Expect to maintain margins at around 6.5%: VIP Industries

VIP Industries reported a 32.94 percent rise in its net profit at Rs 11.3 crore for the quarter ended December (Q3). The company will maintain its margins at 6.5 percent in the next quarter on high volumes, says Dilip G Piramal, Chairman of the company.In an interview to CNBC-TV18, Piramal says the company has gained market share in recent times on the back of growing demand in air travel. Meanwhile, Piramal says that ranges within VIP, Skybags, Carlton, Aristocrat and Alfa have become quite large.Below is the verbatim transcript of Dilip G Piramal's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: Let me start off with what the demand trends are looking like. In the quarter gone by, you generated revenues of about 15 percent. Has demand picked up and what are the trends that you are expecting to see in the quarters to come?A: It is a bit uncertain because the last quarter was very good but January has been tepid. We think things should be improving like the aviation sector is doing extremely well and that is something which affects us directly. That has got to do with travel and that is growing at a healthy rate. So I am quite optimistic that demand should be quite good.Latha: Give us something in terms of visibility, your revenues were up 15 percent. What exactly was the volume growth if you can put a number to it, I am sure you have a lot of range of products but how much did volumes grow and how much do you think volumes can grow, Q4 in FY17?A: We will have the volumes and the values more or less the same, maybe about 3-4 percent might be the inflation. We can extrapolate the same trend because right now, it varies from a month-to-month, if January has not been so great then it makes up in February and March. There is a little bit of a stocking also but nowadays our pipelines have become smaller. That is a very healthy trend because our primary fields are very good and secondary sales also are equally good because deliveries and all are faster, there is no need for a very long pipeline.Whenever the pipeline is small with the dealers, it is a very healthy trend because whatever the consumer does, it is reflected in our sales also.So we are quite optimistic because our ranges are very good. What is happening with VIP, it is more than the market, is that our ranges are doing extremely well. Our Skybags range has now become quite large and all our ranges are doing extremely well, most of our channels are doing quite well and I don’t think we ever had such a good product range across all the brands.So that is where our strength comes from.Sonia: What about competition, there are so many new brands that have come into the market in the last one year? How are you facing that and what is your market share currently?A: You have to distinguish between brands and labels. A brand is something which is advertised throughout and nationally known. So basically there are just two big companies in the luggage space. The others are all labels.Some of them are doing better than before like in some segments. In the backpack segment we have very stiff competition but in fact in the backpack segment, we were not existed two years ago and one of the reasons for our increase in sales has been that we have now become a major player in this segment also. So competition is okay, our market share is still about 50 percent.Sonia: Have you lost any market share to American Tourister in the recent past?A: No, on the contrary we have gained market share. There is Samsonite and American Tourister is one company and we see our overall brands that is VIP, Skybags, Carlton, Aristocrat and Alfa and we sort of keep on varying a little bit at a tactical level like in some segments we push Aristocrat more and VIP's Skybags and Carlton are there in all the segments.Latha: So about 17-18 percent in terms of a revenue growth and this kind of 35 percent growth in EBITDA is deliverable for the full year and for next year you think?A: Last quarter, the exchange rate was quite high. We have been able to get good rates from our suppliers because we are one of the major buyers and the world trends are not so good. So we stand out, the rupee has further depreciated in this quarter. By and large, our margins are improving. So we are hopeful that we should maintain these margins.Latha: I thought you would do better, 6.5 percent is what you have done in terms of margins, you could do better?A: In the next quarter, definitely because in the first quarter our volumes are very good so then the margins do go up.