Mirza International Ltd Management Discussions.

Economic Overview


Financial Year 2018-19 was challenging for the global economy. Global growth in 2019 has been downgraded to 2.6%, 0.3% point below previous forecasts, reflecting weaker-than expected international trade and investment at the start of the year. Growth is projected to gradually rise to 2.8% by 2021, predicated on continued benign global financing conditions, as well as a modest recovery in emerging market and developing economies (EMDEs) previously affected by financial market pressure. However, EMDE growth remains constrained by subdued investment, which is dampening prospects and impeding progress toward achieving development goals. Risks are also firmly on the downside, in part reflecting the possibility of destabilizing policy developments, including a further escalation of trade tensions between major economies; renewed financial turmoil in EMDEs; and sharper-than-expected slowdowns in major economies. It is therefore urgent for EMDEs to reinforce policy buffers and build resilience to possible negative shocks, and to implement reforms that promote private investment and improve public sector efficiency. Efforts to strengthen access to markets and technology while boosting the quality of infrastructure and governance should be prioritized and be implemented through cost-effective and private-sector-led solutions. Structural reforms aimed at improving the business climate would also boost growth prospects. Well-designed social safety nets and active labor market policies are key to managing risks and protecting vulnerable groups.

(Source: Global Economic Prospects. June 2019, World Bank)


India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships.

Indias Gross Domestic Product (GDP) is estimated to have increased 7.2% in FY 2017-18 and 7% in FY 2018-19. India has retained its position as the third largest startup base in the world with over 4,750 technology start-ups. Indias labour force is expected to touch 160-170 Million by 2020, based on rate of population growth, increased labor force participation, and higher education enrollment, among other factors, according to a study by Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Thought Arbitrage Research Institute. Indias foreign exchange reserves were US$ 405.64 Billion in the week up to March 15, 2019, according to data from the Reserve Bank of India.

Numerous foreign companies are setting up their facilities in India on account of various government initiatives like Make in India and Digital India. The Honble Prime Minister of India, Shri Narendra Modi, has launched the ‘Make in India initiative with an aim to boost the manufacturing sector of Indian economy, to increase the purchasing power of an average Indian consumer, which would further boost demand, and hence spur development, in addition to benefiting investors. The Government, under the Make in India initiative, is trying to give boost to the contribution made by the manufacturing sector and aims to take it up to 25% of the GDP from the current 17%. Besides, the Government has also come up with Digital India initiative, which focuses on three core components: creation of digital infrastructure, delivering services digitally and increasing the digital literacy.

India is expected to grow to a US$ 6 Trillion economy by FY_2026-27 and achieve upper-middle income status on the back of digitization, globalization, favorable demographics, and structural reforms.

Indias revenue receipts are estimated to touch Rs 28-30 Trillion (US$ 385-412 Billion) by 2019, owing to the Governments measures to strengthen infrastructure and reforms like demonetization and Goods and Services Tax (GST).

India is also focusing on renewable sources to generate energy. It is planning to achieve 40% of its energy from non-fossil sources by 2030. Currently, 30% of the countrys total installed capacity comes from renewables. It also has plans to increase its renewable energy capacity to 175 GW by 2022.

India is expected to be the third-largest consumer economy as its consumption may triple to US$ 4 Trillion by 2025, owing to shift in consumer behavior and expenditure pattern, according to_ a Boston Consulting Group (BCG) report; and is estimated to surpass the United States (US) to become the second-largest economy in terms of purchasing power parity (PPP) by the year 2040, according to a report by PricewaterhouseCoopers.

Industry Structure and Developments

Leather is one of the most widely traded commodities globally. The growth in demand for leather is driven by the fashion industry, especially footwear. Apart from this, furniture and interior design industries, as well as the automotive industry also demand leather.

The Indian leather industry has a place of prominence in the Indian economy due to the substantial export earnings it generates and its strong growth. It accounts for around 12.93% of the worlds leather production of hides/skins.

Indias Leather Exports

Indias leather industry has grown drastically, transforming from a mere raw material supplier to a value-added product exporter. The Council for Leather Exports (CLE) is an autonomous non-profit organization, which is entrusted with export promotion activities and the development of the Indian leather industry. About 3,500 companies manufacturing/exporting leather and leather products are members of the Council.

