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Indian Footwear Industry Report

This document has been prepared by Shilpa Bhattar and Kaustubh

Kulkarni. For any queries or detailed information contact us on
+91 22- 24372746 or email at research@reevolv.in
A shoe has much more to offer than just to walk, perfectly
sums up the Indian Footwear story. Last decade or so has
witnessed a sea change in the footwear industry, from a basic
need based industry to a fashion, style, quality and performance
focused industry.
The size of the domestic footwear market in India was around
Rs. xxx Bn in 2010, which has grown from Rs. xxx billion in
2005 at a CAGR of xxx % p.a. The urban market has been
growing at a faster pace of xxx % p.a. (20052010) compared to
the rural market which has been growing at a CAGR of xxx %.
As per our estimates, the industry will grow at a CAGR of xxx %
p.a. to reach to Rs. xxx billion in 2015.

March 2013
Indian Footwear Industry Report

Table of Contents
Particulars
Page Nos.
1. Executive Summary 4
2. Global Footwear Industry Overview 5
3. Indian Footwear Industry Overview
3.1. Market Opportunity 7
3.2. Growth Drivers 10
4. Business Dynamics
4.1. Industry Constituents and Structure 12
4.2. Industry Characteristics 17
4.3. Business Model 18
4.4. Cost Structure 21
4.5. Key Success Factors 22
4.6. Key Challenges 25
4.7. SWOT 27
4.8. Porters Five Forces Model 28
5. State-wise Distribution of Exclusive Brand Outlets across Brands 30
6. Player Profiles
6.1. Action 32
6.2. Adidas 42
6.3. Bata 46
Indian Footwear Industry Report

6.4. Catwalk 51
6.5. Crocs India 55
6.6. Khadims 59
6.7. Lancer 64
6.8. Liberty 69
6.9. M & B 73
6.10. Metro 77
6.11. Nike 81
6.12. Paragon 85
6.13. Pavers England 93
6.14. Puma 96
6.15. Red Chief 99
6.16. Red Tape 102
6.17. Relaxo 106
6.18. Reliance Footprint 110
6.19. SSIPL Retail Limited 114
6.20. Tresmode 118
6.21. VKC 122
6.22. Woodland 154
7. Select Interviews 157
8. Annexure 160

Indian Footwear Industry Report

1. Executive Summary

A shoe has much more to offer than just to walk, perfectly sums up the Indian Footwear story. Last decade
or so has witnessed a sea change in the footwear industry, from a basic need based industry to a fashion,
style, quality and performance focused industry. These changes have been driven by a host changing of
demographics and economic factors like growing young and working population, increasing disposable
incomes, increased discretionary spending, growing fashion consciousness, increased media exposure etc
Around XX% of Indias population lives in rural areas. Though the number is gradually decreasing with
increasing urbanization, a sizable population still stays in rural India. As per our estimates, an average rural
consumer spends around Rs. XXX per annum on footwear as compared to an urban consumer which spends
around Rs. XXX per annum on footwear.
The retail footwear market can be divided into Men, Women and Childrens market. India is the only country
where men's footwear is the biggest target category contributing around XX% followed by womens footwear
contributing almost XX% and children's footwear contributing around XX%. In most of the countries in the
world, women footwear dominates the footwear retail market whereas in India it is the mens category
dominating the footwear retail market.
The size of the domestic footwear market in India was around Rs. XX Bn in 2010, which has grown from Rs.
XX billion in 2005 at a CAGR of XX% p.a. The urban market has been growing at a faster pace of XXX% p.a.
(20052010) compared to the rural market which has been growing at a CAGR of XXX%.
As per our estimates, the industry will grow at a CAGR of xxx% p.a. to reach to Rs. XXX billion in 2015.
The urban market is estimated to grow at a CAGR of xxx% (2010-2015E) to reach Rs. xxx billion in 2015
from Rs. xxx billion in 2010.
The footwear market in urban cities (tier 1, 2 and 3 cities) is around Rs. xx billion in 2011 with tier 1 cities
constituting more than xx% of the total market in Tier 1, 2 and 3 cities.
Indian footwear retail is mainly an unorganized market with around xx% market share. The size of the
organised market which was around Rs. xx billion in 2010 increased to ~Rs. xx Bn in 2011, growing at
a CAGR of xx% every year since 2008. The market is expected to reach Rs. xxx billion by 2015 growing
at a CAGR of xx% p.a.





