The discussion under this head covers the financial results for the year ended 31st
March 2023 and other related developments concerning the business of the company.
The Footwear Industry-Structure and Development
Before we present our elaboration for the footwear industry, it would be imperative to
understand its importance in the Indian economy through its contribution of employment
generation as also foreign exchange earner. For this contribution for number of years the
footwear industry has now started gaining attention of the policy makers.
India presently is the 2nd largest producer of footwear globally. The leather and
non-leather segments, driven by a robust domestic market, make up the Indian footwear
industry. According to Invest Indias report on the Non-leather footwear Industry in
India, the sector in India is projected to increase eight-fold by 2030. Due to changing
consumer preferences, 86 percent of footwear consumption has become non-leather by volume
globally, and India is witnessing a similar trend. However, leather footwear continues to
be a significant part of the industry and is a major export category for India.
The domestic footwear retail market in India estimated at 72,000 crore in FY 2020 is
projected to grow at a CAGR of ~8% to reach 1,05,000 crore by FY 2025. The unorganized
segment still dominate this market which needs to be corrected for the overall improvement
in terms of competition, pricing and quality is concerned. In the domestic arena Mens
footwear currently dominates market with approximately 48% share, however growth in
womens footwear segment will outpace the growth in mens to account for an almost equal
share by value in FY 2025 against the current share of 41%. While casual segment is the
largest segment accounting for almost 67% of the total market in FY 2020, sports and
athleisure is one of the fastest growing segments.
Of late the industry has witnessed encouraging trends wherein higher disposable income
is allowing Indians to move up the value chain and ask for products for different use
occasions, further leading to the surfacing of new product segments in footwear in terms
of price, performance, and aesthetics. This, in turn, is fuelling growth in individual
categories, be it slippers, sandals, or shoes, driving industry leaders to innovate their
offerings continually. There has also been a massive shift in consumer perspectives
regarding footwear. Consumers no longer look at shoes and footwear to serve just function
but are now gradually moving towards footwear for fashion.
Indian consumers increasingly want to buy products and brands that are made in India.
Indian brands especially in the value segment have developed distribution capability to
address the dispersed demand, product understanding and pricing framework for the Indian
micro-markets. Exposure to global trends and fashions have increased overall brand
consciousness among Indian consumers, especially the younger generation in urban areas.
Aspiration levels have also improved over time with an increase in disposable incomes and
appreciation of branded products across segments. Besides the urban India, the rural India
is also contributing significantly to the growth of acceptance of branded products. Brand
endorsements by celebrities and eminent personalities in sports and cinema have led to an
increase in brand awareness among the Indian youth. In the current context, social media
has played a critical role in facilitation of faster dissemination of information.Health
and wellness have become an important lever to drive premiumization, specially post
COVID-19 as the consumer has become more aware about health and fitness. Sports and
Athleisure products have benefited from increasing consumer interest in exercise and
sporting activity because of the health and wellness trend, as well as the rising demand
for comfort. It has become an important differentiator so much so that many businesses
have pivoted around this platform.
Liberty regularly study the market trends and timely introduce the new products in the
growing market to further strengthen its position. We also understand that from the
existing level of industry the future growth going forward would be predominantly driven
by:
• Increasing urbanization, growing aspiration levels to international fashion
brands and more focus towards branded footwear and organized retail.
The entry of MNC in the Indian market is the classic illustration of that focus.
• Easy availability and assortment width with the advent of online channel and
other channels of modern trade. A rise in the percentage of online sales as more and more
contemporary retailers use a variety of channels to connect with ustomers of all ages and
income levels.
• Surge in sale of sports and athleisure footwear with increasing focus towards
sports and events including adventure trips.
• Increasing middle class population and working population resulting in
increasing disposable income of consumer and higher spending on lifestyle products;
leading to shift from unbranded to branded play driving the average selling price of the
segment.
• Increase in number of working women driving the growth of womens footwear
market.
• The transformation of footwear from a utilitarian item to a fashion statement.
Opportunities, Risk and Challenges
Opportunities:
The Indian footwear market in the last decade or so has expanded as a result of a shift
toward high-value goods and peoples view for footwear from a functional item to a fashion
statement. Consumer preference is gradually shifting away from mass-market Footwear
categories toward premium categories, driven by brand awareness and the demand for trendy
designs.
