V I P Industries Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

The global economy demonstrated resilience in FY 202526 (calendar year 2025), navigating US tariff disruptions, elevated geopolitical tensions, and the outbreak of conflict in the Middle East from late February 2026. The world economy grew an estimated 3.2% in 2025, reflecting its ability to withstand multiple external shocks despite an increasingly uncertain geopolitical and trade environment.

The Middle East conflict, which erupted in late February 2026, introduced fresh uncertainty into the global outlook by disrupting maritime and air traffic, pushing up energy and commodity prices, and weighing on business sentiment. In response, the IMF revised its near-term outlook, projecting global growth at 3.1% in 2026 in its April 2026 World Economic Outlook.

Global headline inflation continued its downward trajectory through 2025, though the Middle East conflict introduced fresh upward pressure on energy prices and commodities. The near-term outlook carries some uncertainty, but the medium-term direction remains constructive for global growth and trade.

INDIAN ECONOMY OVERVIEW

The Indian economy continued to be the fastest-growing major economy globally during FY 2025-26, with real GDP growth estimated at 7.4% - accelerating from 6.5% in the previous year. Growth was broad-based, supported by robust private consumption, significant income tax relief in the Union Budget, a rebound in investment, and strong services exports.

Retail inflation declined to multi-year lows during the year, well within the RBIs target band. The RBI responded with a series of rate cuts through the year, making credit more affordable and providing further stimulus to consumption and investment.

GST collections and merchandise and services exports both grew during the year, reflecting continued economic momentum. India is projected to retain its position as the worlds fastest-growing major economy in the near term, with the IMF and RBI forecasts remaining constructive.

LUGGAGE INDUSTRY IN INDIA Market Size

Indias luggage market was valued at approximately T17,000 Crores in CY 2024, continuing a sustained period of strong growth. The organised sector has been steadily gaining share from unorganised players, driven by hard luggage penetration, superior quality, and the expanding reach of branded players. The outlook remains constructive, supported by travel growth, premiumisation, and deepening penetration into Tier II and III cities.

Growth Drivers

Various factors continue to drive strong demand for luggage in India, including sustained growth in domestic and international travel, rising disposable incomes, expanding Tier II and III city markets, increased wedding season demand, and widespread adoption of e-commerce. Indias aviation, rail, and road travel infrastructure expanded significantly during FY 2025-26, underpinning broad-based demand across price segments.

Indias tourism and travel infrastructure continued to expand significantly, supported by investment in airports, roads, railways, and the rollout of high-speed train services. Government schemes promoting domestic tourism have supported broad-based growth in travel demand across income segments and geographies.

Indias Domestic Tourist Visits reached nearly 3 billion in 2024, growing approximately 17% year-on-year and reflecting a decade of sustained expansion in domestic travel. The longterm runway remains compelling, with tourism projected to grow significantly over the coming decades.

Aviation and rail travel both continued to grow, with international air travel outpacing domestic, reflecting Indias deepening integration with global tourism. Rising incomes, increasing frequency of travel, and the growing normalisation of air and train travel across income segments continue to underpin demand for luggage.

Outbound travel demand also continued to grow, with nonmetro cities contributing an increasing share of international travellers. Indias rising prominence as a global outbound market is a meaningful long-term driver for the premium luggage segment.

Key Trends

E-commerce and online distribution: While offline channels continue to account for the majority of sales, e-commerce is gaining traction rapidly, particularly in Tier II and III cities. The online channel has become a key arena for brand building and premiumisation, even as competition from platform private labels and D2C entrants intensifies. Brands are increasingly investing in their own digital presence to capture better margins and build direct consumer relationships.

Fashion-forward design: Younger consumers increasingly treat luggage as a lifestyle and identity statement, with social media amplifying brand aspirations. Collaborations with fashion and pop-culture properties are gaining traction, and the premium tier is growing disproportionately faster than the overall market, driven by rising incomes and evolving consumer tastes.

