Financial Statement

Analysis Project
Company- M/s Relaxo Footwear
Competitor- M/s Bata India Footwear
Group 8

Group Members:-
1. Bharath Ganesh Kumar (Vlmp/13/7)
2. Harshit Gupta (Vlmp/13/14)
3. Priyank Rawat (Vlmp/13/26)
4. Saurabh Kumar (Vlmp/13/28)
Introduction
Relaxo Footwears Ltd. is one of the most popular shoe companies in India. Relaxo footwears brand provides a wide range
of fashionable and comfortable shoes, slippers, flip flops and sandals for women, men, and kids at an affordable price

In 1976, two brothers Mukund Lal Dua & Ramesh Kumar Dua dreamed to take their father’s footwear business to what
Relaxo is today - one of the leading and most popular footwear companies in India. A household name, literally.
With its headquarters in New Delhi and 8 manufacturing units, Relaxo produces over 6 lacs pairs of footwear, every day.
Relaxo footwear’s range boasts a fine combination of comfort, style, and quality workmanship. A wide collection of
fashionable, colourful, comfortable and durable footwear for men, women and children.
For a changing India. For a trendsetting India. Relaxo is geared to meet the quality and choice expectations of a young
India with its sub-brands such as Sparx, Bahamas, Flite, Schoolmate and Relaxo Hawaii.
Managing Director: Ramesh Kumar Dua

Relaxo Footwears Ltd: BSE & NSE

Industry Outlook
According to a recent Indian footwear industry report, footwear production is over 22 billion pairs annually, accounting
for approximately 9.6% of the total global footwear output per year. The footwear industry in India employs over 1.1
million workers, making it one of the top employment sources in the country. Due to the fact that India is also the world’s
third-largest footwear consumer after China and the USA, about 90% of the footwear made in India is consumed by the
domestic market and the rest is exported.

Significant accounting policies

Reporting

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards
(Ind A5) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended by Companies
(Indian Accounting Standards) Rules, 2016.

For all periods up to and including the year ended 31st March, 2017, the Company prepared its financial
statements in accordance with accounting standards notified under the section 133 of the Companies Act
2013, Companies (Accounts) Rules, 2014 (Indian GAAP).

Property, plant & Equipment

Depreciation is provided pro- rata to the period of use on Straight Line Method (SLM) based on the estimated
useful lives of the assets, which have been determined as per Schedule II of Companies Act, 2013.

Finance

The Company makes allowances for doubtful trade receivables based on a provision matrix which takes into
account historical credit loss experience and adjusted for current estimates.
Financial Statements of Relaxo Footwears Limited

Balance Sheet

Particulars 31-Mar-18 31-Mar-17

Assets
Non-Current Assets
Property Plant & Equipment 4698.1 4798
Capital Work in Process 1364.4 619.1
Intangible Assets 561.9 617.3
Financial Assets 256.5 201.7
6880.9 6236.1

Current Assets
Inventory 3139.3 2902.1
Financial Assets 2667.1 1565.2
5806.4 4467.3
Total Assets 12687.3 10703.4

Equity & Liabilities

Equity
Total Equity 7612.1 6063.7
Liabilities
Non-Current Liabilities
Financial Liabilities 399.7 713.4
Provisions 77.6 72.6
Deferred Tax liabilities (Net) 263.1 255
740.4 1041
Current Liabilities
Financial Liabilities 3536.2 2860
Other Current Liabilities 704.8 703.1
Provision 67.5 23.8
Current Tax Liability (Net) 26.3 11.8
4334.8 3598.7
Total Liabilities 5075.2 4639.7
Total Equity & Liabilities 12687.3 10703.4

Interpretation
 Capital work in process has increased by Rs. 745.3 Mn hence company has more materials under
process.
 Increase in non-current assets is mainly due to increase in capital work in process.
 Account receivables has increased by 69.17 Mn because money is expected from the customers
 Others equity has increased by 1548 Mn because of increase in general reserves for future expansion.
Income statement

Mar-18 Mar-17
Million ₹ Million ₹
INCOME
Revenue From Operations 19,644.40 16,519.70
Other Income 44.60 136.1
Total Income 19,689.00 16,655.80

EXPENSES
Cost Of Materials Consumed 7,056.90 5801.3
Purchase Of Stock-In Trade 1,909.40 1405.4
Changes In Inventories Of FG, WIP And Stock-In Trade -136.20 51.6
Excise duty on Sale of Goods 75.20 208.2
Employee Benefit Expenses 2,140.80 1770.4
Finance Costs 85.90 150.3
Depreciation And Amortisation Expenses 543.40 514.6
Other Expenses 5,577.40 4973.7
Total Expenses 17,252.80 14,875.50

