Top Footwear Stocks in India 2023

India is the second-largest producer of footwear that accounts for almost 13% of the worldwide production of footwear. According to the latest report given by Maximize Market Research, the market size of Indian footwear got valued at $15.22 billion in 2022. The total revenue is anticipated to grow at a compound annual growth rate of 12.83% between the time period of 2023 to 2029 and will touch approximately $35.43 billion.

In India, it is one of the top employment-generating industries. Although it holds an essential position in the drive of the Indian Government, the sector is dramatically contributing to the Economic Growth of the country. In the nation, the footwear Industry comprises an amalgamation of both the modern and traditional sectors, Manufacturing both non-leather and leather footwear. So, if you are thinking of Investing in top footwear stocks in 2023, let us find them out in this article.

What are Footwear Stocks?

India comprises the largest footwear industry in the world. The market is fragmented with several businesses competing in varying categories, such as Flip-flops, sandals, athletic shoes, and dress shoes. Several foreign firms with a large presence in the market of India, such as Reebok, Puma, Adidas, and Nike, have a presence in the country. However, nationally grown entrants are dominating the market and growing rapidly as well. Several reasons, like increased disposable Income, shifting consumer preferences, expanding urbanisation, and a growing concentration on health and fitness, are driving the footwear sector in the nation. Additionally, government initiatives, such as the Make in India project aiming to enhance domestic production and exports, are helping the business as well.

Footwear Industry in India

The footwear industry in India is a significant sector of the country's Economy. It encompasses the manufacturing, trading, and retailing of various types of footwear, including shoes, sandals, slippers, boots, and more. India has a rich tradition of footwear production, with different regions known for their specific styles and craftsmanship. The contribution of India to global footwear production is 10.7%.

Here are some key points about the footwear industry in India:

• Market Size: The Indian footwear market is one of the largest in the world. According to reports, it was valued at around $15 billion in 2020 and is expected to reach $28.5 billion by 2026, growing at a CAGR of approximately 8.5%.

• Production Hubs: Several states in India are known for their footwear manufacturing clusters, such as Agra in Uttar Pradesh, Chennai in Tamil Nadu, and Kanpur in Uttar Pradesh. These regions have a concentration of factories and skilled artisans producing a wide Range of footwear.

• Traditional and Modern Manufacturing: The Indian footwear industry combines traditional handcrafted techniques with modern manufacturing processes. While traditional footwear-making methods continue to thrive, there has been a rise in the use of technology and automation in larger-scale production facilities.

• Employment: The footwear industry is a significant source of employment in India, providing jobs to a large number of skilled and unskilled workers, particularly in small and medium-sized enterprises (SMEs). It offers opportunities for artisans, designers, manufacturers, wholesalers, retailers, and other related professionals.

• Export Potential: India is a major exporter of footwear, supplying products to countries around the world. Leather footwear, in particular, is a significant export category. The country's competitive advantage lies in its skilled craftsmanship, low labor costs, and access to Raw Materials.

• Domestic Market: The domestic market for footwear in India is also substantial. The rising disposable incomes, changing lifestyles, and increasing fashion consciousness among the population have contributed to the growth of the domestic market. Both urban and rural areas present significant opportunities for footwear sales.

• Government Initiatives: The Indian government has taken various initiatives to support the growth of the footwear industry. These include providing financial assistance, skill development programs, setting up specialized footwear parks, and promoting exports through trade fairs and exhibitions.

Pros and Cons of Investing in Footwear Stocks

As with any investment, it is important to conduct thorough research, consider market conditions, and evaluate the financial health and growth prospects of individual footwear companies before making investment decisions. Here are some pros and cons of investing in footwear stocks:

Pros:

• Growing Market: The footwear industry in India is experiencing significant growth due to factors such as rising disposable income, urbanisation, and changing fashion trends. This presents opportunities for footwear companies to expand their customer base and increase sales.

• Established Brands: India has several well-established footwear brands with domestic and international market presence. Investing in these companies provides exposure to recognised brands with loyal customer bases.

• Export Potential: Indian footwear manufacturers have been successful in exporting their products to various countries. Investing in footwear stocks can offer exposure to the global market and benefit from increasing export opportunities.

