Expect sales to by 11-12% in FY13: VIP Industries

Income from operations of the company during the reported quarter increased by 7.4% to Rs 302.6 crore from Rs 281.6 crore it posted for the corresponding period in 2011-12.

Dilip G Piramal, chairman of VIP Industries told CNBC-TV18 that company’s business is going through a tough phase now due to slowdown in the Indian economy. 

"Our margins are quite badly affected since September last year because of devaluation of rupee. Our sales are predicated on the Indian economy and the growth rate has slowed down," he elaborated.

Given this sluggishness, Primal feels that achieving a topline growth of 15% in FY13 would be very difficult , but 11-12% growth looks possible.

Below is the edited transcript of Piramal’s interview with CNBC-TV18.

Q: Is your business going through a sluggish phase, 7% sales growth does not seem like the kind of stuff that will blow the lights out?

A: Absolutely, because we are going through a difficult phase. Our margins are quite badly affected since September last year because of devaluation of rupee. Secondly, all our soft luggage imports, which has now become a majority of our business is imported and there is nothing much we can do about that. Our sales are predicated on the Indian economy and the growth rate has slowed down.

Moreover in the Q1, which is our biggest quarter there is a strong drive from marriages. In this season, the last quarter marriage season was very dull, there were not too many auspicious dates and so because of that and the overall slowing down of the economy our sales growth has been quite low.

One of our largest single segments and that is the canteen store department of the Indian Army had quite a lot of disruption in their internal working and sales went down last quarter. All in all it’s like Murphy’s Law whatever has to go wrong is going wrong at the moment.

But the saving rates and something from which we derive a lot of satisfaction is that our market position is very strong, our competitive strength is very good. This is because all these other factors including the canteen stores affect everybody including all our main competitors and even the unorganized sector for e.g luggage from China, so the devaluation of the rupee affects them also.

Q: The sluggishness in volume you are seeing in both the hard and the soft luggage segments?

A: The hard luggage segment was more badly affected because of the marriage season. Spike in Q1 is in the hard luggage sales mainly in Bihar and eastern Uttar Pradesh (UP) and in the sort of relatively the smaller segments of the economy. So the fall in hard luggage sales has been more.

Our retail sales in soft luggage is the cities is quite good and that is where I feel that our brand strength is very good. That gives us a good confidence in the long run and that is what matters. Exchange rate is also something which gets adjusted in a period of time and it affects everybody and bad season-good season and economy also affects everybody.

Q: This Canteen Stores Department (CSD) segment problem was there in the Q4 as well. Has something fundamentally gone wrong there?

A: This happens about once in 10-12 years. There is some reorganization and we do not know as it is the government department and they are doing a lot of reorganization. That is what is told to us also. It started from January and it is still continuing to some extent.

Q: Do you see any meaningful pickup in margins anytime soon stripped off the currency impact generally speaking or will margins continue to languish here?

A: At the moment things are not looking too bright, but Chindambaram coming in the finance ministry seems to be a positive thing. If the sentiment changes and if the rupee does appreciate a bit then we should be better than what we are today.

Q: When do you see sales picking up into double digits again or do you think it’s unlikely this year and you would want to lower your guidance that you had setout at the start of the year?

A: Sales should be in double digits and that should be about 10% very shortly. In this last quarter we had negative growth in CDS sales and our international sales are also not doing so well. Now international business has become about 7.5% of our total business. They should get into double digits very soon, but in the early teens.

Q: For the full year 15% looks like a stretch now maybe 11-12% is more like it?

A: Yes, you are right.