Market Research Report : Footwear market in india 2014 - Sample

Footwear Market – India
November 2014

2
Executive Summary
Market
Drivers & Challenges
Government
Competitive
Landscape
Global footwear market is growing at a CAGR of ‘r1’% and is expected to reach INR ‘m1’ by 2018
Indian footwear market is the ‘n1’ largest in the world, and is growing at a CAGR of ‘r2’%
India is also the second largest exporter of footwear in the world after ‘c1’, commanding a share of ‘r3’% in global footwear exports
‘x1’ footwear dominates the Indian market, followed by ‘x2’ footwear and ‘x3’ footwear
FDI in Retail
Goods and Services Tax (GST)
Drivers
Increase in disposable income
Growth in rural segment
Rising international demand for leather footwear
Rise in organized retail
Changing lifestyle of consumers
Increasing availability of credit
Growing consciousness on health and beauty
Increase in awareness
Major Players
Company 1
Company 2
Company 3
Company 4
Company 5
Company 6
Trends
Online retailing
Integration of various business strategies
Shift from Chinese sourcing to Indian sourcing
FOOTWEAR MARKET IN INDIA 2014.PPT
Challenges
Tough competition from unorganized players
Affordability issues
Depreciation of Rupee and rise in energy costs

3
•Macro-Economic Indicators
•Introduction
•Market Overview
•EXIM Data
•Drivers & Challenges
•Government Initiatives
FDI in Retail
Goods and Services Tax (GST)
•Trends
•Competitive Landscape
•Strategic Recommendations
•Appendix

4
Economic Indicators (1/3)
t
q
r
s
p
b3
a3
Q2
d2
c2
b2
a2
Q1
d1
c1
b1
a1
Q4
c4
b4
a4
Q3
c3
INR tn
2010-11 2011-12 2012-13 2013-14
GDP at Factor Cost: Quarterly
Inflation Rate: Monthly
s
t
r
q
p
%
Nov 2013 - Dec 2013
t
Oct 2013 - Nov 2013
s
Sep 2013 - Oct 2013
r
Aug 2013 - Sep 2013
q
Jul 2013 - Aug 2013
p

5
Global footwear market has been steadily rising,
spearheaded by growth in ‘a1’
• Footwear market falls under the broader segment of
‘s1’
•By type of material used, footwear can be classified
as ‘t1’, ‘t2’, ‘t3’, ‘t4’ and ‘t5’, among others
• Globally, ‘a2’, ‘a3’ and ‘a4’ are the top three
consumers of footwear, constituting nearly ‘r1’% of
the total market
• ‘a2’ and ‘a4’ have the world’s fastest growing
footwear consumption rate and are the top two
exporters of footwear
•By 2018, the market is expected to reach a size of INR
‘m1’, with ‘a1’ controlling a market share of about
‘r2’%
• Footwear market is expected to grow sustainably
over the next few years, fuelled by changing fashion
trends, product innovation, increase in disposable
income and retail boom, among others
Global Footwear Market – Overview Global Footwear Market Size and Growth
d
c
b
a
INR tn
r3%
2018e
u
2017e
t
2016e
s
2015e
r
2014e
q
2013
p
India’s Share in Global Footwear Exports (2013)
r6%
r5%
r4%
Country 3
Country 2
Country 1

6
Footwear market in India is showing an upward trend with a
rise in consumer base
• India is the second largest producer of footwear in
the world after ‘c1’
• It produces ‘n1’ pairs of different categories of
footwear
• Major production centres are ‘a1’, ‘a2’, ‘a3’, ‘a4’, ‘a5’,
‘a6’ and ‘a7’, among others
• Unorganized sector employs around ‘n2’ people,
whereas the organized sector employs around ‘n3’
people
Market Overview Footwear Market Size & Growth
Footwear Market – Structure (2013) Footwear Market – Segmentation (2013)
u
t
s
r
q
p
2013
a
b
INR bn
r1%
2023e
c
2018e
r5%
r6%
r4%
r3%
r2%
Segment 2
Segment 1
Segment 2
Segment 1
Segment 3

