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Indian footwear sector to see 11% revenue growth this fiscal: CRISIL

25 Aug '23

2 min read

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Insights

The Indian footwear sector may witness 11 per cent revenue growth this fiscal, with a 4 per cent volume increase.
Operating margins will likely expand to around 9 per cent due to lower raw material costs but remain below pre-pandemic levels.
Domestic revenue is projected to rise 10 per cent.
Industry's focus has shifted to fashion and athleisure.

The Indian footwear sector is anticipated to see an approximately 11 per cent revenue growth this fiscal, driven by higher realisations, with volume up ~4 per cent, as per a report by CRISIL Ratings. The operating margin is likely to expand by about 125 basis points to ~9 per cent, owing to softer raw material prices such as ethylene vinyl acetate, rubber, and resins, which have dropped ~30 per cent in the past fiscal.

Despite this, the operating margin will remain below pre-pandemic levels of ~10 per cent. Raw materials make up ~45 per cent of total footwear manufacturing costs, and their reduced prices will enhance cash accrual and keep credit profiles stable.

According to a CRISIL Ratings analysis, exports, which form a fifth of the sector revenue, will slow to ~12 per cent this fiscal. In contrast, domestic revenue is predicted to rise ~10 per cent, mainly driven by higher selling prices, the report said.

The footwear industry is focusing more on fast-growing segments like fashion/women and athleisure after the pandemic, expected to grow over 15 per cent annually. Footwear companies are projected to incur nominal capital expenditure as capacity utilisation is around 70 per cent, with a stable working capital cycle.

The future will hinge on crude-linked raw material prices and macroeconomic developments, with implications for the thriving Indian footwear industry, the report noted.

Fibre2Fashion News Desk (KD)

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