Campus Activewear Ltd Management Discussions

ECONOMIC OVERVIEW

Global economy

The global economy, after grappling with a prolonged period of unprecedented shocks, showed tentative signs of stabilisation through much of 2024. Inflation gradually declined from multi-decade highs, labour markets normalised, and global growth hovered around 3%, nearing potential output. However, momentum weakened by late 2024, with real GDP growth underperforming earlier forecasts and high- frequency indicators pointing to a slowdown. While trade volumes held up, this was largely due to front-loaded exports and imports, particularly between China and the US, ahead of anticipated tariffs. Meanwhile, disinflation progress stalled, with inflation edging up in several economies, notably in core goods and services.

Adding to the fragility, sweeping policy shifts, especially escalating US trade tariffs and resulting retaliations, have injected significant uncertainty into the global trade and financial systems. Market volatility surged, equity indices dropped, bond yields spiked, and sentiment among consumers, businesses and investors turned increasingly pessimistic. Domestically, many countries are facing rising inequalities, persistent fiscal imbalances, and cost-of-living pressures, as median incomes lag and housing costs climb. In this context, the global economys resilience is being retested, with growth becoming increasingly unbalanced across countries and income groups.

Outlook

Looking ahead, the global economy is projected to experience a deceleration in growth, with estimates suggesting a decline from 3.3% in 2024 to 2.8% in 2025, before recovering modestly to 3% in 2026. The broad-based downgrade reflects the growing impact of new trade measures, which have disrupted crossborder flows, heightened uncertainty, and dampened economic sentiment across nearly all major economies. While fiscal policy support in regions like the euro area and China may partially cushion the slowdown, the near-term outlook remains clouded by the fallout of escalating global trade tensions.

The rapid intensification of tariff-related disputes, especially between the United States and its trading partners, has introduced extraordinary levels of policy uncertainty, complicating any clear consensus on global economic direction. Accordingly, the growth outlook may have a range of possible growth scenarios, based on how the policy environment unfolds. The worsening geopolitical tensions may also have an effect. The net effect of these dynamics will likely shape the pace and unevenness of global recovery in the years ahead.

Indian economy

Indias economy displayed strong resilience and momentum in FY25, expanding at a robust 6.4%, well-aligned with its decade-long average growth rate. This performance was broad-based, with all key sectors contributing meaningfully: agriculture grew by 3.8%, driven by better crop yields; industry expanded by 6.2%, supported by higher construction and mining activity; and the services sector surged by 7.2%, led by transport, communication, and financial services. Inflation remained largely under control, averaging 4.9% between April and December 2024, even as global commodity prices fluctuated. Indias current account deficit was contained at 1.2% of GDP, while banking sector NPAs fell to a 12-year low of 2.6%, reflecting strengthened macroeconomic fundamentals and financial stability.

In the external sector, merchandise exports saw a 6% rise in the first nine months of FY25, while services exports grew by nearly 13%, reinforcing Indias competitive edge in global technology and knowledge-based services. Capital inflows remained steady, with USD 55.6 billion in FDI during April- December 2024, signalling investor confidence. On the domestic front, high-frequency indicators such as GST collections, power consumption, and credit growth showed sustained expansion. Importantly, rural demand rebounded, infrastructure projects accelerated, and tax buoyancy improved, painting a picture of a well-balanced recovery. These trends collectively set a solid base for continued economic progress in the years ahead.

Outlook

Looking ahead, the Economic Survey forecasts Indias GDP growth in FY26 to range between 6.5% and 7.0%, supported by strong domestic demand, resilient rural recovery, and enhanced capital formation. Structural reforms, particularly in infrastructure, digital public goods, and the logistics ecosystem, are expected to play a pivotal role in unlocking productivity and fostering job creation. The governments continued push on public capital expenditure, alongside improving private sector investment sentiment, is likely to provide a multiplier effect on employment and income levels. Easing inflationary pressures and a stable interest rate regime further create a favourable macroeconomic environment for growth.

Despite this optimism, the outlook is not without risks. The global environment remains uncertain, with potential headwinds arising from geopolitical tensions, volatile crude oil prices, and trade fragmentation. However, India is better placed than many peers to weather these challenges, thanks to its diversified economy, strong forex reserves, improved fiscal space, and focus on economic resilience. Continued fiscal prudence, ease of doing business reforms, and efforts to formalise the economy will be crucial in maintaining growth momentum. Overall, India stands poised to remain the fastest-growing major economy, advancing steadily on its journey from endurance to excellence.

