Lehar Footwears Ltd Management Discussions

ECONOMIC OVERVIEW Global Economy

FY2024-25 witnessed the global economy entering a phase of heightened uncertainty, shaped by shifting policy priorities, escalating trade tensions, and a fragile recovery from earlier disruptions. As per IMF?s April 2025 World Economic Outlook titled "A Critical Juncture amid Policy Shifts", global growth is expected to slowdown to 2.8%, well below the 2000–2019 average of 3.7%.

This downward revision is largely driven by an increase in global trade barriers, particularly new tariff measures by the US and reciprocal actions by trading partners. These developments have disrupted trade and investment flows, adding to policy uncertainty worldwide. Advanced economies are projected to expand modestly – 1.8% for the US and just 0.8% for the euro area amid tighter financial conditions and weakening demand. Emerging markets and developing economies are forecast to grow by 3.7%, but continue to face challenges from capital outflows and restricted access to credit.

Inflation continues to ease globally, with headline inflation expected at 4.3% in 2025, although the disinflation process remains slower than initially projected. Risks to the outlook remain firmly on the downside, including geopolitical tensions, market volatility, and declining global development support – factors that could disproportionately impact credit-dependent emerging economies.

Against this backdrop, the IMF stresses the need for globally coordinated responses to preserve macroeconomic stability. For India, this calls for strengthening economic resilience through prudent fiscal management, inclusive financial systems, and adaptive policy frameworks.

(Source: IMF World Economic Outlook - April 2025)

Indian Economy

Despite on-going global headwinds and geopolitical uncertainties, the Indian economy continued to display resilience and robust momentum through FY2024-25. The Reserve Bank of India?s March 2025 bulletin highlighted that strong domestic demand, supportive policy measures, and structural reforms were instrumental in sustaining India?s steady macroeconomic performance.

India?s GDP grew at an estimated 6.5% during FY2024-25, supported by broad-based recovery across consumption, investment, and government expenditure. Sectors such as construction, trade, and financial services remained key growth drivers, aided by infrastructure development and credit expansion.

Inflationary pressures moderated, with consumer price inflationfalling to 3.6% in February 2025, driven by lower food prices. However, core inflation remained at 4.1%, reflecting lingering cost pressures. The RBI?s calibrated monetary policy and fiscal stability and foster growth.

The external sector held firm despite although sustained foreign portfolio investment (FPI) outflows exerted pressure on the rupee. Domestic investors provided partial support, but currency depreciation remains a key risk.

India?s labour market also improved. Manufacturing registered its second-highest employment growth since PMI tracking began, while services saw healthy hiring trends. Urban unemployment dropped to 6.4%, indicating resilient domestic demand.

With GDP touching USD 4.3 trillion by FY2024-25-end, India is poised to overtake Japan and soon become the world?s fourth-largest economy. While it still trails China significantly,

India?s ascent is notable.

Looking ahead, the RBI projects 6.5% growth for FY2025-26, with inflation remaining within target. While global risks persist, India?s growth outlook remains positive, supported by sound fundamentals and proactive policymaking.

(Source: Ministry of Statistics and Programme Implementation (MOSPI), RBI Issues April 2025 Policy Update)

INDUSTRY STRUCTURE AND DEVELOPMENT Global Footwear Industry

The global footwear market continued to demonstrate strong momentum in 2024, building on the positive trend of the previous year. The market was valued at approximately USD 463.9 billion in 2024, as per estimates by Fortune Business Insights, up from USD 386.7 billion in 2023, indicating sustained growth. This expansion was fuelled by rising demand across categories – ranging from athletic and casual shoes to formal and fashion footwear – underpinned by increasing health consciousness, evolving lifestyle preferences, and a greater focus on comfort and performance.

