Weekly Insights #33- Safari Industries: Strong Management Execution
Weekly Insights #33- Safari Industries: Strong Management Execution
Key Focus Area Highlight + Diwali Offer
Our research & stock selection at Surge revolves around our 6-Key Focus Areas which we believe are primary drivers of long-term earnings growth.
One of the Key Focus Area for us is that of Stellar Management Execution.
There do exists some very sharp & astute entrepreneurs who are able to create tremendous wealth even from not-so-great businesses or in some very tough business environment.
No one could have imagined that a commodity cement business can compound investors wealth at 30% consistently without major drawdowns for more than 10 years, but it was Hari Mohan Bangur’s sheer execution & brilliance that allowed Shree Cement to do so.
In this post we are going to highlight the case study of Safari Industries and how stellar execution by Mr. Sudhir Jatia led to the creation of a major 3rd player in an oligopolistic industry like Luggage.
Safari is the 3rd largest Luggage brand in India. The company was started way back in 1974, but was a marginal player with just 2-3% market share till 2012. The brand was revived in 2012 when Mr. Sudhir Jatia acquired 77% stake in the company.
Safari has seen exponential growth since Mr.Jatia’s acquisition-
Sudhir Jatia’s Strategy & Vision for Safari-
The primary factor that has led to Safari’s growth has been Mr.Jatia’s positioning of the brand as a mass market brand.
This helped Safari in two ways-
A. Growth within the mass market segment of the industry has been much higher given the fact that the shift from unorganized to organized is largely happening in this segment of the market.
B. Existing players were not focusing on this segment of the market.
Though both the companies had presence in the mass market segment, they were not able to capture the mindshare of the consumers in this segment given that this segment was not catered by the flagship brands of the companies (which had that brand following).
It was being catered by the secondary brands. Not to mention that the company’s resources & focus was diverted more towards their flagship brands and not the secondary brands.
“We focused on one battle at a time and put disproportionate resources at that single area”- Sudhir Jatia
Because of this singular focus on one brand & one segment (which was growing faster & not focused by existing players); Safari was able to grow in an industry like Luggage industry, wherein it is extremely difficult for new players to enter.
And contrary to general belief, our understanding is that VIP & Samsonite never really lost any market share to Safari, they just were not able to capture the growth in the mass market segment, that Safari was able to capitalize on disproportionately.
And after achieving a decent scale, Mr. Jatia in the recent years have focused on improving profitability & cashflow profile and here as well he has done a remarkable job.
Safari’s margins and working capital are now even better than its listed peer VIP.
The next goal of Mr.Jatia is to enter another segment within the luggage industry as Safari is now a clear leader in the mass segment. And he has set his eyes on the Premium segment ie. segment wherein Samsonite is a leader.
For this, Safari has launched a new brand called- Urban Jungle.
Readers can access our full research on Safari Industries here-
In the future, we believe many more multi-baggers will be created primarily because of some exceptional managements who’s execution is beyond epic and thus Stellar Management Execution is one of the key areas that investors should focus on.
That’s it for this week. This Diwali, we are offering 15% off on our comprehensive research services.