The growth in the Indian fashion and lifestyle market has given a spur to the footwear
industry as well. It has developed as a fashion and style category from a basic need-based
industry. Currently, a major part of Indias fashion market is digitally influenced. Due
to the increasing demand, the e-commerce model has penetrated the footwear industry,
providing ample opportunities for the industry, especially in tier II and III cities.
Further the emergence of the online channel has increased competition because more players
can now showcase their product lines to draw customers. The increased competition has
forced footwear brands to release new designs and styles more quickly in order to remain
relevant and this in turn prove beneficial to the consumers.
On the other hand, the governments efforts to improve the countrys infrastructure,
including ports, airports, and highways, will improve the countrys connectivity and
provide a better business environment for the industry. Besides this the Central Govt. has
been making rigorous efforts for giving strength to the Indian footwear Industry by
introduction of commercial and technical norms for curbing imports from China, employment
generation, infrastructure development, promotion of Brand and reputation, setting up
institutional facilities, technological upgration through introduction of various sub
schemes under IFLADP which has been extended up 2026 and the proposed Production linked
incentive scheme for footwear Sector etc. The central Govt. has also been focusing on
skilling programs, employment opportunities, tax incentives, and infrastructure
development which will also make it easier for overseas companies to set up operations and
grow in India. The governments efforts to empower the countrys youth and simplify the
business process will provide a conducive environment for the industry to thrive.
Liberty is optimistic that going forward the footwear industry is poised to play a key
role in the countrys economic growth in the coming years, as India becomes a hub for
manufacturing and exports.
Threats/Challenges/Risk and concern:
The footwear Industry has largely been unorganized and scattered in different parts of
the Country, though it is moving towards being organized sector and number of unorganized
players are plummeting down. The Organised players are pushing themselves for adoption of
new technologies and introduction of innovations in their marketing and manufacturing
processes to encounter strong price competition from unorganized players and small scale
players.
Quality, design technical and aesthetic, relevant pricing inventory turns are becoming
lesser-The footwear industry, like other fashion-oriented industries, has a shorter design
life span and requires a large number of stock keeping units ("SKU") in terms of
varieties in colour, design, sizes, and types. On account of this, key footwear players
typically tend to introduce new designs frequently to stay relevant and attract customers.
Managing the supply chain to make it more responsive to frequent introductions of new
design is a key challenge for retailers
The major threats and challenges are stiff competition from domestic and International
brands, rapidly change in customer preferences, disrupting supply chain, nonavailability
of raw material, inflation, increasing interest rates and its impact on availability of
retail space, rate of economic growth, fiscal and monetary policies of governments, geo
political tensions, unemployment trends, exchange rate fluctuation, availability and
retention of talent, tackling counterfeit goods, product quality management, innovation
and new product development, impact of strategic and marketing initiatives, data security,
force majeure factors and other matters that influence consumer confidence and spending.
Liberty, recognizing the importance of risk management in a competitive market, has
implemented robust processes to identify, assess, and mitigate risks inherent in the
business environment. The companys board actively reviews the risk policy, while the
audit committee oversees the effectiveness of risk management systems. This proactive
approach enables
Liberty Shoes to navigate uncertainties and challenges effectively, ensuring the
sustained growth and success of the company in the dynamic footwear industry.
The envisaged risk and concerns before your Company are strategic and operational
risks, rising occupancy cost, foreign exchange risks, financial and the social risks.
Liberty monitors its major risks and concerns at regular intervals. Appropriate steps are
taken in consultation with all concerned including the Management Committee and the Audit
Committee of the Board to identify and mitigate such risks.
During the normal course of business operations, your company has been subjected to
several legal cases in connection with or incidental there to. These litigations include
civil matters, Direct and indirect tax related cases , old labour law matters and
infringement of intellectual properties like trade mark and designs etc. filed by and
against the company. These cases are being pursued with due importance and in consultation
with outside legal experts wherever required in respective areas.
Your Directors believes that the outcome of these cases is unlikely to cause a
materially adverse effect on the Companys profitability or business performance. Your
Company has a Contingent Liability of 2,192.23 Lakh as on 31st March, 2023 as compared
to the previous year 1,335.39 Lakh as on 31st March, 2022.
