relaxo footwears ltd share price Management discussions

This report contains statements that are the Companys beliefs and may be considered to be "Forward Looking Statements" that describe our objective, plans or goals. All these forward looking statements are subject to certain risks and uncertainties, including, but not limited to, government action, local & global political or economic developments, changes in legislation, technology, risk inherent in the Companys growth strategy, dependence on certain suppliers and other factors that could cause our actual results to di_er materially from those contemplated by the relevant forward looking statements. These forward looking statements included in this report are made only as on the date of this report and we undertake no obligation to publicly update these forward looking statements to reflect subsequent events or circumstances.

Industry structure and developments

Lifestyles changes, economic growth, and heightened focus on health, especially in the wake of the pandemic, have boosted demand for footwear globally. Further, there is a gradual shift in consumer perception towards footwear, elevating it from being a functional necessity to a lifestyle accessory, requiring occasion based usage, leading to an increase in overall demand. Global footwear market trends indicate a robust growth with CAGR of 15 – 17% over FY22-25.

Rising disposable incomes, easy accessibility and a change in attitude is prompting Indians to move up the value chain, seeking products for di_erent use occasions, spurring design & development of new segments in footwear. This is fuelling growth in individual categories, be it slippers, sandals or shoes, in terms of price, performance and aesthetics, driving industry leaders to innovate their o_erings continually.

India is the second largest producer of footwear globally, next only to China. As one of the fastest growing industries, it o_ers an array ranging from traditional to the modern, in both leather and non-leather categories. Indian footwear industry not only generates employment opportunities nationwide but also contributes to the economy. According to Invest Indias report on the non-leather footwear industry in India, the sector is poised to grow eight-fold by 2030 wherein Indias share will soon cross the $6 billion mark by 2024. Further, the share of unorganised sector is gradually declining, paving way for growth of branded footwear.

Socio economic advances in India and a burgeoning middle class with rising disposable income and growing aspirations is hastening shift towards brands and premium products, driving growth for the Indian footwear market. A dynamic lifestyle, evolving purchase habits and impact of social media has brought about rapid changes in fashion trends, influencing footwear industry as well. Increasing awareness towards fitness and well-being has only further spurred footwear styling and growth, more so in the branded segment.

Additionally, growth of online market places supported with rapidly developing infrastructure for logistics and billing has created an enabling landscape for tapping latent demand across the country. Quick to spot this emerging trend, the companies too have rejigged their strategies and earmarked significant investments for this. Advancements in big data and analytics provide invaluable insights about consumer behaviour, useful for product development and strategic marketing planning. Innovative experiences of Omni channel presence, BNPL (Buy Now, Pay Later) and Quick Commerce are building excitement into this arena and startups of all kind are jumping onto this bandwagon. On their part, Indian consumers are increasingly at ease with technology and digital ecosystems, readily buying in to this transition even as a bonanza of choice, convenience and price optimisation makes them the ultimate winner.

Opportunities and challenges Opportunities:

With broad macro factors turning favourable, Indian footwear industry is poised for rapid growth. Infrastructural development pacing up, increasing urbanisation, changing consumption patterns, growth in organised retail and conducive business environment will all provide momentum to the industry. Even as presently about 90% of the footwear produced in India is consumed domestically, this is expected to scale up in near future.

Indian footwear industry enjoys a competitive advantage over its international peers as it has easy access to cost e_cient skilled manpower and abundant raw material thus holding potential of evolving into a manufacturing hub for exports. With conducive policies it can generate significant employment, primarily for weaker sections of society.

The India growth story has also brought about evident changes on the consumption front.

Conducive business environment and positive socio economic changes within tier II & III cities have opened up new vistas of growth, making consumers more conscious about available choices in footwear and means to access them with ease. More women entering the workforce and a younger population with evolving lifestyle has only further aided this transition to the organised sector.

Challenges, risks & concerns:

FY23 has seen great unrest globally amidst geo political tensions and a raging war in Europe with no signs of abating. This has had catastrophic impact on supply chains internationally, disrupting availability of raw materials and leading to inflationary pressures all across.

The Indian footwear industry is subject to regulatory pressures and increasing requirements of compliance to evolving commercial and technical norms can a_ect business and financial performance, at least in the short run.

Even as the footwear industry is moving towards being an organised sector, large number of small scale players pose a strong price competition to those dealing in branded products, pushing them to embrace greater technology and innovation in their manufacturing and marketing processes.

While the impact of Covid-19 pandemic has slowed down, it is still far from being over, rearing its ugly head every once in a while, casting a dark shadow over life and business alike, subduing outlook before complete normalcy returns.

