Campus Activewear Ltd Management Discussions

Jul 23, 2024|02:24:59 PM

Campus Activewear Ltd Share Price Management Discussions


Since 2020, the global economy has experienced turbulence on account of multiple unforeseen events. It began with the pandemic-induced contraction of global output, followed by the Russia-Ukraine conflict, which resulted in a global surge in inflation. In response, central banks worldwide, led by the Federal Reserve, implemented coordinated policy rate hikes to mitigate inflationary pressures.

The rate hike by the US Federal

Reserve prompted capital inflows into the US markets, leading to the appreciation of the US Dollar against most currencies. Consequently,

Current Account Deficits (CAD) widened, and inflationary pressures increased in net importing economies. The rate hike, coupled with persistent inflation, resulted in the International Monetary Fund

(IMF) lowering its global growth forecasts for 2022 and 2023 in its October 2022 update of the World Economic Outlook. Weaknesses in the Chinese economy further contributed to the downward revision of growth forecasts. Based on the IMFs World Economic

Outlook (WEO) report from April

2023, it is projected that global economic growth will slow down from 3.4% in 2022 to 2.8% in 2023, with a modest recovery to 3.0% in 2024. In 2022, global inflation reached its highest level in several decades, standing at 8.7%. This was primarily driven by pent-up demand, prolonged disruptions in the supply chain, and increases in commodity prices. Consequently, central banks swiftly implemented tighter monetary policies to address inflation and maintain inflation expectations within their targets. The report suggests that global inflation is expected to moderate to 7.0% in 2023 and further decrease to 4.9% in 2024. Throughout the year, the momentum of growth noticeably weakened in the United States, the European Union, and other developed economies, adversely affecting the rest of the global economy.


The IMFs pessimistic outlook reflects the urgent need for stringent policy measures to combat inflation, as well as the negative impact of deteriorating financial conditions, the ongoing conflict in Ukraine, and the expanding fragmentation of global economic relationships. The risks associated with this outlook are predominantly skewed towards the downside, with a significantly increased likelihood of a severe economic downturn. Policymakers find themselves navigating a narrow path where they must seize opportunities while minimising risks. Central banks must maintain theirfirm anti-inflation while remaining prepared to adapt and employ their full range of policy tools, including addressing concerns related to financial stability as circumstances dictate. Fiscal policymakers should complement the actions of monetary and financial policy makers by supporting efforts to bring inflation levels backtotarget while safeguarding financial stability.

Progress towards establishing a more resilient global economy necessitates collaborative efforts through multilateral cooperation, such as strengthening the global financial safety net, mitigating the costs of climate change, and minimising the adverse consequences of economic fragmentation.


The Indian economy, however, has demonstrated its ability to rebound from the impact of the pandemic, surpassing many nations by achieving a complete recovery in FY22 and positioning itself for a return to pre-pandemic growth levels in FY23. Despite this progress, India has faced the challenge of managing inflation, which was further intensified by the European turmoil. Through government and RBI interventions, along with the easing of global commodity prices, retail inflation has been successfully brought below the upper tolerance target set by the RBI as of November 2022.

However, the depreciation of the rupee remains a persistent challenge, despite its relatively stronger performance compared to other currencies. This challenge may be exacerbated by potential increases in policy rates by the US Federal

Reserve. The current account deficit (CAD) may continue to widen due to elevated global commodity prices and the sustained growth momentum of the Indian economy. The loss of export stimulus is also a possibility, as the slowdown in global growth and trade reduces the overall size of the global market in the latter half of the current year.

Notwithstanding these challenges, global agencies consistently project India as the fastest-growing major economy, with a growth rate of 6.5-7.0% in FY23. These optimistic growth forecasts are partly driven by the resilience of the Indian economy, as witnessed by the resurgence of private consumption as a leading driver of growth, effectively replacing export stimuli. The increase in private consumption has also stimulated production activity, leading to higher capacity utilisation across sectors. Moreover, it has contributed to employment generation, reflected in the declining urban unemployment rate and the accelerated net registration in the Employee Provident Fund.

This year has reinforced the countrys confidence in its economic resilience.

The Indian economy has successfully navigated the challenges posed by external imbalances resulting from the Russian-Ukraine conflict, all while maintaining its growth momentum. As expected of a nation of Indias size, FY23 has seen a near recovery of what was lost, a rejuvenation of paused activities, and a re-energisation of sectors that experienced slowdowns during the pandemic and following the

European conflict.


