The sector is in the spotlight after promoters of VIP Industries completed the transaction of selling 32% stake in the company to private equity player Multiples on Wednesday.
Elara Capital expects branded penetration to rise to 60% by 2027 from levels of 54% in 2024, as functionality-led demand is fueling growth in both affordable and premium segments.
Competition in the industry is also increasing compared to earlier, when competition was confined to three players, VIP Industries, Samsonite and Safari Industries.
Digital-native brands, private labels, and D2C entrants have expanded aggressively in the recent times, according to Elara. However, the D2C players have been constrained by the offline reach and high-acquisition costs.
The brokerage believes that both Safari and VIP Industries are well-placed to benefit from capacity expansion, an improved product mix, and tighter cost controls.
Over the last five years, Safari Industries has significantly outperformed VIP Industries, with its share price gaining at a Compounded Annual Growth Rate (CAGR) of 54%, while VIP Industries' stock price grew only 2.5% during the same period.
Safari's sales have also grown at a 21% CAGR in the last five years, comfortably outperforming VIP Industries' 5% growth. Earnings Per Share (EPS) for Safari has grown at a five-year CAGR of 35%.
For the first half of the year, VIP Industries reported a net loss of ₹156 crore, compared to a net loss of ₹69 crore in financial year 2025.
On VIP Industries, Elara believes that the company is in a repair and stabilization mode, and that the Multiples-led ownership transition brings in sharper governance and renewed focus.
However, a recovery in VIP Industries is subject to consistent execution, margin restoration, and regaining market share, with its turnaround trajectory offering a re-rating potential, more so, as risk-reward for the stock is favourable, according to the Elara note from earlier in the month.
Intensifying competition, a sharp rise in input costs, and a failure in identifying a change in consumer demand, are some of the key risks for VIP Industries going forward.
Elara sees a 37% upside for Safari Industries, as its price target of ₹3,111 is the highest on the street for the company, while VIP Industries' price target of ₹430 implies a 9% upside potential.
Shares of Safari Industries are down 14% so far in 2025, while those of VIP Industries are down 18%.
