Stepping Up: Relaxo's Post-pandemic Profit Surge

In the last fiscal year, India produced over 22 crore pairs of footwear, of which 19.5 crore were manufactured and sold by Relaxo Footwears, the leading brand in the country by market capitalisation. Post-pandemic, the footwear industry has witnessed a resurgence, though contrary to popular belief, it is not the shoes or closed footwear categories driving the growth, but rather the open footwear segment—slippers and sandals. 

Despite this growth, the past two to three years have not been without challenges. Regulatory hurdles emerged when the Indian government mandated strict adherence to Bureau of Indian Standards (BIS) codes across the entire supply chain. This had a notable impact on industry-wide sales.

India ranks second only to China in global footwear production. The domestic footwear industry is bifurcated into leather and non-leather categories, both driven by rising demand. According to Invest India, the non-leather footwear market in India is poised to expand eightfold by 2030, with projections suggesting it will surpass $6 billion this year.

Growth & Performance
Founded in 1984, Relaxo has established itself as India’s largest footwear manufacturer. Reflecting on its recent performance, Gaurav Dua, Whole-time Director at Relaxo, notes, “Our profit margins were largely boosted by subdued raw material prices, partially offset by increased fixed expenses.” The company registered a modest revenue growth in FY24, largely driven by a surge in open footwear sales, which helped reclaim market share. Relaxo also invested Rs 248 crore in capital expenditures, including a significant land purchase in Bhiwadi, Rajasthan.

Relaxo’s financials highlight its robust recovery. The company’s net profit surged 30 per cent year-on-year to Rs 200 crore for FY24, while revenue from operations grew 5 per cent to Rs 2,914 crore. EBITDA witnessed a 21per cent increase, reaching Rs 407 crore, and EBITDA margins improved by 188 basis points, standing at 14 per cent. 
The company hit a milestone, selling 19.5 crore pairs in FY24, an all-time high. “This was achieved through increased sales in open footwear. Our volume growth exceeded value growth,” Dua remarks. “At Relaxo, we are aligned to invest in initiatives that can help us unlock exponential growth for our products and solidify our brand presence both domestically and internationally,” he adds. 

Chairman and Managing Director Ramesh Kumar Dua highlights the company’s major sales transformation efforts, particularly in enhancing its engagement with distributors and consumers in FY24. “We achieved a moderate increase in revenue for FY24, with a notable improvement in profitability, driven by a significant uptick in open-footwear volumes,” he says. 

Additionally, Relaxo has expanded its ecommerce presence as a 'brand as a seller' across major online platforms, allowing the company to directly connect with consumers. These digital initiatives are expected to bolster Relaxo’s market growth further. “Our current focus includes developing soles with superior bounce, ultra-soft cushioning, and enhanced comfort, alongside innovative designs for both open and closed footwear. We are committed to revolutionizing footwear materials through cutting-edge technologies that enhance production processes and boost manufacturing capabilities,” Gaurav Dua adds.

Certification Challenge 
India’s pursuit of higher quality standards for its domestic products has been bolstered by stringent regulations from the Department for Promotion of Industry and Internal Trade (DPIIT). These include Quality Control Orders (QCO) issued in collaboration with the Bureau of Indian Standards (BIS). Among the 450 products under BIS oversight, the footwear industry in under rigorous scrutiny so as to ensure compliance.

The government’s push for BIS certification is aimed at curbing the influx of substandard imports, particularly from China, and encouraging local production. However, the footwear sector has raised concerns about the potential costs associated with meeting these new standards. August 1, 2024 is the deadline set for manufacturers to obtain BIS certification. 

Relaxo, however, has successfully navigated these regulatory challenges. "We have implemented these BIS standards,” Gaurav Dua states. “Though the implementation posed significant challenges, we worked closely with our vendors to develop BIS-compliant materials within the stipulated time.” Today, Relaxo produces ISI-marked footwear from BIS-compliant materials across all its manufacturing plants, having collaborated actively with BIS technical committees. 

In its pursuit of continuous innovation, Relaxo has also established an Innovation Centre dedicated to research and development in footwear design and materials.

Exports & Premiumisation
Relaxo operates nine manufacturing facilities across India, with a daily production capacity of 10.5 lakh pairs. In FY24, the company exported to more than 30 countries across six continents, with a strong presence in markets in Africa, the Gulf, Central America, and Oceania. Exports accounted for around 4.5per cent of total revenue, a figure that is expected to grow as Relaxo continues to expand its international footprint.

The company’s premiumisation journey is another key growth driver. “The sports segment is growing faster than the open footwear category, but last year, open footwear outpaced the growth of closed footwear like sports shoes,” Gaurav Dua informs. While 80 per cent of Relaxo’s overall sales come from open footwear, its Sparx brand, which focuses on sports shoes, contributes 60 per cent of its closed-footwear sales. “Sparx is a premium brand contributing a third to our total sales. We aim to further grow this category,” he adds.

Relaxo is also diversifying its product offerings with premium brands like Bahamas and Flite Urban Basics. “Our journey toward premiumisation continues—we have to improve in the premium range,” Dua stresses, underscoring the company’s focus on enhancing its market presence in higher-end segments.

Business Outlook 
Relaxo Footwears’ success in the last fiscal year is a testament to its resilience in a challenging business environment. With strong sales in open footwear, robust financials, and significant investments in technology and compliance, the company is well-positioned to capitalise on future growth opportunities both domestically and internationally. 
“With ongoing infrastructure enhancements and economic progress reaching rural areas, there's a growing demand for footwear among these demographics, stimulating market growth,” says Gaurav Dua. 

The government's "Make in India" campaign is actively promoting domestic footwear production through massive infrastructure backing. This is further helping the industry reduce its dependency on imports while establishing India as a global manufacturing hub for footwear.

By navigating regulatory challenges, expanding into ecommerce, and focusing on premiumisation, Relaxo is charting a course for sustained growth in the Indian footwear market. The company’s emphasis on innovation and compliance, combined with its strategic initiatives in exports and premium brands, is expected to drive its next phase of growth, setting the stage for an exciting future in India’s thriving footwear industry.