Source: The Economic Survey 2024-25 by Department of Economic Affairs

INDUSTRY OVERVIEW

Indian footwear retail industry overview

Indias footwear retail industry is in the midst of a significant transformation, shaped by rapid urbanisation, increasing disposable incomes, and the aspirations of a burgeoning middle class. As of 2024, the market is valued at around USD 17.89 billion, and projections indicate a robust compound annual growth rate (CAGR) of 12.39% between 2025 and 2032. This impressive growth trajectory highlights not only the strong potential for domestic consumption but also the countrys expanding export capabilities. India has firmly established itself as the worlds second-largest producer and consumer of footwear, with annual production volumes approaching three billion pairs. This scale underscores the industrys vital role in the national economy, providing employment to over two million people.

The market landscape is evolving rapidly, with notable shifts in consumer preferences and growth rates across different segments. While mens footwear currently commands the largest share of the market, the womens segment is expected to grow at a much faster pace, potentially achieving near parity in market value in the coming years. Casual footwear remains the dominant category, but the Sports and Athleisure (S&A) segments are emerging as the fastest-growing areas, now accounting for more than two-thirds of the entire market. This surge is driven by a growing inclination towards sports and physical activities, the ability of home-grown brands to cater to previously underserved demand, and an increasing preference for branded products.

The structure of the retail market is also undergoing a transformation. Organised retail, which includes exclusive brand outlets (EBOs), large format stores (LFS), and e-commerce platforms, is gaining significant traction. Branding has become a critical differentiator, with the branded segment expected to achieve parity with the traditionally dominant unbranded sector in terms of market share. This shift reflects changing consumer attitudes, with a growing emphasis on quality, design, and brand value.

Government policy has played a pivotal role in accelerating the industrys formalisation and capacity expansion. Initiatives such as the allowance of 100% foreign direct investment (FDI), the development of dedicated Footwear Parks, and substantial investments in infrastructure have provided a strong foundation for growth. These measures have not only attracted new investment but have also encouraged innovation and the adoption of global best practices.

In summary, the Indian footwear retail industry is on a dynamic growth path, supported by favourable demographic trends, rising incomes, and proactive government policies. The sectors resilience and adaptability, coupled with evolving consumer preferences, present significant opportunities for both established players and new entrants. As the market continues to mature, it is poised to offer an even greater contribution to Indias economic development, job creation, and global standing in the years ahead.

GROWTH DRIVERS

Indias footwear market is expanding rapidly, fuelled by a combination of demographic shifts, economic progress, evolving lifestyle preferences, and supportive policy frameworks. As the sector transitions, several dynamic forces are catalysing this momentum.

1. Rising disposable incomes and urbanisation

A steady rise in disposable incomes across India is directly influencing consumer spending habits, with a marked shift towards branded, higher-quality footwear. Urbanisation, coupled with increasing aspirations, is transforming buying behaviour, especially in metros and tier-1 cities, where consumers now prioritise fashion, comfort, and brand identity in their footwear choices.

2. Lifestyle changes and health consciousness

India is witnessing a growing cultural tilt towards health, fitness, and active living. This is significantly driving the demand for Sports and Athleisure (S&A) footwear, with more consumers, across urban and semi-urban areas, investing in performance-oriented shoes that suit active lifestyles. The appeal of sneakers, running shoes, and athleisure wear has expanded beyond functionality into fashion and daily use.

3. E-Commerce expansion and improved accessibility

The exponential growth of e-commerce platforms has revolutionised access to footwear, especially in tier-2, tier-3 cities, and remote regions. Digital marketplaces now offer consumers a wide assortment of styles, brands, and price points, all delivered to their doorstep. This digital penetration has empowered homegrown brands to scale faster and tap into previously underserved geographies.

4. Exposure to global fashion trends and youthful demographics

Indias large and youthful population is increasingly influenced by global fashion sensibilities. With greater digital connectivity and social media engagement, todays consumers are more trend-conscious and brand-aware. This has increased demand for innovative, contemporary, and stylish footwear across categories, from casual and formal to athleisure and ethnic.

5. Rise of organised retail and brand exclusivity

The expansion of organised retail formats, including malls and exclusive brand outlets (EBOs), is enhancing the customer shopping experience. Consumers now have access to an extensive product range under one roof, with standardised service, ambience, and brand immersion. This shift is accelerating the formalisation of the market and increasing trust in branded offerings.

6. Supportive Government policies and manufacturing push

Policy initiatives like Make in India, 100% FDI allowance in footwear manufacturing, and the development of dedicated Footwear and Leather Parks are driving domestic production and attracting foreign investment. These moves not only strengthen Indias position as a global footwear hub but also improve cost competitiveness and supply chain resilience.

7. Surge in branded and home-grown labels

The organised segment is seeing rising market share, as consumers gravitate towards reliable, quality-assured, and aspirational brands. Indian brands, in particular, are leveraging their deep understanding of local preferences to offer value- driven products that compete effectively with global players.

