Footwear companies have consistently outperformed the benchmark index S&P BSE Sensex for some time now. Naturally, for investors who reposed faith in these companies, phenomenal returns have been the norm. Take, for example, Relaxo Footwear. The New Delhi-based company gave a share price return of over 7400 percent over the last 10 years. About Rs 15000 invested in it a decade ago is now worth over Rs 1 crore.
In order to understand these footwear companies’ performance, Moneycontrol analyzed their select fundamentals. Here are the findings.
High price to earning ratio
All stocks are trading with a very high premium to their five-year average P/E ratio.
Major shareholders (FIIs, MFs & promoters) position
Over the last six quarters, shareholder data of these four companies shows that mutual funds and foreign institutional investors have incrementally raised their stake in Relaxo Footwear. However, in Bata Indiainstitutional holding has fallen over the same period but in percentage terms, they have a higher holding in the stock.
In all these four stocks, however, promoter holding since March 2016 has remained the same.
Topline and Bottomline growth: Relaxo in spotlight
These four listed companies’ top line growth remained muted in FY17. Relaxo saw a significant decline in sales growth as compared to its past five fiscal years but was able to post a positive bottom line growth.
However, Bata India and Liberty Shoes witnessed a de-growth in net profit for the second consecutive fiscal year.
In PAT margin performance, Relaxo Footwear proved to be the best among its peers as it continuously increased its margins each year from 4.41 percent in FY12 to 6.98 percent in FY17. But Bata India’s PAT margin has been shrinking over the years from 9.19 percent to 7.02 percent in the same period.
Prima facie, Bata India’s dependence on borrowed funds was less amongst the four. In general, all footwear majors have been fundamentally healthy on this front, as apparent from a low debt-equity ratio of each company in each of the 5 years. There has been a steady decline in the debt-to-equity ratio of Mirza and Relaxo over a period of time.
Relaxo’s ROCE (return on capital employed), which was previously lower than Bata’s, has been the highest amongst its peers in the last 3 fiscals. Consequently, a similar trend is visible in return on net worth.
Amongst all four companies, Bata India has given the highest dividend per share in all the last five fiscal years.
The organized sector is likely to benefit from Goods and Services Tax roll out as smaller players will most likely wither away.