This report includes statements representing the Companys belief and may be regarded as Forward-Looking Statements describing our objectives and plans. These forward-looking statements are subject to various risks and uncertainties including but not limited to, government actions, local & global political or economic developments, legislative changes, technological advancements, risks inherent in the Companys growth strategy, reliance on specific suppliers and other factors that could lead to actual results which could materially differ from those anticipated by the pertinent forward-looking statements.
The forward-looking statements contained in this report are provided as on the date of this report, and we commit to continuously evaluate and update these statements as necessary to reflect any subsequent events or circumstances.
Industry Structure and Developments
The global footwear market has experienced a noteworthy rise in demand, primarily driven by lifestyle changes, economic growth and increased emphasis on health; particularly, in the aftermath of the pandemic. Consumers have shifted their perception of footwear from a mere functional requirement to a lifestyle accessory; necessitating occasion-based usage, thereby leading to a surge in overall demand. This trend is set to continue with a forecasted CAGR (Compound Annual Growth Rate) of 12 -14% over the next 5 (five) years1.
Indias Footwear Industry is flourishing and currently stands as the worlds second largest producer of footwear, following China. The Industry, which is growing at an unprecedented rate, offers a wide range of traditional and modern footwear in both leather and non-leather categories. The industry is a significant employer, providing nationwide employment opportunities and contributing extensively towards the Nations economy.
A report by Invest India on the non-leather footwear industry has predicted remarkable growth for the sector, with an anticipated 8 (eight) fold expansion2 by the year 2030. Additionally, the share of the unorganised sector is declining steadily; leading to the growth of branded footwear and BIS certified products.
The footwear market in India is experiencing a noticeable shift in consumer behaviour on the back of rising disposable income, greater accessibility to products and change in attitude towards health-conscious and fitness oriented activities. This has prompted individuals to seek out products that cater to specific use occasions that has led to the development of new segments in footwear. These are now driving growth in individual categories such as slippers, sandals and shoes. Industry leaders are continually Innovating their offerings with a focus on optimising price, performance and aesthetics to cater to the evolving demand.
1 https://www.maximizemarketresearrh.rnm
2 https://investindia.gov.in/
The industry is an essential aspect of Indias manufacturing sector and is expected to contribute significantly to the nations economic growth in the coming years. With the increasing demand of footwear globally, the Indian footwear industry is poised to become a significant player in the global market; offering unique and diverse products that appeal to customers worldwide.
Premiumization Trend in Footwear
In the recent years, India has experienced a significant surge in socio-economic progress, leading to a burgeoning middle class with rising disposable income and growing aspirations. This has accelerated the shift towards branded and premium products, driving growth in the Indian footwear market.
The dynamic nature of lifestyles, evolving buying habits and the impact of social media have brought rapid changes in fashion trends; leading to a substantial influence on the footwear industry. Consumers are now seeking footwear products that align with their evolving lifestyle and fashion preferences. The fashion industry is responding to these changes by offering a diverse range of footwear products that cater to the needs and preferences of consumers.
Furthermore, the increasing awareness towards fitness and well-being has additionally spurred the growth and styling of footwear; particularly, in the branded segment. Consumers are now seeking footwear products which not only look stylish but also provide comfort and support for their active lifestyles. The branded segment of the footwear market is particularly benefiting from this trend, with consumers seeking out premium footwear products that offer a blend of style, comfort and functionality.
All these factors have resulted into a significant rise in demand for premium footwear products and have accelerated the growth of the Indian footwear market. The industry is now undergoing a rapid transformation with new players entering the market and established players expanding their product portfolios to cater to the evolving needs of consumers. As the industry continues to evolve, it is expected that the demand for premium footwear products will continue to rise.
Growth of E-Commerce, Quick Commerce and Innovative Buying Experiences
In recent times, India is witnessing growth in online marketplaces, supported by rapidly developing logistics and technological infrastructure. This development has created an enabling landscape that makes it easier for businesses to tap into latent demand across the Country. Companies have quickly taken notice of this emerging trend and have reworked their strategies to capitalise it, earmarking sizeable investments in this area.
Furthermore, the introduction of innovative experiences such as Omni channel, BNPL (Buy Now, Pay Later), and Quick Commerce has added further excitement to this arena. These features have enabled businesses to create a more personalised and engaging shopping experience for their customers which has proven to be a major hit in the market. As a result, start-ups of all kinds are actively jumping on this bandwagon, seeking to leverage these features to their advantage. Notably, Indian consumers have become increasingly at ease with technology and digital ecosystems, making them more receptive to this transition. The abundance of choices, convenience and price optimisation that this landscape offers have made them the ultimate winners in this scenario.
