerce. This can have potential impact on the Companys position with changes in consumer behaviour and preferences. It is critical for the Company to be agile and to build expertise in this area for continued growth.

With tempering down of industry growth, the price competition in the category has been increasing. The Company is managing the challenge by continuing its focus on frugality in costs and improved product-mix.

Companys linear structure facilitates faster and better decision making which allows the Company to grab opportunities in time.

C. Segment/ Product-wise Performance:

With a sharp growth in hard luggage category and limited supplies in the industry, the Company has been able to capitalise well on the demand growth with consistent investment on capacity enhancement. The category is now getting sub-segmented with innovations in aesthetics, colour, shapes, opening mechanism, etc. The Company is consistently enhancing its portfolio with innovative product offerings to drive consumer preference.

Backpack category is highly fragmented and competitive with large number of players. The brand portfolio of Safari, Safari Select, Genie, Genius and Urban Jungle has given the Company a strong offering to cut-through into the Formal, Casual and the School Backpack markets catering to the diverse needs of a school going teenager to that of an office going professional. The Company has grown very well in the category through strong focus on product and go-to-market strategies that have helped it gain market share in key growth channels such as E-commerce and exclusive Retail. The Company will continue to invest aggressively behind this category as a strong growth driver.

D. Outlook:

The Company maintained its growth trajectory well ahead of the market, but the demand side has several short-term uncertainties led primarily by larger marco-economic factors. Hence, it will be important for the Company to stay focussed on specific channels, categories and consumer segments that are expected to drive market growth.

The Company has further optimised its supply chain for better responsiveness and cost, by investments in modern technology in the areas of ERP, warehousing and planning capability. Given the focus on E-commerce and Quick-commerce channels, the Company will continue to undertake focussed investments to make its supply chain more robust and future-ready in dealing with their unique requirements.

Both the premium segment and the backpack category continue to be large opportunity areas for the Company that are critical for long-term growth. It is important for the Company to invest aggressively in building its share in these categories to drive future growth and improve its price realisation through product mix improvement.

While there continue to be some uncertainties, the overall growth drivers are well in place for the Company to continue on a high growth trajectory with improving profitability.

E. Risks and Concerns:

The Company is exposed to various risks and uncertainties which may adversely impact its performance. The Companys future growth prospects and cash flow generation could be materially impacted by any of these risks or opportunities. The major risks as identified by the Company are demand-risks due to recessionary trends in the global economy, currency risk associated with imports, unfair competition, etc.

The Company follows the Enterprise Risk Management (ERM) framework to manage and mitigate such risks which is primarily based on the integrated framework for enterprise risk management and internal controls developed by the Company.

F. Internal Control Systems and their adequacy:

M/s. Moore Singhi Advisors LLP were appointed as the Internal Auditors of the Company to review internal controls periodically with specific reference to evaluation of the current business processes, identify gaps, inefficiencies, process exceptions and suggest action plans, verify adherence to risk mitigation plans, to review sourcing and supply chain management, plant operations and effectiveness, sales planning and distribution channels, branches of the Company, warehouses and retail operations, to provide assurance regarding various compliances by assessing the reliability of financial controls, IT controls and compliance with applicable laws and regulations. The Company has a regular check on expenses including capital expenditure. The Company has documented policies and SOPs with regards to all major activities. The Internal Auditors submit their reports to the Audit Committee quarterly. The Management considers and takes appropriate action on the recommendations made by the Statutory Auditors, Internal Auditors and the Audit Committee of the Company. Significant policies with changes during the year, if any, are disclosed in the notes to the financial statements.

G. Financial Performance with respect to operational performance:

- Sales:

The Total Income of the Company for the year ended 31st March 2025 was at Rs. 1,808.31 Crore (previous year Rs.1,565.11 Crore).

- Expenditure:

The Total Expenses of the Company for the year ended 31st March 2025 was at Rs. 1,656.03 Crore (previous year Rs.1,361.33 Crore).

- Profit:

Profit after Tax for the year under review amounted to Rs. 117.53 Crore (Previous Year Rs.154.48 Crore).

H. Material Developments in Human Resources/ Industrial Relations front, including number of people employed:

The Company has in place ESOP Scheme and ESAR Scheme to retain and attract skilled and experienced personnel. During the year, the Company faced challengesinretainingandattractingrequiredtalentin various functions. Also based on well-defined training process, the Company identified the needs of training and required training was imparted to employees to improve their efficiencies and capabilities.

During the year, Industrial Relations remained cordial. The employee strength as on 31st March 2025 was 921.

I. Financial ratios:

Sr. No. Particulars	FY 2024-25	FY 2023-24
i. Debtors Turnover (days)	42 days	40 days
ii. Inventory Turnover (days)	98 days	102 days
iii. Interest Coverage Ratio	21.52 : 1	28.35 : 1
iv. Current Ratio	4.16 : 1	3.50 : 1
v. Debt Equity Ratio	0.12 : 1	0.15 : 1
vi. Operating Profit Margin (%)*	9.02%	13.64%
vii. Net Profit Margin (%)*	6.64%	9.97%

*Decrease in profit of the Company as compared to the previous year.

J. Return on Net Worth:

Financial Year	FY 2024-25	FY 2023-24
Return on Net Worth (%)	13.85%	25.41%