Khadim India Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

The global footwear market is a multi-billion-dollar industry within the broader clothing and apparel sector, encompassing a wide range of products like shoes, sneakers, luxury and athletic footwear, and sporting shoes. The footwear market globally is projected to generate USD 500.55 billion in revenue by CY2025, with a compound annual growth rate (CAGR) of 3.58% between CY2025 and CY2029¹.

The footwear industry is rapidly evolving, shaped by the emerging trends. The key drivers for its progress are the increased spending on premium luxury footwear, rising disposable incomes—especially in emerging economies and the growing influence of online shopping platforms, along with social media marketing. comfort and functionality are other key priorities that cater to aspirational consumers.

The Indian footwear market is also thriving, fuelled by rising e-commerce sales and an expanding middle class. Exposure to global fashion trends and a large, youthful population are fuelling demand for stylish and trendy footwear. Government initiatives like Make in India are supporting domestic production, while the rise of organised retail and the growth of exclusive brand outlets are enhancing consumer access to a wide range of footwear options. Leading brands are driving innovation with eco-friendly designs and an expanding product range.

In CY2025, the total revenue generated in Indias footwear market is estimated to be USD 33.86 Billion, and the market is expected to grow annually by a CAGR of 7.73% from CY2025 to CY2030. A revenue of USD 23.28 per person is projected to be generated in the Indian footwear market in CY2025. By CY2030, the footwear market volume is expected to be ~4.0 Billion pairs. It is also noteworthy that in CY2025, 97% of the total sales in the Indian footwear market will be attributed to the non-luxury segment².

Khadim India Limited (also referred to as ‘Khadim or the ‘Company), trading under the brand name ‘Khadim, is a distinguished footwear Company with legacy of more than six decades in the Indian footwear sector. Based in Kolkata, West Bengal, the Company ranks as the second-largest footwear retailer in India, with a strong foothold in Eastern and Southern India.

The Company was operating under two distinct business models - Retail and Distribution. However, the Distribution Business including the entire manufacturing units was demerged from the Company and vested with a new Company namely KSR Footwear Limited ("Resulting Company") w.e.f. April 01, 2025 (being the Appointed Date) as a "Going Concern" pursuant to sanction of Scheme of Arrangement in this regard by Honble National Company Law Tribunal, Kolkata Bench, (‘NCLT) vide its Order dated March 27, 2025 upon Scheme became effective on and from May 01, 2025.

Committed to delivering stylish and comfortable footwear at accessible prices, the Company stays true to its core philosophy: "Affordable fashion for everyone". The retail business, which is the Companys sole focus post-demerger, provides a diverse range of high-quality, affordably priced footwear for all age groups. Its presence extends across malls, high-street locations, airports, and railway stations, ensuring accessibility in urban, semi-urban, and small-town markets.

By understanding the needs of price-conscious customers, Khadims retail arm strives to deliver exceptional value to Indias growing middle class. The brand consistently introduces new designs that appeal to millennials and Gen Z, staying ahead of evolving fashion trends. Through its extensive retail network, Khadim aims to ensure customer satisfaction and strong stakeholder returns, positioning the brand as a go-to choice for fashionable footwear without a premium price tag.

In the financial year 2024-25, Net Sales from continuing operations for the Company stood at H 4,180.33 Million, as against H 4,262.52 Million in the previous year, making a fall of 1.93%.

Operating EBITDA stood at H 652.73 Million, down by 9.64% YoY. EBITDA margin stood at 15.61% of net sales, against 16.95% in the lastfiscalProfit before Tax was H 220.12 Million as against Profit beforeTax of H 271.99 Million in the previous year, down by 19.07%.Profit after Tax was H 193.97 Million as against Profit after Tax ofH 233.28 Million in the previous year, down by 16.85%. Gross margin for 2024-25 stood at 54.35%, up by 291 basis points year-on-year.

