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Leather & Leather Products industry has posted moderate performance for the quarter ended September 2009. The aggregate net sales 12 Leather & Leather products companies posted a moderate growth of 18% to Rs 970.39 crore. With marginal expansion in the margins by 10 bps to 10.1%, the operating profit rose by 20% to Rs 97.73 crore. Other income declined 12% to Rs 4.19 crore and restricted growth in PBIDT to 18% to Rs 101.92 crore. Interest cost has marginally declined in interest cost by 1% to Rs 21.94 crore and depreciation was up by 19% to Rs 20.59 crore. Resultantly, aggregated PBT rose by 27% to Rs 59.39 crore. The sharp rise in the effective tax rate by 570 bps to 26.7% restricted net profit growth to 18% at Rs 43.55 crore.
Leather industry occupies a prominent place in the Indian economy due to its massive potential for employment, growth and exports. The leather sector has been identified as a thrust sector for exports promotion in India. In the last four decades, from the status of exporter of raw hides and semi finished leather, the country has now turned into a major importer of these goods. Currently, India is major supplier of value added goods like footwear, bags and travel accessories like belts and wallets etc. The major chunk of India's leather products exports belongs to footwear.
According to Council for leather exports, total leather & leather products, exports for the months April - September 2009 declined to Rs 8060.63 crore from Rs 8456.85 crore in April – September 2008, a fall of 5% on yoy basis. Exports of finished leather declined 18% in the first half of current fiscal to Rs 1387.14 crore and contribution to total exports declined to 17% compared to 20% in the corresponding previous period. Leather footwear and components exports declined 12% to Rs 3074.14 crore the six months ended September 2009, and the contribution from leather footwear & its components declined to 38% compared to 41% in the six month ended September 2008. In April-September 2009, leather garments rose by 36% to Rs 1302.36 crore, and contributed 16% of total leather exports.
Production of leather footwear of Indian type (IPP) in September 2009 increased 26% to 6.19 lakh pairs compared to 4.90 lakh pairs in September 2008. On m-o-m basis, the production declined 13%. The production of leather footwear of Indian type in April- September 2009 rose 29% to 43.24 lakh pairs compared to 33.63 lakh pairs for the period April-September 2008.
Production of leather footwear of western type in September 2009 compared to September 2008 decreased to 15.97 lakh pairs from 16.66 lakh pairs, a decline of 4% over corresponding period. In the first half production declined 1% to 98.30 lakh pairs as against 99.18 lakh pairs in the corresponding previous period. Leather footwear production of Indian type (SSI) in September 2009 increased 4% to 174.30 lakh pairs as against 168.27 lakh pairs for September 2008. In the six months ended September 2009, production rose marginally 4% to 10.39 crore pairs.
Leather industry has benefited with Foreign Trade Policy 2009-14, (i) Leather sector will be allowed to re-export unsold imported raw hides, skins and semi-finished leather from public bonded warehouses, subject to payment of 50% of export duty. (ii) Enhancement of duty credit scrip under Focus product scheme (FPS) from 1.25% of FOB value of export to 2% of FOB value of export. On flip side, as a net exporter, the appreciation of rupee will hit the leather sector.
In the footwear segment, companies are concentrating un-captured Women and children segment. Women's footwear accounts for almost 30% of the total footwear market and organized segment contributes only 20% of this market. So companies planning to grab this market in the near terms. With growing market for kid's footwear, organized players are planning to enter this market.
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