Relaxo Footwears Ltd Management Discussions

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.

The global footwear market was valued at approximately USD 477 billion in 2025 and is projected to reach USD 676 billion by 2033, growing at a CAGR of 4.5%1. Within this, the athletic footwear market is expected to grow from USD 162 billion in 2025 to USD 243 billion by 2033, reflecting a CAGR of approximately 5.2%1, highlighting the growing importance of athletic footwear category. At the same time, Asia-Pacific leads with the largest regional share at 40.7% of the global market in 20251.

Rising disposable incomes, particularly across emerging economies, continue to fuel higher spending on footwear. The global market continues to evolve as consumers place increasing emphasis on comfort, functionality and long term wearability across everyday professional and performance driven use cases.

Indias Footwear Industry is flourishing and currently ranks as the worlds second largest producer of footwear after China. The Indian footwear market, valued at approximately H1,964 billion in FY25, is projected to expand to H4,515 billion by 2034 at a CAGR of 9.7%.2 Non-athletic footwear continues to hold the majority at 68% of the market, while the athletic segment, representing 32%, is growing rapidly2.

The Indian footwear industry is experiencing significant transformation driven by evolving consumer preferences, rising income levels, rapid urbanisation and a deepening digital ecosystem. India is the worlds second largest footwear producer after China, with an annual output exceeding 2.1 billion pairs. However, per capita footwear consumption in India stands at just 1.9 pairs annually, well below the global average of 3.2 pairs3. This consumption gap further highlights a significant long-term growth opportunity for the Indian footwear industry.

Rising Shift Toward Premium Footwear

India is increasingly moving towards premium and branded footwear. The premiumization trend in the Indian footwear industry represents a significant market evolution driven by the countrys expanding middle class with rising disposable incomes. This shift is characterized by increasing consumer willingness to invest in higher quality, branded footwear that offers superior comfort, durability and style attributes. Additionally, increasing workforce participation, particularly among women and evolving fashion preferences are expanding demand across categories.

The premium segment already accounts for 54% of market value in FY25, with Average Selling Prices (ASPs) consistently rising, having grown from H219 in FY15 to H344 in FY25 for the overall market, while womens footwear ASPs rose from H192 to H332 over the same period4.

Furthermore, the increasing awareness towards fitness and wellbeing has additionally spurred the growth and styling of footwear; particularly, in the branded segment. Consumers are now seeking footwear products which not only provide comfort and support for their active lifestyles but also look stylish. 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.

Growth of Sports & Athleisure Category

The Sports & Athleisure (S&A) category has been the fastest growing segment within Indian footwear in recent years, estimated to grow at a CAGR of approximately 11.8%, outpacing the broader market. Athletic footwear currently constitutes 32% of the total Indian footwear market and its share continues to climb.5 This growth is being driven by Gen-Z consumers who have embraced sneaker culture and a wider population that is increasingly adopting fitness conscious lifestyles.

Industry leaders are continuously innovating their offerings with a focus on optimising price, performance and aesthetics to cater to this evolving demand. The convergence of athleisure and everyday fashion wear has expanded the addressable market well beyond traditional sports enthusiasts, making this one of the most exciting growth vectors for organised footwear players.

Growth of E-Commerce and Q-Commerce Channels

The Indian footwear retail landscape has undergone a remarkable transformation through the growth of e-commerce, q-commerce and omni-channel channels. While 85% of footwear purchases in India remain offline as of FY25, the online channels trajectory is consistently upward, supported by the broader global trend of e-commerce outperforming overall footwear market growth.6

Established e-commerce marketplaces continue to dominate the online footwear space with their vast assortments and robust delivery networks, while innovative direct-to-consumer (D2C) brands are leveraging digital first strategies and social media marketing to reach aspirational consumers directly.

The introduction of innovative retail experiences such as omni- channel integration and quick commerce has further expanded the ecosystem. These features have enabled businesses to create a more personalised and engaging shopping experience for consumers across India, while simultaneously offering brands improved visibility and reach. Indian consumers have become increasingly comfortable with digital ecosystems, making them more receptive to these newer formats and channels.

The Indian footwear industry presents a promising set of growth opportunities driven by the multiple structural and macroeconomic factors. The organised segment of the market is expected to grow supported by increasing brand consciousness and formalisation of the sector. This transition is further supported by favourable government initiatives, including the implementation of BIS quality standards and GST rationalisation which are aimed at strengthening domestic manufacturing and enhancing export potential.