• Consumer Demand: Footwear is an essential consumer product with consistent demand. As consumers prioritise comfort, fashion, and sports activities, the demand for footwear products continues to grow steadily.

Cons:

• Intense Competition: The footwear industry in India is highly competitive, with several players vying for market share. Companies need to constantly innovate, differentiate, and adapt to changing consumer preferences to maintain their position in the market.

• Economic Factors: The performance of footwear stocks can be influenced by macroeconomic factors such as Inflation, interest rates, and overall consumer spending. Economic downturns can impact consumer purchasing power and affect demand for footwear products.

• Input Cost Volatility: Footwear manufacturing requires raw materials such as leather, rubber, and synthetic materials. Fluctuations in the prices of these inputs can impact the profitability of footwear companies, especially if they are unable to pass on the increased costs to consumers.

• Fashion Sensitivity: The footwear industry is highly fashion-oriented, and trends can change rapidly. Companies must stay updated with the latest fashion trends and design innovative products to meet consumer preferences. Failure to adapt to changing trends can result in decreased sales and profitability.

Top Footwear Stocks in India to Invest

Here are the top footwear stocks in India to invest in:

Top Performing Companies Based on Net Profit (FY23)

As per the Financial Year 2023, here are some of the top-performing companies you can choose to invest in:

Lehar Footwears

Lehar Footwears Ltd, situated in Jaipur, is a manufacturer of various types of footwear, including lightweight fancy slippers, PVC and TPR footwear, synthetic leather chappals, Hawai Chappals, and canvas shoes. Although the Price to Earnings Ratio of 32.4 is lower than the sector PE ratio of 96.1, the company's valuation does not appear favourable when considering its revenue performance. In the past year, the annual revenue declined by 6.1% to Rs. 138.8 crores. The company also has a higher Debt to Equity ratio of 1.3. The Return on Equity (ROE) for the previous financial year was 5.5%. However, due to the company's low Beta of 0.54 and a significant 165% increase in stock price over the last year, it may be suitable to include a small portion of the stock in your investment Portfolio.

Mirza International

Established in 1979, Mirza International Ltd. is engaged in the manufacturing and export of finished leather and footwear and the trading of footwear, apparel, and related products. The company has successfully reduced its debt, resulting in a significantly improved financial position.

Mirza International Ltd. is currently almost debt-free, which is a positive indicator of its financial stability. The company is anticipated to perform well in the upcoming quarter, suggesting growth prospects. The promoter holding has increased by 3.61% compared to the previous quarter, indicating confidence in the company's future. Despite consistently reporting profits, Mirza International Ltd. has not been distributing dividends to its shareholders. The firm has experienced a poor sales growth rate of -8.39% over the past five years, suggesting a decline in revenue. Over the last three years, Mirza International Ltd. has exhibited a low ROE of 7.45%, indicating suboptimal utilisation of shareholder investments.

Liberty Shoes

Liberty Shoes Ltd. manufactures and trades footwear, accessories, and lifestyle products, distributing them through its retail and wholesale channels. The company is projected to have a positive performance in the upcoming quarter, indicating potential growth and profitability. Liberty Shoes Ltd. has improved debtor days, reducing the average days it takes to collect customer payments from 69.1 to 48.8 days. This signifies enhanced Efficiency in managing Receivables. Over the past five years, Liberty Shoes Ltd. has experienced a low sales growth rate of 3.70%, suggesting a sluggish revenue expansion. The company's ROE for the last three years has been recorded at a low 2.79%. This indicates that the company has not effectively utilised its shareholder investments to generate substantial returns.

Superhouse Limited

Superhouse Ltd. is involved in the manufacturing and exporting leather, leather goods, and textile goods, among others. The company offers a diverse range of footwear and accessories. The stock trades at 0.53 times its Book Value, suggesting a potentially attractive investment opportunity. Over the past five years, Superhouse Ltd. has experienced a poor sales growth rate of 3.35%, indicating sluggish expansion in revenue. The company's ROE for the last three years has been relatively low at 7.69%. Superhouse Ltd. has a low dividend payout ratio, with dividends amounting to only 3.73% of its profits over the last three years.

