Relaxo Footwear: a wannabe brand play

Stock Opportunities Not-so-Hidden Gems
41

Relaxoa signs ‘Salman Khan’ as brand ambassador for its slipper brand aHawaiia

Furthermore, Hawaii has now introduced the new Hi-Fashion range of slippers for men and women, and Salman Khan will feature in all the brand communication related to Hawaii across the media

In the latest development, Relaxo, the second largest producer of footwear in India has signed Salman Khan as the brand ambassador to endorse one of their most popular brands a Hawaii slippers that boast exciting features like long lasting durability, supportive design, superb comfort and supreme quality, making it a favourite among all age groups. Furthermore, Hawaii has now introduced the new Hi-Fashion range of slippers for men and women, and Salman Khan will feature in all the brand communication related to Hawaii across the media.

Speaking on the occasion, Gaurav Dua, Executive Director, Relaxo Footwears Ltd. said aHawaii has always been on the forefront to provide the comfort and ease in daily wear for the masses. Through this new commercial, we bring in light, the strength and toughness aspects of Hawaii slippers. And what better way to promote this strong USP than having Salman Khan endorse our product. Salman, the heartthrob of India, depicts strength, attitude and style, thus making him the perfect blend for being the brand ambassador of Hawaii slippers. We are extremely happy to associate with him and we hope this tie strengthens our bond with our customers. a

Highlighting the same, Salman Khan said aRelaxo is one of the most trusted brands in footwear, and Iam glad to be doing this commercial as it is focused on the concept of amazbootia (strength), and completely suits my persona. The product and the ad are both very appealing and Iam sure the viewers would like them a lot.a

Salman will soon be seen endorsing Hawaii slippers in a 45 second TVC created by ARMS Communications Pvt. Ltd, positioning Hawaii as a symbol of style, comfort and strength. The film revolves around the star Salman Khan, who with confidence saves different girls from life-threatening situations, an act which seems impossible in real life. Since all this seems unrealistic and leaves a shocked expression on the viewersa faces, Salman appears on screen and says, aYeh thodaa zyada ho gaya. Lekin RELAXO Hawaii hai mazboot. Main pehenta hoon.a This statement sums up the exaggeration yet leaves the viewers with the message that think of Relaxo Hawaii, think of strength and toughness. It creates an aspiration in the minds of the consumer to acquire what their favorite star endorses.

Making of Relaxo-Salman Ads can be viewd at :

http://www.youtube.com/watch?v=E8hkUlYRepg

Actual Relaxo-Salman Ad-Snippet can be viewd at :

http://www.youtube.com/watch?v=7phf7BWdSNI

In a related development, Relaxo has sponsored the special ‘Comedy Circus’ show titled ‘Relaxo Max Super Kool Comedy Night’ to be aired on ‘SETMAX’ channel on 27th July 2012 from 08:30 p.m. onwards. This show will mark the beginning of aggressive promotional campaign undertaken by the company for ensuing Festive Season.

42

Q1FY13 Results of Relaxo will be announced on Saturday, 4th August 2012. Estimate for Q1FY13 :

Q1FY13e

Q1FY12

Revenue

240 - 245

216.24

EBITDA

30- 32

24.53

PAT

13 - 15

10.79

EPS

10.8 â 12.5

8.99
43

The big problem I see with relaxo is these days their main product slippers competes with a load of brands, including MNC like lotto, nike, reebok, benetton, and you name it and they have slippers in their portfolio besides the local brands like bata, paragon, lakhani, and many other miscellaneous brands.

It needs to be seen how much of a pull salman khan has in promoting sales for the company and what the payout ratio comes out. salman khan these days does not come cheap.

I guess it might play on the margins in the shorter term as well.

44

_
_

Hi Hitesh,

Yes, MNCs have oflate started offering a wide range of products but they come at a price…Relaxo’s products, especially in slippers and sports shoes and sandals category, are value-for-money products and are reasonably cheap than MNC’s products while at the same time offering similar quality ; this is the thing the company seems to be betting on by plugging the loopholes it had of creating wide awareness of its products…

Ground check suggests aggressive launches in Sparx and ‘Hawaii Hi-Fashion’ range and particularly for Sparx the receiving has been very good as the new merchandise offers sports shoes and sandals in extremely attractive designs at relatively cheaper rate as compared to MNCs and even domestic ones.

As per sources, Salman Khan has been signed for an amount of ~3.5-4 cr. with a commitment to donate a specific % from Hawaii collection sales every year to his charity BH…In response, the actor has committed to aggressively promote Hawaii collection across all media segments and will be present in periodic events organised by the company.

