MANAGEMENT DISCUSSION AND ANALYSIS REPORT
ECONOMIC OVERVIEW Global Economy
After experiencing high market volatility from multiple headwinds in 2022, the global
economy is showing signs of resilience in 2023. The slowdown is expected to be less
pronounced in 2023 than previously anticipated. However, higher inflation, tighter
monetary conditions, and the Russia- Ukraine war continue to impact the global economy.
Inflation is projected to decline from 8.7% in 2022 to 7% in 2023 and 4.9% in 2024.
Further, key factors such as the rebounding of Chinas economy, improved supply-chain
functioning, and the recent decline in energy and food prices indicate the improvement in
economic activity in 2023.
According to the International Monetary Fund (IMF), global GDP growth is projected to
decline from 3.4% in 2022 to 2.8% in 2023 and rise to 3% in 2024. Growth across Advanced
Economies (AEs) is expected to decline from 2.7% in 2022 to 1.3% in 2023 before rising to
1.4% in 2024. Emerging and Developing Economies (EMDEs) fared better and grew at 4% in
2022 and are expected to grow at 3.9% in 2023 and 4.2% in 2024. Asia-Pacific will be the
most dynamic of the worlds major regions in 2023, with China and India leading the
growth.
(Source: IMF World Economic Outlook, April 2023)
Indian Economy
The Indian economy is relatively insulated from global spillovers and continues to be
among the fastest growing economies in the world. Indias real GDP grew by 7.2% in FY2023
as against 9.1% in FY2022 and reflects robust domestic consumption and lesser dependence
on global demand. Despite the weak external demand, the merchandise exports registered
healthy growth. Further, increasing disposable income will stimulate consumption and boost
the demand for goods and services across industries.
According to the IMF, the Indian economy is expected to advance steadily at 5.9% in
FY2024 before rising to 6.3% in FY2025. The economic growth is primarily driven by robust
domestic consumption, abating of inflation, technology- enabled development, export
growth, and revival in credit growth among others. Additionally, increased capital
expenditure on infrastructure and the growth-enhancing policies such as the PLI schemes,
Make in India and Atmanirbhar Bharat will strengthen the infrastructural and
manufacturing base, lead to higher productivity and build a strong foundation for
sustained economic growth.
(Source: Ministry of Statistics & Programme Implementation; IMF World Economic
Outlook, April 2023)
INDUSTRY STRUCTURE AND DEVELOPMENT
The Indian footwear market witnessed a rapid transformation in the last few years. The
footwear business, a major retail sub-sector, has become one of the most dynamic sectors
in recent years due to changing customer sentiments. According to Retailers Association of
India, sales of the footwear segment grew by 34% in the retail sector in FY2023 compared
to the last year. The organised footwear segment has been growing at a faster rate due to
rising urbanisation and contemporary retail formats. The market share of the organised
footwear segment is estimated to grow from 30% in FY2020 to 36%-40% by FY2025. The major
growth drivers are the shift in perception of footwear from a utilitarian commodity to a
fashion statement, changing lifestyles, growing economies, heightened focus on health, and
digital penetration. The expansion of exclusive brand outlets in Tier II and small towns
and increased share of e-retail are also aiding the growth of the organised footwear
sector. Further, the government has allowed 100% FDI through the automatic route for this
sector. The governments campaigns Make in India and Self-reliant India will boost
domestic manufacturing and increase the competitiveness of Indian manufacturers in the
global market. These initiatives will benefit the Indian footwear industry and promote the
export of footwear.
(Source: Retailers Association of India; 5paisa; Invest India, Non-Leather Footwear
Industry in India)
OPPORTUNITIES
The Indian footwear market is well-positioned to achieve healthy growth in the coming
years, aided by a growing young and working population, increasing aspirations and
affordability, the meteoric rise of e-commerce, and exposure of global fashion trends
among others. The Indian footwear market is expected to grow at a CAGR of 15% to 17% from
Rs.920 - Rs.950 billion in FY2022 to Rs.1,380 - Rs.1,450 billion by FY2025. The organised
footwear industry is estimated to reach Rs.530 - Rs.550 billion by FY2025. (Source: ICICI
direct; CRISIL Report - Assessment of organised retail and footwear industries in India,
August 2021)
• De-reservation of the footwear sector
• Growing domestic and international markets
• Rising disposable income and economic growth
• Growth of the retail sector and e-commerce
• Use of modern technology
• Mandatory footwear quality standards will be applicable from 1st
July, 2023 which will curb sub-standard imports
(Source: The Economic Times)
THREATS
• Unorganised players intensify competition by leveraging low price points
• Entry of multinationals in the domestic market
• Compliance issues with the environmental norms and regulations
• Shortage of skilled workforce and high wages
• Fast-changing fashion trends
• Imports from China
COMPANY OVERVIEW
Incorporated in 1994, Lehar Footwears Limited (LFL) is North Indias leading
mass-footwear manufacturer and branded distribution company. Your Company is predominantly
engaged in the manufacturing of high-quality non-leather footwear including lightweight
open-footwears (slippers/ sandals), Hawai slippers, school shoes, canvas shoes, sports
shoes, PVC shoes and EVA/PVC/PU injected footwear. Your Company has established its
reputation as one of Indias most trusted brands in the local market. It has also
established a strong foothold globally and exports its products to South Africa, South
Arabia, Somalia, Kenya and Qatar. It has 4 manufacturing facilities located in Rajasthan
and 2 retail stores (factory outlets) in Jaipur, Rajasthan.
SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE
Your Company is engaged in the business of manufacturing footwear, so the Management
considers "Footwear" as the only business segment of LFL. Your Company sold 2.02
crore pairs of footwear in FY2023 as against 1.55 crore pairs in FY2022.
FINANCIAL PERFORMANCE VIS-A-VIS OPERATIONAL PERFORMANCE
Your Company delivered a strong performance in FY2023 owing to improving market
sentiments and focus on profitability, business growth and premiumisation of the brand. It
recorded a robust net profit of Rs.512.99 Lakhs as against Rs.250.55 Lakhs in FY2022. Its
turnover for the fiscal year stood at Rs.20,216.41 Lakhs as against Rs.13,747.14 Lakhs the
previous year.
OUTLOOK
Your Company envisages robust growth in the coming years with its well-diversified
product portfolio, unparalleled reach, and financial strength on the back of strong demand
for its products in the market. New product development, branding and promotion and
exports will fuel your Companys growth engine. It is focussed on deploying consistent
efforts towards the introduction of newer product designs and extension of core products
to cater to the increased demand of EVA and PU products in the market. Your Company aims
to keep its products relevant, competitive and value for money for customers which will
further enable your Company to penetrate deeper in the target market and expand its top
line and bottom line.
RISKS AND CONCERNS
Your Company has a structured risk management framework for the timely and effective
identification, assessment, and mitigation of key business and operational risks. It
formulates robust mitigation strategies to monitor and mitigate identified risks and
concerns in the industry to minimise their impact on your Companys operational and
financial performance and business environment. It also adopts preventive measures as
considered expedient and necessary.
The increasing competition from both local and international players is something that
your Company recognises. It continuously assesses the risks and concerns in the Footwear
Industry that may impact its current operations, future performance, and business
environment. To address these risks and concerns, it takes proactive measures as deemed
necessary. Your Company understands the need to make continuous changes in its product
portfolio mix to stay relevant to the millennials and the growing youth population in
India. Along with rising competition, changes in customer behaviour and the impact of
online marketing initiatives also affect your Companys performance, given its extensive
distributor network across India. While employment opportunities are on the rise,
retaining talent is considered a challenge. Your Company also acknowledges the importance
of modernising its IT systems and protecting data from the risk of loss or theft, which is
a global concern. It regularly monitors its major risks and concerns, and takes
appropriate steps in consultation with relevant committees of the Board to identify and
mitigate these risks.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has an adequate and structured internal control system commensurate with
the size, nature and complexity of its business. It comprises authorisation levels,
supervision, checks and balances and procedures through documented policy guidelines and
manuals and ensures that all transactions are authorised, recorded and reported correctly
and adherence to the applicable policies and regulations. The operational managers
exercise their control over business processes through operational systems, procedural
manual and financial limits of authority manual, which are regularly reviewed and updated
to improve the systems and efficiency of operations. Your Company places prime importance
on an effective internal audit system. The internal control system is supplemented by
internal audits, regular reviews by the management and well- documented policies. Your
Companys independent internal audit system monitors the entire operations and services
and its observations and recommendations are reviewed by the management and Audit
Committee of the Board, which takes appropriate corrective measures as deemed fit.
HUMAN RESOURCES/INDUSTRIAL RELATIONS
Your Company considers its employees as the most important asset and integral to its
growth and competitive position. It promotes a safe and conducive work environment,
inclusive growth, equal opportunities and competitiveness and aligns employees goals with
the organisations growth vision. It regularly conducts training programmes for the
enhancement of skills, capabilities, working speed, and time management skills of the
employees. It continues to nurture a culture that values meritocracy and motivates
employees by offering performance-based rewards and growth opportunities. Inspired by your
Companys values of meritocracy, entrepreneurship, and innovation along with core tenets
of open communication, transparency, and agility, its talented employees are always on a
quest to take your Company to greater heights. As on 31st March, 2023, your
Companys total employee strength stood at 279 including contractors. Further, industry
relations remained peaceful and harmonious during the year.
CAUTIONARY STATEMENT
The Management Discussion and Analysis may contain certain statements describing your
Companys objectives, plans, goals, projections, and expectations which may be
forwardlooking statements within the meaning of applicable laws and regulations and are
based on informed judgements and estimates. Actual results may differ materially from
those expressed or implied. These forward-looking statements are subject to certain risks
and uncertainties, including but limited to, changes in government regulations and
policies, economic development, raw material availability and prices, competitive
pressures, risks inherent in your Companys growth strategy and other factors that could
cause the actual results to differ materially from those either expressed or implied in
the forward-looking statements.
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