FY24 is expected to witness robust growth as India experiences a dynamic credit disbursement and capital investment cycle, resulting in stronger balance sheets for corporate and banking sectors. The expansion of public digital platforms and the implementation of ground-breaking initiatives like PM GatiShakti, the National Logistics Policy, and Production-Linked Incentive schemes aimed at boosting manufacturing output will further contribute to economic growth.

Considering these factors, the Economic Survey forecasts a baseline GDP growth of 6.5% in real terms for FY24. This projection aligns closely with estimates provided by reputable international organisations such as the World Bank, the IMF, the ADB, and domestically by the RBI.


Indias domestic footwear retail industry, valued at I 72,000 crores in FY20, is expected to grow at a CAGR of 8%, reaching I 105,000 crores by FY25 (Source: Technopak Report). Over the period from FY15 to FY20, the Indian footwear sector experienced substantial expansion at a CAGR of nearly 9%.

Currently, mens footwear holds a dominant 48% market share, but womens footwear is anticipated to grow faster and achieve a nearly equal share in value by FY25. While casual footwear remains the largest category, sports and athleisure are among the fastest-growing segments, comprising over 67% of the entire market in FY20.

Due to COVID-19 related travel restrictions, the retail footwear market in India contracted by almost 33% in FY21. Nevertheless, a swift recovery is expected as the category is forecasted to grow at a remarkable CAGR of almost 22% between FY21 and FY25.

Organised footwear retail, including

Exclusive Brand Outlets (EBOs), large format stores (LFS), and e-commerce, contributed 30% by value and 13% by volume to the overall footwear retail market in

FY20. Organised retail is predicted to grow at a faster pace of 13% over the next five years, outpacing the total categorys growth rate.

The footwear category is characterized by significant branding, and by FY25, the branded segment is expected to equal the market share of the unbranded sector, with a value growth rate of 11% from FY21 to FY25.

As one of the worlds leading producers and consumers of footwear, this industry provides employment to over 2 million individuals.

Our target segment is growing due to a combination of factors such as the transition from the unorganised to organised sector driven by enhanced preference for branded and quality footwear, increasing health awareness, rising levels of disposable income in India, favourable trends in Indian demographics such as increasing population of young adults, and the growing demand for womens footwear. We cover more than 85% of the total addressable market for sports and athleisure footwear in India as of FY21, which is the largest market coverage amongst key sports and athleisure footwear brands.

(Source: Technopak Report)


Customer demographic segmentation

Historically, mens footwear has been the dominant force in the Indian footwear sector, representing over 50% of the retail market by value until FY15. However, the mens segment has been growing at a slower rate compared to the womens and childrens segments, which accounted for about 41% and 10% of the market, respectively, in FY20. By FY25, the valuation of the womens section is projected to surpass that of the mens segment. The rise of the womens market will be driven by an increase in the proportion of working women and their discretionary income.

Usage segmentation

The Indian footwear retail industry comprises broad categories, including formals, casuals, sports and athleisure, and outdoor segments. Among these, sports and athleisure are the fastest-growing sectors, consistently increasing their market share, although casuals remain the largest segment, accounting for over 67% of the entire market in FY20. Across various retail categories, such as food and grocery, clothes and accessories, electronics, health, fitness, and wellness, sports and athleisure footwear hold significant importance. Predictions indicate that sports and athleisure footwear will double in value from I 11,000 crores in FY20 to I 22,000 crores in FY25, experiencing a noteworthy CAGR of 15% between FY20 and FY25. The overall footwear market is following a similar growth trend.

Retail channels

The retail footwear business is highly structured, with organised retail holding a 30% penetration rate.

Organised retail is primarily defined by Exclusive Brand Outlets (EBOs) of top brands, along with Large Format

Stores (LFSs) and other sizable Multi-Brand Outlets (MBOs). Additionally, the rapid emergence of e-commerce has become a significant driving behind the expansion of organised footwear retail. The presence of value brands and the increasing penetration of EBOs in tier II, tier III, and lower towns, throughout the country are expected to further bolster the growth of the organised format.