Now, for FY12 Relaxo has spent ~35 cr. on advertising…Evenif we assume Salman and Akshay’s signing expense to be ~8 cr., it might not inflate the advertising budget too much beyond 5-5.5 % of FY13 sales (1030 cr.) which will come at Rs. 50-55 cr… You see Hitesh the advantage of increasing scale is that one can spend a bigger amount on branding while keeping its % to sales within manageable levels…This is what Relaxo is doing and its a wise strategy and vindicates the commitment of the management towards the growth of the company.

Also, Fy13 should be a good year from company’s point of view as far as raw material prices are concerned and so the increased margins could very well compensate for the increased branding expense.

Feel free to get back to me in case of any query.

Rgds.

45

Hi Mahesh,

Found this interesting report from HDFC Sec http://www.hdfcsec.com/Research/ResearchDetails.aspx?report_id=2984446

Some key negatives probably not covered here

  1. The company hesitates to outsource work to outsiders. This could mean higher fixed costs due to reliance on own facilities.

Only 11.24% of sales of RFL represent purchase of finished goods in FY11 compared to 36.28% for Bata in CY11. Is that why there is huge difference in the EBITDA margins of Bata and RFL?

  1. The asset turnover ratio of the company has consistently fallen down (from the levels of 2.29 in FY08 to 1.94 in FY11). This

reflects inefficient deployment of assets, which could further lead to increase in interest/depreciation costs and a negative

impact on the bottomline. Bata India, one of its key peers has shown a contrary trend where in the asset turnover has

consistently increased over the past 4 years. In the case of RFL, this is more due to capacity increase being faster than

sales increase over the past few years. This also impacts its return on incremental capital ratio.

Any idea on the status of “sparx” brand name copyright issue with bata?

Without improving EBITDA margins compared to Bata, will Relaxo get a better P/E?

Cheers

Vinod

**

**

**

**

46

Hi VInod,

Please find my replies in bold below :

  1. The company hesitates to outsource work to outsiders. This could mean higher fixed costs due to reliance on own facilities.

Only 11.24% of sales of RFL represent purchase of finished goods in FY11 compared to 36.28% for Bata in CY11. Is that why there is huge difference in the EBITDA margins of Bata and RFL?

Ans.- To an extent Yes… But there are other factors too which impact Relaxo’s EBITDA margins vis-a-vis Bata like higher contribution from low-end product Hawaii, own Retail presence being only 5 years old, etc.

  1. The asset turnover ratio of the company has consistently fallen down (from the levels of 2.29 in FY08 to 1.94 in FY11). This

reflects inefficient deployment of assets, which could further lead to increase in interest/depreciation costs and a negative

impact on the bottomline. Bata India, one of its key peers has shown a contrary trend where in the asset turnover has

consistently increased over the past 4 years. In the case of RFL, this is more due to capacity increase being faster than

sales increase over the past few years. This also impacts its return on incremental capital ratio.

Ans. - Here you need to go into history of both companies…Bata is an established name with a first mover advantage in the sector wherein in the beginning it expanded too aggressively before concentrating on asset utilisation and margins…Relaxo is almost through 1st stage of expanding aggressively and now is into second stage of creating brand awareness and establish foothold in the marketplace for its brands post which it should start concentrating on asset utilisatiion and margins…This is not to say that Relaxo’s aggressive expansion is now over and capex cycle is done with… not atall as the company will need to invest continuously in new products as also to augment capacities of existing products…However, because of the higher scale and therefore higher cash generation, CAPEX can be funded quite easily now than before.

Any idea on the status of “sparx” brand name copyright issue with bata?

Ans.- No update yet…may be Donald can help out on this…However, logically, if the settlement would not have been done, company would have not gone for Akshay Kumar as brand ambassador for the brand.

Without improving EBITDA margins compared to Bata, will Relaxo get a better P/E?

Ans.- Yes… definetly Relaxo deserves to command much better multiples than its commanding at present…This is because :

**
**

)-- Relaxo is the largest and most credible listed Indian brand in footwear segment atpresent… remember even Bata is a MNC

**
**

)-- Over years Relaxo has exhibited consistent growth which is not atall reflected by the multiples given to it by the market

**
**

)-- Consistent growth-oriented performance for 1-2 more years and this company can’t remain ignored by the markets for too long

**
**

)-- Scarcity premium is completely absent from the valuations which is surprising and on first equity dilution move by the management, the multiples can rerate very fast

**
**

)-- We are here seeing FY12 numbers but we need to think slightly long term and turn our attention to FY15 when the company’s scale would be 1300 cr. + ,At current market rate of Rs. 535 and a mcap of 642 cr. what multiples are applied – 0.49 times FY15 sales – and that too for a company which is consistently generating cash and is bound to have FCF by FY15 – Such consumption oriented themes don’t trade at such low valuations for too long and Relaxo is one of the best opportunity available in the consumption-basket with such a scale of operations… Only thing required from the company is consistent growth-oriented performance for 1 more year – and appointment of Accenture as also aggressive brand-engagements and hiring of sales personnel are depicting the seriousness of the management to walk this path smoothly.