The US is the largest market for the Indian leather industry. To tap this market further, the Indian leather industry is increasing its capacities with financial assistance from the Government under the Integrated Development of Leather Sector. The unique selling proposition of the Indian leather industry continues to be its huge raw material base, strong products, and availability of huge labor. The CLE has also requested the Government to reduce GST rate to 12% from the existing 18% on footwear priced above Rs 1,000, to boost manufacturing and exports.

As per officially notified DGCI&S, monthly export data, the export of Leather and Leather products for the period_ April-March FY 2018-19 touched US$ 5,690.99 Million_as against the performance of_US$ 5,740.98 Million in April–March FY 2017-18, recording a_marginal decline of 0.87%._ In rupee terms, the export touched Rs 397,930.43 Million in April–March FY 2018-19_as against Rs 370,034.14 Million in April–March FY 2017-18, registering a_ positive growth of 7.54%.

Export of different categories of Footwear (leather & non-leather and components) holds a major share of about 50.34%. This is followed by Leather Goods & Accessories with a share of 24.84%, Finished Leather 13.29%, Leather Garments 8.71% and Saddlery & Harness 2.81%.

Though export of finished leather and leather garments contracted in rupee terms in FY 2018-19, the industry was able to achieve overall positive growth due to good growth levels shown by other segments such as leather footwear (8.98%), leather goods (13.78%), saddlery and harness (10.74%) and footwear components (4.21%).

For FY 2019-20, the CLE is aiming to achieve 9% to 10% growth in exports of leather and leather products, for which it has planned a comprehensive and extensive marketing campaign involving more than 20 events.

As per Indian leather export data, the country is exporting these products from its 15 different states. These are also the largest leather producing states in India. Tamil Nadu and Uttar Pradesh are the largest states from where India exports leather and recorded share value of 50% and 40% respectively. It is followed by West Bengal (4%), Maharashtra (3%) and Himachal Pradesh (1%).

Further, the leather export of India is done through 21 different Indian ports including air, land and sea. Chennai air is the biggest port departing maximum leather shipments and records around 40% of shipments from the total exports.

Footwear Industry

The footwear sector is a very significant segment of the leather industry in India; rather it is the engine of growth for the entire Indian leather industry.

India is the second-largest global producer of footwear after China, accounting for 13% of global footwear production of 16 Billion pairs. India produces 2,065 Million pairs of different categories of footwear (leather footwear - 909 Million pairs, leather shoe uppers - 100 Million pairs and non-leather footwear – 1,056 Million pairs). India exports about 115 Million pairs.

The footwear sector is now de-licensed and de-reserved, paving the way for expansion of capacities on modern lines with state-of-the-art machinery. To further assist this process, the Government has permitted 100% Foreign Direct Investment through the automatic route for the footwear sector.

Growth Drivers

Favorable Global Opportunities: The Global Footwear Market is expected to garner US$ 371.8 Billion by 2020, registering a CAGR of 5.5% during the forecast period FY 2015 – 2020. The rising demand for fancy, trendy yet comfortable footwear among all age groups is a key factor driving the global footwear industry. The global footwear market is segmented by type of footwear, end users of footwear, various platforms for sale of footwear, material used, and their sales across various geographies. Asian countries, such as China and India are major exporters of leather footwear across developed countries (UK and US).

Leather footwear are premium products occupying a significant market share in the global market for footwear. Additionally, rising health concerns are influencing individuals to perform indoor and outdoor physical activities. This trend has generated a high demand for athletic shoes, in turn increasing the demand for footwear. Over the past decade, the global market for footwear has witnessed a steady growth and is anticipated to continue at the same pace in the years to come. The estimation of global market is based on revenue generated by the sale of footwear across different geographic regions.

High Government Focus: The Government of India had identified the leather sector as a focus sector in the Indian Foreign Trade Policy in view of its immense potential for export growth prospects and employment generation. Accordingly, the Government is also implementing various Special Focus Initiatives under the Foreign Trade Policy for the growth of leather sector. With the implementation of various industrial developmental programmes as well as export promotional activities, and the industrys inherent strengths of skilled manpower, innovative technology, increasing industry compliance to international environmental standards, and dedicated support of the allied industries, the Indian leather industry aims to augment the production, thereby enhancing export, and resultantly create additional employment opportunities.