Khadim operates exclusively through its retail business, which serves as the primary driver of the companys growth and market presence. As of 31 March 2025, the Company had established a robust network comprising 886 Khadim-branded retail stores, spanning 24 states and 4 Union Territories, with 76% of these outlets operating through the franchise model. This extensive footprint positions Khadim as one of the leading footwear retailers in India, providing access to a wide and diverse customer base nationwide.

The retail division is supported by a dynamic omni-channel strategy, which integrates a strong e-commerce platform with the brick-and-mortar presence. Initiatives such as an enhanced online shopping experience, seamless navigation, optimised checkout processes, and omni-channel service including same-day delivery, allow Khadim to deliver convenient, accessible and engaging services to customers across different touchpoints.

All products sold through Khadims retail network are procured only via contract manufacturing and outsourcing arrangements. This asset-light approach enables the Company to maintain agility, manage inventory, and respond quickly to changing fashion trends and consumer demand.

Khadims focus on affordable pricing, continuous product innovation, and customer-centric marketing activities has enabled it to capture emerging opportunities in new catchment areas and underpenetrated markets, particularly in Eastern and Southern India. Store expansion, ongoing renovation of existing stores, investments in technology, and targeted marketing campaigns position Khadim to further strengthen its leadership in the footwear retail landscape. The Companys retail business targets middle and upper-middle-income consumers in metropolitan areas as well as Tier I to Tier III cities through exclusive retail stores. These stores include both COCO outlets and Franchises, mainly located in high street stores and malls. Through an asset-light model, the Company is expanding its store network nationwide while emphasising premiumisation for sustainable growth.

The Company opened 75 new stores in FY 2024-25, expanding its retail network in markets across the country. With this, it has taken its total retail footprint to 886 retail outlets across 24 states and 4 union territories as of March 31, 2025. These include 213 Company Owned Company Operated stores (COCO) and 673 Franchisees (in various forms).

Presently, the Company promote the mother brand "Khadim" and 9 sub-brands namely, ‘British Walker, ‘Lazard, ‘Turk, ‘Pro, ‘Sharon, ‘Cleo ‘Softouch, ‘Adrianna and ‘Bonito with varied product offerings.

The Companys extensive product range includes leather/non-leather sandals, slippers, boots, ballerinas, stilettos, moccasins, sports shoes and accessories (socks, shoe polishes, brushes, leather belts, wallets and laptop bags, etc.) at price points ranging between H 105 and H 4,199. The varied brand options under this segment are targeted at the middle and upper middle-income consumers in metros (including mini metros), Tier I – III cities, consumers of different age groups, and at affordable prices. With its innovative products, the Company stays tuned to market trends and changing consumer preferences, and resonates strongly with Millennials and Gen-Z.

Throughout 2024-25, Khadim India implemented several strategies to drive sales and attract consumers. The company focussed on its core retail business, specifically by reducing the MRP of its mother brand, Khadim, to boost sales and consumer appeal. This strategic pricing adjustment was not applied to its premium sub-brands.

Concurrently, the Company has continued to strengthen its retail footprint, particularly in its stronghold regions of East and South India. The Company is expanding its business mainly in the Eastern and Southern region through COCO and Franchise model. This enables the Company to quickly achieve break-even in these dominant market place. In contrast, the company is taking a more cautious and selective approach while opening new stores in West and North India. These expansion strategies are aimed at capitalising on brand recognition and optimising operational models across different markets.

With the intention to deepen its roots in the retail space through collaboration with Puma, the German multinational corporation for selling its socks, the Company has entered into a tie-up with Underlinen Fashion House, exclusive licensee and master distributor for Puma socks and other Puma products in India.

The Company follows an asset light model in its business. Its focus remains on entering into new markets through COCOs and further augmenting presence in such markets through franchisees. This growth strategy aligns with the Companys asset-light model, as all products sold through its retail network are procured exclusively through contract manufacturing and outsourcing arrangements.

Khadim India Limited has implemented a comprehensive strategy to enhance its e-commerce and omni-channel capabilities, aligning with the evolving digital retail landscape.