**
**

)–Still lots of untapped opportunities are available for growth like foray into accessories, export opportunities, etc. which are still not explored by the management even at FY13e scale of 1000 cr.

**
**

)-- Relaxo has to trade at significant premium to Liberty Shoes post the aggressive branding initiatives taken by the management as Liberty was given rich valuations mainly for this aspect…Hence, either liberty’s commanded multiples have to come down which is unlikely considering the fact that Liberty is actively looking for PE funding or Relaxo’s valuations have to rise.

**
**

Feel free to get back to me in case of any query.

Rgds.

47

Having said all the things in my previous posts, its imperative for me to candidly state here few things rgdg. Relaxo :

Branding and Employee expenses will be key monitorable for Relaxo going ahead…its how well the company manages these expenses and how well it tackles utlisation of both expenses that will determine it becoming an adorable investment opportunity…

Employee expenses are set to rise in future for Relaxo which have already dubled to 12.28 % of sales in FY12 from below 6 % a decade before…Company has been quite aggressive in recruiting since 2HFY12 which could be a precursor to management’s conviction about rising scale in future…However conviction has to translate in actuals…

Branding expenses are still much lower at 3.5-4.5 % (advertising) of sales which should rise going ahead as the company tries to establish its brands in the marketplace… Except FY10, company has kept its Branding and Promotional expense at less than 8 % of sales… in FY10 it spent 9.9 % of sales on B&P which was the highest for the company…however, in FY10 company spent heavily on incentivising distributors and therefore went for indirect brand push rather than direct push which it is attempting right now…Now, important thing that needs to be seen is that whether the company attempts indirect and direct push both or only relies on direct push which is highly unlikely…hence, FY13 should see B&P expenses at 10 % + of sales for the first time in company’s history full benefit of which on scale should start translating from FY14 onwards…

Raw material price susceptibility is a well known fact for Relaxo and if raw material prices maintain the trend they are exhibiting right now (in all probability they will because recent data suggests 5 % decrease in Rubber consumption of China as also its industries includng solar there are in real trouble which should negate any positive trigger for EVA and Rubber prices atleast till FY13 is through), a 250 to 300 basis points decline in raw material costs w.r.t. sales could very well be expected in FY13…

Another important thing company has done in 2HFY12 is appointment of Accenture which is working hard to improve margins and decrease its susceptibility to raw material prices…it is doing this by focussing on plugging loopholes in logistic & supply chain which is critical to save margins…company is also aggressively pursuing accenture’s advise on increasing the reach of company’s products for which it is aggressively signining new distributors in western and southern zone which are traditionally weak for Relaxo…Incentivising these will also add up to B&P expenses…

Because of all these and other factors, the margins of company will be subject to fluctuations on QoQ as also on YoY basis atleast till FY14 with foundations of stability in margins being built till then…Key monitorable will be scale without which expenses will mount…Company is set to go for aggressive ‘activation’ of Hawaii and Sparx which is a blessing in disguise in current sluggish consumption environment…Sponsoring 1st television show on 27th July was for activating Hawaii brand while there seems to be many such initiatives planned in 2HFY13 for activating Hawaii and Sparx brands…Company has been making all the right moves so far which is evident from recent plan to set-up PU footwear plant – PU footwear is catching up fast and is the fastest growing segment of footwear industry atpresent – company has so far demonstrated capability of thinking ahead of others and its good to see the third generation of promoter family taking active part in affairs of the company… It was actually only after recruiting third generation in 2007 that company has demonstrated aggressive growth year after year…

The present stage of Indian Footwear industry reminds me of Indian watch industry two decades before…The way its unorganised, the way organised players are trying to penetrate the market are all synonyms to watch industry…The only difference being, presence of Bata which moved into India much ahead of time and therefore occupies a significant first mover advantage…However, its focus away from volume to margins benefited creation of Relaxo and today Relaxo finds itself in such a comfortable position because footwear, unlike watch, is a necessity…and therefore there is significant room for independent growth as also conversion-growth from unorganised segment which occupies 70 % of the market…

Relaxo has to to be looked at from only long term angle and from long term i mean 2-4 years minimum as in the short to medium term it might exhibit wild fluctuations…Rerating is due but it will only happen in stages first stage of which will start when HNI-PMS_Managers will start exploring the company as a viable investment opportunity…Once the scale is past 1000 cr., which should happen hopefully this year, prudent fund managers might find it difficult to ignore this company provided debt level don’t swell too much…

Feel free to get back to me in case of any query.

Rgds.

48

Link to pdf of Q1FY13 update on Relaxo Footwears Ltd. :

Rgds.

1 Like
49

Reproducing in this and next posts Q1Fy13 update sections below for quick reference :


Relaxo Footwears Ltd. [ NSE â RELAXO ; BSE â 530517 ] declared its Q1FY13 Results today which were inline with our estimates. Given below are the highlights of the numbers and our prima-facie analysis post numbers :


(fig. in ` cr.)