Economic and political factors, both national and global, that are beyond control, and factors force majeure may directly a_ect performance of the Company as well as the footwear industry.

These factors include interest rates and its impact on availability of retail space, rate of economic growth, fiscal and monetary policies of governments, inflation, deflation, consumer credit availability, consumer debt levels, tax rates and policy, unemployment trends, terrorist threats and activities, worldwide military and domestic disturbances and conflicts, pandemics, and other matters that influence consumer confidence and spending.

The Company is subject to risks arising from material price changes and exchange rate fluctuations which may adversely a_ect our financial performance.

The raw material prices, notwithstanding slight moderation in recent months, continue to remain high which, if sustained, may negatively impact profitability of the industry in FY24.

During the normal course of business, the competition is ever increasing from domestic and international brands. The availability and retention of talent, tackling counterfeit goods, product quality management, innovation and new product development, rapidly changing consumer preferences, impact of strategic and marketing initiatives, data security etc. may a_ect your Company. Your Company has 8 (eight) state of art manufacturing units and normal challenges of labour management, technological developments, etc. are, nonetheless, risks faced by your Company.

Your Company monitors its major risks and concerns at regular intervals. Appropriate steps are taken in consultation with all concerned including the Risk Management Committee and the Audit Committee of the Board to identify and mitigate such risks. The Board is responsible for reviewing the Enterprise Risk Management Policy of the Company whereas the Audit Committee of the Board is responsible for evaluating the risk management systems in the Company.

Your Company, with over four decades of experience in manufacturing and marketing of footwear, is better placed than its peers to counter these uncertain times.

Internal Control System and its adequacy

A separate paragraph on internal control systems and its adequacy has been provided in the Boards Report.

Human Resources/Industrial Relations

Over the last year, your Company has taken various initiatives for employee benefit and retention. The detailed information is provided at point no. 3 of the Boards Report. The relationship of your Company with employees has been cordial during the year. As on March 31, 2023, the total number of employees of the Company are 6,736 against 8,026 on March 31, 2022.

Financial Performance of the Company

During the FY23, your Company achieved a turnover of H2782.77 crores and profit of H154.47 crores. Detailed report on financial performance of the Company is provided in point no. 2 & 3 of the Boards Report.

The Board has recommended a final dividend @ 250% equivalent to H2.50/- per equity share of H1/- each fully paid up for the FY23.

The capital expenditure incurred during the FY23 amounted to H174.35 Crore as compared to H145.87 Crores in FY22. The capital expenditure was in line with the growth strategy of your Company and was funded through internal accruals.

Your Company has no term loan outstanding as on March 31, 2023.

Your Company has only one segment i.e. ‘Footwear and related products and the performance is already captured in point no. 2 & 3 of the Boards Report and Financial Statements.

Details of Significant changes in Key financial ratios along with explanation

In compliance with the requirement of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred as Listing Regulations), the key financial ratios along with explanation for significant changes (i.e. changes of 25% or more as compared to the immediately preceding financial year) has been provided hereunder:

S. N.

Particulars UOM 2022-23 2021-22 Change in % between Current FY & Previous FY Explanation/ Reason for Change
1 Debtors Turnover Times 9.69 11.36 -14.70 -
2 Inventory Turnover Times 3.20 3.31 -3.32 -
3 Interest Coverage Ratio Times 11.92 21.26 -43.93 Due to lower EBIT & increase in Interest Cost
4 Current Ratio Times 2.54 2.57 -1.17 -


Debt Equity Ratio Times - 0.01 -100.00 There was no utilisation of working capital limits at year end
6 Operating Margin i.e. EBITDA % 12.07 15.67 -22.97 -


Net Profit Margin % 5.59 8.83 -36.69 Net Profit margin was impacted mainly due to higher raw material prices and subdued demand


Return on Net worth % 8.55 13.96 -38.75 Return on Net worth was impacted due to lower profits

Net Profit Margin, Operating Margin (EBITDA) and Return on Net worth were impacted due to higher raw material prices.


The India growth story is going strong with the country growing to claim its spot as fifth largest economy in world rankings. India continues to be a preferred investment destination for FDI among all emerging economies. A stable political environment providing infrastructural development, conducive economic policies, ease of doing business and a growing middle class prophesises Indias supremacy over the next decade.

With gradual settling down of raw material prices and supply chain stability we can expect improved financial performance.

While consumer expectations are always rising over time, your Company is well ahead of the curve with all its brands in a position of leadership. A ‘Customer First approach coupled with a strong, committed distribution network supported by aggressive, proactive marketing strategies provide a strong moat against competitive threats.