Technology and sustainability continue to shape the industry landscape. Brands are increasingly adopting eco-friendly materials and innovative manufacturing processes, including 3D printing and recycled components, to meet the growing consumer appetite for sustainable footwear. Meanwhile, the on-going surge in e-commerce has expanded global reach and made customised, digitally-enabled shopping experiences a norm rather than a novelty.

Emerging markets in Asia-Pacific and Latin America have remained key growth engines, thanks to urbanisation, rising disposable incomes, and expanding retail infrastructure. The athletic footwear segment, in particular, has witnessed robust demand, driven by heightened focus on wellness and active lifestyles.

Looking ahead, the global footwear market is projected to grow at a CAGR of 6.9% and reach approximately USD 789.5 billion by 2032. Key drivers include changing fashion cycles, sports and fitness trends, digital influence, and technological upgrades in footwear design and comfort –reinforcing the sector?s long-term growth potential.

Indian Footwear Industry

India remains the world?s second-largest footwear producer, contributing approximately 13% to global production. In 2024, the Indian footwear market was valued at around USD 18.8 billion. The sector continues to be a significant employment generator, providing livelihoods to approximately 4.5 million individuals, with women comprising around 40% portion of the workforce. The organised segment of the industry has been gaining ground, propelled by the proliferation of e-commerce platforms, changing consumer preferences towards branded products, and the expansion of retail infrastructure. However, the unorganised sector still holds a considerable share, presenting both challenges and opportunities for formal players.

In terms of exports, the industry witnessed a robust performance in FY2024-25, with leather and non-leather footwear exports surging by approximately 25% to USD 5.7 billion. This growth was primarily driven by healthy demand from key markets such as the United States and the United Kingdom.

Regulatory developments have also shaped the industry landscape. The Bureau of Indian Standards (BIS) Quality Control Orders (QCOs) for various categories of footwear, including leather and polymer-based products, came into effect on August 1, 2024. These mandates aim to enhance product quality and standardisation across the sector. To facilitate a smooth transition, the government has allowed the sale of non-BIS-certifiedinventory manufactured or imported before the implementation date until July 31, 2026.

(Source: IMARC Group, PIB, Economic Times)

Outlook

The Indian footwear industry is poised for significant growth, with projections estimating the market to reach USD 46 billion by 2033, growing at a CAGR of 10.1% from 2025 onwards. Key growth drivers include the increasing shift towards non- boosting leatherfootwear, rising health and fitness demand for athletic shoes, and the continued expansion of online retail channels.

While challenges such as competition from the unorganised sector and regulatory compliance persist, the industry?s trajectory remains positive, supported by favourable demographic trends, technological advancements, and evolving consumer preferences.

(Source: IMARC Group)

Emerging Trends in the Footwear Industry

The global and domestic footwear landscape is evolving rapidly, shaped by shifting consumer preferences, technological advancements, and increased environmental consciousness. redefining how Several key trends are footwear is designed, marketed, and consumed:

Sustainability and Eco-Conscious Materials: There is growing emphasis on sustainability across the footwear value chain. Consumers are increasingly aware of the environmental impact of their purchases, prompting brands to adopt greener alternatives. The use of recycled materials, plant-based or vegan leathers, and eco-friendly production methods is on the rise. These efforts are not only aimed at reducing the industry?s carbon footprint but also at aligning with consumer demand for non-leather and ethically produced products.

Comfort-Driven Innovation and Functional Design:

Comfort is emerging as a key purchase criterion across all footwear categories. Driven by increasing health awareness and active lifestyles, there is rising demand for footwear that blends style with utility. Brands are investing in ergonomic designs, advanced cushioning technologies, and breathable materials to deliver superior comfort. The growing popularity of athleisure and casual wear also reflects this comfort-first mindset.

New BIS and export market opportunity: The Indian government has introduced new BIS (Bureau of Indian

Standards) quality standards, effective April 2025. These new regulations aim to improve product quality, safety, and competitiveness in global markets, benefiting both domestic manufacturers and consumers. By ensuring compliance with national standards, the industry can improve product quality, build trust, and access global markets. This also helps level the playing field for domestic manufacturers, making it easier for them to compete with imported brands.