Indian Footwear Industry Report

2. Global Footwear Industry Overview

Diagram




Rank Country Pairs Millions World share
1 China
2 India
3 Brazil
4 Vietnam
5 Indonesia
6 Pakistan
7 Thailand
8 Mexico
9 Italy
10 Turkey



Rank Country Pairs (millions) World share Per capita (pairs)
1 China
2 USA
3 India
4 Brazil
5 J apan
6 Indonesia
7 UK
8 Spain
9 France
10 Germany



Top 10 Footwear production countries (quantity) 2010
Top 10 Footwear consuming countries (quantity) 2010
Source: World Footwear Yearbook 2011
Indian Footwear Industry Report

3. Footwear Industry Overview

3.1. Market Opportunity
Total Market
Fig 2: Footwear Industry Size (20052015E)

Rs. In billion 2005 2010 2015E
CAGR%
(200510)
CAGR%
(201015E)
CAGR%
(200515E)
Total
Urban
Rural

Urban Market %
Rural Market %


Diagram

Urban Market Tier 1, 2 and 3 cities
-
Fig 4: Footwear Industry Size Tier 1, 2 and 3 cities

Urban Market State wise
Diagram



Cities No. of Cities Rs. million
Tier 1 cities
Tier 2 cities
Tier 3 cities
Total
Fig 3: Share of Urban and Rural Market (20052015)
Indian Footwear Industry Report

Key States
Urban Population (2010)
[in millions]
Urban Market Size (2010)
[Rs. billion]
Per Capita
Expenditure on
Footwear Services
(Rs.)
Maharashtra (Mah)
Uttar Pradesh (UP)
Delhi
Tamil Nadu (TN)
Karnataka (Kar)
Andhra Pradesh (AP)
Gujarat (Guj)
Madhya Pradesh (MP)
West Bengal (WB)
Rajasthan (Raj)
Haryana (Har)
Punjab (Pun)
Kerala (Ker)
Bihar
Others
Total

3.2. Growth Drivers

Indian Footwear Industry Report

4. Business Dynamics

4.1. Industry Constituents and Structure

4.2. Industry Characteristics


4.3. Business Model
Diagram:

4.4. Cost Structure

Tanneries (Producing Finished Leather)

Description As a % of Sales
Raw Hide (Medium Quality) (Per Sq ft)
Processing Chemicals
Labour
Electricity
Compliances
Overheads
Operating Profit / EBIDTA 5%

Footwear Manufacturing
Description As a % of Sales
Raw Material
Labour
Direct expenses
Marketing, Selling and Distribution expenses
Other Admin and Miscellaneous Expenses
Operating Profit / EBIDTA
Indian Footwear Industry Report

4.5. Key Success Factors

4.6. Key Challenges

4.7. SWOT of the Indian footwear market

Strengths Weakness

Opportunities Threat

Indian Footwear Industry Report

10

4.8. Porters five forces model

Diagram
No Five Forces Remarks Current Trends
1. Power of Supplier (Low)
a.
Raw material
Unorganized
Imports from China, Taiwan, Singapore
Availability of suppliers of footwear components

2. Availability of Substitutes (High)

Nature of substitutes
Supply of substitutes
Price differential
Brand erosion

3.
Entry Barrier (Low)

Time and cost of entry
Designs
Brand play
Market access

4.
Power of Customers (High)
Changing customer trends
Availability of multiple options
Discretionary purchases

5.
Competitive Rivalry (High)
Type of competition
Unorganized players
Influx of foreign brands

Indian Footwear Industry Report

11

5. State-wise Distribution of Exclusive Brand Outlets across Brands

States Action Adidas Bata Catwalk Crocs Khadims Liberty M&B Metro Nike
Pavers
England
Andhra Pradesh
Bihar
Chandigarh
Chhattisgarh
Goa
Gujarat
Haryana
Himachal Pradesh
J ammu & Kashmir
J harkhand
Karnataka
Kerala
Madhya Pradesh
Maharashtra
NCR
Odisha
Punjab
Rajasthan
Tamil Nadu
Uttar Pradesh
Uttarakhand
West Bengal
Assam
Other States
Grand Total
Indian Footwear Industry Report

12

States Puma Red Chief Red Tape Relaxo
Reliance
Footprint Tresmode Woodland Grand Total
Andhra Pradesh
Bihar
Chandigarh
Chhattisgarh
Goa
Gujarat
Haryana
Himachal Pradesh
J ammu & Kashmir
J harkhand
Karnataka
Kerala
Madhya Pradesh
Maharashtra
NCR
Odisha
Punjab
Rajasthan
Tamil Nadu
Uttar Pradesh
Uttarakhand
West Bengal
Assam
Other States
Grand Total
Indian Footwear Industry Report

13

6. Player Profiles
6.1.
6.1.1. Overview
Description
Company Name
Company Profile
Promoter
Brands
Year of Incorporation
Production Facilities
(Capacity and Sales)

Distribution
Raw Material
Institutional Footwear
Other Key Businesses
Future Plans
Location













Source Company Website and Reevolv Research
Indian Footwear Industry Report

14

6.1.2. Locations
Northern Region
Exclusive Stores
Main Cities
Eastern Region
Exclusive Stores
Main Cities
Western Region
Exclusive Stores
Main Cities


6.1.3. Target Customer Segment
Men Women Kids
Formal


Casual/ Semi Formal


Sports



6.1.4. Pricing
Brands Rs. Per pair

Source Company Website
Source Company Website and Reevolv Research
Source Company Website and Reevolv Research
Indian Footwear Industry Report

