Rakesh Jhunjhunwala’s bet gets Covid-19 hammering

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Lack of tour and travel activities amid the ongoing uncertainty over the Covid-19 pandemic forced VIP Industries to report a consolidated loss of Rs 3.78 crore for the quarter ended March 31. The company had posted a profit of Rs 9.52 crore in the same period last year. However, brokerages retained their bullish view of the company despite bleak quarterly performance.

The consolidated total revenue of the company declined by around 18% YoY to Rs 259.69 crore during the quarter under review.

Shares of the company traded 1.54% lower at Rs 360 at around 2 pm (IST). On the other hand, the benchmark BSE Sensex was up 0.71% at 50,995 at around the same time. Brokerage Edelweiss has a ‘Hold’ call on VIP with a price target of Rs 366, while Nilesh Jain, analysts, Centrum Broking has a ‘Buy’ rating on the company with a price target of Rs 380

“While profitability receded in Q4FY21 due to lower gross margin, EBITDA stayed positive at Rs 3.2 crore (down 90% YoY). For FY21 as a whole, VIP incurred a loss at the EBITDA level of Rs 65.3 crore. However, lower sales were partially offset by management’s efforts to cut costs via headcount reduction and salary cuts, reduction in a number of stores, and a revamped supply chain,” Edelweiss said adding that the normalised cycle recovery now pushed out to FY23.

Ace equity investor Rakesh Jhunjhunwala’ wife Rekha Jhunjhunwala held 32,73,400 shares, or a 2.32% stake in the company as of March 31. There are hopes that revenge spending will give a boost to the tour and travel industry once the unlock will start.

In a regulatory filing, VIP Industries said, “The company’s operations and financial results for the period ended March 31, 2021 have been adversely impacted by the outbreak of Covid-19 pandemic, as the travel industry has been amongst the most affected segments in the economy.”

Prabhudas Lilladher slashed VIP’s rating to ‘Hold’ with a price target of Rs 376 (Rs 374 earlier). It valued the stock at 28 times FY23E EPS of Rs 13.4 amid a slump in demand environment, near term margin stress and 3) rising competitive intensity.