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 FOOTWEAR MARKET IN INDIA 2014.PPT

•Macro-Economic Indicators

•Introduction

•Market Overview

•EXIM Data

•Drivers & Challenges

•Government Initiatives

FDI in Retail


•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

2013-14 2012-13 2011-12 2010-11

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 – Segmentation (2013) Footwear Market – Structure (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-Wise Segmentation (2012-13) Exports – Country-Wise Segmentation (2013-14)

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



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 the automatic route in select priority sectors

‘y2’: FDI up to ‘p2’% allowed under the automatic route in cash & carry wholesale

‘y1’: Indian economy opened FDI up to ‘p1’% allowed under the automatic route in select priority sectors

Retail market in India has been slowly opened up to FDI…


India is expected to implement Goods and Services Tax (GST) in the year ‘y1’


• 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

c3 b3

%

a3

Company 2

c2 b2

a2

Company 1

c1 b1

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’%


Operating Margin Net Margin Gross Margin


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)

Profit / Loss Total Income

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

r4% q4%

p4%

2013

r3% q3%

p3%

2012

r2% q2%

p2%

2011

p1%

Segment 3 Segment 1 Segment 2


19

T O

W S


Public: Company 1 – SWOT Analysis (4/4)


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

Net Profit/Loss Total Income

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



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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Market Research Report : Footwear market in india 2014 - Sample

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