iifl-logo

Redtape Ltd Management Discussions

147.3
(0.99%)
Apr 2, 2025|12:00:00 AM

Redtape Ltd Share Price Management Discussions

Forward Looking Statement

The statements in this Management Discussion and Analysis Report concerning the Companys goals, projections, estimates, expectations, or predictions may be considered ‘forward-looking statements as per applicable securities laws and regulations. It is important to acknowledge that actual outcomes may differ significantly from those indicated in these statements. Several key factors could influence the Companys operations, including the availability and pricing of raw materials, cyclical demand and pricing trends in its primary markets, changes in government regulations and tax regimes, economic developments both in India and in the countries where the Company operates, and other related factors.

Unless otherwise specified or the context otherwise requires, all references to "we," "us," "your", "our," "the Company," or "REDTAPE" pertain to REDTAPE Limited.

INDUSTRYSTRUCTURE AND DEVELOPMENTS

Footwear Industry

Economic think tank "Global Trade Research Initiative"

said that the Indian footwear market, valued at USD 26 billion, is projected to reach USD 90 billion by 2030.This growth will be driven by two main changes - a significant increase in the demand for non-leather footwear (like sports shoes, running shoes, casual wear, and sneakers), rising from 25% to 75% market share by 2030; and a shift in leather shoe production from small-scale, cottage industries to large corporates.

India is increasingly adopting non-leather footwear, a trend driven by younger, fashion-conscious consumers with more disposable income. This shift is supported by factors like rising middle class, urbanization, and a preference for branded and casual footwear. E-commerce has also expanded access to various footwear styles. Footwear has become a fashion statement, leading to an increase in both the volume and price of sales. People now own multiple pairs of footwear for different occasions, including casual, formal, dress, and athletic styles.

India is the second-largest global producer of footwear, accounting for 13% of global footwear production and 2.2% of global exports.

Given the enormous growth of the footwear industry over the years, REDTAPE feels innovating not only in its products, but also in the way of presenting the brand to the consumer and the same has become a part of brand identity. Your Company strives to stand by its values which is the strength of its brand.

Apparel Industry

• Global Industry

According to McKinseys analysis of fashion forecasts, globally the apparel and retail industry will post top-line growth of 2 to 4 percent in 2024, with regional and country-level variations. Once again, the luxury segment is expected to generate the biggest share of economic profit. Accordingly, for FY2024, the apparel market size is estimated to USD 1.36 trillion and is expected to reach USD 1.78 trillion by 2029, this growth can be primarily attributed to increase in the popularity of e-commerce platforms, facilitating manufacturers to serve a global clientele base.

• The Indian Apparel Industry

As Indias per capita income is experiencing rapid growth, among various categories, fashion apparel is anticipated to exhibit the highest growth rate and maintain its position as one of the largest segments. With increasing affluence, consumers are likely to enhance their fashion preferences and keep up with evolving trends driving sustained demand for apparel products in the market,

In post-pandemic world, many fashion and apparel retailers have continued to expand their retail footprint. The year 2023 highlighted that e-commerce and omnichannel play become a permanent feature in the retail industry. Several brands have increasingly adopted omnichannel play, leveraging their physical stores to fulfil online orders and enhancing customer value proposition.

Indias youthful population distinguishes it from other major economies, presenting a demographic advantage that is expected to drive the growth of organized retail. With a median age of around 28.2 years, young consumers are more inclined towards discretionary spending and are adept at rapidly adopting and interpreting fashion trends. As a result, the expected contributions from "Gen Z and Millennials" are poised to significantly enhance the growth prospects of the apparel sector.

The Indian fashion and lifestyle industry is set for dynamic growth by embracing innovative strategies, leveraging technological advancements, expanding retail operations, employing better sustainable practices, and improving employee engagement. Revenue in the Indian apparel market is projected to reach USD 105.5 billion in 2024, presenting significant opportunities for brands to extend their geographical footprint. In addition to retail expansion, brands are strategically focusing on niches such as e-commerce, omnichannel approaches, and the incorporation of advanced technologies, particularly Artificial Intelligence.