Q1FY13

Q1FY12

YoY Growth

Q4FY12

QoQ Growth







Revenue

249.52

216.19

15.41 %

242.72

2.8 %







EBITDA

31.27

24.48

27.73 %

34.24

(-8.67 %)







PAT

15.06

10.79

39.57 %

18.78

(-19.8 %)







EBITDA Margin

12.53 %

11.32 %

+ 121

basis points

14.10 %

(- 157)

basis points







PAT Margin

6.03 %

4.99 %

+ 104

basis points

7.73 %

(-170)

basis points




  1. Company posted Q1FY13 Revenue at INR 249.52 cr. which translates into a YoY growth of 15.41 % and a sequential QoQ growth of 2.8 %. Q4 and Q1 are normally the best quarters as far as sales of the company are concerned.


  1. Company's EBITDA for Q1FY13 came at INR 31.27 cr. which translates to a YoY growth of 27.73 % but a QoQ decline of 8.67 % mainly because of sharp rise in Employee costs which rose by 307 basis points (w.r.t. Revenue) YoY and by 288 basis points (w.r.t. Revenue) QoQ. Another reason for low EBITDA despite favourable key raw material prices is lower outsourcing of manufacturing work, or, in other words, lower purchase of finished products for sale which declined by 188 basis points (w.r.t. Revenue) YoY and by 406 basis points (w.r.t. Revenue) QoQ.


  1. PAT for the quarter stood at INR 15.06 cr. which translates to a YoY growth of 39.57 % but a QoQ decline of 19.8 % mainly because of lower EBITDA for the reasons mentioned above and increase in taxes paid which rose by 808 basis points (w.r.t. PBT) YoY and by 802 basis points (w.r.t. PBT) QoQ. Tax rate for the quarter stood at one of the historical highest level at 31.76 %.


  1. EPS for the quarter (not annualised) stood at INR 12.55, a YoY increase of 39.59 %.


  1. During Q1FY13, company opened 5 new Exclusive Retail Stores ('Relaxo Retail Shoppe') to take the total tally to 154 operational stores in Q1FY13. It is worthwhile to note here that during the month of July'2012, company has opened another 4 stores which takes the total number of company operated exclusive Retail Stores as at 31st July 2012 to 158.


  1. After signing Salman Khan for the brand 'Relaxo Hawaii' and Akshay Kumar for the brand 'Sparx', company has recently signed-in Katrina Kaif for its brand 'Flite'. Katrina Kaif will replace Prachi Desai who was till now the brand ambassador for 'Flite' brand and appointment of top-notch celebrities as brand ambassadors for all of its three major brands augurs very well for the sales of the company in the current recessionary environment.


  1. Company kicked-off its aggressive promotional campaign for the ensuing festive season by title sponsorship of special television show called 'Max Super Kool Comedy Night' aired on SonyMax channel on 27th July 2012.


  1. Company seems to be aggressively focussing on 'pre-brand-activation' stage for all of its three key brands with brand activation likely to follow from Q4FY13 onwards. First brand taken up for pre-brand-activation is 'Relaxo Hawaii' whose August'2012 promotional lineup across all media seems to be one of the most aggressive in company's history. Media Schedule for July'August'2012 for promoting 'Relaxo Hawaii' brand in Print & Television Media is attached at the end for reference.


  1. Key Raw Material prices remained stable during the quarter with average Q1FY13 EVA landed price at INR 124.16 per kg. ( down 14.9 % YoY & 3.3 % QoQ ) while average Q1FY13 Rubber price at INR 192.54 per kg. ( down 15.2 % YoY but up 0.8 % QoQ ). As on 3rd August 2012, EVA landed price is hovering around INR 119 per kg. while Rubber price is hovering around INR 181 per kg.

  2. Peer comparison for Q1FY13 is provided below for reference :

Q1FY13 Revenue

Q1FY12 Revenue

YoY Growth in Q1FY13 Revenue

Q1FY13 EBITDA Margin

Q1FY12 EBITDA Margin

YoY Growth in Q1FY13 EBITDA Margin








Relaxo

249.52

216.19

+ 15.41 %

12.53 %

11.32 %

+ 121

basis points

Bata

506.51

432.31

+ 17.16 %

16.95 %

15.96 %

+ 99

basis points

Liberty Shoes

79.33

74.24

+ 6.85 %

8.79 %

6.88 %

+ 191

basis points





Prima-facie View post Q1FY13 Results :


We maintain our view that Relaxo Footwears Ltd. Is one of the best opportunities available in the domestic-consumption-oriented basket which possesses :


  • reasonable scale of operations,

  • is professionally managed,

  • is in a transformation phase which could make it a pure brand-play from current plain-vanilla-play

and therefore offers decent scope of valuation-multiples rerating.