Hard luggage preference: Hard luggage now accounts for over half the market and continues to gain share, driven by growing consumer preference for durability, security, and design variety. The rise in domestic air travel has further accelerated this shift. Organised manufacturers producing hard luggage domestically benefit from better margins and a more resilient supply chain.

Increasing competition: The industrys growth has attracted a diverse set of new entrants - global players, D2C brands, and e-commerce-native startups - alongside the established organised players. This competition is driving product innovation, shortening replacement cycles, and expanding consumer interest in the category, all of which are structurally positive for volumes over the long term.

Wedding and gifting demand: Weddings in India are a significant and growing driver of luggage demand, both for trousseaus and gifting. The rise of destination weddings has further boosted high-value luggage purchases, and with Indias young demographic profile, weddings will remain a structural demand driver for the foreseeable future.

Tier II and III city expansion: Demand is increasingly emanating from Tier II and III cities, driven by rising middle- income households, improving connectivity, and higher discretionary spending. E-commerce has been instrumental in extending brand reach into these markets, and organized players are progressively building a broader physical presence beyond the metros.

Sustainability focus: Sustainability has moved from a niche preference to a mainstream purchase consideration. Brands across the industry are adopting eco-friendly materials and responsible manufacturing practices, driven by consumer demand and evolving regulation. This trend is expected to accelerate, particularly at the premium end of the market.

The luggage industry is poised for continued expansion, underpinned by Indias structural travel growth, improving consumer purchasing power, and rising brand preference. The organised segment is expected to continue gaining share from unorganised players, with hard luggage, e-commerce, and Tier II and III city penetration as the primary drivers of the next phase of growth.

COMPANY OVERVIEW

Established in 1968, VIP Industries Limited is Asias leading and the worlds second-largest manufacturer and retailer of luggage, backpacks, and handbags. With a legacy of over 57 years, the Company has built a portfolio anchored in trust, quality, and brand recognition. VIP Industries operates 10 inhouse manufacturing facilities across India and Bangladesh, serves approximately 14,000 points of sale across ~1,400 towns and cities, and manages a diversified brand portfolio spanning the full spectrum of price points through VIP, Skybags, Aristocrat, Alfa and Caprese.

FY 2025-26 was defined by deliberate balance sheet repair and structural reset under the Companys new management team. Consolidated revenue from operations was ^1,858 Crores for the year, compared to ^2,178 Crores in FY 202425. The revenue decline was an intended outcome of actions to correct channel inventory overstocking, reset pricing guardrails, and reduce sell-in of legacy SKUs. The Company reported a consolidated net loss of ^338 Crores, which includes f123 Crores of one-time inventory provisions and approximately ^40-50 Crores of channel liquidation support - both classified by management as non-recurring. Net inventory was reduced from ^698 Crores to ^472 Crores, and net debt was lowered from ^377 Crores to ^309 Crores.

VIP caters to consumers across all significant product categories and price ranges through various brands.

BRANDS AND PRODUCTS FROM THE HOUSE OF VIP

Skybags

Hard Luggage Soft Luggage Duffle Bags

Aristocrat

Business Satchels Backpacks

Alfa

Caprese Ladies Handbags

FINANCIAL REVIEW (STANDALONE)

(Rs Crores)

Particulars	FY 2025-26	FY 2024-25	FY 2023-24
Revenue from Operations	1,849.09	2,169.66	2,215.50
EBITDA	(221.89)	67.44	143.16
PBT (Before Exceptional Item)	(405.59)	107.23	10.40
PBT (After Exceptional Item)	(342.56)	107.23	36.18
PAT	(342.88)	81.40	28.02
Net Worth	208.72	549.67	616.75
Debt Equity Ratio	1.83	0.60	0.70
Basic EPS (Rs)	(24.14)	(5.73)	1.97

FINANCIAL REVIEW (CONSOLIDATED)

(Rs Crores)

Particulars	FY 2025-26	FY 2024-25	FY 2023-24
Revenue from Operations	1,858.13	2,178.43	2,244.96
EBITDA	(218.57)	93.21	205.31
PBT (Before Exceptional Item)	(416.20)	(99.05)	50.80
PBT (After Exceptional Item)	(338.02)	(91.22)	76.58
PAT	(338.01)	(68.79)	54.30
Net Worth	289.50	616.16	677.91
Debt Equity Ratio	1.42	0.67	0.79
Basic EPS (Rs)	(23.79)	(4.84)	3.84