Internal Control System and its Adequacy
Liberty has a well recognized and comprehensive internal control structures across all
functions to ensure that all assets are protected, to prevent and detect frauds and errors
to maintain accuracy and completeness of its accounting records and to further enable it
in timely preparation of reliable financial information. These controls have been
integrated with the Companys risk management policy to ensure that control measures for
the effective mitigation of risks identified are in place. During the year, such controls
were tested and no reportable material weakness in the design or operation was observed.
The Company has in place a strong and independent Internal Audit Department which is
responsible for assessing and improving the effectiveness of internal financial control
and governance. To further strengthen the internal control system and their adequacy and
evaluating them from time to time, the Company has appointed reputed firm of Chartered
Accountants as Internal Auditors. To maintain its objectivity and independence, the
Internal Audit function reports to the Chairman of the Audit Committee and also places its
report in the audit committee meetings. However, audit is a continuous process and the
findings of the internal auditors, though not very significant, have been resolved in
consultation with departments heads and concerned Directors.
During a routine internal audit, a deviation in settlement of one vendor and also
purchase of asset has been noted and the audit team, in consultation with the Management
Committee, has taken requisite and decisive action to prevent its reoccurrence.
Liberty has an independent Audit committee which acts in accordance with the terms of
reference specified in writing by the Board including evaluation of internal financial
controls and risk management system.
The Audit Committee, on behalf of the Board, assesses the adequacy and effectiveness of
the internal control system in detecting fraud, irregularities or infringement of laws,
rules and regulations or material control failures on a regular basis by reviewing the
work and findings of Internal Audit Department.
The Executive Directors/CFO certification provided elsewhere in the Annual Report
confers the adequacy of internal control systems and procedures followed by the Company.
Discussion on Financial Performance
The Companys current year operations and financial performance has been remarkable due
to companys continuous thrust on improvement and availability of full year of operations
without the impact of COVID-19 pandemic. The Companys performance improved to its highest
level and reached to pre-covid level and ended with highest ever operating profits during
the year. The Earning per share (EPS-Basic & Diluted) of your Company for the
financial year ended 31st March 2023 remained at 7.58 as compared to the EPS
for the previous financial year ended 31st March 2022 at 1.32.
The EBDITA margin during the year under review attained improvement as compared to
previous financial ended 31st March 2022.
On account of improved collection from trade receivables, improved inventory turnover
and better vendor payment management led to overall improvement in working capital cycle.
The cash flows and internal accruals were efficiently used for working capital and the
working capital borrowings despite higher drawing power remained at 7,579.92 Lakh,
during the financial year ended 31st March 2023 as compared to 5,092.41 Lakh
during the previous financial year ended 31st March 2022. The long term loan
availed a Guaranteed Emergency Credit Line 2.0 as per the Scheme of Government of India
introduced to counter COVID impact along with some vehicle loans remained at 1,124.37
Lakh (Including Current Maturities) during the financial year ended 31 st March, 2023 as
compared to 1,424.03 Lakh during the financial year ended 31 st March 2022.
Your Company has not availed any particular/specific term loan for funding of its
capital expenditure and the entire routine capital expenditure has been funded through
internal accruals. The capital expenditure incurred for purchase of furniture &
fixtures, new moulds, innovations & technology and supporting machinery at plants as
well as towards other normal capital expenditure in furtherance to the business operations
of the Company was 2,349.16Lakh (Other than Leasehold rights) during the year under
review as compared to ^1,083.65 Lakh in the previous year. In addition to the same, during
the year in accordance to the Ind-AS-116, the Company has recognized its leasehold rights
at present value aggregating to 3,693.21 Lakhs on account of addition and adjusted
879.48 Lakhs on account of termination of earlier recognized contracts and the same have
been made part of the Intangible Assets.
The non current investments and other Financial Assets were at 0.45 Lakh and 713.10
Lakh during the financial year ended 31 st March 2023 as compared to 0.45 Lakh and
726.64 Lakh respectively during the previous financial year ended 31 st March 2022.
The beginning of the year witnessed the pent up demand with the opening of schools,
colleges, institutions, offices after evaporation of COVID 19 impact in the Country. The
Company managed its all resources of people, technology, available infrastructure in terms
of e-commerce and offline stores for maximizing its revenue. In order to remain
competitive and also available amongst consumers mind, the Company has strategically
taken the step of major advertising campaign for Companys owned brand LEAP7X.