Geographical segmentation

As the footwear market is mainly discretionary, urban India holds a significant share of 67% in the overall value of the Indian footwear market. Leading national and international brands dominate the market in the top 8 cities, including metro and tier II cities, which collectively account for 40% of the urban footwear market. The urban footwear market in tier II cities and below constitutes approximately 35% of the total, and it is anticipated to grow further with the increasing penetration of Exclusive Brand Outlets (EBOs) and online retail in these areas. Cities in Tier I, Tier II, and lower tiers are expected to witness growth, presenting new opportunities for retail establishments to thrive.


Expanding niches and occasion-specific segments

The demand for footwear has been fuelled by growing niches and sub-segments tailored for various occasions. Customers, especially in metropolitan areas, now own multiple pairs of shoes to match different outfits and events. Casuals and flats are favoured for daily wear due to their affordability and comfort, while office workers opt for professional shoes. Dress shoes, such as high heels and glittery shoes for women and classy loafers or moccasins for men, are preferred for outdoor gatherings or parties. Those leading an active lifestyle necessitate sports and athleisure footwear.

Shift in formal vs. casual and open vs. closed footwear

The COVID-19 pandemic has caused changes in customer purchasing habits across various market sectors, including FMCG, personal care, apparel, and footwear. A heightened focus on health and fitness has led to an increased demand for sports and athleisure footwear. Running shoes have emerged as one of the most sought-after items in the sports footwear category. There has also been a transition from formal to informal sports footwear, evidenced by the popularity of walking and running shoes. In the mens and childrens categories, open footwear holds a relatively small share, while in the womens casual and formal footwear markets, it remains dominant. Closed shoes, on the other hand, command a higher realisation compared to open shoes, which are generally priced lower.

Footwear as a fashion statement

Footwear has evolved from being utilitarian to becoming fashion statements. It is no longer just a necessity for feet protection but an essential component of fashion outfits. Alongside clothing, footwear and accessories play a pivotal role in creating a complete look. This trend has driven continuous growth in both footwear volume and the average selling price. Sneakers, in particular, have become style items and symbols of identity, youth culture, and fashion, forming the foundation of what we now recognise as sneaker culture.

Women segment

The womens segment is on the rise, in tandem with the increasing number of women joining the workforce. As more women are working and family earnings are rising, the demand for womens footwear has witnessed a significant surge. Additionally, the growing number of celebrations has further contributed to this upward trend. Between FY15 and FY20, the womens footwear market share increased from approximately 37% to about 41%. This growth is projected to continue at an impressive rate of 9%, outpacing the overall categorys growth. By FY25, womens footwear is expected to account for approximately 44% of the global footwear market.

Also, womens footwear offers a diverse range of niches compared to mens footwear, which necessitates a wider variety of styles to cater to different preferences and occasions.


Premiumisation has been a driving force behind the rise in the average selling price of footwear in India over the past decade. This shift in customer preference towards more luxurious and expensive products has had a notable impact on the market. The mass sector (products priced under I 500) constituted 56% of the overall footwear retail market in FY15; however, it is anticipated to decline to 51% by FY25.

The average selling price of a pair of footwear has experienced a steady CAGR of approximately 5% during this period. It has risen from I 220 per pair in FY15 to I 275 per pair in FY20, and it is projected to reach I 345 per pair by FY25.

Several factors contribute to this trend, including consumers increased brand consciousness, the availability of both domestic and foreign brands and private labels, rising income levels, and a significant upswing in the demand for high-quality footwear. All of these elements together have elevated the overall average selling price in the footwear industry.


Campus Activewear is a fashion and lifestyle footwear brand that offers an extensive range of products catering to the needs of the entire family for every occasion throughout the day. Their footwear exudes a youthful and trendy vibe, making everyone feel stylish at all times.

The brand showcases global designs and provides a wide selection of styles, colour palettes, and price points, accompanied by an attractive product value proposition. In a segment largely dominated by international brands, the Company proudly stands as the largest established Indian Sports and

Athleisure (S&A) footwear brand.

Having been listed on the bourses in 2022, the Company has been leading the S&A footwear market since 2005.

With extensive market coverage, it has become one of the most sought-after brands in this segment, catering to over 85% of the total addressable market for S&A footwear in India.

The Company continues to have the highest drop rate in the footwear category in India.

As Indias largest and fastest-growing sports and athleisure footwear in terms of value and volume, the Company continues to solidify its position in the market.


• In FY23, the Company registered remarkable volumes by selling more than 23.5 million pairs, marking a substantial volumetric growth of 22% compared to the previous year. This has been the highest ever volume in the history of the Company.

