India’s Luggage Industry To Witness 15 Per Cent Rise In Revenue This Fiscal: CRISIL

New Delhi, Aug 10 (KNN) The luggage industry’s revenue is all set to rise 15 per cent on-year this fiscal, said CRISIL Ratings on Wednesday.

The rise is predicted despite a high-base effect of 40 per cent growth last fiscal due to rising penetration of hard luggage made by the organised sector, and continuing growth in tourism and corporate travel, it said.

As per the report, the consumer preference for hard luggage has driven up operating efficiencies and improved capacity utilisation of the organised sector. That, in turn, should expand their operating margin 150-200 basis points (bps) on-year to 16 per cent this fiscal.

The analytics company said that for higher marketing and promotional expenditure by organised players, margin improvement would have been much sharper as prices of key raw materials of polypropylene, polycarbonate, and polyamide declined almost 20 per cent.

For the record, the key raw materials prices are largely crude price driven and comprise 40-45 per cent of the cost for luggage makers. Improved profitability and lean balance sheets will support credit risk profiles, despite planned capacity enhancement.

Jaya Mirpuri, Director, CRISIL Ratings said, “In the past five fiscals, the market share of hard luggage has shot up to 55 per cent from 33 per cent. Operating margins are relatively better on them since these are manufactured locally.”

“On the other hand, the fragmented unorganised sector largely imports soft luggage from China. They have been impacted by supply-chain disruptions and implementation of the Goods and Services Tax, leading to loss of market share,” he said.

Rushabh Borkar, Associate Director, CRISIL Ratings said, “With utilisation at full tilt, organised manufacturers are looking at expanding capacity as well as their retail networks. Says Rushabh Borkar.”

“Apart from doubling capacity, organised manufacturers are set to ramp up retail presence by 35-40 per cent, which would involve a capital expenditure of Rs 700 crore this fiscal. While this will increase their debt levels, overall capital structure and coverage metrics will not be materially impacted because of improved cash accruals. Gearing and interest coverage of our sample set will remain comfortable at 0.6 time and 11.5 times, respectively,” he said.

The industry’s fortunes hinge on travel trends. Any decline thereof, and sharp volatility in the prices of crude oil-derived inputs will bear watching.  (KNN Bureau)