VIP Industries To Achieve 11% Ebitda Margin In FY26: PL Capital's Jinesh Joshi
The company is expected to achieve an Ebitda margin of 14–15% in FY27, says the research analyst.
VIP Industries Ltd. is expected to achieve an Ebitda margin of 11% in FY26, according to Jinesh Joshi of Prabhudas Lilladher Capital.
The research analyst attributed the expected rise in margins to the cost-resetting that is likely to happen after inventory liquidation.
"FY26 will be a year of reorganisation where the inventory liquidation will happen. So once the liquidation happens, the cost reset will occur in autopilot mode," he said during a conversation with NDTV Profit on Wednesday. "We are expecting about 11% Ebitda margin to come through in FY26."
He expects normalcy to be restored in FY27, with Ebitda margins touching 14% to 15%.
“If you look at the numbers of the past, FY23 and all the prior years, VIP was a 50%-plus gross margin business with an Ebitda margin of 15% odd. In FY27, working on a normal base, a slightly higher growth with a 14-15% margin may not be wishful thinking,” the analyst underlined.
VIP Industries recently announced to divest its promoters’ stake. In a press release dated July 13, VIP Industries said it will sell up to a 32% stake in the company to a consortium.
“A turnaround possibility is definitely there. What will happen with this new PE guy coming in is that you might see a change happen at the top management level. And that is where you will see perhaps the turnaround come through, at least in terms of earnings,” Joshi said.
The new promoter’s track record adds to the optimism. The analyst outlined their success with consumption-driven companies like PVR, Arvind Fashions and Delhivery.
According to Joshi, the problem for VIP Industries began on its balance sheet. The company started FY24 with Rs 900 crore in inventory. While it managed to liquidate about Rs 200 crore of this slow-moving stock in FY25, a substantial Rs 700 crore remains.
“Your entire P&L (profit and loss) is a mess. We need to understand this link to the high inventory on the balance sheet. Because of high inventory, what happens is that your warehousing cost is high, freight cost is high and working capital gets elevated. And to that extent, the debt on the balance sheet is also high,” the analyst explained.
Given the scale of the clean-up required, Joshi termed the company's projection of a turnaround by the second half of FY26 a "slightly wishful thinking".
