V I P Industries Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

The global economy showed signs of stabilisation in 2024 after prolonged disruptions. The world economy grew 3.3% in 2024, and global inflation declined significantly to 5.8% from 6.9% in 2023. Advanced Economies grew 1.8% while Emerging Markets and Developing Economies registered a growth rate of 4.3%. The United States demonstrated the strongest performance among major economies, with its GDP growing at 2.8% in 2024. The Euro area managed to grow 0.9%.

However, the economic landscape has shifted following the 2024 US presidential election, with tariff-related disruptions and geopolitical concerns. The IMF (International Monetary Fund) projects the world economy to grow at 2.8% in 2025 and 3% in 2026. Advanced Economies (AEs) are expected to expand by 1.4% in 2025 and 1.5% in 2026, while Emerging Markets and Developing Economies (EMDEs) are anticipated to grow at a rate of 3.7% in 2025 and 3.9% in 2026.

Global inflation is projected to continue its downward trajectory, decreasing to 4.3% in 2025 and further to 3.6% in 2026 from above 5% in 2024.

INDIAN ECONOMY OVERVIEW

The Indian economy continues to be on the path to becoming the third-largest economy by 2030. The economy also continues to be the fastest-growing large economy, though the pace of growth has moderated following global and domestic headwinds. According to the government estimates, Indias GDP grew 6.5% in FY 202425 on a large base of 9.2% for FY 2023-24. The economic growth was supported by high growth in the Construction Sector, Financial, Real Estate and Professional Services and Trade, Hotels, Transport, and Communication. The Private Financial Consumption Expenditure (PFCE) is expected to register a growth of 7.2% during the fiscal as against 5.6% growth observed in FY 2023-24.

The retail inflation in India hit a six-year low of 4.6% for FY 2024-25. This was achieved through a coordinated effort of the RBIs monetary tightening and government measures to manage the supply side. As the inflation stayed within the RBI comfort zone, the central bank reduced repo rates to 5.5% in June after three consecutive rate cuts, starting in February. The low inflation along with easy availability of cheap credit improve purchasing power of the consumer, aiding to consumption and providing impetus to economic growth.

According to the IMF, the Indian economy is expected to advance steadily at 6.2% in 2025 and 6.3% in 2026. The RBIs forecast is more optimistic, projecting a GDP growth of 6.5% for FY 2025-26.

Indias Index of Industrial Production (IIP) expanded by 4% in FY 2024-25 compared to 5.9% in the previous year. However, other economic indicators like GST collection, exports show a rising trend, showing economic growth momentum. The gross GST revenue collected in FY 202425 stood at T 22,08,861 Crores, registering a growth of 9.4% over the previous fiscal. In 2024-25, merchandise exports excluding petroleum products rose to a record USD 374.1 billion, registering a 6% increase from USD 352.9 billion in FY 2023-24 ?€” the highest ever annual non-petroleum merchandise exports.

Along with RBIs monetary policy, the Indian budget for FY 2025-26 prioritises four growth engines - agriculture, MSMEs, investment and exports. It aims to boost economic growth through significant personal income tax reductions, which is expected to increase disposable income and spur consumer spending. The government has also been taking various measures to promote tourism including promoting domestic tourism, enhancing infrastructure and improving overall visitor experience.

LUGGAGE INDUSTRY IN INDIA Market Size

Indias luggage market was estimated at ~ T 15,000 Crores by CRISIL in 2023 annually, following a significant boom from FY 2021-22 to FY 2023-24. Going ahead, the market growth expectation are high single to mid doubledigit growth over next few years. The organised sector is growing consistently over years in this market, with major players having strategically increased their domestic manufacturing capacity and backward integration over the last three fiscals to meet rising demand and reduce import dependence.

Growth Drivers

Various factors, including a surge in domestic and international travel and tourism, increased demand during the wedding season, and widespread adoption of e-commerce, have led to increasing demand for luggage.

