By
Fibre2Fashion
Published
Aug 25, 2023
The Indian footwear sector is anticipated to see an approximately 11% revenue growth this fiscal, driven by higher realisations, with volume up ~4%, as per a report by CRISIL Ratings. The operating margin is likely to expand by about 125 basis points to ~9%, owing to softer raw material prices such as ethylene vinyl acetate, rubber, and resins, which have dropped ~30% in the past fiscal.
Despite this, the operating margin will remain below pre-pandemic levels of ~10%. Raw materials make up ~45% 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% this fiscal. In contrast, domestic revenue is predicted to rise ~10%, 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% annually. Footwear companies are projected to incur nominal capital expenditure as capacity utilisation is around 70%, 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.