Competitive advantage for Indian footwear industry: After re-election to its second term, the Trump administration imposed steep protective tariffs on

United States, including leather and non-leather footwear.

These tariffs are intended to be reciprocal and address trade imbalances and willhave significantimpact on the global footwear industry. However, as the tariffs on the

Indian footwear industry are lower than those imposed on competing nations – China, Vietnam and Bangladesh – it could enjoy a comparative advantage. Out of the country?s USD 4 billion leather and non-leather footwear exports in April-Feb of FY2024-25, the US accounted for 22% or USD 870 million.

These trends are likely to shape future product development, marketing strategies, and competitive positioning within the footwear industry, both in India and globally.

Factors Driving Industry Growth

The Indian footwear industry is witnessing strong growth, backed by favourable policy support, changing consumer preferences, and a rising demand for branded, high-quality products.

Growth Drivers

To promote domestic manufacturing and reduce reliance on imports, the Government of India has raised import duties on finished footwear and is considering expanding the Production Linked Incentive (PLI) scheme. These efforts, alongside initiatives like Make in India and the establishment of the Footwear Design and Development Institute (FDDI), are enhancing local capabilities and creating a more competitive domestic ecosystem. offering a wide array of

There is a growing need for investment in dedicated design and R&D centres, especially for non-leather footwear. While many Indian manufacturers replicate existing styles, innovation in design and materials are crucial to compete globally. R&D-driven production can help the industry shift from traditional methods to more automated and scalable operations, while aligning with global sustainability trends.

India?s rising disposable incomes are also transforming consumer behaviour. The premiumisation trend is evident, with the share of premium footwear projected to rise from 47% in FY2020-21 to 49% in FY2024-25. Consumers are increasingly opting for branded products that offer better design, comfort, and durability – spurring growth for both established and emerging brands.

Technology is further reshaping the industry. Innovations such as smart footwear with fitness tracking and posture correction features are gaining traction. These high-tech offerings, combined with performance-enhancing materials, are elevating consumer expectations and expanding the premium segment.

Population growth and urbanisation continue to boost demand. India?s projected population of 1.5 billion by 2030, along with increasing urban concentration, is expected to fuel sustained demand for fashionable, functional, and easily accessible footwear.

Challenges of the Indian Footwear Industry

Despite strong fundamentals, several challenges persist. The dominance of the unorganised sector – accounting for around

70% of the market makes it difficult for organised players to compete on price and reach. Inventory management also remains a key concern, with excess stock leading to high holding costs and impacting profitability

The labour-intensive nature of footwear manufacturing adds further pressure on costs and operational intense competition, both from domestic and global players, has led to thin margins and pricing pressures, particularly in mass-market segments.

While these challenges are real, the industry?s shift towards premiumisation, digital transformation, and design-led growth presents significant opportunities for agile, brand-focussed players.

Company Overview

With over 30 years of experience, Lehar Footwears Limited (referred to as ‘Company? or LFL) continues to be one of North India?s prominent mass-market footwear manufacturers.

Lehar focusses on delivering fashionable and affordable non-leatherfootwear, across

1,300+ active SKUs. These include lightweight open footwear, EVA/PVC/PU-injected footwear, Hawai slippers, school shoes, canvas shoes, sports shoes, and PVC shoes – serving men, women, and children across multiple customer segments.

LFL has built a strong presence in over 27 states, supported by a robust distribution network of 520+ dealers nationwide. Additionally, the Company maintains an active export footprint, supplying products to various countries across Africa, the Middle East, and South East Asia.

The Company operates five integrated manufacturing facilities located in Rajasthan, along with two factory outlet retail stores in Jaipur. These production units are equipped with advanced machinery and adhere to global standards of manufacturing and quality. Continued investment in technology and infrastructure has enabled the Company to diversify its product portfolio.