If the management can achieve 20-25 % topline growth with stable EBITDA and PAT margins till FY15 by gradually reducing the debt levels, then, the current valuations could very well become a history post 2HFY13 when the actual rerating process for the company should start. Recent aggressive branding initiatives by the management depict the seriousness for achieving the said growth and aggressive recruitment undertaken by the company on ground signify the means towards achieving the said growth.


50


Print Media


( July-August 2012 Schedule for 'Relaxo Hawaii' )

Newspapers


(Total 10 Ads in 29 Editions)

Magazines


(Coverage in 10 Magazines)



Hindustan Times

(English Daily - National)

Womens Era â English

(Women's Magazine - 24 Lakh Readers)

Times of India

(English Daily - National)

Gruh Shobha - Hindi

(Women's Magazine â 77 Lakh Readers)

Prabhat Khabar

(Hindi Daily â Bihar, Jharkhand & West Bengal)

Sarita - Hindi

(Family Magazine â 35 Lakh Readers)

Amar Ujala

(Hindi Daily â North India)

Chitra Lekha - Marathi

(Regional Magazine â 1 Lakh Readers)

Dainik Bhaskar

((Hindi Daily â North & Central India)

Stardust - Hindi

(Bollywood Magazine â 1 Lakh Readers)

Punjab Kesari

(Hindi Daily â North India)

Saras Salil - Hindi

(General Magazine â 97 Lakh Readers)

Navbharat Times

(Hindi Daily â Mumbai, Delhi)

Galatta - English

(Largest Circulating English South Indian Film Magazine)

The Assam Tribune

(English Daily â Assam)

Rail Bandhu

(India's Only Magazine for Rail Passengers â 30 Lakh Readers)

Asomiya Pratidin

(Assamese Daily â Assam)

Outlook â Hindi

(General Magazine â 16 Lakh Readers)


Outlook Business - English

(Business Magazine â 2.6 Lakh Readers)














Television Media â GECs, News, Movies & Regional Channels


( July-August 2012 Schedule for 'Relaxo Hawaii' )


General Entertainment Channels - National


( Coverage Across 7 GECs in 14 Prime Time Shows )


General Entertainment Channels - Regional


( Coverage Across 8 GECs in 11 Prime Time Shows )


News Channels - National


( Coverage Across 6 News Channels in 7 Prime Time Shows )


News Channels - Regional


( Coverage Across 9 News Channels in 10 Prime Time Shows )


Movie Channels - National


( Coverage Across 4 Movie Channels in 13 Prime Time Movies )


Movie Channels - Regional


( Coverage Across 4 Movie Channels in 16 Prime Time Movies )








Sony TV

(Kya Hua Tera Vaada â 10 p.m.


Bade Achchhe Lagte Hai â 10.30 p.m.)


Zee Kannada

(Panduranga Vittala â

10 p.m.)


Aaj Tak

(Prime Time News â 9 p.m.)


MBC News â Orissa

(MBC News 360 â 9 p.m.)


SonyMax

(15th Aug.- Lagaan â 9 p.m.


18th August â Tere Naal Love Ho Gaya â 9 p.m.


25th Aug.- Om Shanti Om â 9 p.m.)


Zee Talkies

(19th & 26th Aug. - Sunday Movie)


Star Plus

(Diya Aur Baati Hum â

9 p.m.


Ek Hazaron Mein Meri Behna Hai â 8.30 p.m.)


Zee Telugu

(Kalavari Kodallu â

6.30 p.m.)


India TV

(Breaking News â 9 p.m.

Aap Ki Adalat â 10 p.m.)


Suvarna News â Kannada

(Prime Time News â 9 p.m.)


Star Gold

(12th Aug.- Wanted â 9 p.m.


19th Aug.- Singham â 9 p.m.


25th Aug. - Bodyguard â

9 p.m.)


Surya TV - Malayalam

(25th Aug. - Saturday Movie â 12.30 p.m.


19th & 26th Aug. - Sunday Movie â 5 p.m.)


Zee TV

(Pavitra Rishta â 9 p.m.


Phir Subah Hogi â

9.30 p.m.


Mrs. Kaushik Ki Paanch Bahuein â 10 p.m.


PunarVivaah â 10.30 p.m.)


Mazhavil Manorama â Malayalam

(Kadha Ithu Vare â

9 p.m.)


Times Now

(NewsHour with Arnab Goswami â 9 p.m.)


News Live â Assam

(Assamese Prime Time â 7 p.m.

News @ 60 â 9.30 p.m.)


Zee Cinema

(12th Aug. - Vivah â 9 p.m.


19th Aug. - Hum Aapke Hai Kaun â 9 p.m.


31st Aug. - Hera Pheri â

9 p.m.)