Indias position as the fifth largest global footwear exporter by volume, coupled with ongoing supply chain diversification away from China due to geopolitical developments, presents an opportunity for the country to enhance its share in global exports. Further, increasing digitisation and the growth of e-commerce are enabling companies to strengthen their direct-to-consumer capabilities, improve operational efficiencies and expand their reach through omni-channel models.

In addition, category level opportunities are emerging, with the womens footwear segment benefiting from rising workforce participation and evolving fashion preferences, while the childrens segment continues to offer long term growth potential. Increasing consumer awareness regarding sustainability is also driving demand for eco-friendly and responsibly manufactured products, creating opportunities for organised players to differentiate themselves.

The Indian footwear industry continues to navigate a range of structural and operational challenges that require proactive management. Despite steady gains by organised players, the unorganised sector continues to account for a significant portion of the market, estimated at approximately 65% as of 2025, making it difficult for organised players to compete on pricing due to higher compliance and operating costs. This segment is dominated by small scale manufacturers and local artisans who often operate without formal compliance, quality standards, or modern infrastructure. In addition, increasing competition from global brands is intensifying pressure on domestic players, particularly in the premium and athleisure segments.

The industry is also heavily labour intensive, while this creates significant employment, it also presents challenges. A major issue is the shortage of skilled workers, especially in advanced design and mechanised operations, which affects productivity and product quality. Additionally, dependence on manual labour makes scaling up difficult and limits consistency in output. Rising labour costs and a lack of formal training infrastructure further compound the problem, making it harder for the industry to modernise and compete with more automated global manufacturing hubs.

The industry also remains exposed to input cost volatility, with fluctuations in key raw materials such as Rubber and other synthetic materials such as EVA, PU, PVC, LDPE, SBR, POE, etc. thereby, impacting production costs and margins.

Financial performance is also subject to foreign exchange fluctuations, particularly for companies with exposure to imported raw materials or export markets. In addition, infrastructure constraints, including limitations in logistics and manufacturing capabilities in certain regions, may impact efficiency and scalability, especially in the context of expanding into Tier II, III and rural markets.

The continued accumulation of input tax credit under the inverted duty structure is resulting in significant blockage of working capital. While GST refunds are available for unutilized credit pertaining to inputs of goods, credit attributable to input services and capital goods remains ineligible for refund, leading to permanent tax cost and cash flow blockage. This adversely impacts liquidity, increases the cost of operations and disproportionately affects manufacturing sectors which have substantial service and capital expenditure requirements. The issue continues to be a key concern requiring policy intervention to ensure tax neutrality and improve ease of doing business.

Lastly, relatively lower levels of investment in research & development and design capabilities across the industry may limit the ability to develop globally competitive products, thereby impacting long term growth in premium segments and export markets.

Despite facing challenges such as labour management and technological developments, your Company has consistently demonstrated its ability to navigate through the risks and uncertainties. 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.

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

The Company has made significant strides in enhancing its human capital through a series of focused initiatives aimed at employee development, digital transformation and elevation of leadership capabilities. Key actions taken include the introduction of innovative app based training modules, strategic recruitment from leading educational institutions and the implementation of a comprehensive cloud based Human Resource Management System (HRMS). As of March 31, 2026, the company had a total of 7,548 employees, reflecting its sustained efforts to build a strong and future ready workforce. The Company is committed towards fostering a dynamic culture characterized by trust, collaboration and mutual growth, thereby empowering employees to thrive and to make meaningful contributions to the organizations continued success.

During the FY26, your Company achieved a revenue of H2,702.16 crores and profit of H179.27 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 @350% equivalent to H3.50 /- per equity share of H1/- each fully paid up for the FY26.

The capital expenditure incurred during the FY26 amounted to H139.38 Crores as compared to H61.64 Crores in FY25. 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, 2026.

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.

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:

Disclosure of Accounting Treatment, if different from that prescribed in an Accounting Standard: Not Applicable

Indias economy continues on a strong growth trajectory, cementing its position as the 4th largest economy in the world and targeting 3rd position within the next few years. A stable political environment, sustained infrastructure development, conducive economic policies, improving ease of doing business and a rapidly expanding middle class continue to underpin Indias enduring growth story.

For the Indian footwear industry, the long term fundamentals remain deeply promising. The organised segments share of the market is set to expand meaningfully over the coming decade, benefiting players with strong brands, quality manufacturing and wide distribution reach.

Your Companys diversified portfolio of brands, combined with a ‘Customer First approach, a committed distribution network and proactive marketing strategies, provides effective protection against competitive threats and a strong platform for continued growth. By continuing to focus on innovation, premium products and customer centric practices, we aim to further strengthen our position in the Indian footwear market.