The company has made significant improvements to its e-commerce platform, focussing on user experience, streamlined navigation, and a more efficient checkout process. This has been a key driver in boosting online sales and improving customer retention. Simultaneously, Khadim has successfully integrated its online and physical brick-and-mortar stores to create a seamless shopping experience, enabling customers to browse products online and complete purchases in-store. This omni-channel approach also supports services like same-day delivery.

A pivotal move has been the companys shift of its e-commerce operations to Ekart. The company has rolled out a fully automated e-commerce channel at its Haringhata facility, further streamlining its digital operations. This transition from a fixed house warehouse to a variable-cost model has resulted in an approximate 20% reduction in costs, while also leveraging Ekarts superior infrastructure to enhance customer service. This operational change was accompanied by a technology upgrade, replacing the homegrown software with the more advanced Microsoft D365 WMS (Warehouse Management System).

Furthermore, Khadim has launched a dedicated website, www.britishwalkers.com, for its premium sub-brand, British Walkers, to provide a focussed digital presence.

A strategic blend of marketing, product innovation, and improved margins—alongside dynamic brand campaigns—has helped the Company elevate its market presence. To strengthen consumer connections, the Company continues to invest in targeted marketing initiatives that enhance engagement and reinforce its brand identity.

Throughout FY 2024-25, Khadim India Limited undertook a wide range of marketing and branding initiatives to boost brand visibility, increase customer outreach, and drive sales. The Companys strategy combines both offline and online approaches to align with its core philosophy of providing affordable fashion for all.

The Company executed a series of tactical and festive campaigns across India. These included region-specificcampaigns like the Bihu Campaign in Assam, which used Canter Vans and hoardings to capture the local cultural essence. A nationwide School Campaign was conducted, focussing on key markets in the South and employing bus and auto branding. Major festivals were also a focus, with comprehensive campaigns for Durga Puja, Diwali, and Eid that used a mix of press advertisements, influencer digital channels. For the wedding season, Khadim launched extensive campaigns in Uttar Pradesh, Bihar, and Jharkhand using a variety of media to reassure customers of its stylish yet affordable offerings. Additionally, targeted promotions were run for the End-of-Season Sale and for the launch of new stores.

Khadim is also enhancing its brand and customer engagement through several developments. The Company now uses personalised marketing strategies by analysing customer data to tailor promotions and offers, increasing engagement and loyalty. It has responded to consumer demand by reducing prices for its Khadim mother brand to deliver value, while simultaneously working on premium value-added products for its sub-brands. These premium lines, along with new product ranges for Spring Summer, Eid, and wedding collections, aim to meet diverse customer needs. Furthermore, Khadim has successfully test-marketed new product lines such as an Athleisure line, priced competitively to drive volume sales, and ready-made garments, both of which are moving towards commercialisation and are expected to positively impact revenue and gross margins. A new website for the British Walkers sub-brand has also been launched to create a focussed digital presence.

Khadims retail business stands well-placed to benefit from multiple growth opportunities withinIndias evolving footwear landscape. The Companys extensive presence across 886 retail stores as of March 31, 2025, spanning 24 states and 4 union territories, enables it to capitalise on rising consumer demand in both established and emerging markets. Strategic expansion continues, with a focus on new store openings in high-footfall locations across Eastern and Southern India, where retail break-even is typically achieved within 12 months.

The Company has adopted a franchise-led model, driving scalability and cost efficiency, with 76% of outlets now operated by franchise partners. Khadim also prioritises ROI-focussed store planning, ensuring new locations meet rigorous sales and profitability criteria. Renovation of existing stores and investment in in-store experience further contribute to enhanced customer engagement and loyalty.

Khadim responds proactively to shifting consumer preferences by regularly updating its product offering, emphasising quality, affordability, and comfort. The introduction of new designs—such as autumn/winter styles and spring/summer styles—strengthens the Companys appeal to value-conscious customers and supports increased volume growth. In addition, product innovation through trending categories like clogs and affordable athleisure expands market reach and matches evolving fashion sensibilities.