Byleveragingdesign, and scale, LFL remains committed to offering reliable and value-driven footwear to millions of consumers across India and beyond.

Expansion into Government-Supported Initiatives: PM Vishwakarma Scheme

In addition to its core footwear business, Lehar Footwears Limited has forayed into a high-impact new business segment – the Tool Kit business, which commenced in Q2 of FY2024-25. This strategic diversification aligns with the Government of India?s PM Vishwakarma Yojana, a flagship

Central Sector Scheme focussed on uplifting traditional artisans and craftspeople across 18 trades. The scheme provides end-to-end support including skill development, access to credit, and the provision of toolkits, with a total outlay of 13,000 crores aimed at benefiting 30 lakh families.

Under this initiative, the Company has been granted an order for supply of carpenter toolkits – covering procurement, assembling, packaging, warehousing, and quality control –based on standards prescribed by the National Small Industries Corporation (NSIC). This business has now transitioned from a proof-of-concept phase to full-scale execution with a Pan-India network of warehouses and robust delivery capabilities.

Lehar?s strong execution capabilities and reliable delivery have earned it a leading position as one of the major vendors under the PM Vishwakarma Scheme. This early-mover advantage not only provides a high-return, asset-light business opportunity but also aligns the Company with India?s employment-generation programmes. It offers a sustainable long-term growth runway while reinforcing Lehar?s role in contributing meaningfully to nation-building efforts.

Segment-Wise or Product-Wise Performance

Footwear business

In FY2024-25, the Company sold approximately 1.7 crore pairs of footwear, compared to 1.9 crore pairs in FY2023-24. Revenue was primarily driven by three core segments – the domestic channel, government tenders, and exports.

Despite a challenging consumption environment, particularly in rural and semi-urban areas, the Company maintained stable domestic volumes. The domestic channel continued to be the largest contributor, accounting for 54% of total footwear revenue in FY2024-25, followed by exports at ~25% and government tender at ~21%.

Toolkit business

The Company sold 69,288 toolkits in FY2024-25 and as of March 31, 2025, the company has an outstanding order book of ~ 195 crores, with an execution timeline of 6 to 9 months.

In addition, company is expected to receive additional order under the current order book, further enhancing sales visibility.

Operational Performance

In FY2024-25, Lehar Footwears Limited achieved several important operational milestones, marking a pivotal year in its strategic evolution across both the footwear and toolkit businesses.

The footwear segment saw a strong consolidation, led by the launch of EVA footwear, a fast-growing category targeted at younger, trend-conscious consumers. The Company successfully commissioned new machinery to support this product line, enabling timely market entry and strong traction in the premium low-cost segment. This move has broadened Lehar?s product portfolio and enhanced its relevance in evolving market segments. The company plans to enter into the closed footwear segment with a focus on sports shoes towards further improving its positioning in the market.

Export sales registered mild growth during the year. However, addition of new product category has created a strong platform for future expansion. With favourable geopolitical conditions and growing demand from international buyers, the Company remains focussed on increasing wallet share in its existing overseas markets, while simultaneously exploring entry into new geographies.

Domestically, sales began to recover after a prolonged slowdown towards the end of the financial year, especially in the low and mid-range categories where rural demand had previously remained tepid. Early signs of stabilisation were visible by Q4, suggesting improved consumer sentiment and better offtake across trade channels.

The government tender business, however, remained muted due to the impact of state and central elections, which delayed procurement cycles in key markets. This segment is expected to regain momentum in FY2025-26 as the administrative machinery normalises and fresh tenders are rolled out.