The industry is witnessing a paradigm shift towards sustainability, paving the way for a greener future Growing environmental awareness is prompting brands and retailers to adopt sustainable practices, as evidenced by the growth of the ethical fashion market. Furthermore, Indias burgeoning population, increasing disposable income, and evolving fashion trends are expected to bolster the growth of the apparel market.

The government has also introduced initiatives like the Amended Technology Upgradation Fund Scheme and the Advance Authorisation Scheme, aimed at enhancing and increasing the production of textile and apparel products in the country. Additionally, the Government of India has approved the continuation of the Rebate of State and Central Taxes and Levies (RoSCTL) scheme until March 31, 2026, further supporting the industrys growth.

Outlook

Indian economy is likely to grow at 7% in the FY25, according to the Reserve Bank of Indias (RBI) annual report. The outlook for the Indian economy remains bright, underpinned by a sustained strengthening of macroeconomic fundamentals, robust f nancial and corporate sectors and a resilient external sector, said the RBI.

The governments continued thrust on capex while pursuing fiscal consolidation, and consumer and business optimism augur well for investment and consumption demand, as per the central banks report.

According to the top bank, the easing of supply chain pressures, broad-based softening in core inflation and early indications of an above normal southwest monsoon augur well for the inflation outlook in 2024-25. Although, low reservoir levels, especially in the southern states and the outlook of above normal temperatures during the initial months of 2024-25 need close monitoring, says the top bank.

Headline inflation moderated by 1.3 percentage points on an annual average basis to 5.4% in 2023-24.

The volatility in international crude oil prices, the persisting geopolitical tensions and elevated global financial market volatility also pose upward risk to the inflation trajectory.

OPPORTUNITIES AND THREATS

Opportunities:

• The growth of the retail sector and e-commerce will boost the growth of the Footwear and Retail Industry.

• We are planning to open approximately 100 retail outlets across India, with a particular focus on expanding our presence in South India.

• Rising disposable incomes will stimulate domestic demand.

• Growing popularity of ‘fast fashion product will contribute to the growth of the Footwear and Apparel Industry.

• We have significant control over our global supply chain, with major vendors BIS (Bureau of India Standards) certified under the Ministry of Consumer Affairs, ensuring high quality and reliability.

• We are proud to highlight that our company has established a robust international presence in Turkey, Australia, the Middle East, Sri Lanka, Bangladesh, and Nepal. This strategic expansion enables us to leverage the significant growth opportunities available in these dynamic economies.

• There is significant potential for growth in emerging markets like India, China, and Southeast Asia, where the middle class is expanding, and the demand for sportswear is increasing. REDTAPE can focus on expanding its presence and increasing its market share in these regions.

• Proliferation of e-commerce market provides opportunities for REDTAPE to increase its online sales and reach more customers.

• Investing in a user-friendly online shopping experience, targeted digital marketing, efficient logistics, and innovative, fashionable athleisure and casual wear can help REDTAPE capitalize on market trends and changing consumer preferences.

• Capitalizing on urbanization in tier 2 and tier 3 cities, we aim to capture growth and diversify our customer base through strategic expansion and an advanced, diverse footwear range including outdoor, performance, and womens shoes.

Your Company continuously explores and embraces new ideas to exceed customer expectations, incorporating innovation into both its products and brand identity, while adhering to core values that align with its purpose and long-term vision for all stakeholders.

Threats, risk and challenges:

• Being a labour-intensive sector, the shortage of skilled workforce may impact the operations and result in inability to complete orders.

• Stiff competition in the global market.

• Todays informed consumers demand branded, aspirational products, challenging the footwear and apparel industry to swiftly adapt and ensure transparency and security in purchasing.