Mahuaa TV

(29th July â Aakhri Rasta


5th Aug. - Dil)

Sabe TV

(ChidiyaGhar â 9 p.m.)

ETV Gujarati

(Flavours of Gujarat â 6.30 p.m.


Aapnu Gujarat â 7 p.m.)

ETNow

(Morning News â 9 a.m.)

Sahara Samay

(NCR/Haryana/Rajasthan

Prime Time News â 7 p.m.

Mumbai

Prime Time News â 8 p.m.

MP/Chattisgarh/Bihar/Jharkhand/UP/Uttarakhand

Prime Time News â 10 p.m.)

DD National

(17th Aug. - Zindagi NaMilegi Dobara â 9 p.m.


18th Aug. - Well Done Abba â 9 p.m.


24th Aug.- Force â 9 p.m.


25th Aug.- Raajneeti â

9 p.m).

PTC Punjabi

(3rd Aug. - Jihne Mera Dil Lutiya


5th Aug. - Tera Mera Ki Rishta


10th Aug. - Mitti Waajan Maardi


12th Aug. - Yaar Anmulle


17th Aug. - Hashar


24th Aug. - Pata Nahi Rab Kehreya..


19th, 26th & 31st Aug.)

Life OK

(Devon Ke Dev Mahadev â 8 p.m.)

Tarang TV â Oriya

(Jai Shri Krishna â

9.30 p.m.)

Zee News

(NonStop@9 â 9 p.m.)

TV9 â Maharashtra

(Prime Time News â 8 p.m.)




DD National

(Sankat Mochan Hanuman â 8.30 p.m.


Pehchan Astitva Ki Talash â 9 p.m.


Command Force

â 9.30 p.m.)


Zee Bangla

(Kanakanjai â 8 p.m.)


ABP News

(Star Khabaar â 9 p.m.)


TV9 â Telugu

(Prime Time News â 9 p.m.)




Ten Cricket

(India v/s SriLanka Studio Show & Live Sports)


Rang â Assam

(Tumi Dusokut Kajol Lole â 8.30 p.m.


Meghranjini â 10 p.m.)



TV9 â Kannada

(Prime Time News â 9 p.m.)




Title Sponsorship of Special Show 'Max Super Kool Comedy Night' on SonyMax


Zee Marathi

(Home Minister â 6.30 p.m.


Tu Tithe Mee â 7 p.m.)



Manorama News

(Prime Time News â 8 p.m.)







Sakshi TV

(Prime Time News â 9 p.m.)





51

Attched is the link to Angel Broking’s latest Q1FY13 update on Relaxo Footwear – Price Target Rs. 684

_
_

http://www.scribd.com/doc/102425376

Rgds

1 Like
52

Mr. Maheh Is it trust worthy to believe Broker’s recommendations?? The relaxo appreciated much during the discussions held in this forum. I really appreciate the discussions and opinions of expert members here in this forum than brokers.

regards,

paturi

53

Hi Paturi,

Broker’s recommendations, and for that matter, any one’s analysis, including me, should only be taken as a direction for further research and should not be followed blindly…Once has to put-in his/her own efforts to cross check all the facts and figures and get convinced before taking any decision.

Rgds.

54

Video Link to Flite-Katrina endorsement :

http://www.youtube.com/watch?v=q9owgqxCMI0

Company is really graduating fast to MNC-style advertising which is evident from first Salman then Akshay and now Katrina’s AD-making videos…However, due to low public float and management being low-key amongst financial community, company is even not getting half the valuations commanded by other Indian consumer staple companies…MD’s son Gaurav Dua seems to be very proactive on branding front and if this branding initiatives are extended to financial community too, then scarcity premium could make this company look extremely attractive…

By buying a company’s shares we actually buy a business and be a part of that business with day-to-day running of business entrusted to the promoter management…and its a rare opportunity that we get such businesses with estabilshed past track-record, strong brands and visibility of growth atleast for coming two years at the valuations Relaxo is trading at…Each of the three key brands has the potential to become a 500 cr. brand (from current 250-300 cr.) by FY15 and if that was not the aim, the management would have refrained from signining such highly paid celebrities for each of the brand or could have managed with one celebrity endorsing couple of brands…Afterall, promoters hold 75 % in the company with the rest 14.5 % being held by promoters’ entrusted circle viz., VLS Finance…Hence in case of adversity, minority shareholders loose much less than actual promoters…and thats what I call a rare investment opportunity as such opportunites at such scale of operation are found one in many years…

The approach of the management is thoroughly professinal and thats what I like the most in this company and so my apporoach to investment in this company has been 'whether i like to be in a business and run such business the way its being done ?? '… Till the answer is Yes I will remain invested in this company irrespective of the valuations and financial performance as valuations are going to be driven by level of fancy the company catches amongst financial community members, whereas, financial performance is bound to be volatile in the transitionary phase ‘from only footwear company to a branded footwear company’.

