VIP Industries rises 1% amid reports of promoters mulling stake sale

The Dilip G Piramal-led promoter and promoter group holds around 51 percent of stake, as of June 2023

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Shares of VIP Industries gained 1.6 percent to Rs 667 per share on the BSE on October 3 amid reports of promoters mulling to sell their stake in the luggage and travel accessories maker. The S&P BSE Sensex was down 338 points or 0.5 percent to 65,490 levels, as of 9:25 am.

On a year-to-date (YTD) basis, the stock of VIP Industries was flat, as against 8 percent surge in the Sensex benchmark. That said, the scrip of VIP Industries had touched a 52-week low of Rs 548 apiece on August 3, 2023.

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The Dilip G Piramal-led promoter and promoter group holds around 51 percent of stake, as of June 2023. As per reports, the deal, which includes a potential offer, could be worth up to $1 billion and see promoters completely exit the business. The promoters have hired Incred Capital’s investment banking team to manage this sale.

The report further added that private equity firms are most likely to be interested in the asset as VIP Industries is larger than Indian peers except Safari Industries.

In the April-June quarter of fiscal year 2023-24 (Q1FY24), the company’s net sales had grown 7.7 percent year-on-year (YoY) to Rs 636 crore, while profit-after-tax (PAT) had declined 16.4 percent YoY to Rs 57 crore.

The company’s earnings before interest, tax, depreciation, and amortisation (Ebitda), too, saw a drop of 21.5 percent to Rs 80 crore in Q1FY24 from Rs 102 crore, in the year-ago period.

Analysts at Prabhudas Lilladher downgraded the stock to ‘accumulate’ from ‘buy’ with revised target price of Rs 707 apiece (versus Rs 866 per share earlier).

“The rising competitive intensity is likely to result in growth challenges. Further, the company’s decision to delay capex of Rs 200 crore indicates growth revival may take some time. In light of these factors, we cut our target multiple to 38x (41x earlier) and expect sales/Ebitda compounded annual growth rate (CAGR) of 10 percent/17 percent over FY23-FY25E,” the brokerage firm added.

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