The tourism industry in India is on a path to outpace the countrys economic growth, with an expected annual growth rate exceeding 15%. This remarkable expansion is supported by significant investment in infrastructure, which includes:

?€? Nearly 1,50,000 km of road network

?€? Over 500 new air routes, 150 new airports

?€? Introduction of high-speed Vande Bharat trains

?€? Completion of 100 tourism infrastructure projects

?€? Initiation of new projects worth T 3,300 Crores across 23 states to boost tourism

Government programmes such as Dekho Apna Desh, PRASHAD, Vibrant Village Programme, SWADESH 2.0, and Regional Connectivity Scheme - Udaan have successfully promoted domestic tourism. The results are visible in the burgeoning number of tourists. In 2023, 2,509.63 Million Domestic Tourist Visits (DTVs) were recorded (provisionally) compared to 1,731.01 Million DTVs in 2022.

Other travel indicators are also encouraging.

Air Travel: According to the Directorate General of Civil Aviation (DGCA), India saw a robust 10.35% growth in passengers carried by domestic airlines, to 431.98 Lakhs in FY 2024-25 from 391.46 Lakhs in the previous fiscal.

International Travel: In the first half of 2024, 15 Million Indians travelled internationally, registering a 14% increase over the previous year. In 2019, India was the 10th largest outbound market; by 2027, it is projected to jump to fifth place. A young population hungry for new experiences, increasing prosperity, and the impact of social media have been fuelling wanderlust.

Rail Travel: Between April 1, 2024, and March 31, 2025, 715 Crores passengers travelled by the Indian Railways, an increase of 5% over the previous year. With a rising inclination towards international travel, weekend getaways, and solo trips, Indians are reshaping the travel landscape and contributing to the growth of the luggage industry.

A large number of Indian students travel domestically and internationally for higher education. In 2024, ~7,59,000 Indian students studied abroad.

Key trends

E-commerce and online distribution: While the offline channel continues dominating approximately 70% of sales, e-commerce is rapidly gaining traction. It has increased the accessibility of products, especially for consumers in Tier II and Tier III cities. However, the digital marketplace has resulted in intensified competition, leading to heavy discounting practices.

Fashion-forward design: The young and the affluent segments are increasingly seeking stylish and personalised luggage with unique prints, vibrant colours, and custom designs. Although 87% of the market in India remains for the non-luxury segment, rising income levels and growing aspirations are leading to increased interest in premium and luxury luggage offerings.

Hard luggage preference: Hard luggage options that combine lightweight construction with expanded design and colour choices captured 60% market share, aligned with growing consumer demand, coupled with aesthetic appeal.

Increasing competition: Industrys promising growth trajectory has led to intensified competition, fuelled by the ascent of international brands and the emergence of new-age startups and upcoming ventures in the organised market. The competitive environment is driving product innovation and service improvement across the industry.

Smart luggage adoption: The new market entrants are revolutionising the industry with innovative luggage features like tracking systems. Some products incorporate smart sensors that adjust to customers walking speed, enhancing the user experience. Many brands are focusing on lightweight yet durable options to make the travel experience more comfortable for consumers.

Sustainability focus: There is a growing emphasis on sustainability within the industry, with brands increasingly adopting eco-friendly materials and environmentally friendly manufacturing practices. This includes using recycled materials and adopting low-impact production processes to appeal to environmentally friendly customers.

The industry remains poised for expansion, presenting opportunities for industry players to innovate and adapt to shifting market dynamics.

COMPANY OVERVIEW

Established in 1968, VIP Industries Limited (hereinafter referred to as "VIP" or "the Company") is Asias leading and the worlds second-largest manufacturer and retailer of luggage, backpacks and handbags. It commands a ~38% market share in the organised and oligopolistic Indian luggage market.

With a rich legacy of over 57 years, the Company has solidified its position as the most trusted brand in India and across many countries worldwide. Through consistent product innovation, premium quality, and globally inspired aesthetics, VIP has redefined the luggage and travel industry. The Company leverages in-house design capabilities to deliver trend-setting products that evolve with customer preferences and market dynamics.

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

Brands and products from the house of VIP

Brands	VIP	Skybags	Carlton	Aristocrat	Caprese
Product Range	Hard luggage	Soft luggage	Duffle Bags	Backpacks	Business satchels Ladies handbags

New product launches
40	25	64
Premium/Mass premium segment	Value segment	Backpack category

10

Manufacturing facilities in India and Bangladesh

~14,000

Points of Sale

~1,400

Towns

FINANCIAL REVIEW

During FY 2024-25, the Companys Consolidated net revenue from operations showed a 3% decline to f 2,178 Crores from f 2,245 Crores in FY 2023-24 due to lower realisations despite a 11% volume growth. Profit after tax in FY 2024-25 stood at f (68.79) Crores compared to f 54.30 Crores in the previous year. EBITDA stood at f 93.21 Crores as against f 205.31 Crores in FY 2023-24.

