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 540 level against the Sensex’s 21% return — that is after the stock has come off its 52-week high of 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 355 crore as of FY17, while profit has galloped from 1 crore to 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 1,200 crore, had already caught the attention of Tano Capital, which had picked up a 20% stake in the company for 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 14.59 crore, Malabar India Fund bought shares worth 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 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.