The Tool Kit business has rapidly scaled from a proof-of-concept to full-fledged operations, supported by a Pan-India infrastructure network. Warehousing and logistics facilities have been set up across all four regions – Jaipur (West), Delhi (North), Patna (East), and Vijayawada (South) – enabling efficient distribution. A robust pre-dispatch quality assurance system has been implemented to meet NSIC standards, alongside a customer service network comprising a central call centre and on-ground technical support. With a largely asset-light model, parts of the tool kits are manufactured in-house while the rest are sourced through a network of vetted vendors.

Lehar?s Toolkit business cemented its position as a preferred implementation partner under the PM Vishwakarma Yojana. The Company ensured seamless execution and uninterrupted supply throughout the year. Backed by a robust operational setup and a strong bid pipeline, Lehar is also preparing to enter new product categories under the scheme, enabling broader participation across both existing and new verticals.

Financial Performance ( in Lakhs)

Particulars	FY2024-25	FY2023-24	Variance (%)
Operating Revenue	27,721.3	19,426.1	42.7
Total Income	27,748.0	19,483.3	42.4
Operating Profit	2610	1,830	42.6
Finance Cost	700	580	20.7
Depreciation	490	410	19.5
Profit/(Loss) Before Tax	1,444.4	890.2	62.3
Tax	357.5	234.4	52.5
Net Profit/(Loss)	1,086.9	655.8	65.7

Key Financial Ratios

Particulars	FY2024-25	FY2023-24
Debtors Days	75	125
Inventory Turnover Ratio (times)	3.5	2.5
Debt Service Coverage Ratio (times)	2.0	1.4
Current Ratio (times)	1.3	1.4
Debt Equity Ratio (times)	0.8	0.9
Operating Margin (%)	9.4	9.4
ROE (%)	13.6	9.5
ROCE (%)	17.3	12.3

In FY2024-25, the Company witnessed significant growth across various financial metrics. Revenue from operations stood at 277.2 crores, compared to 194.3 crores in the previous year, reflecting an increase of 42.7%. EBITDA remained constant at 8.4%, reaching 26.1 crores from 18.3 crores in FY2023-24. This growth highlights the operational efficiency of the Company.

Profit Before Tax increased to 14.4 crores from 8.9 crores in FY2023-24, showing a robust growth of 62.25%. Similarly,

Profit After Tax for FY2024-25 was 10.86 crores, compared to 6.5 crores in FY2023-24, reflecting a growth of 65.7%.

Outlook

Lehar Footwear enters FY2025-26 with renewed momentum and a sharp focus on scaling its operations across both core and new business segments. The Company is actively executing a refreshed sales and distribution strategy, targeting high-potential markets, strengthening its dealer network, and expanding its on-ground sales force to ensure agile market responsiveness and deeper customer penetration.

In the footwear segment, FY2025-26 will mark a key phase of product expansion and portfolio diversification.

The successful launch of the EVA category has opened up fresh avenues for growth, and will drive sales, especially among younger consumers seeking comfort and style. Looking ahead, your Company is preparing to enter the closed footwear and sports shoes segments, a new manufacturing facility has been setup for the closed footwear and sports shoes segments and is expected to be commercialised and operational by July 10, 2025, enabling marketcoverageandportfoliodiversification

On the international front, exports are poised for an upswing, supported by improving geopolitical conditions and favourable demand dynamics. The Company plans to deepen its presence in existing international markets, while also exploring opportunities in new geographies. Additionally, the government footwear supply business, which saw a slowdown during the election year, is expected to regain traction as procurement cycles normalise.

In the toolkit segment, Lehar?s position as a preferred implementation partner under the PM Vishwakarma Yojana continues to strengthen. A robust bid pipeline is already in place for FY2025-26 in current product categories. The Company is also planning to expand its participation into new toolkit categories under the scheme, thereby broadening its presence across both existing and emerging verticals. This aligns with Lehar?s vision of supporting national employment generation and skilling efforts while unlocking a sustainable, asset-light growth opportunity.

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With a clear roadmap in place, Lehar Footwear is poised to harness operational synergies, deepen its impact in both commercial and government channels, and build on its strengths in manufacturing, innovation, and execution. The Company remains committed to delivering long-term stakeholder value while supporting India?s broader development goals.