Profit Before Tax 2,436.20 1,780.30

Tax Expenses
Current Tax 815.30 572.3
Deferred Tax 10.20 10.2
Tax For Earlier Years 0.00 -1.7

Profit for the Year 1,610.70 1,199.50

Other Comprehensive income

Items that will not be reclassified in Profit or Loss
Remeasurement Gains / (Loses) on Defined Benefit Plan -6.1 35.1
Income Tax effect 2.10 -12.2

Total Comprehensive Income for the Year 1,606.70 1,222.40

Earnings Per Equity Share of ₹ 1/- each (in ₹)

Basic EPS (Rs.) 134.00 99.9
Diluted EPS (Rs.) 133.80 99.8

Interpretation of Income statement

Profit for the Year ₹1610.7 Million [Net] validates that the company has been profit making during this tenure, of their
Business. However, we shall have a deeper look into the Cash flow report (later in this document) to assess, how far the
company has been profitable in its core functions of Business (Operations).

Increase in the Net profit of 34.28 %, over the previous year (2016-2017) is notable.

Revenue from Operations of ₹19644.4 Million includes, almost 99.53% from core sales of products (manufactured &
traded), & only ₹93.1 Million accounts to other operating income. This reflects the company as mainly concentrating on
its core business, rather than accumulating revenues from other investments.

The increase of revenue around 19 % when compared to previous tenure (2016-2017) can be amounted to an array of
measures ranging from strategic initiative to streamline the distribution network-especially in underpenetrated markets,
new product sales (across all brands -Relaxo, Flite, Sparx & Bahamas) to e-commerce, technology advancements through
IT adoption.

Total Expenses has increased around 16% when compared to last year (2016-2017), and the key contributors to this, are
Cost of Materials Consumed [approximately 22 % increase from last year] & Purchase of Stock-In Trade [approximately
36 % increase from last year]. The reason for this increase shall be inferred from the increase in retail volume of units of
7,85,870 units (approximately 10 % increase from last year)1.

From the change in inventories of finished goods, WIP, Stock-In-Trade, it can be concluded that there has been an
accumulation of stock in the inventory (approximately 7 % increase)2 & also in the work in progress goods.

Excise duty has reduced to ₹ 75.2 Million (a decrease of approximately 64 %) can be directly connected to the GST norms
that brought down the duty (to 5% only for footwear below ₹ 500) while earlier in 2016, the reduced Excise Duty (halving
the duty from 12 to 6 per cent)3.

The other expenses have incurred a significant amount of around one third of the total expenses, ranging from advertising
& Sales promotion, many of operational costs like freight handling, processing, rental, power & fuel, legal & professional
expenses and many others.4

Lastly the contribution towards CSR in this year is notable as the committee that has been formed on 31st March 2017
and, 2% of Average net profit of last three years as per section 198 of the Companies Act, 2013 has been spent on CSR
activities.5

From the basic & diluted earnings per equity share, we can deduce that there is no alarming difference between them,
indicating no potential dilution for the company's shares.

Cash Flow Statement

Year Ended YearsEnded

31st 31st
March,2018 March,2017
Particulars

Cash flow from operating activities

Profit Before Tax 2436.2 1780.3

Adjustments
Depericiation and Amortisation Expense 543.4 514.6
Finance Cost 85.9 150.3
Interest Income -5.8 -7.4
Net Gain On Sale of Current Investments carried at Fair Value through -5 -0.1
Profit or Loss
Net Unrealised Foreign Exchange Gain -38.5 -99.2
Share Based Payments 40.7 13.2
Fair Valuation Loss on Derivatives 2.7 86.1
Bad Debts Written Off 3 0.3
Allowances for Doubtful Trade Receivables 7.3 7.4
Net Loss on Disposal/Write off of Property, Plant and Equipment and 5.5 4.4
Intangible Assets
Operating Profit Before Working Capital Changes 3075.4 2449.9

Changes in Working Capital

 Loans to Employees -0.7 -0.4
Security Deposits -16.8 -8
Other Non-current Assests -0.2 -0.3
Other Financial Assests 2.4 -1.3
Other Current Assets -422.4 -46.6
Inventories -237.2 -43.7
Trade Payables 493 42.2
Other Financial Liabilities 103.5 18.8
Provisions 42.6 31.5
Other Current Liabilities 1.7 101
Cash Generated from Operations 2343.3 2388.6
Tax Paid -800.8 -586.6
Net Cash Flow from Operating Activities 1542.5 1802

