New Delhi, June 16 (FN Agency) Luggage makers are set to cross past pre-pandemic revenues, ratings major CRISIL said on Thursday. Operating profitability will rise 150-200 basis points this fiscal while credit outlook will remain stable. Luggage makers are set to wheel in on-year revenue growth of 45-50% this fiscal on the back of pent-up tourism demand, resumption of corporate travel, reopening of schools/colleges/offices, and limited restrictions on festivities and social events. That would be 5-7% more than in fiscal 2020, or just before Covid-19 arrived. Operating margin should recover by 150-200 basis points to 11.5-12.0%, supported by higher capacity utilisation and better absorption of fixed cost, price hikes and change in product mix in favour of the higher-margin hard-luggage segment. That said, increased promotion and marketing expenses and higher input prices will keep margin well below the pre-pandemic level of 15%, the rating agency said.
Prices of crude-linked raw materials such as polypropylene, polycarbonate and polyamide, which comprise over half the cost of making luggage, have risen steeply over the past two fiscals. Net-net, better operating profits and continuing strong balance sheets will keep the credit risk profiles stable, an analysis of three CRISIL-rated luggage makers that account for 90% of the organised sector’s revenue, showed. Naveen Vaidyanathan, Director, CRISIL Ratings, said, “The revival in business and leisure travel, normalisation of flight schedules, and students moving abroad for studies are encouraging signs. Air traffic, a key indicator of luggage demand, was already at 86% of the pre-pandemic level this April. Besides, demand will also benefit from increased purchases during the wedding season and the low-base effect of last fiscal, which was impacted by the second and third waves of the pandemic.”