7
Rise in footwear production in India…
• Export of footwear and allied products has been
steadily rising
• Cheaper products from ‘c1’ have impacted India’s net
contribution to global footwear exports in recent
years, and overall global market share has seen a
downward trend from ‘r1’% in ‘y1’ to ‘r2’% in ‘y2’
• Primary export destinations include ‘c2’, ‘c3’, ‘c4’ and
‘c5’
• ‘s1’ constitute the bulk of exports
Exports Total Exports (Value)
r8%
r7% r6%
r5%
r4%
r3%
t
s
r
q
p
INR bn
2014
d
2013
c
2012
b
2011
a
Exports – Country-Exports – Country-Wise Segmentation (2013-14) Wise Segmentation (2012-13)
Note: Figures are for the respective financial years
r12%
r11%
r10%
r9%
r14%
r13%
Others
Country 5
Country 4
Country 3
Country 2
Country 1
Others
Country 5
Country 4
Country 3
Country 2
Country 1

8
…has resulted in eventual rise in exports
r11%
r10%
r9%
r8%
r7%
r12%
r5%
r4%
r3%
r2%
r1%
r6%
Product Segmentation 2012-13
Product Segmentation 2013-14
HS code Particulars
HS Codes for Footwear Products
Product 4
Product 1
Product 2
Product 3
Product 6
Product 5
Product 2
Product 3
Product 4
Product 6
Product 5
Product 1

9
Drivers & Challenges – Summary
Drivers
Increase in disposable income
Growth in rural segment
Rising international demand for leather footwear
Rise in organized retail
Changing lifestyle of consumers
Increasing availability of credit
Growing consciousness on health and beauty
Increase in awareness
Challenges
Tough competition from unorganized players
Affordability issues
Depreciation of Rupee and rise in energy costs

FOOTWEAR MARKET IN INDIA 2014.PPT 10
Evolution of retail FDI policy
• Government of India has gradually opened up the retail sector to FDI amidst reservations concerning fear of job losses,
procurement from international market, competition and loss of entrepreneurial opportunities
• Discussions are still being carried out by the government to open up and allow ‘p1’% FDI in multi brand retailing
‘y6’: Government allows
‘p6’% FDI in single brand
retailing
‘y4’: Government mulled over the idea of
allowing ‘p4’% FDI in single-brand retail and
‘p5’% in multibrand retail
‘y5’: Government proposed to
allow FDI in multibrand
retailing
‘y3’: FDI up to ‘p3’% allowed
in single brand retail with
prior government approval
1991: Indian economy opened
FDI up to 51% allowed under
priority sectors
‘y2’: FDI up to ‘p2’% allowed
under the automatic route in
cash & carry wholesale
‘y1’: Indian economy opened
‘p1’% allowed under
the automatic route in select
priority sectors
Retail market in India has been slowly opened up to FDI…

11
India is expected to implement Goods and Services Tax (GST) in the year ‘y1’
Goods and Services Tax (GST)
•Goods and Services Tax (GST) is a comprehensive tax imposed on the supply of goods or services
•India is in the process of implementing a dual GST system, namely a ‘t1’ and a ‘t2’
•GST will replace a variety of taxes such as ‘t3’, ‘t4’, ‘t5’, ‘t6’, ‘t7’, ‘t8’, ‘t9’ and ‘t10’
•The combined tax rate (‘t1’+’t2’) on an item is expected to be between ‘p1’% and ‘p2’%, although the rates for the component taxes are yet to be decided
•With the implementation of GST, prices of goods are expected to fall, provided the benefit of reduced taxation is passed on to consumers
•In case there are revenue losses to a state government due to implementation of GST, the Government of India would provide compensation to the state government for the same
•Overall, GST would bring about a number of benefits for all stakeholders involved
Reduction in the total number of taxes paid to just two, namely ‘t1’ and ‘t2’
Net decrease in the tax rate on goods, thereby reducing unit cost of goods and lowering prices of final products
Elimination of cascading tax, thereby making the taxation process more efficient
Net decrease in transaction costs of taxpayers through a simple tax structure
Overall increase in government revenues, as lower prices would boost consumption of goods