COMPANY OVERVIEW

Campus Activewear Limited is a homegrown success story in Indias Sports and Athleisure footwear market. Founded in 2005, the brand has risen from a domestic challenger to capturing a significant share of Indias branded S&A footwear market, with about ~25 million pairs sold annually. We pride ourselves on combining global fashion trends with deep local insights, delivering hundreds of new styles every year, currently at 1,900+ active styles in circulation, with 100+ pairs sold per style. We are the category-leading player in speed of new styles introduction and variety of portfolio.

Our strength lies in a vertically integrated supply chain, spanning in-house sole and upper manufacturing, plus in-house assembly across 6 facilities. This enables us to manage quality, cost, and fast fashion cycles, typically moving from demand input to warehousing collections within 60-90 days. Our pan-India omnichannel reach spans 23,000+ retail touch points, 290+ brand outlets, and a booming D2C business contributing almost 47% of revenue. Publicly listed in 2022, Campus is now one of Indias largest and fastest-growing scaled Sports & Athleisure footwear brand, uniquely positioned to step confidently from endurance to excellence.

OPERATIONAL HIGHLIGHTS

• In FY25, we sold 24.9 million pairs of footwear, marking a robust growth of over 12.16% compared to 22.2 million pairs sold in FY24

• The trade distribution channel contributed approximately 53% of our total revenue in FY25, while the Direct- to-Consumer (D2C) channel accounted for the remaining 47%

• Within the D2C segment, online sales comprised 36.8% and offline sales 10.5% of our overall revenue for the year

• Our Average Selling Price (ASP) declined marginally by ~2%, from A652 in FY24 to A639 in FY25, primarily due to a higher mix of open footwear and accessories, along with the liquidation of non-BIS compliant inventory

• We introduced 270+ fresh designs across categories in FY25, reflecting our continued focus on innovation and trend responsiveness

• The number of Exclusive Brand Outlets (EBOs) rose by 30, bringing the total store count to 296 by the end of the year

• Open footwear contributed 15.2% of volumes in FY25, up from 14.2% in FY24, demonstrating a strategic category push

• We also launched socks (ASP -A140) within our distribution network

KEY FINANCIAL RATIOS

PARTICULARS	FY25	FY24	CHANGE	REASON
CURRENT RATIO	2.19	2.40	8.80%	NA
DEBT-EQUITY RATIO		0.04	(100%)	The ratio has decreased from 0.04 in March 2024 to Nil in March 2025 because of repayment of borrowings.
DEBT SERVICE COVERAGE RATIO	3.38	3.36	0.57%	NA
RETURN ON EQUITY RATIO	17.21%	14.86%	15.82%	NA
INVENTORY TURNOVER RATIO	4.07	3.40	19.79%	NA
TRADE RECEIVABLES TURNOVER RATIO	10.21	8.39	21.68%	NA
TRADE PAYABLES TURNOVER RATIO	3.56	3.15	13.09%	NA
NET CAPITAL TURNOVER RATIO	4.04	3.71	8.86%	NA
NET PROFIT RATIO	0.08	0.06	23.18%	NA
RETURN ON CAPITAL EMPLOYED	21.98%	19.20%	14.47%	NA

OPPORTUNITIES

We foresee a promising growth trajectory, supported by external enablers such as Indias dynamic market landscape and progressive government policies, alongside our intrinsic strengths, strong brand equity, an expanding omni-channel network, and ongoing retail modernisation. As we push the envelope, explore untapped regions in Western and Southern India, and meet evolving consumer aspirations, we are well-positioned to scale new heights. Below are the key growth drivers shaping our optimistic outlook.

1. Growing interest in sports and fitness

The increasing popularity of sports and physical activities presents a significant opportunity for Campus Activewear, as our range is tailored to meet the demands of active and health-conscious consumers.

2. Deep understanding of Indian consumers

As a proudly home-grown brand, our nuanced understanding of domestic preferences allows us to address underserved market segments and tap into the expanding Indian consumer base.

3. Preference for branded footwear

With a clear shift in consumer behaviour from unbranded to branded footwear, Campus is strategically placed to cater to this transition with trusted and trend-led offerings.

4. Rising health consciousness

As awareness around health and wellness grows, more consumers are seeking footwear that complements an active lifestyle, creating demand for our comfort- driven, performance- oriented collections.

5. Demand for premium products

The markets increasing appetite for premium and differentiated footwear presents an opportunity for Campus to enhance its positioning as a provider of aspirational, high-quality products.

6. Demographic-focused targeting

We aim to sharpen our focus on specific customer segments such as women, children and teenagers, leveraging our brand equity to serve their unique needs and broaden our consumer reach.

7. Regional expansion strategy

We plan to scale our presence in the high-potential Western and Southern markets, unlocking new consumer bases and expanding our footprint in underpenetrated territories.

