Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
11,856.80-80.7
Stock Analysis, IPO, Mutual Funds, Bonds & More

Forever optimistic that things will improve but it could be wishful thinking also: Dilip Piramal, VIP Industries

We cannot be too aggressive in marketing expenditure as profits go down if volumes do not rise.

ET Now|
Nov 20, 2019, 03.56 PM IST
0Comments
BCCL
Dilip Piramal-1200
The cause of the consumer downturn is not clear to anybody. So, there is not much we can do, we are just planning inventories and other actions accordingly, says Dilip Piramal, Chairman, VIP Industries. Excerpts from an interview with ETNOW.

How would you summarise the festive season gone by? How is demand moving for your category -- bad, really bad, or just bad?
I will talk about the last quarter. The September quarter was quite tepid and it was not unexpected. We had virtually flat sales, we grew by about 3% and as I said that was the expectation. We are in line with consumer companies which have shown 6% growth in the first half. Things are slightly better now but that was expected because the festive season has set in and let us see how the month of November pans out.

At the moment, everybody is very cautious because no one can forecast anything. People like me are forever optimistic that things will improve but it could be wishful thinking also.

If you are still seeing a slightly uncertain environment, going ahead, how are you strategising to cope with that?
The cause of the consumer downturn is not clear to anybody. So, there is not much we can do, we are just planning inventories and other actions accordingly. We cannot be too aggressive in our marketing expenditure because profits do go down if volumes do not increase, especially in products like ours where the growth margins are quite high.

The good thing for us is that we have improved our growth margins in the last quarter. Of course, the EBITDA has not been so good because EBITDA is a function of volumes, particularly for us, and of course there is a slight change in the accounting principles. That is why EBITDA seen as higher but there is a change in the way we account for lease rents, which means that the rent is not debited as rent but it shown as an asset and then we depreciate the asset and pay a notional interest on the amount of the loan, which is a notional loan created on the value of the asset.

It is quite a convoluted system but it is there. The only good thing was that our margins went up. We are waiting and watching and there is nothing much we can do.

Let us talk about the ecomm channel. How did that perform?
E-comm is the fastest growing channel and that trend continues.We are working on strategies so that there is no big clash with other retailers. We will find a good way out. It is a good channel.

And between the different segments, where are you still seeing growth? Where is more margin comfort?
My company is very boring from that point of view. All our segments are growing more or less equally and in the last two years, the economy segment has become a bit larger but now growth is there in all the segments. The competition also is more or less equal in all the segments and margins also are little bit higher in the upper segments, particularly in the top segment where our brand Carlton is in operation. But there, the volumes are lower but because the prices are a bit high. The margins are highest but all our segments contribute equally because though the margins are slightly lower, the volumes are much higher.

Both Skybags and VIP, which are in the mass premium segment and Aristocrat which is in the economy segment, are all faring equally and our handbags brand Caprese is also doing quite well.

Also Read

VIP Industries Q1 volume growth fell to 9% from 25% last year but I am optimistic: Dilip Piramal

In Q4, we will get back a good portion of our lost margins: Dilip Piramal, VIP Industries

We are growing because of tailwinds in all sectors: Dilip Piramal, VIP Industries

In top segment, we increased our share from 0% to 20-25% in five years: Dilip Piramal, VIP Industries

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service