Opportunities and Challenges
Opportunities:
The Indian Footwear Industry is expected to experience significant growth due to various favourable macro factors. The countrys infrastructure development, increasing urbanisation, changing consumption patterns, growth in organised retail and conducive business environment will all contribute to the industrys momentum. Although, ~ 90% of the footwear produced in India is consumed domestically, there is potential for this to increase in the near future.
The industry has a competitive advantage over its international counterparts given its access to cost-efficient skilled manpower and abundant raw materials; which has potential to become a manufacturing hub for exports; generating notable employment opportunities for the weaker sections of the society with the right policies in place.
The growth of Indias economy has led to noticeable changes in the consumption patterns of footwear. The positive socio-economic changes in tier II and III cities along with a conducive business environment, have opened up new opportunities for growth.
Challenges, Risks & Concerns:
FY23 was marred by significant unrest on a global scale, caused by geopolitical tensions and an ongoing war in Europe, which has continued into FY24 as well with tensions opening in West Asia as well. The resulting disruption in supply chains has led to the scarcity of raw materials, triggering inflationary pressures worldwide.
The Indian footwear industry is grappling with regulatory pressures and evolving commercial and technical norms that demand compliance, potentially impacting business and financial performance in the short run. Despite the industrys transition towards organisation, small-scale players continue to pose strong price competition to those trading in branded products, necessitating innovation and adoption of technology.
The Industrys financial performance is exposed to risk arising from material price changes and exchange rate fluctuations.
Additionally, during the course of regular business, competition from domestic and international brands is ever-increasing. Talent retention, tackling counterfeit goods, product quality management, innovation and new product development and rapidly evolving consumer preferences are some of the factors that impact the industry.
Despite facing challenges such as labour management and technological developments, your Company has consistently demonstrated its ability to navigate through the risks and uncertainties. With nine state-of-the-art manufacturing units, your Company is well-equipped to tackle any challenge that comes its way.
To mitigate risks, your Company proactively monitors its major concerns and takes appropriate steps in consultation with the Risk Management Committee and the Board of Directors of the Company.
With over four decades of experience in the manufacturing and marketing of footwear, your Company has a strong foundation to overcome any obstacle. Your Company is committed to deliver high-quality products and services to customers while maintaining a safe and fair work environment for its employees.
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
Your Company has made commendable efforts over the last year to improve employee benefits and retention. The Boards Report provides detailed information about these initiatives under point number 3. The Company has enjoyed a positive and collaborative relationship with its employees throughout the year. The number of employees have increased from 6,736 as on March 31, 2023, to 7,704 as on March 31, 2024. Overall, the Companys initiatives have been effective and it is vital to continue focusing on improving employee satisfaction and retention.
Financial Performance of the Company
During the FY24, your Company achieved a revenue of H2914.06 crores and profit of H200.47 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 @300% equivalent to H3/- per equity share of H1/- each fully paid up for the FY24.
The capital expenditure incurred during the FY24 amounted to H231.80 Crores as compared to H174.35 Crores in FY23. 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, 2024.
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 | 2023-24 | 2022-23 | Change in % between Current FY & Previous FY | Explanation / Reason for Change |
1 Debtors Turnover | Times | 8.38 | 9.69 | -13.52 | - |
2 Inventory Turnover | Times | 3.36 | 3.20 | 5.00 | - |
3 Interest Coverage Ratio | Times | 15.41 | 11.92 | 29.28 | Due to increase in EBIT |
4 Current Ratio | Times | 2.40 | 2.54 | -5.51 | - |
5 Debt Equity Ratio | Times | 0.01 | - | 100.00 | Utilisation of working capital limits |
6 Operating Margin i.e. EBITDA | % | 13.95 | 12.07 | 15.58 | - |
7 Net Profit Margin | % | 6.93 | 5.59 | 23.97 | - |
8 Return on Net worth | % | 10.40 | 8.55 | 21.64 | - |
Disclosure of Accounting Treatment, if different from that prescribed in an Accounting Standard: Not Applicable
Outlook
Indias economy is experiencing a strong growth trajectory having secured its position as the 5th (fifth) largest economy in the world. India is already targeting to be the third largest economy in the next 3-4 years.
The country is a top choice for foreign direct investment among all emerging economies. A stable political environment, infrastructural development, conducive economic policies, ease of doing business and growing middle class are all contributing to its continued success.
As raw material prices continue to remain stable and the steadiness of supply chains improves, we can expect even better financial performance. Your companys position of leadership in all its brands, combined with a Customer First approach, a committed distribution network and proactive marketing strategies, provides effective protection against competitive threats.
Let us continue to build on Indias success story by adopting constructive strategies that propel us towards sustained growth.
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