With the increase of sale during the year under consideration, the overall payout on
account of franchise fees/royalty to promoters partnership firms with whom the Company
has arrangements, has also increased by 346 Lakh as compared to previous year. Despite
the substantial expense on account on advertising and franchise/royalty and other
overheads, the Company has posted notable operating profits during the year due to better
product mix having high margin, leveraging of its fixed cost & manufacturing
capacities. The efficient working capital utilization has been the prime focus of the
management during the year and despite substantial increase in CAPEX and also relatively
higher sales against the previous year, the borrowings/working capital limits have been
used to the extent of 65% only against the total sanctioned limits available with the
Company.
As highlighted in Directors Report also, your Company has observed & recognised
huge potential available in e- commerce segments and has been focusing on expansion of
digital footprint through its own website and other market places like Amazon, AJIO
& Flipkart.
These market places have yielded product placement for diversified customers all over
India. The newly introduced segment of perfume has received overwhelming response embraced
confidence trust of overseas customers where these products are available through
e-commerce partners in USA, UK, Australia and UAE. The other segments like institutional,
retail, franchisee and distribution segment of the Company have shown promising response
from the consumer expressing their confidence and loyalty towards the brand.
The other highlights of the financial performance of the Company during the year ended
31st March, 2023 have been stated in the Directors Report for the year ended 31st March,
2023, which appears separately in the Annual Report.
Material developments in Human Resources/ Industrial Relations front and Number of
people employed
Liberty takes immense pride in its diverse and talented workforce, representing
multiple geographies and generations. The company acknowledges the pivotal role of its
Human Resources in driving excellence across various fields and contributing to the
overall growth of the organization. With a strong belief in the value of its employees,
Liberty continuously endeavors to upgrade and enhance their skills, keeping them agile and
responsive in a dynamic business environment. The HR structure is thoughtfully designed to
align with the companys strategic objectives, providing simultaneous support for business
growth and employee development. Liberty recognizes that a motivated and skilled workforce
is critical for achieving its goals and maintaining competitiveness in the market. Through
various talent retention and development initiatives, the company nurtures leadership
capabilities and fosters a culture of continuous learning, ensuring that its Human Capital
remains a driving force for long-term value enhancement.
Furthermore, Liberty proudly declares that during the reviewed period, no cases were
filed under the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and
Redressal) Act, 2013, reaffirming the companys commitment to providing a safe and
respectful work environment. Cordial industrial relations with staff and workers further
strengthen the harmonious work atmosphere. Liberty understands that its employees are key
to its success, and by investing in their growth and well-being, the company aspires to
retain its position as a preferred employer and an industry leader. Upholding ethical
standards and fostering an inclusive workplace, Liberty seeks to sustain the dedication
and excellence of its workforce in achieving the organizations objectives.
As on 31st March, 2023, the total employeess strength of the Company stood
at 2090 as compared to previous years 1,805.
Details of significance changes in key financial ratios along with detailed
explanations
In compliance with the requirement of the Listing Regulations, the key financial ratios
of the Company along with explanation for significant changes (i.e. 25% or more as
compared to the immediately previous financial year will be termed as "significant
changes"), has been provided here under:
| Sr. No. |
Particulars |
2022-23 |
2021-22 |
| 1 |
Debtors to Sales (in Days)* 1 |
51 |
77 |
| 2 |
Inventory to Turnover (In Days)* 2 |
101 |
140 |
| 3 |
Interest Coverage Ratio*3 |
2.50 |
1.36 |
| 4 |
Current Ratio |
1.75 |
1.89 |
| 5 |
Debt Equity Ratio |
0.44 |
0.34 |
| 6 |
Operating Profit Margin (%) |
6.64% |
5.91% |
| 7 |
Net Profit Margin [excluding exceptional items](%)*3 |
2.11% |
0.60% |
| 8 |
Return on Net Worth [excluding exceptional items] (%)*3 |
6.93% |
1.55% |
1. On a/c of higher volume of business/sales/purchases, realizations and payments
during the year in comparison to the previous year.
2. On a/c of higher volume of business/sales/purchases, realizations and payments
during the year in comparison to the previous year.
3. Yielding of higher Net Profits in comparison to previous year wherein the overall
business was recouping from the pressure of Covid-19.
Cautionary Statement: Statements in the Managements discussion and analysis,
describing the Companys objectives, expectations and industrial outlook, may constitute
forward looking statement within the meaning of applicable laws. The actual results might
differ materially from those either expressed or implied.
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