Having said all these, i must caution here that because of low public float, the company’s share price could be pretty volatile on either side and trading should be strictly avoided to extract maximum benefit out of the investment into this company…Relaxo is only meant for long term investment and by long term i mean minimum 2-3 years as if one gets influenced by short term price fluctuations then he could only face a loss.

Views Invited…

Feel free to get back to me in case of any query.

Rgds.

55

Link to latest 2012 Annual Report of Relaxo Footwears Ltd. :

Company seems poised to cross 1000 cr. revenue mark this fiscal.

Rgds.

56

There was strong buying today in the Relaxo counter, especially on NSE, wherein w/o any sort of bulk deals there was continuous absorption of offered quantity at Rs. 610…Delivery % was also higher at 98.25 % which is a good sign at the second highest avg. traded rate…

Had an informal chat with my technical analyst friend yesterday and I asked him to provide his inputs on Relaxo. Although he told that such low liquidity counters can be decptive in technical studies, still, because of 500+ cr. mcap and upon my insistence he looked at the company in detail. He found Relaxo placed very lucratively in technical terms…he said the bull-run that started for the company in 2009 is still intact and if this chart would have been of any highly traded company then it would have triggered buy calls across technical community as company has only in the current week, given a breakout after consolidation of almost 2 years…

he tossed an interesting theory which he has used in the past to spot midcaps that are in multi-year bull phase…he said that Relaxo’s bull run which started in 2009 came to a halt in price terms in end-2010 whereas in technical terms, it came to a halt in Feb’2011 when its 200 DMA made a high of Rs. 370 odd…After that the company’s share price corrected and the correction came to an end in September’2011 when its 200 DMA made a low of Rs. 293 odd…this was a healthy correction of 20 odd % and after that the share price went into a consolidation phase till June’2012…Now, in this week the 200 DMA has went past previous high of Rs. 370 and it should settle at minimum 20 % to 40 % higher than previous high after the end of current bull run which has started in June’2012…He said this is a pecularity of all midcaps who have exhibited multi-year bull phase to eventually turn multibaggers…Since the liquidity is low in almost all the counters it is best to assess them technically in 200 DMA terms rather than actual price terms as they fluctuate wildly in short term…His assessment for the lowest level of 200 DMA post conclusion and correction of current bull phase is Rs. 480-520 which means there are much higher levels than current one to be sought by the company’s share price in the times to come…

To reiterate again, technical analysis could be deceptive in illiquid counters like Relaxo and this is just the result of informal chat which I thought it proper to convey in the forum as the theory and conviction put out by him was interesting and first time heard for me… I only look at fundamentals of a company and have least knowledge of technicals as also don’t follow it…

Rgds.

57

Hi,

ValuePickr Core Team is back from another set of Management Q&As…excellent updates to share on companies like Atul Auto, Astral Polytechnik, Alembic Pharma, Gujarat Reclaim. Donald will share in due course. If there are others who can write good English and good at editing other’s work, please put your hands up - in the service of our community:)

Good to see Mahesh keeping up the interest in Relaxo in his usual style. Mahesh’s diligence and great ability to keep defending a stock idea is admirable. ValuePickr Forums is developing a very focused readership- thanks to the quality of discussions, participation by passionate investors like Mahesh and others. Too much of details however, can take one away from the real crux of the matter. One runs the risk of losing objectivity (falling in love with one’s idea). Worse, gullible new investors can be completely swept away. While we generally keep away from active Moderation, sometimes we need to intervene in the natural flow of discussions. We believe it’ our SOLEMN DUTY to protect gullible investors with adequatecautionarystatements - and RESTORE objectivity and balance.

ValuePickr Core Team has very different views on Relaxo from Mahesh - and thought it prudent to highlight why

1). Relaxo is nowhere near a quality business like some of the other companies mentioned above.

2). Relaxo is a simple CYCLICAL business to understand. Its margins have BIG DIRECT correlation with RM price volatilty - in this case - Rubber.

3). It is NOT a BRAND PLAY as it tries to portray itself.

4). The only reason it started doing well in past few quarters is because Rubber prices have been falling. and the only reason it was not doing well (both business and stock performance) before that was because Rubber prices were rising.

5). The volatility in RM prices is extreme, its Asset Turns have been falling as company has been increasing investing in Capex without corresponding rise in Sales - in short becoming more inefficient with time.

6). RISKS in Relaxo are very high for normal, beginner investors. If you are savvy enough, yes you could have ridden the cyclicality in Relaxo when it was quoting at 300+ 2-3 Quarters back. Certainly this is not the time - NOT for beginners, and we suspect NOT for savvy investors either - Valuations for this type of a cyclical company with decreasingefficienciesare looking to be extreme and UNSUSTAINABLE.

IN SHORT, STAY AWAY is our advise. DONT GET LOST IN THE DETAILS. FOCUS ON THE RISKS. There is simply NO MARGIN OF SAFETY.

