The Indian footwear industry is grouped into two segments—leather and non-leather. The solid domestic market drives the footwear industry's growth in the country. In consumption terms, 86% of volume-wise global consumption of footwear is of non-leather. Hence, the non-leather footwear sector in India offers a broad scope for growth in the years ahead. The Indian non-leather footwear industry is highly fragmented, with 75% of production coming from the unorganized sector.
The companies involved in this business are mostly micro, small, and medium enterprises. We are also among the top exporters of footwear in the world. Market capitalization wise, Relaxo Footwears Ltd (NS:RLXO) and Bata India (NS:BATA) Ltd are the biggest footwear companies in India. Apart from them, Mirza International Ltd (NS:MIRZ), Khadim India Ltd (NS:KHAD), Liberty Shoes Ltd (NS:LIBS), and Super House Ltd (NS:SPRH) are smallcapped Indian footwear companies. We have made a comparison of India's two largest listed footwear companies in terms of their financials.
Relaxo Footwears Vs. Bata India—Key Financials
The first parameter is the latest quarter's revenue growth. In Q1FY2022, Relaxo reported a total income of Rs 497.13 crore, up 36.7% year-on-year from Rs 363.58 crore in the corresponding quarter of fiscal 2021. On the other hand, Bata India clocked a robust 98.1% y-o-y growth in the total income amounting to Rs 267.05 crore from Rs 134.79 crore in Q1FY2021. The second parameter is EBITDA growth. Relaxo's EBITDA jumped 11.8% y-o-y to Rs 71.44 crore from Rs 63.9 crore in the comparable period. On the contrary, Bata India posted a negative EBITDA of Rs 21.83 crore in Q1FY2022 compared to negative Rs 34.09 crore in the corresponding quarter of fiscal 2021.
The third metric is operating profit growth and operating margin. The operating margin is calculated by dividing the operating profit by net sales turnover. Relaxo's operating profit was Rs 43.98 crore in the quarter, up 20.8% from Rs 36.4 crore in the corresponding quarter of fiscal 2021. On the other hand, Bata India's operating profit was a negative Rs 71.9 crore in the quarter from negative Rs 107.2 crore in Q1FY2021. Relaxo’s operating margin contracted 1.13% to 8.48% from 10.01% in Q1FY2021. Since Bata India has negative operating profit, the operating margin calculation is meaningless.
The following parameter is profit after tax (or PAT) growth and margin. For Relaxo, the profit after tax was Rs 30.96 crore, up 27.8% from Rs 24.22 crore in the first quarter of fiscal 2021. Its PAT margin was 6.2% in the quarter, marginally down from 6.53% in Q1FY2021. Bata India reported a negative PAT of Rs 71.32 crore compared to a negative PAT of Rs 101.1 crore in the corresponding quarter of fiscal 2021.
Relaxo Footwears vs. Bata India—Key CAGR
Now, we will turn to the CAGR of select financial parameters. On a 10-year revenue CAGR scale, Relaxo Footwears surged far ahead of Bata India. The former recorded CAGR of 13% and 3%, respectively. On a 3-year revenue CAGR basis, Relaxo again beat rival Bata with a 7% CAGR. The latter witnessed a revenue de-growth during the last three years with a negative 13% CAGR. Relaxo's 10-year PAT CAGR was 27%, whereas Bata India posted a negative PAT CAGR during the comparable period. In the last 3-years, Relaxo's net profit CAGR declined to 21%. On the other hand, Bata India's net profit CAGR remained a negative zone.
Now let us turn to the balance sheet. While both the companies are almost debt-free, Relaxo has an excellent track record of return on equity. The company's 10-year, 5-year, and 3-year ROE CAGR was 22%, 20%, and 19%, respectively. Bata India reported 16%, 12%, and 11% ROE CAGR in the comparable period. As far as the dividend yield is concerned, both the companies have an almost equal dividend yield of 0.2%. Promoter holding is also an important criterion. With 70.92% promoter holding in June 2021 quarter, Relaxo leaves its arch-rival behind, with a 52.96% promoter stake.
Relaxo Footwears vs. Bata India—Returns' Comparison
Relaxo Footwears announced its first-quarter 2022 results on July 31, whereas Bata India declared the same on August 12. Since the quarterly results announcement date, Relaxo delivered 14.34% returns to shareholders, whereas Bata India fetched a 14.9% yield. India's largest footwear company by a market cap made investors richer by 11.5% in a month, whereas India's second-largest footwear company by market cap delivered 12.7% returns during the same time. A time frame of a year is an excellent measure to judge the difference in yield. Relaxo Footwears more than doubled in a year, clocking 102.6% returns for its shareholders, whereas Bata India lagged far behind with 44.8% returns.