8. Omni-channel enhancement

Our omni-channel approach will continue to evolve, blending offline and digital retail to offer a seamless, integrated shopping experience that meets customers wherever they are.

9. Focus on premiumisation

We will continue to elevate our offerings through premiumisation, strengthening our appeal among upwardly mobile consumers looking for refined, top-tier footwear choices.

10. Product portfolio expansion

Campus will explore new adjacent product categories, including apparel and accessories extending our brands reach and unlocking opportunities in complementary footwear and lifestyle segments.

11. Sectoral growth tailwinds

The Indian Sports and Athleisure footwear market is growing at a healthy pace, offering significant headroom for growth, powered by rising incomes and increasing fitness adoption.

12. Broad market presence

Our widespread presence across price tiers, with a portfolio covering over 85% of the S&A market, positions Campus as an industry leader with ample room for continued customer acquisition.

13. BIS quality mandate

The implementation of BIS quality standards creates a level playing field for organised players vis-a-vis unorganised players. As a trusted brand, Campus stands to benefit from the shift toward higher-quality and compliant footwear, while curbing substandard imports.

THREATS

Campus Activewears performance, much like that of the broader footwear industry, is intricately linked to the evolving global economic landscape. Disruptions in the supply chain, such as those triggered by pandemics or geopolitical unrest, have the potential to escalate raw material costs and increase operational overheads, thereby impacting our price competitiveness.

We also contend with several critical challenges that may affect our performance, including employee attrition, the proliferation of counterfeit goods, the constant need for innovation and product development, shifting consumer preferences, and the growing threat of data security breaches.

Additional potential threats include:

1. Intensified competition

Navigating stiff competition from global brands operating within the Indian market.

2. Quality expectations

The pressing need to continually improve product quality to align with evolving international benchmarks.

3. Fast-changing fashion

Maintaining relevance in a market shaped by rapidly shifting style preferences.

4. Tech limitations

Slower adoption of modern technology in manufacturing and operations.

5. Component sourcing

Challenges in securing consistent supply of high-quality raw materials and components essential for footwear production.

RISK AND CONCERNS

The Board has constituted a dedicated Risk Management Committee to proactively identify, assess, and mitigate risks that may affect the Companys operations and performance. The committees roles and responsibilities are comprehensively outlined in the Corporate Governance Report forming part of this Annual Report.

To strengthen our preparedness, the Company has mapped a broad spectrum of internal and external risk factors that could influence its business.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES

At Campus, we regard human capital as one of our most valuable assets, essential for driving long-term sustainability and growth. We are deeply committed to nurturing our workforce through continuous engagement, upskilling, and structured development initiatives. Our talent development ecosystem includes well- defined job evaluations, career progression frameworks for high-potential managers, and targeted training in areas such as effective communication, tax literacy and planning.

Our regular learning modules also cover practical skills like Microsoft Excel, Effective Managerial Techniques, Fire Safety, and mandatory Prevention of Sexual Harassment (PoSH) training, fostering a safe and capable work environment.

To further incentivise and align our talent with organisational goals, we have introduced ESOP Plans - ‘ESOP 2021 and ‘Vision Pool 2021. These programmes are designed to attract, retain, and motivate employees by offering them a stake in the Companys future. Beyond promoting a sense of ownership, these plans create meaningful opportunities for long-term wealth generation and shared success.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

We have instituted a comprehensive system of internal financial controls that is appropriately aligned with the scale, complexity, and nature of our operations. This framework ensures the efficient and disciplined execution of our business processes, strict adherence to Company policies, safeguarding of assets, prevention and timely detection of fraud and errors, maintenance of accurate and complete financial records, and the prompt generation of reliable financial information.

Internal Audit Reports are regularly reviewed during Audit Committee meetings to evaluate the robustness and effectiveness of our internal control environment. Wherever gaps are identified, corrective actions are swiftly implemented to strengthen operational controls. We also maintain a structured follow-up mechanism to monitor the execution of audit recommendations, including those aimed at fortifying our risk management framework.

Based on a detailed assessment conducted by the Management and subsequent evaluation by the Board, we affirm that our internal control systems are both adequate and effective.

Notably, there have been no instances of fraud requiring the reporting of any material misstatements in our operations.

DISCLAIMER

The Management Discussion and Analysis (MDA) section contains statements regarding our future outlook that may be classified as forward-looking. These statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. In addition to macroeconomic shifts, our business and operating environment may face unforeseen and continuously evolving challenges.

The assumptions used throughout this report are derived from the best available internal and external information and serve as the basis for various projections and estimates. However, as the underlying factors influencing these assumptions may change over time, the related estimates are also subject to revision.

These forward-looking statements reflect our present intentions, expectations, and beliefs as of the date of this report. We undertake no obligation to publicly update or revise any of these statements, whether due to the emergence of new information, future developments, or any other circumstances.