Relaxo Footwears Ltd. – The Best in Class Footwear

Incorporated in 1984, Relaxo Footwears Ltd. has been India’s largest footwear manufacturer, serving the nation for four decades, and is now ranked among the top 500 Most Valuable Companies.

It’s an incredible journey of a company’s relentless focus on quality, followed by the creation of a brand, with everything else falling into place inexorably. Simply put, their products have been recognised for its excellent quality at an affordable price.

Relaxo Footwears Ltd. stepped into the footwear industry in 1976 by Ramesh Kumar Dua and Mukand Lal Dua when they realized that their cycle parts manufacturing business was not making money.

The company started off with the manufacture of Hawaii slippers and subsequently diversified into manufacturing casuals, joggers, school and leather shoes. Today, Relaxo is one of the most quality-conscious and progressive footwear companies of India.

It is headquartered in Delhi, India, and maintains a fine balance of comfort, design, and craftsmanship, as well as ambitious growth plans for the future.

Over the last ten years, the business has grown at a record-breaking rate of 4800 %! It has risen from a modest sales of about Rs. 10 lacs in 1977-78 to more than Rs. 2000 Cr today.

Relaxo Footwears Ltd. has a production capacity of over 100 million pairs per year. It is only second to Bata, a well-known brand in the footwear industry.

In India, it has a customer base of around 100 million people. Relaxo has gradually extended its manufacturing facilities across the length and breadth of Northern India since its inception.

It has the industry’s highest potential for manufacturing 300,000 pairs of Hawaii slippers a day.

Relaxo Footwears Ltd. Financials: 

Relaxo, Sparx, Flite, and the Bahamas are among the company’s most well-known brands. Relaxo has a pan-India distribution presence and a 350+ strong network of its own retail outlets, as well as being available on all major e-commerce portals.

Source: Company Disclosures

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Relaxo Footwears Ltd. Operational Highlights

• The revenue is up by 12% at Rs. 672 Cr as compared to Rs. 600 Cr in the corresponding period of the previous year due to picking up of demand at consumer end. 
• EBITDA is up by 46% at Rs. 149 Cr as compared to Rs. 102 Cr in the corresponding period of the previous year. The EBITDA Margins increased by 519 bps YoY to 22.1% mainly due to product mix, benign raw material prices and saving in selling and administrative expenses. 
• Other income stood at Rs. 4 Cr as compared to Rs. 2 Cr in the corresponding period of the previous year. The increase is mainly due to a Rs. 2 crore lease rent waiver/reduction agreed by the lessors for rented premises.
• Profit after Tax is up by 66% at Rs. 90 Cr as compared to Rs. 54 Cr in the corresponding period of the previous year. The PAT Margins increased by 437 basis YoY to 13.4%. 

Operational Highlights 9MFY21

• The revenue is at Rs. 1611 Cr as compared to Rs. 1870 Cr in the corresponding period of the previous year. 
• EBITDA is up by 6% at Rs. 333 Cr as compared to Rs. 313 Cr in the corresponding period of the previous year. EBITDA margins increased by 391 basis YoY to 20.6%.  
• Other income stood at Rs. 16 Cr as compared to Rs. 5 Cr in the corresponding period of the previous year. The increase is mainly on account of lease rent waiver/reduction agreed by lessors for the rented premises and surplus fund investments.  
• PAT is up by 9% at Rs. 189 Cr as compared to Rs. 174 Cr in the corresponding period of the previous year. The PAT Margins has increased by 242 basis points YoY to 11.8%.

Management Update

The demand has started improving across categories and geographies. PAT margins increased by 437 basis points YOY in Q3FY21, thanks to Benign raw material prices and our continued focus on administrative expenses. The successful rollout of vaccines gives more hope for the economy’s revival, but also concerns about increasing raw material prices. 

The management aims to achieve sustainable growth by extending their product ranges, maintaining cost control, increasing market share in key geographies, and expanding into new geographies. 

The key focus remains value creation for customers and providing them with the best product quality and continuous product innovation. The company enjoys a comfortable liquidity position with zero net debt and continues to provide assistance to our dealers, distributors and vendors. 

Relaxo Footwears Ltd. has delivered a strong quarter with the combination of the strategies adopted and efforts of people in implementing them along with investment in their strong brands, robust distribution network and supply chain. 

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StockEdge Technical View

Relaxo Footwears is trading right above the weekly support area and is likely to stay positive in the near term till the stock stays above the 810-820 zone. Technical parameters look neutral to positive till now and there is a strong possibility of a bounce if the stock holds above the support zone. Probable resistance in the short term comes at 900-905 zone. Further momentum to take place above swing high of 930 level. 

Bottom Line

The management sounds optimistic and the company has historically shown good growth even during adverse conditions. With new product lines, companies may see good growth in the future. The only hiccup is the rise in raw material prices which can impact margins.

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