15-Jan-2022

RELAXO FOOTWEARS LIMITED

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Relaxo
DHDFootwears Ltd., headquartered in New Delhi, is one of the largest players in the non-leather footwear market in India and
currently manufactures Hawai rubber slippers, EVA (ethylene vinyl acetate) and PU (polyurethane) based slippers, sports shoes and
sandals. The company was incorporated in September 1984 as Relaxo Footwears Private Ltd. by Mr. Mool Chand Dua.
The company started as a single product (Hawai slippers) and has over the years been successful in diversifying into higher-value
products in its portfolio.
It has a portfolio of 9 brands viz. Relaxo, Flite, Sparx, Boston, Mary Jane, Casualz, Kids Fun, Schoolmate and Bahamas.
Post capacity expansion at Bhiwadi Rajasthan, the total capacity increased to 10 lakh pairs per day. It sells its products through
distributors, exclusive brand outlets (EBO), exports and e-commerce /modern trade channels. Its distribution channel comprises
more than 50,000 retailers, ~650 distributors and ~400 EBOs.
It has eight state of the art manufacturing facilities, five in Bahadurgarh (Haryana), two in Bhiwadi (Rajasthan) and one in Haridwar
(Uttarakhand). Additionally, the company has also developed its international markets and exports to more than ~30 countries in Asia,
Middle East, Europe, Australia, Africa, South America and Oceania.

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DHD
Revenue Mix (FY21)

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 GROWTH
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DHD SALES GROWTH

In FY21, the net sales saw a marginal decline of ~2%
YoY.
In H1 FY22, the net sales was ₹1,211.56 cr, a growth
of 29% YoY. This was due to base effect on the back of
disruption caused by covid in the corresponding
period last year.
Topline growth is likely to be supported by increase
in capacity, growing presence in untapped markets
and new product additions.
Additionally, demand for low ticket size products
(~85% of its product portfolio) such as slippers and
open sandals continues to see steady growth.

5 Year CAGR: 6.4%

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DHD EBITDA GROWTH

In FY21, EBITDA was ₹495.5 cr, a growth of 21.5%
YoY.
In H1 FY22, EBITDA was ₹183 cr, a decline of 0.5%
YoY.
This was mainly due to rise in input costs and other
expenses. In order to mitigate this the company took
overall price hike of ~15%.
Rise in prices of raw materials and increasing
promotional spends (for FY22 it is expected to be
~4% of revenue) may impact the EBITDA in the near
term.
It may consider further price hikes if the situation
demands.

5 Year CAGR: 15.6%

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DHD PAT GROWTH

In FY21, PAT was at ₹291.6 cr, a growth of 29% YoY.
In H1 FY22, PAT was ₹99.65 cr, saw a marginal growth
of 0.3% YoY.
The company strives to deliver profitable growth by
expanding its product offerings, cost control
measures and strengthening market share across key
geographies.

5 Year CAGR: 19.5%

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 GROWTH EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 PROFITABILITY
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DHD EBITDA MARGIN

In FY21, EBITDA margin was 22.04%, an expansion of
460 bps YoY.
In H1 FY22, EBITDA margin was 15.10%, a
contraction of 448 bps YoY. This was mainly due to
increase in raw material prices and uptick in
marketing and promotional expenses.
As per the management, for FY22 margins are
expected to be around 17%.

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DHD PAT MARGIN

In FY21, the PAT margin was 12.36%, an expansion of
297 bps YoY.
In H1 FY22, PAT margin was 8.22%, a contraction of
235 bps YoY.

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DHD ROCE
In FY21, ROCE was 28.62%.
The company has been generating healthy and stable
ROCE of ~25% to 30% over the last five years.

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DHD ROE
In FY21, ROE was 20.61%.
The company’s growing profitability continues to
support the metric.
In FY21, the metric saw an improvement supported
by higher profits despite an increase in average net
worth.

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 PROFITABILITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 EFFICIENCY
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DHD CASH FLOWS

In FY21, the company generated ₹513 cr from its
cash from operations backed by improved operating
profit and working capital adjustments.
The company’s cash from investing saw an outflow of
₹453 cr, on the back of higher current investments of
₹331 cr coupled with the purchase of property, plant
& equipment worth ₹123 cr.
Repayment of borrowings and lease liabilities along
with finance costs led to cash outflow of ₹56 cr from
financing activities.

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WORKING
DHD CAPITAL CYCLE
The company’s working capital cycle continues to be
on the higher side, mainly due to higher inventory
days.

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DHD FREE CASH FLOW

Over the last few years, the company continued to
incur capex with an annual outflow of ~₹100-₹150 cr.
Capex related outflows are likely to continue going
forward as well.
Capex for FY22 is likely to be in the range of ₹140-
₹145 cr.

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 EFFICIENCY
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ASSET
DHD TURNOVER RATIO
In FY21, increase in average total assets along with a
marginal decline in total sales impacted the metric.

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 EFFICIENCY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 SOLVENCY
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DHD DEBT TO EQUITY

In FY21, the company managed to become debt free.

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 SOLVENCY
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INTEREST
DHD COVERAGE RATIO
The company is well poised to meet its interest
obligations.

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 SOLVENCY
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DHD CURRENT RATIO

The company has sufficient resources to meet its
short term liabilities.
As on 30th September 2021, it has cash balances and
liquid investments of ₹216.3 cr. Thus, having a stable
liquidity profile.