Cash flow from investing activities

From purchase and proceeds of property, Plant and equipments -1089.8 -903.3
including capital work in progress and intangible assets
Net proceeds from sale/Purchase of current investments 7.8 3
Interest income received 5.4 7.2
Investment in bank deposit held as margin money -7.1 -1.3
Net Cash flow from investing activities -1083.7 -894.4

Cash flow from financing activities

Proceeds from issuance of equity share 0.2 0.1
Securities premium received on exercise of equity share 45.4 18.3
Repayment of borrowings -217.3 -625
Dividend and dividend distribution Tax Paid -144.6 -86.7
Finance costs Paid -146.4 -201.6
Net Cash flow from financing activities -462.7 -894.9

Net increase/decrease in cash and cash equivalents -3.9 12.7

Cash and Cash equivalents at the beginning of the year 35.1 22.4
Cash and Cash equivalents at the end of the year 31.2 35.1
Components of Cash and Cash equivalents
Balances with banks on current accounts 24.3 28.8
Cash on hand 6.9 6.3
31.2 35.1

Interpretation of Cash flow statement:

Cash Flow through Operations declined to 1542.50 crores from 1802.00 in year 2017. This 14% decline has been noted
due to following reasons:

 Adjustment towards Net Gain on Sale of Current Investment.

 Adjustment due to writing off bad loans.
 The company has huge amount of Trade Receivables.
 M/s Relaxo Footwears has accumulated inventories of worth INR 237.2 Million in the year 2018. Finished good
accounted for majority of the inventories.
 M/s Relaxo Footwears saw an increase in Trade Payable.
 d) High Tax Duty paid as compared to previous years.
Cash flow from investing has decreased by 189.3 Mn for the following reasons:

 Relaxo has invested in land, buildings, plant machinery, computers, office furnitures etc. and intangible assets
like computer software
 Interest income reduced by Rs 1.8 Mn

Cash flow from financing has decreased by 432.2 Mn:

 2 lakh shares have been issued @Rs 1 each in 2018

 Company has repaid Rs 407.7 Mn of loan
 Paid dividends of Rs 57.9 Mn in cash

Overall Cash has decreased by Rs 3.9 Mn

Ratio Analysis
Liquidity ratio
2018 2017
Current ratio 1.34 1.24
Quick ratio 0.62 0.43
Financial slack 0.32 0.33

Efficiency ratios
2018 2017
Overall Efficiency 0.24 0.23
Fixed assets efficiency 3.25 1.52
Working capital efficiency 13.38 19.18

Profitability ratio
2018 2017
Operating profit margin 64% 65%
Net profit margin 8% 7%
Return on total Assets 13% 17%
Return on Capital employed (ROCE) 15% 15%
Return on net worth (RONW) 21% 20%
Dividend per share 12.03 7.22
Dividend pay-out ratio 8.98% 7.23%
Basic EPS 134 99.9

Leverage
2018 2017
Debt Equity ratio 0.10 0.17
Debt ratio 15% 22%
Trend Analysis:

BALANCE SHEET TREND ANALYSIS

Year Assets Liabilities Equity Year Assets Liability Equity
FY-14 8412.2 4734.1 3678.1 FY-14 100.00 100.00 100.00
FY-15 9967.4 5167.6 4799.8 FY-15 118.49 109.16 130.50
FY-16 10086.8 5190.4 4896.4 FY-16 119.91 109.64 133.12
FY-17 10703.4 4639.7 6063.7 FY-17 127.24 98.01 164.86
FY-18 12687.3 5075.2 7612.1 FY-18 150.82 107.21 206.96

Assets Liability
200.00 115.00

150.00 110.00
151 105.00 109 110
100.00 127 107
118 120 Assets 100.00 Liability
100
50.00 95.00 100
98
0.00 90.00
FY-14 FY-15 FY-16 FY-17 FY-18 FY-14 FY-15 FY-16 FY-17 FY-18

Equity
250.00

200.00
207
150.00
165
100.00 130 133 Equity
100
50.00

0.00
FY-14 FY-15 FY-16 FY-17 FY-18

Data for trend analysis

Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Million ₹ Million ₹ Million ₹ Million ₹ Million ₹
Total Income 12146.1 14812.1 17152.7 17398.4 19689
Total Expenses 11190.7 13385.5 15419.4 14955.5 17252.8
Profit 656.3 1030.5 1202.7 1229.7 1610.7
Income statement trend analysis
Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Total Income 100.00% 121.95% 141.22% 143.24% 162.10%
Total Expense 100.00% 119.61% 137.79% 133.64% 154.17%
Profit of the year 100.00% 157.02% 183.25% 187.37% 245.42%
Income statement trend analysis report:

 We could observe an increasing trend of Revenue & Expenses, year on year.