12
Key Trends
Online retailing
Shift from Chinese sourcing to Indian sourcing
Integration of various business strategies
Trends – Summary

13
Competitive Rivalry
•x
Bargaining Power of Suppliers
•x
Bargaining Power of Buyers
•x
Threat of Substitutes
•x
Threat of New Entrants
•x
Impact i4
Impact
i2
Impact
i1
Impact i3
Impact i5
Porter’s Five Forces Analysis

14
Competitive Benchmarking (1/5)
Public Trading Comparables
Company 1
Company 2
Company 3
Company 4
Market Capitalization (INR bn)
Share Price (INR)
EV/EBITDA (x)
EV/Revenue (x)
PE Ratio
Note: Top 4 Public companies based on the Market Capitalization; Market Capitalization, Share Price and PE ratio is as of 18/09/2014

15
Key Ratios of Top 3 Companies – Operational Basis (FY 2013) (1/3)
Competitive Benchmarking (2/5)
p
s
r
r
t
Company 3
b3 c3
%
a3
Company 2
b2 c2
a2
Company 1
b1 c1
a1
• Company 1 recorded gross margin of ‘a1’%, higher than both Company 2 and Company 3 which recorded gross margin
of ‘b1’% and ‘c1’% respectively
• Company 1 recorded operating margin of ‘a2’%, higher than both Company 2 and Company 3 which recorded operating
margin of ‘b2’% and ‘c2’% respectively
• Company 3 recorded net margin of ‘c3’%, higher than that of Company 2 which recorded net margin of ‘b3’% but lower
than that of Company 1 which recorded net margin of ‘a3’%
Gross Margin Operating Margin Net Margin

16
Key People
Products and Services
Company Information
Offices and Centres – India
Corporate Address
Tel No.
Fax No.
Website
Year of Incorporation
Ticker Symbol
Stock Exchange
Name
Designation
Chairman and MD
CEO and President
CFO
Director
Head Office
Public: Company 1 (1/4)
Brands
Products/Services
H1

Financial Snapshot Key Ratios
Financial Summary
• The company incurred a net profit of INR ‘d’ in FY 2014, as
compared to net profit of INR ‘c’ in FY 2013
• The company reported total income of INR ‘s’ in FY 2014, registering
an increase of ‘r1’% over FY 2013
• The company earned an operating margin of ‘r2’% in FY 2014, a
decrease of ‘r3’ percentage points over FY 2013
• The company reported debt to equity ratio of ‘n1’ in FY 2014, an
increase of ‘r4’% over FY 2013
Particulars
y-o-y change
(2014-13)
2014 2013 2012 2011
Profitability Ratios
Operating Margin
Net Margin
Profit Before Tax Margin
Return on Equity
Return on Capital Employed
Return on Working Capital
Return on Assets
Return on Fixed Assets
Cost Ratios
Operating costs (% of Sales)
Administration costs (% of
Sales)
Interest costs (% of Sales)
Liquidity Ratios
Current Ratio
Cash Ratio
Leverage Ratios
Debt to Equity Ratio
Debt to Capital Ratio
Interest Coverage Ratio
Efficiency Ratios
Fixed Asset Turnover
Asset Turnover
Current Asset Turnover
Working Capital Turnover
Capital Employed Turnover
Improved Decline
Key Financial Performance Indicators
Indicators Value (17/09/2014)
Market Capitalization (INR mn)
Total Enterprise Value (INR mn)
EPS (INR)
PE Ratio (Absolute)
Total Income Profit / Loss
g
f
e
v
u
p
a
Profit
INR mn
2014
Total Income
INR mn
s
d
2013
c
r
2012
b
q
2011