• Our trade distribution channel witnessed a growth rate of 10%, while our direct-to-consumer

(D2C) channels soared with an impressive growth of 48%. Revenue from Operations in FY23 stood at I 14,842.5 million as compared to I 11,941.8 million, registering a growth of 24% year on year.

• Revenue contribution from Trade Distribution Channel for the year FY23 stood at 55.3%, while for D2C Channel it was 44.7%. Within D2C Channel, D2C Online stood at 37.5% of the total sales, and

D2C Offline stood at 7.2% of the total sales for FY23.

• The premium category continues to gain good traction for the Company, as we experienced a healthy increase in demand for Campus Shoes in the price range of I 1,000 to I 3,000. This contributed to a notable rise in our revenue share within this segment, surpassing the performance of the previous year.

• Our Average Selling Price (ASP) exhibited a marginal increase of 2%, climbing from I 620 to I 631 in FY23. This growth signifies our ability to maintain competitive pricing while offering high-quality footwear to our valued customers, despite temporary macro headwinds.



PARTICULARS FY23 FY22 YoY Change (%)
Revenue 14,842.5 11,941.8 24.3%
EBITDA 2,563.3 2,443.7 4.9%
PAT 1,171.2 1,085.4 7.9%
Net worth 5,521.2 4,275.9 29.1%


EBITDA is calculated as follows: Profit After Tax + Tax Expense + Finance Costs + Depreciation and Amortization Expense.


PARTICULARS FY23 FY22 YoY Change (%)
Current Ratio (in times) 1.64 1.59 3.42%
Debt Equity Ratio (in times) 0.33 0.41 (19.68%)
Debt Service Coverage Ratio (in times) 2.49 3.56 (30.01%)
Return on Equity Ratio/Return on Investment Ratio 23.91% 29.33% (18.47%)
Inventory Turnover Ratio (in times) 3.66 4.26 (14.15%)
Trade Receivables Turnover Ratio (in times) 8.45 9.07 (6.76%)
Trade Payables Turnover Ratio (in times) 4.16 4.12 0.92%
Net Capital Turnover Ratio 5.01 5.29 (5.26%)
Net Profit Ratio 0.08 0.09 (12.87%)
Return on Capital Employed 0.23 0.31 (24.07%)


1. Debt Service Coverage Ratio has decreased from 3.56 in FY22 to 2.49 in FY23 mainly due to increase in repayment of principal and interest as compared to previous year.

2. During previous year, Inventory Turnover Ratio was presented in days.


The Company foresees a favourable growth environment driven by external factors such as the buoyant Indian markets, growing domestic consumption, favourable government policies, as well as the inherent strengths of the Company like brand value, omni-channel presence, integrated manufacturing capabilities, and design and innovation capabilities. As we continue to push boundaries, explore new markets, and cater to evolving consumer needs, we are ready to conquer new heights. The following key growth strategies and factors contribute to our optimistic outlook:

• The increasing inclination towards sports and physical activities presents a significant growth opportunity for Campus

Activewear, as our products cater to the active lifestyle needs of consumers.

• As a home-grown brand, we have the advantage of understanding and addressing the underserved demand in the market, addressing various market gaps, and capturing a larger share of the growing Indian consumer base.

• The shift from unbranded to branded footwear is an ongoing trend and we are well-positioned to capitalise on this shift by offering quality branded products that resonate with consumers.

• With the rising awareness of health and fitness, consumers are seeking appropriate footwear that supports their active lifestyle. Campus Activewear is poised to benefit from this trend by offering comfortable and performance-driven footwear options.

• The ongoing shift from the unorganised to the organised sector in the footwear market creates an opportunity for Campus Activewear to capture a larger market share and establish a stronger presence. The enforcement of BIS quality control standards by the authorities creates a conducive environment for the organised industry, promoting the delivery of high-quality products to customers and discouraging the import of inferior and inexpensive alternatives.

• We will capitalise on our brand reputation and leadership position by catering to the specific needs of women, children, and kids, further expanding our customer base.

• We will focus on expanding our footprint in the untapped markets of western and southern regions, tapping into new customer segments and geographical areas, while consolidating our position in the current strongholds such as northern India.

• We will enhance our omni-channel strategy, integrating online and offline channels to provide a seamless and convenient shopping experience for our customers.

