Footwear sector sees 11% revenue growth, 4% rise in volume: CRISIL Ratings
footwear sector is seen striding 11% ahead this fiscal on higher realisations, while volume is seen up 4%, said CRISIL Ratings on Tuesday. Operating margin is expected to expand by about 125 basis points to 9% on softer raw material prices, but will still be below the pre-pandemic levels of 10%. Prices of key inputs such as ethylene vinyl acetate, rubber and resins have fallen 30% in the past fiscal.
Raw materials constitute 45% of the total cost of footwear makers. The resultant healthy cash accrual and balance sheets will keep their credit profiles stable.
A CRISIL Ratings analysis of 43 of them it rates, accounting for 15% of industry revenue of Rs 100,000 crore, indicates as much. Exports, which constitute a fifth of sector revenue, are seen slowing to 12% this fiscal — compared with a growth of 25% last fiscal — as high inflation cuts demand from Europe and the US, which account for three-fourths of footwear exports from India.
Last fiscal, exports grew as pent-up demand after the pandemic continued. Domestic revenue, on the other hand, is seen rising 10%, driven largely by higher selling prices.
This fiscal, the increase in average selling price will largely be due to a shift in the product mix towards higher-priced segments, compared with price hikes initiated in the past to counter costlier raw materials. Says, Nitin Kansal, Director, CRISIL Ratings, “Footwear makers have been sharpening focus on the fastgrowing fashion/women and athleisure segments after the pandemic, which largely falls in the premium category with average selling prices of Rs 1,000 per pair, or higher.