KEY FINANCIAL RATIOS (CONSOLIDATED) OPERATION AS PER SEBI LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS (AMENDMENT) REGULATIONS, 2018

(Rs Crores)

Particulars	FY 2025-26	FY 2024-25	FY 2023-24
Debtors Turnover	5.82	6.26	7.70
Inventory Turnover	2.02	1.47	1.42
Interest Coverage Ratio	(4.92)	(0.25)	2.39
Current Ratio	0.94	1.28	1.31
Debt Equity Ratio	1.42	0.67	0.79
Operating Profit Margin (%)	(18.6)	(1.69)	4.19
Net Profit Margin (%)	(18.19)	(3.16)	2.42
Return on Net Worth (%)	(116.76)	(11.16)	8.01

KEY FINANCIAL RATIOS (STANDALONE) OPERATION AS PER SEBI (LISTING OBLIGATIONS AND DISCLOSURES REQUIREMENTS (AMENDMENT) REGULATIONS, 2018

Particulars	FY 2025-26	FY 2024-25	FY 2023-24
Debtors Turnover	5.83	6.26	7.80
Inventory Turnover	2.75	1.94	2.00
Interest Coverage Ratio	(5.04)	(0.56)	1.73
Current Ratio	0.87	1.24	1.32
Debt Equity Ratio	1.83	0.60	0.70
Operating Profit Margin (%)	(18.30)	(1.78)	1.98
Net Profit Margin (%)	(18.54)	(3.75)	1.26
Return on Net Worth (%)	(164.28)	(14.81)	4.54

OUTLOOK

The Indian Luggage industry is poised for continued growth on a high base, fuelled by increasing travel and tourism, increasing disposable income and rising demand from Tier II and III cities. The hard luggage segment, from which VIP derives more than 63% revenue, drives demand due to consumer preference and durability. The Company is capitalising on these trends through operational efficiency, reduction in inventory and reduction in debt. With a greater focus on the premium segment, the strategic reaLignment of distribution channeLs with an emphasis on expanding EBOs and re-positioning its brands, the Company anticipates sustainable growth in the dynamic luggage industry Landscape.

RISK MANAGEMENT

The Company is exposed to various risks and uncertainties that may adversely impact its performance. Key risks are demand fluctuations driven by the global economic slowdown, high inflation and reduced demand in major markets, as weLL as currency risk associated with imports, volatility in raw material prices, competition risk, operational risk, personneL risk, and technology risk, internationaL manufacturing presence in Bangladesh among others. Through a well-defined risk management framework, the Company ensures the timely and effective identification, assessment, and mitigation of key business and operational risks. By prioritising the key risks based on their severity and probability, it develops effective mitigation strategies to monitor and manage them effectively, thereby minimising their impact on the Companys operational and financiaL performance.

HUMAN RESOURCES

At VIP Industries, we believe that a strong culture and empowered people are the foundation of sustainable growth. In FY 2025-26, we continued our journey toward building a high-performing, future-ready organisation rooted in trust, capability, and connection.

We are proud to be certified as a Great Place to Workr, a recognition that reflects the strength of our values-led culture and the high level of trust and engagement across the organisation. The strong sense of beLonging and advocacy among our employees continues to be one of our biggest strengths.

Over the past year, we undertook key steps to streamline our organisational structure, making it more efficient and responsive to business needs. At the same time, we focussed on strengthening taLent pipeLines across aLL LeveLs and nurturing a cuLture of open communication - supported by approachable leadership and structured platforms that encouraged feedback, idea-sharing, and sustained employee engagement. Targeted learning and deveLopment initiatives were introduced to buiLd criticaL capabilities across teams, with a particular focus on sales effectiveness. Our structured rewards and recognition programs continued to pLay a key roLe in ceLebrating high performance and reinforcing a culture of appreciation.

