India is the second-largest global producer of footwear in the world, after China, and accounts for around 13% of global footwear production of 16 billion pairs. Interestingly, it is also the third-largest footwear-consuming country after China and USA. There are nearly 15,000 units engaged in manufacturing footwear in India with a total turnover estimated at INR 50,000 crores.
There is a decent number of options available to choose your favorite footwear manufacturer, but Relaxo Footwears Ltd (NS:), being the largest player in this business probably makes it to the top. The company has a market capitalization of INR 25,128 crores with 9 manufacturing facilities, helping it to cater to around 30 countries. Its stock is relatively a low-beta one with a volatility of roughly 1.51x times of the .
The product portfolio of the company includes brands such as Bahamas, Flite, Sparx, Schoolmate, etc, across the product line of slippers, sports shoes, school shoes, sandals, etc. The products are being sold via a wide distribution channel comprising both offline retailers and online e-commerce platforms which includes more than 60,000 retailers and MBOs, 650 distributors, and 394 EBOs.
In FY22, the company reported the highest net revenue of INR 2,676.99 crores, a 12.39% jump over the preceding year’s revenue of INR 2,381.92 crores. This is almost in line with the 5-year average revenue growth of 10.23% (yearly rate), compared to the industry’s growth rate of 4.56%. FY22 revenue growth was primarily on account of calibrated price hikes made during the year to minimize the impact of increasing raw materials costs. Therefore, despite a revenue increase, net income declined 20.19% on a YoY basis to INR 232.68 crores in FY22.
The profit figure would have been much higher had there been no disruption from the Omicron variant of Covid-19 and the GST rate hike from 5% to 12% (on footwear below INR 1,000) w.e.f 1 January 2022. However, both these headwinds have impacted the entire sector and are not company-specific.
Being a growth stock, many companies in this sector command a high price multiple. The stock is trading at a P/E of 108, which seems a bit overpriced, but it is less than half of its direct rival Bata India Ltd (NS:) which is trading at a P/E of 236.9. Another company Metro Brands Ltd (BO:), which is almost of similar size is commanding a P/E of 105.5. To top it all, Relaxo Footwear is almost debt free with debt to equity ratio of 0.1. The share price of Relaxo has also corrected around 30% from the 52-week high to the last traded price of INR 1,009.5.