This is the considered view of ValuePickr Core Team. We will shortly request some astute and street-smart investors (who know how the Indian market operates) to share their views on the same.Why did they miss Relaxo at 300+ by the way? And what do they think of entering at current levels.

Request Donald also to use his network for further scrutiny/advise. How do we maintain a BALANCED view in a Forum that prides itself for intensive data, investigation & analysis -something that ValuePickr core readers perhaps look for? How do we prevent overdose )- overwhelming our main motto - of separating the wheat form the chaff?

Encourage thoughts from everyone.

58

I spoke to a friend who is in a reputed fund and he indicated that the company had refused to meet them. The fund does not invest in a company unless a management meeting happens.

This came as a surprise since Donald had met them earlier and hence unlike Hawkins and other companies this one did not seem to be closed to folks.

59

Hi,

ValuePickr Core Team is back from another set of Management Q&As…excellent updates to share on companies like Atul Auto, Astral Polytechnik, Alembic Pharma, Gujarat Reclaim. Donald will share in due course. If there are others who can write good English and good at editing other’s work, please put your hands up - in the service of our community:))

Good to see Mahesh keeping up the interest in Relaxo in his usual style. Mahesh’s diligence and great ability to keep defending a stock idea is admirable. ValuePickr Forums is developing a very focused readership- thanks to the quality of discussions, participation by passionate investors like Mahesh and others. Too much of details however, can take one away from the real crux of the matter. One runs the risk of losing objectivity (falling in love with one’s idea). Worse, gullible new investors can be completely swept away. While we generally keep away from active Moderation, sometimes we need to intervene in the natural flow of discussions. We believe it’ our SOLEMN DUTY to protect gullible investors with adequatecautionarystatements - and RESTORE objectivity and balance.

ValuePickr Core Team has very different views on Relaxo from Mahesh - and thought it prudent to highlight why

1). Relaxo is nowhere near a quality business like some of the other companies mentioned above.

2). Relaxo is a simple CYCLICAL business to understand. Its margins have BIG DIRECT correlation with RM price volatilty - in this case - Rubber.

3). It is NOT a BRAND PLAY as it tries to portray itself.

4). The only reason it started doing well in past few quarters is because Rubber prices have been falling. and the only reason it was not doing well (both business and stock performance) before that was because Rubber prices were rising.

5). The volatility in RM prices is extreme, its Asset Turns have been falling as company has been increasing investing in Capex without corresponding rise in Sales - in short becoming more inefficient with time.

6). RISKS in Relaxo are very high for normal, beginner investors. If you are savvy enough, yes you could have ridden the cyclicality in Relaxo when it was quoting at 300+ 2-3 Quarters back. Certainly this is not the time - NOT for beginners, and we suspect NOT for savvy investors either - Valuations for this type of a cyclical company with decreasingefficienciesare looking to be extreme and UNSUSTAINABLE.

IN SHORT, STAY AWAY is our advise. DONT GET LOST IN THE DETAILS. FOCUS ON THE RISKS. There is simply NO MARGIN OF SAFETY.

This is the considered view of ValuePickr Core Team. We will shortly request some astute and street-smart investors (who know how the Indian market operates) to share their views on the same.Why did they miss Relaxo at 300+ by the way? And what do they think of entering at current levels.

Request Donald also to use his network for further scrutiny/advise. How do we maintain a BALANCED view in a Forum that prides itself for intensive data, investigation & analysis -something that ValuePickr core readers perhaps look for? How do we prevent overdose )- overwhelming our main motto - of separating the wheat form the chaff?

Encourage thoughts from everyone.

Appreciate it.

60

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** ValuePickr

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** 6). RISKS investors. ** decreasingefficienciesare

** IN SAFETY. **

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Hi Vimal,

I can not agree with you more. It is indeed good to have conviction in one’s ideas and equally valid to put forward one’s argument on why perticular investment idea is worth a look. However, as you very rightly suggested key to success in value investing is going to be revolving around making investment in quality businesses at vaulations that provides significant margin of safety.I also feel the same way for Relaxo that though it is a well known brand in footwear, it may be too early to conclude that it is a brand play. Typically a company having “moat” on brand will have pricing power which will help it protect its margin despite rise in RM prices most of the times. I do not feel that Relaxo still commands that kind of a moat. I think, you have taken a good initiative to bring all the fellow boarders to err on the side of conservatism.

With respect to your appeal on sharing the work on editing/rewriting, I can take up some work if the team thinks I will be able to deliver the content in the right perspective. I am not sure what kind of comfort the valuepickr team will seek, but you may have look at my blog to judge it for yourselves.

Best Regards

Dhwanil Desai

http://www.valueinvestinginpractice.blogspot.in/ Link: http://www.valueinvestinginpractice.blogspot.in/