VIP Industries Ltd., India’s biggest luggage maker, is planning to buy a European rival this financial year as overseas companies such as Samsonite LLC expand in the company’s home market.
VIP surged as much as 12 percent to a record in Mumbai after Chairman Dilip Piramal said the company, about 6 percent owned by Indian investor Rakesh Jhunjhunwala, is targeting a luggage maker owned by a private equity firm. The company also plans to form joint ventures to manufacture soft luggage and boost sales, he said.
“It is quite a respected name,” Piramal said of the acquisition target he’s identified. “In soft luggage, we will enter into joint ventures with some major suppliers both in India and abroad.”
VIP is expanding its product range as economic growth and rising salaries prompts more Indians to travel. The nation’s luggage industry, estimated to be valued at about 20 billion rupees ($433 million) a year, is growing at 15 percent annually, Piramal said. India’s $1.2 trillion economy may grow 8.5 percent in the year ending March 31 and 9 percent the following year, according to Finance Minister Pranab Mukherjee.
“The business is looking very interesting as the amount of traveling is increasing due to which this industry is getting a boost,” said Deven Choksey, chief executive officer at K.R. Choksey Shares & Securities Pvt. “There is lots of upside as the company has very good focus.”
Shares Surge
The company based in Mumbai may complete the purchase by the year ending March 31, Piramal said without elaborating.
VIP’s shares advanced 8.3 percent to 467.5 rupees at 9:57 a.m. in Mumbai. The stock, the best performer on the BSE500 index this year, has climbed two and a half times compared with a 3.7 percent gain for the benchmark Bombay Stock Exchange’s Sensitive Index.
The company’s net income surged 60 percent to 322 million rupees in the three months ended June 30, it said July 28. Sales surged 17.
“Consumer preference in the last decade has shifted to soft luggage, while we were essentially a hard luggage company,” Piramal said. “We have gotten over that now and our sales of both types of luggage are equal.”
Samsonite plans to spend 1 billion rupees this year to open 200 stores to sell its products such as American Tourister in the South Asian nation, the Press Trust of India reported on Dec. 30. Ramesh Tainwala, Samsonite’s president for greater Asia couldn’t immediately be reached for comment at his office today.
Source: Business Week