Footwear Market – India November 2014
Executive Summary Market
Drivers & Challenges
Trends Government
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
Drivers
Challenges
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
Tough competition from unorganized players Affordability issues Depreciation of Rupee and rise in energy costs
Online retailing Integration of various business strategies Shift from Chinese sourcing to Indian sourcing FDI in Retail Goods and Services Tax (GST) Major Players
Competitive Landscape
Company 1
Company 2
Company 3
Company 4
Company 5
Company 6
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•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 FOOTWEAR MARKET IN INDIA 2014.PPT
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Economic Indicators (1/3) GDP at Factor Cost: Quarterly INR tn t
r
d1 c1 b1
q
a1
s
c4 b4 a4
c3 b3 a3
d2 c2 b2 a2
p Q1
Q2 2010-11
2011-12
Q3 2013-14
2012-13
Q4
Inflation Rate: Monthly % t s
p
r
s
q
r q p
t Jul 2013 - Aug 2013
Aug 2013 - Sep 2013
Sep 2013 - Oct 2013
Oct 2013 - Nov 2013
FOOTWEAR MARKET IN INDIA 2014.PPT
Nov 2013 - Dec 2013 4
Global footwear market has been steadily rising, spearheaded by growth in ‘a1’ Global Footwear Market – Overview • Footwear market falls under the broader segment of ‘s1’
Global Footwear Market Size and Growth INR tn d
• By type of material used, footwear can be classified as ‘t1’, ‘t2’, ‘t3’, ‘t4’ and ‘t5’, among others
c
• Globally, ‘a2’, ‘a3’ and ‘a4’ are the top three consumers of footwear, constituting nearly ‘r1’% of the total market
b
• ‘a2’ and ‘a4’ have the world’s fastest growing footwear consumption rate and are the top two exporters of footwear
r3% p
q
r
s
t
u
2013
2014e
2015e
2016e
2017e
2018e
a
India’s Share in Global Footwear Exports (2013) r5%
• 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
FOOTWEAR MARKET IN INDIA 2014.PPT
Country 1 Country 2 r6%
Country 3
r4%
5
Footwear market in India is showing an upward trend with a rise in consumer base Market Overview
Footwear Market Size & Growth
• 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
INR bn u
c
t
r1%
s
r
b
q
a
p 2013
Footwear Market – Structure (2013)
2023e
Footwear Market – Segmentation (2013)
Segment 1 r2%
2018e
Segment 1
r6%
Segment 2
Segment 2
Segment 3 r5% r4%
r3%
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Rise in footwear production in India… Exports
Total Exports (Value)
• 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 – Country-Wise Segmentation (2013-14)
t
d
s b
c
2012
2013
a
r q p
2011
Exports – Country-Wise Segmentation (2012-13)
Country 1 r9%
Country 2 Country 3 r4%
Country 4
Country 2 Country 3
r14% r10%
Country 5 r5%
2014
Note: Figures are for the respective financial years
Country 1
r3%
r8%
INR bn
Others
Country 4 Country 5 Others
r11% r13% r12%
r7% r6%
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…has resulted in eventual rise in exports HS Codes for Footwear Products HS code
Product Segmentation 2013-14
Particulars
r1% r6% r2%
Product 1
r5%
Product 3
r4%
Product 2 Product 4 Product 5 Product 6
r3%
Product Segmentation 2012-13
r10%
r7% r12% r8%
Product 1
r11%
Product 3
Product 2 Product 4 Product 5 Product 6
r9%
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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
Challenges Tough competition from unorganized players Affordability issues Depreciation of Rupee and rise in energy costs
Growing consciousness on health and beauty Increase in awareness
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Retail market in India has been slowly opened up to FDI… 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
1991: Indianeconomy economyopened opened ‘y1’: Indian FDI up to 51% ‘p1’%allowed allowedunder under the automatic route in select priority sectors
‘y2’: FDI up to ‘p2’% allowed under the automatic route in cash & carry wholesale
‘y3’: FDI up to ‘p3’% allowed in single brand retail with prior government approval
‘y4’: Government mulled over the idea of allowing ‘p4’% FDI in single-brand retail and ‘p5’% in multibrand retail
FOOTWEAR MARKET IN INDIA 2014.PPT
‘y5’: Government proposed to allow FDI in multibrand retailing
