Relaxo Footwears Limited

Relaxo Footwear reported a Q4 FY25 revenue from operations of INR 695 crores, marking a 6.96% decline from INR 747 crores in Q4 FY24, primarily due to softer volumes in the mid-range footwear segment. Q4 EBITDA stood at INR 112 crores, down from INR 120 crores year-on-year, with PAT at INR 56 crores, representing an 8.1% margin. For the full FY25, revenue was INR 2,790 crores, a 4% decline from FY24, with an EBITDA of INR 382 crores (13.7% margin) and PAT of INR 170 crores (6.1% margin). The company remains net debt-free, holding INR 357 crores in investments as of March 31, 2025.

The company is actively restructuring its distribution model, shifting focus from primary to secondary sales and retail growth. This involves implementing a Distributor Management System (DMS) and the Relaxo Parivaar app, which has tied up 70,000 outlets, with 60,000 buying regularly and 50% of sales being captured. Management acknowledges resistance from some distributors due to increased transparency and changes in credit terms, leading to the closure of some non-compliant distributors. The goal is to improve the quality of distributors and credit, targeting 50 new retail outlets and 100 new distributors in the coming year.

Relaxo is enhancing its e-commerce strategy by segregating its portfolio and adopting a 'Brand As Seller' (BAS) model to counter price wars previously experienced with platforms like Flipkart and Amazon. E-commerce currently contributes 10% to total revenue, consistent with the previous year. The company is also focusing on premiumization, with the share of premium articles and shoe business increasing, while the Hawai segment (lower ASP) has seen a decline. New product development is geared towards consumer needs, including sneakers in the INR 1,200-2,500 range, and exploring export opportunities in the UK for EVA footwear and flip-flops.

Despite the revenue decline, the company has maintained its EBITDA margin, which stood at 13.7% for FY25. Management attributes a reported Q4 gross margin reduction to an accounting effect from a decrease in inventory, rather than an operational issue. Efforts are underway to improve profitability through enhanced back-end operations, working capital efficiency, and cost savings from energy-efficient devices and solar energy investments. The company anticipates a 100bps+ improvement in EBITDA margin and a 2-3% improvement in ROCE in the coming time.

Relaxo incurred a capex of INR 62 crores (net of capital subsidy) in FY25. For the next fiscal year, a capex of approximately INR 100 crores is planned. This includes around INR 30 crores annually for new moulds to introduce new articles, capital for opening 50 new retail outlets, and investments in energy-saving devices like solar energy and fuel-efficient boilers. While acknowledging a challenging demand environment, particularly in rural and middle-income segments, management expects top-line growth and improved bottom-line in H2 FY26 as strategic initiatives stabilize.