Robust Domestic Demand: The Indian footwear industry has a robust growth outlook, led by higher demand for fashionable and comfortable footwear. Currently, the Indian footwear market is relatively underpenetrated with an average per capita consumption of only 1.7 pairs per annum vis--vis the global and developed countries average of 3 and 5 pairs respectively. Rapid urbanization, favorable demographics, growing size of the middle-class segment, rising disposable income and changing lifestyles are likely to generate a higher demand for branded offerings. The stabilization of GST also augurs well for the growth of the organized sector. In the womens footwear segment, demand will be driven by growing fashion consciousness and steady increase in the number of working women. The market dynamics are also fueled by the strong growth of the e-commerce platform with young India increasingly shopping online for convenience and better experience.


1. The Company brands are well-positioned to address the opportunities in the footwear segments across various categories. Additionally, brand extensions in apparels and accessories increase the opportunity matrix. To leverage the success of its brands, the Company is continually expanding its distribution network to connect better with its consumers and increase market share.

2. The Company has introduced independent sub-brands catering to middle-class consumers without brand dilution. The countrys burgeoning middle-class segment and rise in disposable incomes with higher economic growth hold significant promise for growing consumerism.

3. Indias youth are aspirational, fashion-conscious and well aware of global trends and styles. This offers branded players strong opportunity to grow their market share.


1. Foreign brands bring in more competition and hence can affect_business growth.

2. Local brands with good designs and higher profit margins for retailers may result in lesser shelf space for the Companys brand offerings, which in turn can adversely impact sales.

3. Cheap imitations/fake products cause threat to the market share of the Companys brands.

Segment-Wise Performance

The Companys business segments are primarily Shoe Division and Tannery Division. During the year under review, revenue from the Shoe Division increased to Rs 871.57 Crore as against Rs 803.51 Crore in the previous year. Revenue from the Tannery Division was Rs 179.11 Crore for the year as against Rs 186.79 Crore in the previous year.

Overseas Revenue

Weak global market sentiments impacted the Companys overseas operations. As a conscious and pragmatic decision, the business strategy was also more inclined towards leveraging domestic opportunities. Revenue from overseas sales during the year under review stood at Rs 501.87 Crore as against Rs 523.41 Crore in the previous year. While revenue from UK operations decreased from Rs 376.18 Crore to Rs 317.20 Crore in FY 2018-2019, revenue from the US operations increased to Rs 88.48 Crore from Rs 77.78 Crore in the previous year.

Domestic Sales

During the year under review, the Company focused primarily on developing and expanding the domestic market. Domestic sales stood at Rs 651.92 Crore as against Rs 449.09 Crore in the previous year, thus registering an increase of 45.16% year-on-year. The robust growth demonstrates that the Companys performance is up to the mark in the domestic market, the success of its domestic expansion strategy, and the high consumer admiration and confidence enjoyed by its brands.

Details of significant changes in key financial ratios along with explanation

In compliance with the requirement of the Listing Regulations, the key financial ratios of the Company alongwith explanation for significant changes (i.e., for change of 25% or more as compared to the immediately previous financial year will be termed as ‘significant changes), has been provided hereunder:

Sl. No. Particulars# FY 2018-19 FY 2017-18
(i) Debtors Turnover 6.15 8.37
(ii) Inventory Turnover 2.66 2.54
(iii) Interest Coverage Ratio 3.21 5.72
(iv) Current ratio 1.56 1.61
(v) Debt Equity Ratio 0.82 0.75
(vi) Operating Profit Margin (%) 10 15
(vii) Net Profit Margin (%) 4 8
(viii) Return on Net worth (%) 8 14

# The Government of India has implemented Goods and Services Tax (GST) from July 2017 subsuming excise duty, service tax and various other indirect taxes. Accordingly, the Revenue for the financial year ended March 31, 2019 as reported in the Statement of Profit and Loss are not comparable with the previous financial year. Therefore, the Ratio relating to Turnover are not comparable with the previous financial year.

a. The significant changes in Operating Profit Margin (%), Net Profit Margin (%) and the Net worth Ratio (%) is due to cost efficiencies/productivity improvement and premiumisation of our product range leading to increased sales.

b. The significant changes in Debtor Turnover Ratio has been recorded on account of increase in turnover.

c. The significant changes in Interest Coverage Ratio has been recorded due to significant decrease in Earnings Before Interest and Taxes (EBIT).