• We will continue to emphasise premiumisation across our product segments, offering high-quality and premium products to cater to the growing demand for elevated footwear options.

• We will explore opportunities for product diversification by expanding into allied categories, leveraging our expertise and brand presence to capture new market segments.

• The Indian S&A footwear market presents attractive industry prospects, with the market size projected to reach I 882 billion

(US$11.7 billion) by FY25. Indias per capita footwear consumption is lower compared to other countries, indicating significant growth potential. With the increase in fitness consciousness and disposable income, the

Indian S&A market is expected to be driven by rising demand.

• Campus Activewear enjoys the widest presence across price segments, offering an expansive and diverse product portfolio that covers a significant share of the S&A footwear market, reaching more than 85% of the market. This wide market coverage positions Campus Activewear as a leader in the industry, providing ample opportunities for growth and capturing a larger customer base.


The Companys performance, along with the footwear industry, can be directly or indirectly influenced by the dynamic global economic environment. Disruptions in the supply chain, such as those caused by the pandemic and war, have the potential to drive up raw material prices and overhead costs, thereby diminishing the Companys competitive edge in the market. The Company also faces several concerns that could impact its overall performance, including workforce attrition, counterfeit products, the need for innovation and new product development, rapidly changing consumer preferences, and the risk of data breaches.

Some of the other potential threats the Company faces:

• Intense competition from multinational corporations in the domestic market

• The requirement to enhance shoe quality to meet more stringent international standards

• The ability to keep up with ever-evolving fashion trends and remain relevant

• Insufficient supply of high-quality components for footwear production

• Technological modernisation and advancement


The Board has established a Risk Management Committee to thoroughly assess and mitigate potential risks that may affect the Companys operations. The responsibilities and scope of the Risk Management Committee can be found in the Corporate Governance Report, which is included in this Annual Report.

The Company has developed comprehensive risk factors, both internal and external, to analyse the potential risks that may impact its business. These risk factors are elaborated in detail in the Red

Herring Prospectus (RHP).



Human capital is a vital asset to the Company, essential for business sustainability and expansion. Campus engages, trains, and enhances its human capital through various mediums, training programmes, and initiatives. These initiatives include structured job evaluations and career development for high-potential managers, training programmes on effective communication, tax literacy including personal finance, and tax planning sessions for employees. The Company has also launched a programme called Be Your Own Laxmi, which empowers female employees with financial awareness. Other regular training initiatives include Microsoft Excel,

Effective Managerial Skills, Fire

Safety Training, and Prevention of

Sexual Harassment (PoSH) training.

Additionally, the Company has introduced ESOP Plans—Special Grant 2021 and Vision Pool 2021. These plans aim to engage, retain, and incentivize employees in the Companys operations, allowing them to contribute to both present and future Company plans. The Company regards options as enduring incentives. These options not only make employees co-owners but also offer the potential for future wealth creation. As of March 31st, 2023, the employee count was 839.


The Company has established a robust system of internal financial controls that aligns with its size, scale of operations, procedures, and policies. This system ensures the orderly and efficient conduct of business, including adherence to Company policies, protection of assets, prevention and detection of fraud and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information.

The Audit Committee meetings involve discussions on the Internal Audit Reports to assess the adequacy and effectiveness of the Companys internal control environment. Necessary actions are taken to strengthen controls in areas where required for business operations. Additionally, a monitoring process is in place to track the implementation of audit recommendations, including those related to enhancing the Companys risk management systems.

Following an assessment conducted by the Management and evaluation of the assessment results, the Board of Directors affirm that the Company has sufficient and effective Internal

Controls in operation.

There have been no instances of fraud that necessitate the reporting of material misstatements in the Companys operations.


The MDA section includes statements regarding future prospects that may be forward-looking in nature. These statements involve a variety of identified and unidentified risks and uncertainties that could potentially lead to material differences in actual results.

In addition to the changes occurring in the macro-environment, there may be unforeseen and constantly evolving risk to the Company and its operating environment.

The assumptions made in the report, which are based on available internal and external information, serve as the foundation for determining certain facts and figures. However, as the factors underlying these assumptions can change over time, the estimates upon which they are based may also change accordingly. Its important to note that these forward-looking statements reflect the Companys current intentions, beliefs, or expectations, and they are valid only as of the date on which they were made. The Company does not assume any obligation to revise or update these forward-looking statements, whether due to new information, future events, or any other reason.

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