The Company leverages technology to reinforce its competitive edge, from the use of advanced manufacturing processes to the roll-out of the Live Retail Mobile App for sales tracking at the outlet level. E-commerce and omni-channel initiatives are being strengthened, including the introduction of a new British Walkers portal and the shift of fulfilment logistics to efficient partners, delivering better customer experience and cost savings.

Khadims brand-building efforts, driven by focussed marketing campaigns around festive and local occasions, new store launches, and product introductions, are designed to drive footfall and enhance visibility. The advancing adoption of automated warehouse management systems, personalised marketing, and customer feedback . surveys ensures that retail operations remain responsive, nimble, and oriented toward long-term growth.

The Companys retail strategy is underpinned by a commitment to affordability and accessibility, making fashion footwear available to a broader spectrum of of Indian consumers. Through continuous store network expansion, agile merchandising, and sustained focus on quality, Khadim is well-positioned to leverage the opportunities in Indias dynamic retail environment and deliver value for stakeholders.

The Company has in place a proper risk management framework which forms an integral part of the strategy and planning process. The Company time to time identifiesand undertakes appropriate mitigation measures for various types of risks, as stated below:

Risk: Consumer preferences are rapidly changing, with a rising interest for sustainable, eco-friendly, and personalised products, which forces the Company to remain active and responsive to evolving trends and preferences.

Mitigation: The Company continuously monitors market trends and consumer feedback to adapt its product offerings. The Company consistently upgrades its products with new designs based on extensive research and focus on digital campaigns to build the brand and attract customers.

Risk: Company operates in an extremely competitive market with our peers who have similar product lines and services that lead to pressure on margins.

Mitigation: The Companys strength is its wide range of family-oriented products. The Company is expanding its market presence by growing its retail network. Strategic marketing and partnerships are key to increasing brand value and customer base.

Risk: Increasing inflation coupled with higher living costs impact purchasing power of the people and thereby impact spend on non-essential stuff which includes footwear.

Mitigation: The Company maintains a diverse product range, from premium and affordable options, ensuring accessibility and affordability to different consumer segments, thereby reaching a broader audience. The Company has also taken steps to reduce the price of its products in the mother brand ‘Khadim to enhance its demand.

Risk: Fast Modernisation of technology can render existing processes and products obsolete, needing continuous innovation.

Mitigation: The Company invests in R&D to stay ahead in technological trends. Moreover, the Company successfully implemented omni-channel services, linking stores with advanced technology platforms for better customer services.

Risk: Adhering to stringent regulatory standards and compliance requirements, adds complexity & costs for the Company. The Central Governments mandate for the footwear industry to comply with Bureau of Indian

Standards (BIS) quality norms demands strict adherence to quality standards, posing significant challenges.

Mitigation: The Company has adopted measures to comply with the regulatory shift. The Company is diligently monitoring the situation and taking necessary steps to ensure full compliance with the orders.

The Company continues to leverage its business to further growth in the respective segments. It is capitalising on quick commerce as a part of its diversification strategy and partnering with e-commerce platforms for utility products. The demerger of its retail and distribution businesses has marked a key shift in its growth. Additionally, government initiatives supporting the leather and footwear industries—such as improved credit access, duty rationalisation, and stable policy frameworks—have further strengthened the sector and contributed towards growth.

Withspecialemphasisandtherisingdemandforsports footwear, the Company has expanded its product offering with an athleisure line to reach new customer demographics. This line is a vibrant, edgy and stylish range of products for contemporary consumers. The Company has also restructured its accessories line, including womens bags, backpacks and school bags, to deliver a fresh and appealing look. The Companys recent demerger represents a significant step to unlock value for its core retail business. By separating its operations, the Company is poised to sharpen its focus on the retail segment, which is expected to foster specialisation and independent growth. This strategic move is likely to boost market focus and operational efficiency, thereby increasing the valuation and translating into a positive outlook.

