I hope everyone of you is keeping safe and is in good health. I welcomeyou to another year of our Annual General Meeting and present you the Annual Report forfiscal 202021. I appreciate you for taking some time out for the report and assure you ofan insightful commentary on the company's performance.
Economies across the world experienced sharp contraction in GDP growthin 2020 due to the covid-19 pandemic and the attendant economic crisis. The Indian economyshrank by 7.3% during the fiscal year 2020-21 as the nation withstood the pandemic and thegrinding lockdown which led to massive disruption in economic activities. Restrictedmobility and voluntary social distancing severely affected people aggregating sectors andbusinesses such as travel malls amongst others. The expansionary policies adopted byGovernment institutions and the Reserve Bank of India aimed at stimulating demandsupported the reversal of decline post unlock as pent-up demand gained momentum. Howevera full recovery of the economy is dependent on the pan India vaccination program whichbegun in January 2021 and has been making good progress. Besides the prospects of theeconomy continue to reel under uncertainty due to emerging mutant forms of Coronavirus andsporadic regional lockdowns.
Impact of Covid 19 on our business
In the aftermath of the lockdown in Q1FY21 our business units wereshut down for a considerable period during lock down which had an adverse impact on theprofitability of the Company. While better utilization of resources and absence ofmaterial long term debt shielded the company's capital and financial resources fromadverse impact the Company faced short-term working capital crunch.
What we did
The Company adopted a cautious view on new capital expenditure projectsduring the period under review. While the Company increased its online marketing leadingto increase in online sales; it also launched innovative marketing campaigns during thephase wise unlock period. To overcome inability of the customers to visit stores due toPandemic we took steps to reach out to the customers by launching (On The Go) - astore on wheels; (Hot Spot) - to disseminate Shoe Sanitizers & Masks; (KhadimsNear Me) - exclusive shopping tents set up in residential areas. These initiativesreceived a good response from customers.
The Company availed working capital term loan facility under theEmergency Credit Line Guarantee Scheme (ECLGS) of the Government of India as a mitigatingmeasure and the scheme also included moratorium on interest payments.
The Company posted an annual revenue of INR 6261.8 million during thefiscal FY21 against INR 7718.7 million in FY20 recording a 18.9% decline. The decline canbe largely attribute to the lockdown associated demand contraction and slow recovery inretail footfalls across the country. The gross margin witnessed a decline by 755 basispoints to 28.8% in FY21 while EBIDTA margin declined 339 basis points to 0.6% in the sameperiod. Subsequently the Company registered profit after tax (PAT) of negative INR 328.7million during the fiscal 2020-21 against INR -312.7 million in FY20.
In terms of turnover from Retail and Distribution business the Companyhas overachieved its Sales from Retail and Distribution in aggregate during half yearended March 31 2021 in comparison with its pre covid sales of the same period (i.e. 2ndhalf of the FY20). The gross margins for the said period improved substantially in bothretail and distribution verticals. The Company has also bagged an institutional order fromEducation Department of Uttar Pradesh worth INR 1281 million for supply of school bagsduring the year under report.
As a result of premiumization of its products through varioussubbrands there has been an increase in ASP leading to higher gross margin.
Higher demand for low price products enabled the Company to achieve 12months sales of FY 20 in 11 months of FY 21 with respect to distribution business inspite of closure of business units for more than a month during Q1FY21 due to nationwidelockdown.
The retail business represented 47% of the revenue share at INR 2960.5million during the year while the Distribution business which represents 32% of therevenue stood at INR 2018.2 million during FY21. The corresponding gross margins stood at45.1% for retail and 30% for distribution business.
In spite of unfavorable business conditions for a substantial part ofthe year your Company has booked profit in the last two quarters of FY 21.
The Indian market with over 1.3 billion population presentssignificant opportunity in the footwear segment since it is the second largest consumerin the world.
The industry is expected to witness significant growth from tailwindsprovided by the demography and favorable macroeconomic conditions which in turn is beingshaped by the policy interventions and structural transformation across various sectors.The country has a younger demography as nearly 78% of the population is estimated to bebelow 45 years of age. Moreover increasing presence of women in the workforce increasingdisposable income of consumers and higher expenditure on lifestyle products augers wellfor the industry as people look towards branded products.
India is witnessing a significant shift in the consumption pattern ofunbranded vis a vis branded footwear The gap between the two is getting narrower YOY withsharp inclination towards branded footwear. The current figures stands at 45% in favor ofbranded footwear1. Also 40% of the population is expected to reside in urbanareas by 2030. This places the Company at an advantageous position to penetrate into awider market.
As a leading footwear brand in India the Company is well placed tocapitalize the opportunities owing to its two-pronged business model focusing on Retailand Distribution business.
In the retail business the Company aims to increase footprint in SouthIndia West India and in North India. Furthermore the Company plans to enter into newmarkets through company owned and company operated (COCO) outlets and then furtherpenetrates through franchisees once the brand is well established. The Company has beenexpanding its store network across India with focus on premiumization asset light modeland optimum capacity utilization.
In the distribution business the Company aims to focus on penetrationin existing markets in East India and South India by capitalizing on retail brand recallin the markets. Additionally the Company aims to increase utilization of existinginstalled capacity and invest in machines and moulds at existing manufacturing facilities.
The Company also intends to achieve premiumization through varioussubbrands in its distribution business. The Company plans to increase focus on productionof sports shoes and PU products to drive premiumization.
Our strategy is further strengthened by the presence of brands acrossdifferent price segments catering to men women and kids. We offer affordable fashionwhich allows us to cater to both the business segments effectively without dilutingeither. This de-risk dependence on any one business and further premiumization in both thesegments help us to increase gross margins.
We recognize the contribution of all the employees and businesspartners during these trying times and the importance of ensuring that we make ouremployees feel safe protected supported and rewarded. I would like to thank all myemployees and their families for the support throughout the year risking their livessacrificing their time and increasing the vigor with which they approached to tackle thesituation. During the year under review the Company provided for insurance benefits foremployees such as group and term insurance products as well as Mediclaim benefits.
On behalf of the Company I extend my gratitude to our Covid warriorswho are constantly putting their lives at risk and working tirelessly to keep us safe. Ialso appreciate the global health community who have relentlessly worked to ensure theavailability of critical drugs vaccines and medical equipment for the patients.
Our people in the organisation business partners and investors havebeen with us through the ups and downs. Nevertheless the collaboration spirit andresilience exhibited by our people at a time marked by absence of crisis manual steeredthe Company out of the crisis. I owe my gratitude to our people and their families fortheir extraordinary support in an unprecedented crisis.
I extend my thanks to our Board of Directors business partnersemployees and other stakeholders for their trust on us and the support they have beenproviding to this Company all year along.