15

6.1.5. Financials whether available based on Company Filings

Profit & Loss Account for the year ended 31
st
March
Rs. Mn FY2008 FY2009 FY2010 FY2011 FY2012
Total Revenue
Total Expenditure
EBITDA
Depreciation
EBIT
Financial expenses
PBT
PAT

Balance Sheet as at 31st March (Rs. Mn)
Share Capital
Reserves & Surplus (net of P&L debit
balance and Misc Expenditure)
Shareholders funds
Secured Loans
Unsecured Loans
Loan Funds
Deferred Tax Liability
Total Liabilities
Gross Block
Net Block
Capital Work in Progress
Investments
Current Assets

Current LIabilties

Net Working Capital excl. Cash & bank
Cash & Bank
Net Working Capital incl. Cash & bank
Total Assets








Indian Footwear Industry Report

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Key Ratios 2008 2009 2010 2011 2012

Profitability Ratios
EBITDA %
PBT %
PAT %

Return Ratios
ROCE %
ROE %
Financial Ratios
Capital Employed
Total Debt/ Net Worth
Secured Debt/ Net Worth
Total Debt to EBITDA

Turnover Ratios
Working Capital (excl.Cash & Bank)
Turnover Ratio
Net Fixed Assets turnover ratio
Inventory Days
Debtors Days

DuPont Anal ysis
EBIT/ Total Income
PAT/EBIT
PAT/ Total Income
Total Assets/ Net Worth
Total Income/ Total Assets
















Source Company filings
Indian Footwear Industry Report

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7. Select Interviews
Interviewer 1: Retailer
Questions Answers
What are the margins for a distributor in footwear Industry?
What are the general margins for a retailer in footwear industry?
What are the inventory levels maintained by a retailer?
How do the companies ensure that the distributor doesnt charge higher margins than
stipulated?

How many days it takes for the distributor to deliver goods once the order is placed?
What are the brands you sell?
Do you have any fixed customer base?
What are the margins offered to retailer by established brands?
What type of footwear is fast moving and why?
Do footwear companies take feedback from retailer?
What is the price differential between organized and local players?
What are the seasonal products?
How is the buying pattern of a typical female customer?
How is the buying pattern of a typical male customer?

Interviewer 2: Manufacturer
Questions Answers
What is the type of footwear you manufacture?
Do you manufacture for other big brands?
What is the arrangement with international brands which you retail in India?
What is the domestic and export share?
What factors determine the pricing of raw material in case of footwear?
Has the domestic share changed over the years?
How many distributors you have per state?
Where is your manufacturing plant located?
Do you outsource the manufacturing job to smaller vendors?
Is the labour easily available?
Do you pay the labour on a per piece basis or on a salary basis?
What are the main buying criteria for footwear?
How is the childrens footwear market outlook?
What is the trend you are observing for last 5 years in footwear industry?
How do you see China as a threat to leather footwear manufacturing?
What are the key challenges for footwear companies?
What is the basis of forecasting?
What is the SKU per male and female to be carried?
What is the margin offered to the retailer?
What is the average sales price for your product?
Is there any shortage of capacity?
What are the generic geographic variations which are observed?
Indian Footwear Industry Report

18

Is the distributor critical?

What is the credit period offered to distributors?
What is the difference between apparel retail compared to footwear retail?
What is the strategy to build customer retention and loyalty?

Interviewer 3: Manufacturer
Questions Answers
What is your main product?
In how many MBOs / LFRs do you have presence?
What are the other states?
Do you have your own manufacturing unit?
When was the company incorporated?
What are the other types of products manufactured by your company?
From where do you procure leather?
Why have you chosen Chennai as your manufacturing base?
What is the margin you offer to retailers?
What is the margin you offer to distributors?
Is there any return goods policy?
What is the credit period you offer to the distributors?
What is your price point?
How many exclusive outlets do you have?

Interviewer 4: Manufacturer
Questions Answers
What is the main season for sports shoes?
In which states your product is available?
Do you sell to retailers?
How many distributors do you have in every state?
What is the credit period offered to distributors?
Is there any minimum quantity the distributor has to order?
Who bears the logistics cost?
Does the MRP vary from state to state?
So how do you manage same price when the state taxes are different?
What is your daily production?
Do you pay labourers on per piece basis or on salary basis?
Why do you not package your products in a box?
From where do you procure the Raw Material?
Indian Footwear Industry Report

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8. Annexure

8.1. Annexure 1
Manufacturing Process:

1. Leather Footwear:

Diagram
Environmental Concerns:




a. Manufacturing:


Diagram

2. Non Leather Footwear manufacturing:




Diagram

Diagram


Indian Footwear Industry Report

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8.2. Annexure 2: VKC group of companies

8.3. Annexure 3: Ratios

8.4. Annexure 4: Abbreviations








Indian Footwear Industry Report

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Address: Shop No. 8, Shiv Shakti CHS Limited, Agar Bazar, S.K.Bole Road, Dadar West,
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You can also email the research analyst at
Shilpa Bhattar
shilpa@reevolv.in
Kaustubh Kulkarni
kaustubh@reevolv.in