Khadim India

Established in 1981 as S.N. Footwear Industries Private Limited, Khadim's primarily engaged in wholesale and distribution of branded basic utility footwear. However, in 1993, the company ventured into retail and successfully established itself as a renowned fashion footwear brand. Khadim's aims to provide "Fashion for Everyone" and has built a reputation as an affordable fashion brand. Despite consistently reporting profits, Khadim's has not distributed dividends to its shareholders. The company has low-interest coverage ratio indicates potential difficulties in meeting interest payments on its debts. Over the past five years, Khadim has experienced a negative sales growth rate of -2.48%, indicating a decline in revenue. The company has demonstrated a low ROE of -0.79% over the last three years, implying inefficiency in generating shareholder returns. Debtor days have increased from 85.4 to 104 days, suggesting slower collections and potentially impacting the company's cash flow.

Sreeleathers

Established in 1991, Sreeleathers Ltd. is involved in the manufacturing, sale, and distribution of footwear and related products and accessories. Sreeleathers Ltd is nearly debt-free, indicating a favourable financial position with minimal liabilities. The company is anticipated to have a positive performance in the upcoming quarter, suggesting potential growth and profitability. Despite consistently reporting profits, Sreeleathers Ltd has not distributed dividends to its shareholders. Over the past five years, the company has experienced a poor sales growth rate of 7.21%, suggesting sluggish expansion in revenue. Sreeleathers Ltd has had a low ROE of 5.34% over the last three years.

Bata India

Bata India is primarily involved in the manufacturing and trading footwear and accessories, distributing them through its retail and wholesale channels. The company is anticipated to have a positive performance in the upcoming quarter, indicating potential growth and profitability. Bata India has maintained a healthy dividend payout ratio of 225%, providing consistent returns to its shareholders. The stock is trading at a high value of 14.9 times its book value, which may indicate an overvaluation. Over the past five years, Bata India has delivered a poor sales growth rate of 5.55%, suggesting sluggish expansion in revenue. The company has a low ROE of 6.55% over the last three years.

Campus Activewear

Campus Activewear Limited, established on September 24, 2008, is a prominent brand in India's sports and athleisure footwear market, renowned for its substantial value and volume. The company specializes in the manufacturing and distributing various footwear options, including Running Shoes, Walking Shoes, Casual Shoes, Floaters, Slippers, Flip Flops, and Sandals. The company is expected to have a favourable performance in the upcoming quarter, indicating potential growth and profitability. Campus Activewear Limited has achieved a commendable profit growth rate of 30.2% CAGR over the past five years, reflecting consistent improvement. The stock is trading at a high value of 12.2 times its book value, suggesting a potential overvaluation. Despite reporting repeated profits, Campus Activewear Limited has not distributed dividends to its shareholders.

Relaxo Footwear

It is one of the leading companies in India and was established in 1976. The company provides extensive footwear products, including formal shoes, sports shoes, sandals, casual shoes, and more. The brand is known for its commitment to innovation and quality. Relaxo Footwear uses the latest technology and quality materials to create comfortable and durable footwear. It holds a reputation for providing excellent customer service and boasts a loyal and large customer base in the country. The company is in a strong financial position and is nearly debt-free, indicating favourable financial stability. The company has consistently maintained a healthy dividend payout ratio of 29.4%, providing reliable returns to its shareholders. The stock is trading at a high value of 12.2 times its book value, which suggests a potential overvaluation. Over the past five years, the company has experienced poor sales growth of 7.47%, indicating a sluggish revenue expansion. The company's ROE over the last three years has been low, with a rate of 13.6%.

Conclusion

In 2023, investing in top footwear stocks in India presents opportunities and challenges. Investing in this sector can be enticing with the industry experiencing growth, established brands, and export potential. However, intense competition, economic factors, input cost volatility, and fashion sensitivity pose risks. It is crucial to conduct thorough research and consider individual companies' financial health and growth prospects. Prudent investors should analyse market conditions and align their investment decisions with long-term strategies. By carefully assessing the pros and cons and staying informed about industry trends, investors can navigate the footwear sector and potentially benefit from its growth prospects.