 It is notable that the growth has been profitable for the company, which is evident in the trend of Net
income YoY.
 The 13 % sales growth, 58% increase of Net income, in the year ending Mar-2018, is a reflection of
company's ability adapt to the simplification of the applicable tax structure (GST) by carrying out
necessary changes expedite in the product mix. (more details on the same has been included in the
interpretation of Income statement)
Cash Flow Trend:
Cash Flow Trend Analysis
Year FY2014 FY2015 FY2016 FY2017 FY2018
CFO Value in INR (Mn) 1249.1 1095.6 1594.32 1810.8 1542.5
CFO Trend Statement 100.00 87.71 127.64 144.97 123.49
CFI Value in INR (Mn) -69.7 -129.79 -130.26 -89.44 -108.37
CFI Trend Statement -100 -186.2 -186.9 -128.3 -155.5
CFF Value in INR (Mn) -51.25 21.1 -31.31 -89.49 -46.27
CFF Trend Statement -100 41.2 -61.1 -174.6 -90.3

Cash Flow trend analysis report:

 Cash Flow from Operation is positive and healthy

 Cash flow from Investing shows that M/s Relaxo has been investing since the year 2014.
 Cash Flow from Financing shows that M/s Relaxo is taking loans every year. This is mainly for investing
purposes and carrying our daily operations.
Competitor Comparative analysis:

We have chosen M/s Bata India Limited as the competitor for comparison purpose. The results of the
comparisons are tabulated below:

Competitor analysis
March-15 March-16 March-17 March-18
Total Income - Relaxo 14812.1 17152.7 17398.4 19689
Total Income - Bata 27374.1 24481.3 25438.8 26871.6

Total Expenses - Relaxo 13385.5 15419.4 14955.5 17252.8

Total Expenses - Bata 24084.7 21474.5 22886.4 23471.4
March-15 March-16 March-17 March-18
Profit for the year - Relaxo 1030.5 1202.7 1229.7 1610.7
Profit for the year - Bata 2313.4 2187.4 1587.4 2235.7

Dividend
FY2015 FY2016 FY2017 FY2018
M/s Bata Footwear 415.72 416.52 448.75 448.99
M/s Relaxo Footwear 29.89 59.9 86.7 144.6

Capex
FY2015 FY2016 FY2017 FY2018
M/s Bata Footwear 1464.92 794.41 386.8 930.77
M/s Relaxo Footwear 55.4 427.5 324.3 359.2

Net Cash
FY2015 FY2016 FY2017 FY2018
M/s Relaxo Footwear 44.86 23.74 36.5 31.2
M/s Bata Footwear 535.28 900.52 629.86 557.33

Net Profit
FY2015 FY2016 FY2017 FY2018
M/s Relaxo Footwear 1030.49 1202.7 1222.4 1606.7
M/s Bata Footwear 2311.72 2187.48 1573.78 2075.75

Comparative Revenue
FY2015 FY2016 FY2017 FY2018
M/s Bata Footwear 26871.62 25753.15 25438.87 27372
M/s Relaxo Footwear 14812.05 17152.7 17398.4 19689
 Comparisons of Ratios for the FY 2018 (M/s Relaxo Footwear Ltd. Vs
M/s Bata India Ltd.)
Sr. M/s Bata
Ratio Category Ratio Description M/s Relaxo Footwear
No. Footwear
1 Operating Profit 12% 13%
Profitability
2 Net Profit Margin 8% 8%
Ratios
3 Return on Equity 21% 14%
4 Debt Equity Ratio 0.10 0.07
5 Solvency Ratios Debt Ratio 0.09 0.07
6 Interest Coverage Ratio 29.36 81.99
7 Overall Efficiency 0.24 1.6
Efficiency Ratios
8 Fixed assets efficiency 3.25 8.6
9 Current ratio 1.34 2.76
Liquidity Ratios
10 Quick ratio 0.62 1.4

Overall Financial Health of M/s Relaxo Footwears Limited:

 Overall company is growing and making profits
 Relaxo is investing in assets and future expansion
 They have some cash left even after repaying loans.
 Overall relaxo is performing good

*Bata has reported 15 months data for 2015 in all their financial statement