Key Brands

REDTAPE: Known for its unparalleled comfort, international styles and finesse, REDTAPE has entrenched its position in the niche segment of high-fashion and lifestyle brands. Its unmatched quality, skilled craftsmanship and trendy products have enabled it to capture opportunities in both international and domestic markets. The brands leading overseas markets include the UK, US, France, Germany, West Asia and South Africa, where it is sold through the Companys extensive distribution channel. The brand has been endorsed in the past by the leading actor and style icon Salman Khan.

REDTAPE footwear has emerged as a leader in the high-end fashion footwear segment. The footwear range is designed in the Companys in-house design studios located in UK and Italy. Product manufacturing is also undertaken internally at the Companys integrated facilities while ensuring strict adherence to international standard of quality and materials.

REDTAPE forayed into the apparel sector in 2006 and unveiled mens clothing and a line-up of accessories. This range offers an eclectic mix of casual and semi-formal wear including shirts, t-shirts, trousers, denims, sweaters, jackets and accessories such as belts, socks, handkerchiefs and wallets.

REDTAPE Athleisure: Leveraging the brand equity of REDTAPE, the Company has launched a new brand REDTAPE Athleisure in the mens sports shoes segment. REDTAPE Athleisure is targeted to meet the aspirations of young India eager who have embraced an active lifestyle and seek quality athletic footwear. The offerings are available at attractive prices to reach out to a wider market.

BOND STREET: The Company has launched Bond Street to cater to the domestic demand for mens fashionable casual footwear at affordable prices. The target audience is primarily consumers located in Tier II and III cities who seek value-fashion brands.

MODE: The Company has launched this brand to address the demand for womens footwear in both casual and sportswear segments. The offerings are stylish, comfortable and available at attractive prices.


The Company has an established leadership position in the industry and is one of the trusted names in branded footwear and accessories. With change in customer preferences, footwear has become a style statement, especially among the teenagers, youth and the af_uent working class. The domestic demand for footwear is projected to grow at a fast pace. The inclination towards purchase of products manufactured by established brands is also increasing. For retail companies, the e-commerce platform, through pursuing brand presence in social media, blogs and online advertising, is fast catching up with the brick and mortar sales model. The Company is proactively engaged in taking appropriate steps to tap these opportunities in order to improve its market share and retain its leadership position in the organized footwear and accessories sector of the industry.

Risks and Concerns

The Company believes that risks that are well managed can create opportunities, whereas risks that are incorrectly managed could lead to financial and reputation loss. The Company monitors its major risks and concerns at regular intervals. Appropriate steps are taken by the Board to mitigate such risks.

Internal Control Systems and their Adequacy

The Companys internal control systems are commensurate with the nature of its business and the size and complexities of its operations. These systems are designed to ensure that all assets of the Company are safeguarded and protected against any loss and that all transactions are properly authorized, recorded and reported.

Material Developments in Human Resources/ Industrial Relations Front, Including Number of People Employed

Human Resources

It is the Companys firm belief that its people constitute the primary source of its sustainable competitive advantage and must always be at the heart of its corporate purpose. For success in the footwear market, particularly, skills and workmanship are important to create superior products with excellent finish. Recognizing the invaluable contribution of its people in creating footwear that is well-accepted in international and domestic markets, the Company gives significant importance to its human capital. It remains dedicated for continuous enhancement of their skills and knowledge by way of training and supervision. The Companys focused endeavors towards promoting trust, transparency and teamwork improved employee productivity at all levels. As on March 31, 2019, the total number of employees in the Company stood at 3,850.

Cautionary Statement

Statement in this Management Discussion and Analysis describing the Companys objective, projects, estimates and expectations may be ‘forward-looking statement within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward-looking statements contained in this document due to various risks and uncertainties. Several factors could make a significant difference to the Companys operations. These include economic conditions, government regulations and tax laws, political situation, natural calamities, among others, over which the Company does not have any direct control.