Introduction:

  • Safari was incorporated in 1980 and is in the business of manufacturing and trading of luggage and luggage accessories. It is the third largest branded player in the oligopolistic organized Indian luggage industry after VIP and Samsonite
  • The Indian luggage industry is valued at ~ Rs. 10,000 Cr and is largely dominated by the unorganized sector. The top three branded players namely- VIP Industries, Samsonite and Safari forms roughly a third of this market. In the organized pie, the market shares are approx. 55%, 30% and 15% for VIP, Samsonite and Safari respectively
  • Safari’s underwent a shift after Mr. Sudhir Jatia (CMD) bought majority stake in the company in May 2012. Prior to that sales CAGR was 3.6% over FY07-12. Due to changes instituted by him Safari has been able to accelerate growth and post a sales and EBITDA CAGR of 33% and 59% respectively over FY13-18

As seen in the chart above, Safari industries has given 66% CAGR return over the last 5 year

Post the new management, product portfolio has been revamped to suit the changing consumer trends. Safari has a pan India presence through its well-entrenched distribution network. Its offerings are available in major 25+ cities across 3500+ outlets


Investment Rationale:

  1. Beneficiary of GST–created level playing field: Since Safari is an economy brand and offers products which cater to mass market, it is a preferred choice for customer who wants to upgrade to a branded product after reduction in price gap between organized and unorganized players post implementation of GST
  2. Increasing travel & tourism to drive growth: Increasing airline passenger traffic, more youth-orientated products and premiumization will enable growth
  3. Focused product strategy: Growth in Soft Luggage is driven by 4-wheeler (fastest growing with in SL) and Short-duration travel products (e.g. rolling duffels). Polycarbonate (PC) is the growth driver within Hard Luggage. Renewed focus by Safari on backpacks as Backpack to be the fastest growing product category across all existing categories (SL, HL and Backpacks)
  4. Product expansion to boost growth: Safari has realigned the entire product portfolio by eliminating non-performing SKUs. Also, it has entered into newer categories like PC luggage, laptop bags, school bags and back packs
  5. Channel expansion strategy: Over the last few years, Safari’s  distribution channel has undergone huge transformation with the share of Canteen Stores Department coming down to 25% from 50% and moving towards other categories like hyper market, MBO, EBO, E-com. The company currently has 40-50 EBOs and is looking to expand the stores in high footfall areas



Financials:

Safari has grown tremendously fast in last 5 years after management change. Sales growth has been accompanied by margin expansion.