Financial Review (Consolidated)

(Rs. in Crores)

Particulars	FY 2024-25	FY 2023-24	FY 2022-23
Revenue from Operations	2,178.43	2,244.96	2,082.32
EBITDA	93.21	205.31	330.88
PBT (Before Exceptional Item)	(99.05)	50.80	228.74
PBT (After Exceptional Item)	(91.22)	76.58	196.53
PAT	(68.79)	54.30	152.34
Net Worth	616.16	677.91	641.69
Debt Equity Ratio	0.67	0.79	0.28
Earnings per share (in f)	(4.84)	3.84	10.76

Financial Review (Standalone)

(Rs. in Crores)

Particulars	FY 2024-25	FY 2023-24	FY 2022-23
Revenue from Operations	2,169.66	2,215.50	2,019.53
EBITDA	67.44	143.16	259.97
PBT (Before Exceptional Item)	(107.23)	10.40	178.38
PBT (After Exceptional Item)	(107.23)	36.18	193.38
PAT	(81.4)	28.02	160.93
Net Worth	549.67	616.75	607.06
Debt Equity Ratio	0.60	0.70	0.22
Earnings per share (in f)	(5.73)	1.97	11.37

Key Financial Ratios (Consolidated) Operation as per SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

Particulars	FY 2024-25	FY 2023-24	FY 2022-23
Debtors Turnover	6.26	7.70	8.79
Inventory Turnover	1.47	1.42	1.84
Interest Coverage Ratio	(0.35)	2.39	7.90
Current Ratio	1.28	1.31	1.62
Debt Equity Ratio	0.67	0.79	0.28
Operating Profit Margin (%)	(1.19)	4.19	11.53
Net Profit Margin (%)	(3.16)	2.42	7.32
Return on Net Worth (RONW) (%)	(11.16)	8.01	23.7

Key Financial Ratios (Standalone) Operation as per SEBI (Listing Obligations and Disclosures Requirements (Amendment) Regulations, 2018

Particulars	FY 2024-25	FY 2023-24	FY 2022-23
Debtors Turnover	6.26	7.80	8.98
Inventory Turnover	1.94	2.00	2.82
Interest Coverage Ratio	(0.56)	1.73	9.22
Current Ratio	1.24	1.32	1.74
Debt Equity Ratio	0.60	0.70	0.22
Operating Profit Margin (%)	(1.78)	1.98	5.92
Net Profit Margin (%)	(3.75)	1.26	7.97
Return on Net Worth (RONW) (%)	(14.81)	4.54	26.5

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, inventory and debt reduction. With a greater focus on the premium segment, the strategic realignment of distribution channels with an emphasis on expanding EBOs and repositioning its brands, the Company anticipates sustainable growth in the dynamic Luggage industry Landscape.

VIP will continue its focus on durable products, smart luggage, and e-commerce growth, positioning it to increase in its market share with sustainable growth.

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 2024-25, 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 Work®, 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 focused 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:

?€? Enhancing front-line capabilities to deliver sharper execution and deeper customer engagement

?€? Accelerating digital adoption across functions to improve agility, productivity, and decision-making

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 CONTROL SYSTEM

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. Mahajan & Aibara, Chartered Accountants, LLP serve as the Companys InternaL Auditors, responsibLe for ensuring 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 control system. The management takes suitabLe action based on the recommendations provided by the Statutory Auditors, Internal Auditors and the Audit Committee.

CAUTIONARY STATEMENT

The Management Discussion and Analysis may contain some statements describing the Companys views of the industry, objectives, projections, estimates or expectations, which may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results may differ substantially or materially from those either expressed or implied in the Statement depending on the factors that could affect the Companys operations such as economic conditions affecting demand and/or price conditions in the domestic and overseas markets in which the Company operates, changes in government regulations, tax laws and other statutes and incidental factors. The Company undertakes no responsibility to publicly amend, modify or revise any forward-looking statements, whether as a result of any subsequent developments, new information, future events, or otherwise.