Safari Industries, the country’s third-largest luggage player with 10% market share, after leader VIP Industries and Samsonite, has had a phenomenal run on the Street over the past one year. The stock has gained 144% to Rs.540 level against the Sensex’s 21% return — that is after the stock has come off its 52-week high of Rs.664, hit in December 2017.
The rally in the stock was largely driven by the company’s sharp turnaround. Safari’s topline has shown 40% CAGR to Rs.355 crore as of FY17, while profit has galloped from Rs.1 crore to Rs.9 crore over the same period. The luggage maker’s fortunes have turned around since Sudhir Jatia, former managing director of VIP Industries, acquired a controlling stake in the company. Over FY12-17, the company’s operating profit too has seen 52% CAGR against a fall of 9.5% over FY08-12. The move to launch premium brands (Frame, Primus), widen the company’s sales network by tying up with hypermarkets, e-commerce portals, and opening exclusive brand outlets have played a crucial role.
The small-cap stock, whose market cap is around Rs.1,200 crore, had already caught the attention of Tano Capital, which had picked up a 20% stake in the company for Rs.49.8 crore in 2014. Tano is an alternative asset management firm founded by Chuck Johnson, former co-president of Franklin Templeton Investments and CEO of Templeton Worldwide. While the fund has pared its stake since then, it continues to hold over 14% stake.
On Wednesday, the fund sold 9.84 lakh shares to Malabar India Fund, an existing investor in the company, and entrepreneur and philanthropist Ronnie Screwvala. While Screwvala bought 2.79 lakh shares, representing 1.2% stake, for Rs.14.59 crore, Malabar India Fund bought shares worth Rs.30.63 crore shares, representing 2.6% stake. Post the deal, Malabar India Fund, an India-focused fund co-founded by Sumeet Nagar, has seen its holding go up to 8.5%. The bulk deal was struck at Rs.520 a share.
Over the past five years, the organised luggage industry has been growing at 2x the real GDP, led by 10% growth in domestic air passenger traffic. Analysts feel the company’s earnings per share can even quadruple by FY20 owing to premiumisation, resulting in 26% sales CAGR over FY17-20.