• Your Companys limited presence in some emerging Southeast Asian markets, compared to competitors, may restrict its ability to capitalize on significant growth opportunities.

• Major threats include rapidly changing customer preferences, raw material shortages, inflation, rising interest rates, limited retail space, government policies, geopolitical tensions, and challenges in product quality and innovation.

REDTAPEs proactive risk management, with Board of Directors reviews and Risk Management Committee oversight, enables effective navigation of uncertainties and challenges, ensuring sustained growth and success in the dynamic footwear industry.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

We have an adequate system of internal financial controls in place commensurate with the size, scale and complexity of the operations of the Company. We have documented policies and procedures covering all financial and operating functions. These controls have been designed to provide a management efficiency, measurability and verifiability, assurance regarding maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations, and protecting assets from unauthorized use or losses, executing transactions with proper authorisation, compliances with regulations. This is to timely identify and manage the Companys risks (operational, compliance-related, economic and financial).

We have continued our efforts to align all our processes and controls with global best practices.

Some significant features of the internal control of systems are:

• The Audit Committee has been constituted and it regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with accounting standards as well as reasons for changes in accounting policies and practices, if any.

• A monitoring process is in place to track the implementation of audit recommendations, including those related to enhancing the Companys risk management systems.

• Documentation of major business processes and testing thereof including financial closing, computer controls and entity level controls, as part of compliance program, as required under the Companies Act, 2013.

• Robust Enterprise Resource Planning, supplier relations management and customer relations management connect our different locations, dealers and vendors for efficient and seamless information exchange.

• Detailed business plans for each segment, Investment Strategies, year-on-year reviews.

• A well-established, independent, multi-disciplinary Internal Audit team operates in line with governance best practices. It reviews and reports to Management and the Audit Committee about compliance with internal controls and the efficiency and effectiveness of operations as well as the key process risks.

• The Board of Directors, responsible for the internal control system, sets the guidelines and verifies its adequacy, effectiveness and application.

• The Company this year get its Internal Financial Control System (IFCS) checked & verified by the Grant Thornton Bharat LLP as well and the report of the same is duly presented to the audit committee, Internal Auditors, Statutory Auditors and further discussed with the Board of Directors. No adverse findings were recognized during such verification.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES

REDTAPE, as an organization, places its Employees at the heart of its operations, with a belief that they are the driving force behind the companys success. The Organization believes that our Employees are the cornerstone of its ongoing success in all segments. The organization believes in human resource development, which identifies pools of competences essential to provide desired output and prioritizes the development of those talents through ongoing training. The Company provides an array of learning opportunities as well to help employees improve their existing skills and knowledge.

As a new-age organization, the companys goal is to establish a strong team with an approach which optimizes for both present challenges and prospective possibilities of growth within the organization. The staff members as an asset of our company are engaged with businesses to recruit suitable candidates for all vacant positions to create a pool of sustainable talent. The organizations leadership engages with high performers and establishes clear development paths for them. The organization provides lucrative incentives to stimulate and engage employees in achieving goals. The company has developed a strategy to identify possible successors for various positions throughout the organization.

The organization encourages its staff to experiment with novel processes in order to set themselves free from their worn-out routine. The company also makes an effort to

arrange events that foster teamwork. Furthermore, the staff retention tool has been strategically placed throughout the companys operations.

The Organization also fosters a fair and inclusive work environment through multiple initiatives that encourage employees to learn from one another and reach their full potential. With strong confidence in the value of its people, REDTAPE is constantly working to update and improve their abilities, keeping them nimble and responsive in a dynamic business environment.

The Human Resources and Secretarial Departments collaborate with other Functional Heads to prevent and address sexual harassment in the workplace. So, REDTAPE proudly proclaims that no charges have been fled under the Sexual Harassment of Women at Workplace

(Prevention, Prohibition, and Redressal) Act, 2013 during the time period under consideration.