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 SOLVENCY EDGE METER: 5
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 VALUATION
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DHD PE RATIO
Relaxo Footwears is currently trading at a TTM PE
multiple of 113.59x.
The company’s ability to capture market share from
unorganised players, its financial stability and its
growing presence in the small ticket size non-leather
footwear gives visibility of earnings growth over the
next few years.
The company has a low free float, with the
promoters owning ~71% stake.

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DHD DIVIDEND YIELD

The dividend payout ratio for FY21 was 21.3%.
The total equity dividend for the year was ₹2.5 per
share.

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DHD KEY LEVELS

Relaxo Footwears Ltd. has been in a steady uptrend
since the year 2017 and the stock has rallied from
₹200 odd level to a recent high of ₹1448.
After consolidating between ₹815 and ₹975 between
January to April, 2021 the stock gave a breakout in
the month of May on good volumes.
It has remained buoyant since then and strong
₹1000-₹1050 zone will continue to act as a strong
support zone. On the upside, a breach of ₹1400-
₹1500 zone is likely to trigger fresh bullish
momentum.

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 VALUATION EDGE METER: 2
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 QUALITY
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DHD MANAGEMENT
Ramesh Kumar Dua, Mukand Lal Dua and Nikhil Dua
are part of the promoter group.
The management’s key focus remains on value
creation for customers and continuous product
innovation.
It strives to deliver profitable growth by expanding its
product offerings, cost control, strengthening market
share across key geographies and penetrating into
newer geographies.

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SHAREHOLDING
DHD PATTERN
Promoter’s stake saw a marginal decline from
70.92% in Q2 FY22 to 70.78% in Q3 FY22.
DII have decreased their stake from 7.17% in Q2
FY22 to 7.08% in Q3 FY22.
FII have increased their stake from 3.56% in Q2
FY22 to 3.81% in Q3 FY22.

Top Public Shareholding:-

VLS Securities Ltd. 6.26%
VLS Finance Ltd. 3.79%

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 QUALITY
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DHD SECTOR POTENTIAL

• India is the second-largest producer and consumer of footwear in the world.
• Rapid urbanisation, higher disposable income, growing younger population, wide usability of e-commerce and growth in the Indian
fashion and lifestyle market is likely to propel growth over the long term.
• The footwear industry is one of the focused areas under the ‘Make in India’ initiative of the Government of India. Thus, the future
potential of the footwear industry seems to be promising, particularly for established and organized brands.
• Government has permitted 100% FDI (Foreign Direct Investment) through automatic route for the sector.
• The global footwear industry is now focusing on the non-leather footwear segment. About ~86% of the global footwear
consumption is expected to come from non-leather by volume. Thereby providing ample growth opportunities for India as it is now
gaining traction in the production of non-leather footwear.
• India’s share in global exports is just 2% compared to China’s share of ~40%, thus providing ample headroom for growth.
• The headwinds like increasing competition from international brands, product counterfeiting, quick change in customer preference
and the highly fragmented nature of the industry continue to have a bearing on the overall performance.
• Additionally, proposed increase in GST from 5% to 12% (w.e.f 1st January 2022) on footwear below ₹1000 per pair. This may have
an impact on the overall demand.

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COMPETITIVE
DHD LANDSCAPE
Relaxo Footwears’ product portfolio remains well
placed to sustain the downturn as most of its
product offerings cater to the bottom of the
pyramid.

Pent up demand witnessed in low ticket size

products such as slippers/open sandals and sports
shoes, puts the company in a sweet position.
It stands to be the beneficiary of market share gains
as many players in the unorganized segment (major
competitors) mainly dominant in the mass and value
category would be facing liquidity constraints.

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DHD FUTURE OUTLOOK

• The company remains the market leader in the value-priced segment (in terms of volumes) and is well placed to gain market share
from unorganised and small players
• The company will continue to invest in brand building initiatives, which is a part of its long term strategy. Therefore, spending on
brand building activities will be more during FY22 as compared to FY21.
• North India continues to remain its major market, however, it has also started focusing on market expansion in the west and south
regions through the appointment of new distributors and dealers. It is also expanding its presence in the international markets.
• It has streamlined its already strong distribution network by adopting a well-diversified distribution strategy which includes
modern formats like e-commerce, large format store and exclusive stores, which is likely to generate better volume growth.
• Additionally, a decline in imports from China is also likely to be advantageous for the company.
• Its key raw materials (EVA, PU material, etc.) are crude derivatives. Any fluctuation in price of crude would impact the prices of its
key raw material. Thus, impacting its operating margins.
• Increased competition due to the presence of a large number of small-to-medium-sized players may constrain its pricing power.

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 QUALITY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 FINAL
ABOUT EDGE
THE MATRIX
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DHD
Edge Meter Aspects Grade
Growth 3
Profitability 4
Efficiency 4
Solvency 5
Valuation 2
Quality 3
TOTAL 21

The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
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DHD

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DISCLOSURES
DHD
Neither Kredent Infoedge P Ltd. nor any of its associates have any financial interest in the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates have actual/beneficial ownership of one percent or more securities of the subject company, at the end of the month
immediately preceding the date of publication of the research report or date of the public appearance.
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appearance.
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