Key Business Segments Key Geographic Segments
Business Highlights
Description News
Overview
• Company 1 was incorporated in ‘y1’ by ‘n1’ and is part of the ‘n2’
• Initially, it owned the largest chain of ‘p1’ in India and subsequently diversified into ‘p2’, ‘p3’ and ‘p4’
• The company was listed in ‘n3’ in ‘y2’
• Today, it has evolved into a global retail, brand licensing, distribution and sourcing company
Business Operations
• The company is licensed to a portfolio of brands consisting of ‘n4’, ‘n5’ and ‘n6’
• It also owns ‘n7’ that designs and supplies ‘n4’ products to mainland ‘a1’, ‘a2’ and ‘a3’
Business Network
• The company has presence across ‘a4’, ‘a1’, ‘a5’ and ‘a6’
• It has exclusive rights to distribute ‘n4’ in ‘a4’, ‘a7’, ‘a8’ and ‘a9’
The company has been
operating solely in Segment 1
over the last four years
Note: Business Segments and Geographic Segments are based on total revenues
c
b
a
2013
p1%
Segment 1
c
b
a
2014
q4% r4%
p4%
2013
q3% r3%
p3%
2012
q2% r2%
p2%
2011
p1%
Segment 1 Segment 2 Segment 3

19
T
O
W
S
Public: Company 1 – SWOT Analysis (4/4)

20
Key People
Products and Services
Company Information
Offices and Centres – India
Category
Products/Services
Name
Designation
Director
Director
Director
Corporate Address
Tel No.
Fax No.
Website
Year of Incorporation
Head Office
H1
Private: Company 2 (1/5)

21
Shareholders of the Company Ownership Structure
Name No. of Shares held
a%
b%
Note: AGM as of 30th Sep 2013
Segment 1
Segment 2

Financial Snapshot Key Ratios
Financial Summary
Particulars
y-o-y
change
(2012-11)
2012 2011 2010 2009
Profitability Ratios
Operating Margin
Net Margin
Profit Before Tax Margin
Return on Equity
Return on Capital Employed
Return on Working Capital
Return on Assets
Return on Fixed Assets
Cost Ratios
Operating costs (% of Sales)
Administration costs (% of
Sales)
Interest costs (% of Sales)
Liquidity Ratios
Current Ratio
Cash Ratio
Leverage Ratios
Debt to Equity Ratio
Debt to Capital Ratio
Interest Coverage Ratio
Efficiency Ratios
Fixed Asset Turnover
Asset Turnover
Current Asset Turnover
Working Capital Turnover
Capital Employed Turnover
Improved Decline
Total Income Net Profit/Loss
j
i
h
g
f
e
x
w
v
u
INR mn INR mn
2012
d
s
2011
c
r
2010
b
q
2009
a
p
• The company incurred a net loss of INR ‘d’ in FY 2012, as
compared to net loss of INR ‘c’ in FY 2011
• The company reported total income of INR ‘s’ in FY 2012,
registering an increase of ‘r1’% over FY 2011
• The company earned an operating margin of ‘r2’% in FY 2012,
an increase of ‘r3’ percentage points over FY 2011
• The company reported debt to equity ratio of ‘n1’ in FY 2012,
an increase of ‘r4’% over FY 2011

23
Business Highlights
Description
News
Overview
•Company 2 is the exclusive licensee of ‘b1’ in India
•Founded in ‘y1’, it is a spin-off of ‘n1’, a leading pan-India player in international apparel and footwear brands management
•In 2011, the company signed a ‘y2’-year extension deal to operate and maintain the ‘b1’ brand in India, which is the longest ever deal signed with any international brand in India
•The present product portfolio of the ‘b1’ brand in India includes ‘p1’, ‘p2’ and ‘p3’
Retail Network
•The company operates ‘n1’ exclusive company-owned outlets and also has presence in over ‘n2’ multi-brand outlets of leading retailers such as ‘n2’, ‘n3’, ‘n4’, ‘n5’, ‘n6’ and ‘n7’
•It also has a strong distribution network which caters to a large number of multi-brand outlets through sub-licensee partners

24
T
O
W
S
Private: Company 2 – SWOT Analysis (5/5)

25
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