The Companys e-commerce strategy further underscores this focus on profitability and sustainable growth. By shifting its e-commerce operations to a third-party logistics provider, the Company has successfully converted fixed costs into variable expenses and optimised its supply chain. This move is projected to improve overall profitability and contribute to a more sustainable future.

Going forward, the Company remains dedicated to enhancing customer satisfaction and product excellence. Its expansion strategy is centred on launching new COCO stores and franchises, with a primary focus on strengthening its foothold in Eastern and Southern India. While remaining cautious, the Company will also explore opportunities for expansion in Western and Northern India. By staying aligned with market trends and expanding its presence, the Company aimsstrategic to solidify its leadership in the footwear industry and engage with consumers across all age groups.

The Company understands that effective Human Resource Management is fundamental in achieving success through high performance, a customer-centric culture, and fostering happy and value-oriented employees. of our workforce is crucial for meeting transformational objectives and plays a vital role in supporting managers with their day-to-day responsibilities—from hiring and employee development to providing valuable insights to senior leadership. These efforts strengthen our strategic planning and decision-making capabilities by laying down a solid foundation of data and knowledge. Ultimately, we recognise that effective workforce management is key to organisational success and progress towards our overarching goals.

At the core of our strategy is a strong focus on nurturing our human capital through comprehensive training programs. These initiatives are designed to systematically enhance employees knowledge, skills, attitudes, and teamwork abilities. Our training programs are strategically crafted not only to improve personal competencies essential for current job performance but also to prepare employees with the skills necessary for future career advancement. Moreover, our recruitment processes are consistently aligned with established procedures and business needs, ensuring to attract the right talent for our organisation. We have implemented various measures and programs to boost employee engagement and foster a deeper sense of commitment among our workforce.

As part of our commitment to diversity and inclusion, the company is implementing targeted strategies aimed at attracting, retaining, and nurturing top talent, regardless of race, gender, religion, age, culture, sexual orientation, disability, or background.

In addition, we are dedicated to supporting young individuals in securing apprenticeships that provide them with practical skills essential for navigating everyday workplace challenges in the corporate world. In conclusion, our sustained investment in human resource management and employee development will continue to drive our Companys success and ensure we cultivate an environment where all employees can thrive.

As on March 31, 2025 there were 726 permanent employees on the rolls of your Company.

The Company has implemented strong internal control mechanism that ensures the accurate recording of transactions with internal checks, prompt reporting and strict adherence to applicable accounting standards and compliance with applicable statutes, policies, procedures, guidelines and authorisations. This entails establishing and implementing an Internal Financial Control (IFC) framework to ensure compliance with the Companies Act and support the Directors Responsibility Statement.

The Internal Audit department under the guidance of the Head of Internal Audit Department conducts periodic audits at all locations and functions based on the Annual Audit Plan approved by the Audit Committee and promptly addresses any deviation in internal control procedures.

Significant Internal Audit Observations of implementation are submitted to the Audit Committee every quarter for its review by the Head of Internal Audit Department. As a part of their audit procedures, the Statutory Auditors review the efficacy and adequacy of the Internal Audit function and have full access to all the reports and findings of the internal audit Department.

Statements in the Management Discussion and Analysis report describing the Companys objectives, projections, estimates and expectations may be "forward-looking statements" within the meaning of applicable laws and regulations and futuristic in nature. These ‘forward-looking statements by their very nature involve assumptions from the Company and are subject to inherent risks and uncertainties. There is a significant that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to put undue reliance on forward-looking statements as multiple factors could lead to assumptions, actual future outcomes and events to differ materially from those expressed in the forward-looking statements. Hence, this document is subject to the disclaimer and qualified in its entirety by the assumptions, limitations and risk factors included in the Management Discussion and Analysis of Annual Report of Khadim India Limited for FY 2024-25. Investors, therefore, are requested to make their own independent judgments before taking any investment decisions.