Rate of Demand has reduced significantly: Dilip Piramal, Chairman, VIP Industries

Massive fire accident in April 2019 at a warehouse in Ghaziabad created a loss of Rs48 crore to the company in the first quarter of FY20, says Dilip Piramal, Chairman, VIP industries. In a candid chat with Dimpy Kalra, Zee Business, Mr Piramal said, “High dollar rates in past two-quarters relieved us as it had an impact on our sales to China”. Edited Excerpts: 

Q: Quarterly numbers of the June series suggest that the profits have reduced to Rs 38 crore from Rs 60 crore. Are there any adjustments in this and if not, then why the profits have reduced by 40%?
A: It is an exceptional item as a massive fire accident that occurred at one of our warehouses in the first week of April 2019 led to a loss of Rs 48 crore to the company. These results have been posted after a write-off of that Rs 48 crore. Although it was insured, it will take a year to receive the money and once the cost is recovered, it will be taken into the consideration of profit. Earlier, such a situation could be shown as a contingent loss, but it is not possible now as some accounting norms have changed. We will have to show the entire loss and once the insurance is claimed, it will benefit us. The fire was enormous, and it was a huge warehouse in Ghaziabad. 

Q: By when will you receive these insurance claims?
A: It will take a year due to the regulations of the insurance companies. 

Q:  Your company is one of the few corporations in the market that has an improvement in margins. Will the ratio of margins remain the same at the current 20%?
A: The margins are quite good; the rate of dollar was high in the past 2 quarters and we have a got some relief from it as it had an impact on our sales to China. Also, we have increased the cost of products from April as well as there has been an improvement in the product mix. These are the reasons that are responsible for the improvement in the margins. 

Q: The companies related to consumption have faced a slowdown and problems related to demand. Although your company does not as qualify as a daily-needs company, the patterns are now changing as travel and tourism have been given a boost. Is there a decrease in the demand for your products?
A: The rate of demand and growth has reduced significantly. We grew at a rate of 25% in the first quarter of the last year and we have come down to 9% now. But our numbers are good when compared with other FMCGs and other industries like the automobile sector has seen negative growth. I am satisfied with our performance in this quarter and our situation is good.  

Q: Do you have expansion plans, if yes, then what is the size of CapEx for the purpose? Has the CapEx has been applied or not?
A: When expansion happens, we expand in several areas like warehouses, which is modernized and transformed. There is a capital expansion in areas like the software. When it comes to manufacturing then we are carrying out our manufacturing activities mainly in Bangladesh. This is an ongoing process and our company is on a growth path and it keeps repeating itself every year. It is a continuous effort as it is not a one-time process. 

Q: You being a leading company in the luggage segment and that’s why I would like to know that do you have any plans to set-up new plant/s on foreign land or have plans of acquisitions?
A: Luggage is a fragmented business as there are many small companies across the world. It is a small business and we don’t see any targets for acquisitions as it is not easy. Possibilities may arise in the future and we’ll investigate it after a year.  

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Q: Is there any debt on balance sheets, if yes, what are your plans to lower it? What is the situation of cash in books?
A: We were debt-free from the past 2-3 years, but our inventory has increased from March of this year. There was no cash flow from the government’s CST department from January to March and as a result, the level of deterring had increased. There was some borrowing of the past 2-3 years, and we expect to be debt-free by the end of 2-3 months. Considering the size of our company, a debt of Rs 50-100 crore is negligible.