The ongoing financial crisis would have very less impact on the Indian footwear market due to continued growing demand for footwear by the expanding middle class families. Some of the leading footwear companies are Bata India, Liberty Shoes, Mirza International, Relaxo Footwear etc. Footwear companies offer a range of shoes under categories such as women's footwear, men's footwear and children footwear.

Indian footwear industry is major strength of Indian leather industry. The Indian leather industry occupies a place of prominence in the Indian economy in view of its substantial export earnings, employment generation and growth. The exports of leather and leather products increased very rapidly over the past decades. The export increased from Rs 2.90 crore in 1956-57 to Rs 307.60 crore in 1991-92 and Rs 1400 crore in 2007-08. It is expected that footwear exports would increased to USD 4.5 billion by 2010-11 from USD 1.5 billon in 2007-08. Leather shoes are produced by medium and large players, while sandals and chappals are produced by small players. The main markets for Indian leather shoes are UK and USA, which account for about 55% of total exports from the country.

Production of leather footwear of Indian type for the month of April 2009 increased to 7.84 lakh pairs from 6.74 lakh pairs in April 2008, an increase of 16.42% on yoy basis. Production of leather footwear of western type for the month of April 2009 decreased to 14.31 lakh pairs from 15.65 lakh in April 2008, a decline of 8.56% over corresponding period.

The aggregate net sales 6 footwear companies posted a growth of 7% to Rs 502.28 crore. Operating profit margins registered healthy expansion of 410 bps to 13.0% resulting operating profit to grow by 57% to Rs 65.18 crore. Other income declined to Rs 2.07 crore from Rs 9.4 crore restricting PBIDT growth to 32% to Rs 67.25 crore. With decline in interest cost and marginal rise in depreciation by 14% to Rs 10.12 crore and 17% to Rs 13.00 crore-led PBT to grow by 57% to Rs 44.13 crore. As the effective tax rate increased by 2080 bps to 36.1%, the net profit grow by 19% to Rs 28.18 crore.

Footwear market is classified into men footwear, women footwear and children footwear. In terms of category wise men foot wear accounts for 56% of the total footwear market share and in terms of products causal footwear accounts around 75% of market share. For the footwear business, April-June and October-December quarter will peak season, as most of school & college in first case and festival season in the second case. Hitherto, companies are targeting the men's footwear segment and currently they are looking for untapped women and children footwear segments.

Bata India posted 6% fall in the net profit to Rs 10.33 crore on 7% rise in net sales to Rs 233.60 crore for the quarter ended March'09. Operating profit margins expanded by 90 bps to 9.2% boosted operating profit to increase by 22% to Rs 21.55 crore. Decline in profits is mainly due to spike in the taxation from Rs 1.74 crore in the corresponding pervious period to Rs 5.91 crore in the quarter under review. Due to economic slow down almost all companies are closing their some one non profitable stores but the company has opened 32 new retail stores and also renovated 3 existing stores in the quarter under the review. These new stores are based on the international format of Bata Stores and have a minimum area of 3000 sq. ft. The company also launched its new Spring Summer Collection in its stores, offering several new trendy designs targeted at the young customers, under its famous brands such as Marie Clair, North Star, Power and Weinbrenner.

Relaxo Footwear manufactures slippers, Joggers, Casuals and School shoes. Relaxo exports footwear to US and Europe. It has also been a partner to Nike in the production of Joggers. Relaxo Footwear posted robust performance for the quarter ended March'09. The net profits of the company posted strong growth of 152% in net profits to Rs 7.34 crore on 30% growth in net sales to Rs 122.41 crore. The good show on the back of strong growth in operating margins by 410 bps to 14.6% resulting operating profit to grow by 80% to Rs 17.89 crore.

Outlook

The Union Budget 2009-10 is expected to unveil measures to improve the competitiveness of export oriented sectors like textile, leather etc. While the demand in the advanced markets of US and European Union has turned sluggsh, the domestic players are wresting orders by working on slimmer margins. This can improve, depending on the additional incentives expected to be provided in the Union Budget 2009-10 Also, the domestic demand is improving, which is quite well tapped by frontline players like Bata India.

According to report-Indian Footwear forecast to 2012, with growing demand for children and women footwear, the Indian footwear retail market is projected to grow at a CAGR of about 19% between 2009 and 2012. In terms of exports it is estimated footwear would comprise around 65% of total leather exports by 2011. Over all, the footwear sector has the potential to grow at a double digit, despite sluggishness in demand in the advanced markets.