Redtape hits record high; stock zooms 49% in 2 months on positive outlook

Stock market today: CRISIL expects revenue to grow further with strong domestic demand from metro cities and increasing penetration in tier II cities over the medium term.

Shares of Redtape hit a record high of Rs 910, as they surged 9 per cent on the BSE in Monday’s intra-day trade on positive outlook. In the past two months, the stock of the footwear company has zoomed 49 per cent. 

Redtape is a prominent player in the retail segment of footwear and garments for men, women and children. It sells products under three brands – Redtape, Mode (Redtape London) and Bond Street (REDTAPE London).

Most of the company's sales come from the domestic market, with minimal exports.

According to Redtape, the growth of the retail sector and e-commerce is expected to boost growth for the footwear and retail industry. Rising disposable incomes is also expected to stimulate domestic demand.

The growing popularity of ‘fast fashion’ products is further expected to contribute to the growth of the footwear and apparel industry. In that backdrop, Redtape plans to open around100 retail outlets across India, with a particular focus on expanding its presence in South India.

To capitalise on urbanisation in the tier II and III cities, the company's management aims to capture growth and diversify its customer base through strategic expansion and an advanced, diverse footwear range, including outdoor, performance and women's shoes.

There is a significant potential for growth in emerging markets like India, China, and Southeast Asia, where the middle class is expanding, and the demand for sportswear is increasing, the company said in its FY24 annual report. The company can focus on expanding its presence and increasing its market share in these regions, the company added.

Meanwhile, on August 6, 2024, CRISIL Ratings revised its outlook on the long-term bank facilities of Redtape to ‘Positive’ from ‘Stable’ while reaffirming the rating at ‘CRISIL A’.

The revision in outlook factors in the wide market reach of the company in metros and tier I cities, apart from its improving presence in tier II and III cities. The company has also shown its ability to adapt to changing market trends, the rating agency said in rationale.

The company’s revenue grew 26 per cent year-on-year in fiscal 2024 to Rs 1,843 crore (Rs 1,468 crore in fiscal 2023) driven by strong growth in both footwear and garment sales.

Meanwhile, CRISIL expects revenue to grow further, with a strong domestic demand from metro cities and increasing penetration in tier II cities over the medium-term. Strong offline presence through exclusive brand outlets (EBOs) and multi-brand outlets (MBOs) also offer better margins.

“Redtape will continue to benefit from strong brand recall across product categories, a wide variety of product offerings, strong presence in metros and tier I cities and improving penetration in tier II and III cities. The financial risk profile should remain strong, driven by low long-term debt, high financial flexibility and moderate capex,” CRISIL Ratings said.