The company produces footwear of a higher quality than that manufactured by unorganized players and therefore it’s seen an aspirational buy’ for consumers moving up the value chain to the branded space.
Relaxo is a footwear manufacturing company whose products include slippers, canvas shoes, sport shoes, sandals, school shoes and other types of footwear. It has a market share of 5-6 percent in the footwear market implying huge scope for growth. It manufactures “value for money” products catering to the entire family and offers quality products in the low price range segment.
The company has effectively increased its reach in rural India and has gained traction in –urban India especially in the “home wear and leisure” segment. A significant proportion of its revenues comes from the north and east. It has a forayed into the south and west that is seeing good growth.
Relaxo’s overall strategy is an optimal-sized product portfolio of high quality products. It produces footwear of a higher quality than that manufactured by unorganized players and therefore it’s seen an aspirational buy’ for consumers moving up the value chain to the branded space.
To achieve this it continuously adapts its portfolio to consumer usage patterns, key purchase drivers and fills portfolio gaps to address this. To sustain any growth story, new products are key. It has an in –house design team for new product development across all its brands–Relaxo, Flite, Sparx and Bahamas and soon.
In Q2-FY20, the company’s revenue grew by 14.5 percent y-o-y to Rs 6218 mn (volume growth 8 percent) driven by premiumisation and price hikes, while reported PAT grew by 78.8 percent y-o-y to Rs 705 mn helped by strong operating performance and a lower corporate tax rate. Going forward, the company plans to add at Bhiwadi capacity for 100,000 pairs a day over the next three years with capex of Rs 900 mn.
India is still an under penetrated footwear market with a per capita consumption of approximately 1.7 pairs p.a. against a global average of 3 pairs p.a. Developed countries average 6-7 pairs p.a. Incremental growth will come from deeper penetration of organised footwear in tier II and III cities.
The share of the organised segment is approximately 45 percent and it’s well positioned to benefit from introducing GST and an increase in aspirational spend as the price differential between the unorganised and the organised space closes in.
With deep penetration and excellent brand recall, Relaxo has established itself in both, rural and urban India. We believe Relaxo will be the best performer in the listed footwear space.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.