REDTAPE LIMITED also yearns to provide a safe working environment to foster a sense of belonging in its employees. To ensure zero injuries and meet safety goals throughout the industrial unit and premises, a process of suggestions and continuous improvement has been developed.

Upholding ethical standards and fostering an inclusive workplace, REDTAPE seeks to sustain the dedication and excellence of its workforce in achieving the organizations objectives.

As of March 31, 2024, the companys on-roll employee strength stood at 867 compared to 803 the previous year.

FINANCIAL PERFORMANCE

The key indicators of the financial performance of the Company for the Financial Year 2023-24 were as under:

Amount in INR Lakhs
S r . Particulars No. Standalone Consolidated
F.Y. 2023-24 F.Y. 2022-23 F.Y. 2023-24 F.Y. 2022-23
1 Total Revenue 184464 146533 185597 147483
2 Total Expenses Excluding Finance Cost & Depreciation 152615 122533 152798 122683
3 EBITDA (Earnings before Interest, Depreciation & Tax) 31849 24000 32799 24800
4 Finance Costs 3244 1444 3251 1446
5 Depreciation & Amortization Expenses 5876 4444 5924 4444
6 Profit/ Loss before Exceptional items 22729 18112 23624 18910
7 Add: Exceptional items [Gain(+)/ Loss(-)] 0 0 0 0
8 Proft/Loss from continuing operations before Tax 22729 18112 23624 18910
9 Tax Expense 5749 4505 6000 4695
10 Proft/Loss from continuing operations After Tax 16980 13607 17624 14215
11 Proft/Loss from dicontinued operations After Tax 0 0 0 0
12 Profit/ Lossfor the year after Tax 16980 13607 17624 14215
13 Other Comprehensive Income -33 -234 -20 -234
14 Total Comprehensive Income 16947 13373 17604 13981
15 Basic EPS (Per Share of Rs. 2/-) (in Rs.) 12.29 9.85 12.75 10.29
16 Diluted EPS (Per Share of Rs. 2/-) (in Rs.) 12.29 9.85 12.75 10.29

Details of significant changes in key financial ratios along with explanation

Amount in INR Lakhs
Standalone Consolidated
FY 2023-24 FY 2022-23 Variation (in %) FY 2023-24 FY 2022-23 Variation (in %)
Debtors Turnover 20.98 20.80 0.87% 21.08 20.93 0.72%
Inventory Turnover 2.61 2.81 -7.12% 2.62 2.82 -7.09%
Interest Coverage Ratio 1.98 2.97 -33.12% 2.04 3.07 -33.55%
Current Ratio 1.46 1.37 6.57% 1.48 1.39 6.47%
Debt Equity Ratio 0.25 0.17 -47.06% 0.25 0.17 47.06%
Operating Profit Margin (%) 14.38 14.19 -1.34% 14.81 14.64 1.16%
Net Profit Margin (%) 9.27 9.33 -0.64% 9.56 9.68 -1.24%
Return on Net Worth 27.25 29.51 -7.66% 27.7 30.24 -8.40%

Cautionary statement

The Management Discussion and Analysis Report contains statements regarding estimates, expectations, or predictions, which may qualify as forward-looking statements under applicable laws and regulations. Actual results could differ significantly from these statements, whether expressed or implied. Key factors influencing the companys operations include demand-supply dynamics, fluctuations in raw material prices, shifts in government policies and tax regimes, global economic trends, as well as other variables like litigation outcomes and negotiations with labour.

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

Knowledge Center
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Capital Services Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Loading...

Follow us on

facebooktwitterrssyoutubeinstagramlinkedintelegram

2025, IIFL Capital Services Ltd. All Rights Reserved

ATTENTION INVESTORS

RISK DISCLOSURE ON DERIVATIVES

Copyright © IIFL Capital Services Limited (Formerly known as IIFL Securities Ltd). All rights Reserved.

IIFL Securities Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

ISO certification icon
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.