‘y6’: Government allows ‘p6’% FDI in single brand retailing
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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
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Trends – Summary
Online retailing
Key Trends Shift from Chinese sourcing to Indian sourcing
Integration of various business strategies
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Porter’s Five Forces Analysis Threat of New Entrants •x
Impact i1
Impact i4 Bargaining Power of Suppliers •x
Competitive Rivalry
Impact i5
•x
Threat of Substitutes •x
FOOTWEAR MARKET IN INDIA 2014.PPT
Impact i2 Bargaining Power of Buyers •x
Impact i3
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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 FOOTWEAR MARKET IN INDIA 2014.PPT
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Competitive Benchmarking (2/5) Key Ratios of Top 3 Companies – Operational Basis (FY 2013) (1/3) Gross Margin
% t
a1
Net Margin a3
a2
s r
Operating Margin
b1
c1
b2
r
c2
b3
c3
p Company 1
Company 2
Company 3
• 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’%
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Public: Company 1 (1/4) Company Information
Offices and Centres – India
Corporate Address Tel No. Fax No. Website
Year of Incorporation
H1
Ticker Symbol Head Office
Stock Exchange
Products and Services Brands
Products/Services
Key People Name
Designation Chairman and MD CEO and President CFO Director
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Public: Company 1 (2/4) Financial Snapshot Total Income INR mn v
Key Ratios
Total Income
b a
Profit INR mn
d
c
g
s q
u
Profit / Loss
f
r
p 2011
e 2012
2013
2014
Financial Summary
• 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
Key Financial Performance Indicators Market Capitalization (INR mn) Total Enterprise Value (INR mn) EPS (INR) PE Ratio (Absolute)
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
• The company incurred a net profit of INR ‘d’ in FY 2014, as compared to net profit of INR ‘c’ in FY 2013
Indicators
Particulars
Value (17/09/2014)
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
FOOTWEAR MARKET IN INDIA 2014.PPT
Decline
17
Public: Company 1 (3/4) Key Business Segments
Key Geographic Segments
Segment 1
Segment 1
Segment 3
c
c b
Segment 2
p1%
The company has been operating solely in Segment 1 over the last four years
b
p1%
a
a
2011
2013
p2%
p3%
p4%
q2% r2%
q3% r3%
q4% r4%
2012
2013
2014
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’ Note: Business Segments and Geographic Segments are based on total revenues FOOTWEAR MARKET IN INDIA 2014.PPT
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Public: Company 1 – SWOT Analysis (4/4)
S
W
O
T
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Private: Company 2 (1/5) Company Information
Offices and Centres – India
Corporate Address
Tel No. H1
Fax No. Website Year of Incorporation
Head Office
Products and Services Category
Products/Services
Key People Name
Designation Director
Director Director
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Private: Company 2 (2/5) Shareholders of the Company Name
Ownership Structure No. of Shares held Segment 1 Segment 2
b%
a%
Note: AGM as of 30th Sep 2013 FOOTWEAR MARKET IN INDIA 2014.PPT
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Private: Company 2 (3/5) Financial Snapshot
Key Ratios
Total Income
Net Profit/Loss
INR mn x
Particulars
INR mn a
j b
i
w
h
d
p
g
v
c
u
2009
q
r
s
2010
2011
2012
f e
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
Financial Summary • 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
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
FOOTWEAR MARKET IN INDIA 2014.PPT
Decline
22
Private: Company 2 (4/5) Business Highlights Description
News
• 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 Overview
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’
• The company operates ‘n1’ exclusive company-owned outlets and also has presence in Retail Network
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
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Private: Company 2 – SWOT Analysis (5/5)
S
W
O
T
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