As we look ahead, our focus is two-fold:

Customer Obsession: Enhancing front-line capabiLities to deLiver sharper execution and deeper customer engagement

Consumer First: Focussed consumer-based decisionmaking across the organisation from Brand, manufacturing, service, retail experiences and operations.

With our peopLe at the core, we remain committed to fostering a workplace where talent thrives, innovation is encouraged, and everyone contributes to building the next phase of VIPs growth story.

INTERNAL CONTROLSYSTEM

The Company maintains a robust internal control system, commensurate with the size and nature of its business. The internal control framework is designed to enhance operational efficiency and alignment with the Companys strategic objectives. A robust budgetary controlsystem ensures continuous oversight of all expenditures against approved budgets. M Mahajan & Aibara, Chartered Accountants, LLP serve as the Companys Internal Auditors, responsible for maintaining internal control systems to protect the Companys assets, ensuring operational effectiveness and efficiency, and evaluating the reliability of financial controls and compliance with appLicabLe Laws and regulations. ALL their audit findings and reports are submitted to the Audit Committee every quarter. The Audit Committee regularly reviews the adequacy of the internal control systems and internaL audit findings. It proposes corrective action plans to enhance business processes and the internal controlsystem. The management takes suitable action based on the recommendations provided by the Statutory Auditors, Internal Auditors and the Audit Committee.

CAUTIONARY STATEMENT

Established in 1968, VIP Industries Limited is Asias leading and the worlds second-Largest manufacturer and retailer of luggage, backpacks, and handbags. With a legacy of over five decades, the Company has built a portfolio anchored in brand trust, manufacturing depth, and wide distribution. VIP Industries operates in-house manufacturing facilities across India and Bangladesh and manages a diversified brand portfolio spanning the full spectrum of price points through VIP, Skybags, Aristocrat, Alfa and Caprese - giving it broader consumer reach than any other player in the organised Indian Luggage market.

Message from the Managing Director on BRSR

At VIP Industries Limited, sustainability is central to how we create Long-term value. We believe that responsible growth is achieved by integrating environmental stewardship, social responsibility, and strong governance into every aspect of our business. As we continue to strengthen our market leadership, we remain equally committed to building a resilient enterprise that delivers sustainable outcomes for our customers, employees, business partners, shareholders, and the communities we serve.

Our Business Responsibility and Sustainability Report reflects our progress in embedding ESG principles across our operations in line with the evolving expectations of SEBIs BRSR and BRSR Core framework. We recognize that transparency, measurable performance, and accountability are essential to creating stakeholder trust and driving continuous improvement.

Climate action remains a key priority. We are focused on reducing the carbon intensity of our operations through energy- efficient manufacturing, process optimization, adoption of cleaner technologies, increased use of renewable energy where feasible, and improved supply chain efficiency. These initiatives not only reduce environmental impact but also enhance operational resilience and resource productivity.

Innovation remains at the heart of our business. We are increasingly incorporating sustainability considerations into product development, material selection, packaging, and manufacturing processes. By promoting eco-friendly designs, responsible sourcing, and cleaner production practices, we aim to deliver products that meet customer expectations while contributing to a lower environmental impact.

Our people are our greatest strength. We are committed to providing a safe, healthy, diverse, equitable, and inclusive workplace where every employee is respected, empowered, and provided equal opportunities to grow. We continue to strengthen our culture through employee development, workplace safety, ethical conduct, and respect for human rights across our operations and value chain.

As sustainability expectations continue to evolve, so will our ambitions. We will continue to strengthen our ESG performance through measurable targets, transparent disclosures, data-driven decision-making, and continuous improvement. Our objective is not only to comply with evolving regulatory requirements but to create enduring value through responsible innovation, operational excellence, and stakeholder collaboration.

On behalf of the Board and the leadership team, I thank our employees, customers, partners, investors, and all stakeholders for their continued trust and support. Together, we remain committed to building a more sustainable, resilient, and future- ready VIP Industries Limited.

Managing Director VIP Industries Limited