Risks and Concerns

Effective risk management is a critical component of Lehar

Footwear?s strategic execution and operational performance. The Company acknowledges that while certain risks are inherent to the business environment, proactive identification and mitigation can ensure long-term resilience and sustained growth.

Operating in a highly competitive industry, Lehar Footwear faces constant pressure from both domestic players and international brands. However, the breadth of its product portfolio provides a strategic advantage, allowing the Company to cater to diverse consumer segments. To further strengthen its competitive positioning, the Company is enhancing its market reach through a deeper retail footprint and an expanded distribution network.

Rapidly evolving consumer preferences present another key challenge. A failure to align productofferings with current trends may affect customer engagement and sales. To stay ahead of this curve, the Company places a strong emphasis on continuous product innovation and fashion-forward design, ensuring offerings remain relevant and appealing across markets.

Talent retention is also a priority, especially in today?s competitive employment landscape. The Company mitigates this risk by offering fostering career growth, and nurturing a supportive work culture that encourages employee engagement and development.

With increasing reliance on digital platforms and data-driven operations, cybersecurity is an area of growing concern. Lehar Footwear has implemented comprehensive security protocols to safeguard sensitive information and maintain operational integrity.

The Company continuously monitors its key risks and engages with relevant Board committees to evaluate and address emerging challenges. Through a structured and dynamic risk management approach, Lehar Footwear remains committed to preserving stakeholder value while pursuing strategic opportunities.

Human Resources / Industrial Relations

At Lehar Footwear, Human Resource Management is viewed as a key enabler of business success. The Company fosters a performance-driven, customer-centric culture supported by engaged and value-oriented employees. Its HR strategy is closely aligned with organisational objectives, with a strong focus on the holistic development of its workforce.

Employee training and development remain a priority, aimed at enhancing knowledge, skills, and collaboration across functions. Structured training programmes are designed not only to improve current job performance but also to prepare employees for future roles and leadership opportunities within the organisation.

Recruitment processes continue to be streamlined and aligned with business needs, ensuring that the right talent is brought on board at the right time. In addition, various employee engagement initiatives have been implemented to boost morale, strengthen team cohesion, and enhance workplace satisfaction.

As of March 31, 2025, the total workforce of the Company, including contractual employees, stood at 781 people on roll, including contractors. Lehar Footwear remains committed to investing in its people and nurturing a positive and inclusive work environment.

Internal Control Systems and Their Adequacy

The Company has established a well-structured and adequate internal control system tailored to the scale, nature, and complexity of its operations. This framework incorporates definedauthorisation hierarchies, supervision mechanisms, checks and balances, and detailed procedures, all governed by documented policy guidelines and operational manuals. These controls ensure that all transactions are properly authorised, accurately recorded, and compliant with applicable regulations and internal policies.

Operational managers maintain control over key processes through the use of standardised operating procedures, financial authority matrices, and process manuals, which are attractive periodically reviewed and compensation packages, updated to drive continuous improvement and operational efficiency.

A strong internal audit function is central to the Company?s governance framework. The internal audit system operates independently to evaluate the effectiveness of controls, ensure compliance, and identify potential areas for enhancement across all functions.

Audit findings and recommendations are regularly reviewed by senior management and presented to the Audit Committee of the Board. Based on these insights, corrective actions are implemented in a timely manner to strengthen the overall control environment and support sustainable business performance.

Cautionary Statement

Statements in this report describing the Company?s objectives, projections, estimates and expectations may constitute ‘forward-looking statements? within the meaning of applicable laws and regulations that involve risks and uncertainties. Such statements represent the intention of the management and the efforts being put in place by them to achieve certain goals. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances. Therefore, the investors are requested to make their own independent assessments and judgements by considering all relevant factors before making any investment decision.