Relaxo’s stock or slipper? What is worth buying?
3 min read
To begin with, the Indian footwear industry was dominated by BATA for a long period. It is true to say, BATA had become a synonym for footwear products. But, in 1976, a company dared to start its operations with just one product, The Hawaii chappal, which has now grown into 300 different types of Chappals, Slippers, Shoes & Casual Shoes.
The company is none other than Relaxo!
Back then in 1976, its revenue was meager 12 lacs which now stands at Rs 2,410crs in FY20. It also has 8 states of the art manufacturing plants. Relaxo houses India’s 4 most famous brands – Sparx, Flite, Bahamas, and schoolmate. In FY20, Relaxo sold 17.92crs of pairs while BATA sold 4.94crs of pairs.
The reason behind Relaxo’s success is its mantra to provide the best quality products at the most affordable prices. It is further supported by its strong distribution network across 50,000+ retailers and 396 exclusive outlets spread pan-India. Even during the Pandemic, wholesalers in parts of rural Rajasthan and Haryana had approached large distributors to pick up essential goods, which included dairy products, groceries, medical equipment, and medicines. “In the tempos where wholesalers were stocking goods for sale, they also bought three to five cartons of Relaxo slippers, to be sold through their own channels,” says Ramesh Kumar Dua, managing director of Relaxo Footwears in an interview to India Forbes.
People started treating footwear as an essential commodity by preferring fit and comfort over style and exclusivity. This helped Relaxo weather the pandemic better than its peers. Also, Pandemic opened dirt of opportunities for the organized footwear retailers as many unorganized players had to shut their factories and shops on account of lower sales, supply chain disruptions, and a not-so-free-flowing line of credit. This allowed the brands like Relaxo to tap unorganized footwear markets which makes up to 70% of the entire footwear industry. And one can start realizing the company’s potential from the numbers it has posted.
For 9 months ended FY2021, Relaxo clocked revenue of 1,611crs marginally down by 13% YoY as compared to BATA, who saw its revenue slip by 54% during the same period. Also, Relaxo’s EBITDA for Q3FY2021 has seen a rise of 8% YoY while BATA has slipped into losses. Even its stock has soared from ₹190 to ₹870 in the last 5 years, delivering a CAGR of 35.56% vis-à-vis 24.19% by BATA. Today, investors are willing to pay 4 times than a consumer pays for Relaxo’s slippers costing on an average ₹134/-. Going further, Relaxo has set a target to manufacture 10 lakh pairs per day from its current capacity of 7.5 lakh pairs.
It is Relaxo’s consumer-centric focus that rests on the three pillars of Quality, affordability, and innovation that has led to its rise over the decades. It seems this will not stop here, as Ramesh Kumar Dua, MD of Relaxo quotes, “We believe in strengthening our strengths rather than trying to manage our weaknesses.”
So, what’s worth buying? slipper or stock? You reckon!
