Queries for Relaxo Management from my side… I hope Donald you and your team will be able to cover this promising company’s Mnagament Q&A in your recent management-visits :
(1) Revenue Contribution of each major brand (Hawaii, Sparx & Flite) in FY12.
(2) Any indcative margins each brand offers.
(3) In FY12, company has significantly ramped up sales team wherein almost 700 people are added in the fiscal as compared to total 150 people sales team of FY11 (source- Management Interaction with Niraml Bang guys). Also, the employee cost has inched up by 152 basis points over FY11 to stand at 12.28 % of FY12 sales. Is such aggressive addition likely to continue in FY13/FY14 too and where we see employee cost getting stablised w.r.t. sales.
(4) What is exactly the goal behind appointing management consulting firm Accenture â
(a) Is it to drive Sales Growth or
(b) is it to Improve Margins and therefore reduce its dependence on Raw Material Price fluctuations or
© is it to Significantly Improve Credibility of Organisation as a Brand in Operating Marketplace as also in the eyes of Financaial Community
and whats the progress on the same asto measures suggested by Accenture and approximate broad timeline on implementation of the same.
(5) Company has recently signed-up Saman Khan and Akshay Kumar to endorse Hawaii and Sparx brands respectively â so, is it likely to inflate Advertising & Promotion Expense significantly in FY13 or is such expense likely to remain at less than 10 % of sales as is the trend since last many years. Also, what are the benefits company expects to derive out of the appointment of such high-calibre celebrities ??
(6) Particularly on appointment of Salman Khan for Hawaii, which is actually a low-realisation brand, is the company planning for any price revision of Hawaii to improve realisations or the expenditure of appointment of such high-calibre celebrity for low-realisation brand like Hawaii is likely to be met by realisations of other high-realisation brads like Sparx and Flite thereby putting pressure on overall realisation per product.
(7) As on date, 154 Retail Stores of the company are under operation â
(a) How many of them are profitable ??
(b) ~Amount it requires for opening a Store and ~Time it takes for a store to brakeven ??
© Is the company looking for expanding the Reatail Stores prsence geographically which is still North India heavy ??
(d) So far, since last 5 years, company has on an average added 20-22 stores each year; so, going forward, can we expect such figure to be higher each year on lines of evolution and transformation we have seen in case of Bata in its history or Footwear Retailing is likely to continue to be secondary focus for the company.
(8) Relaxo has been by and large absent in Upper Middle Class segment which is dominated by Liberty, Action, Bata, Nike, Adidas & Reebok (forget the Rich Class segment dominated by MNCs) and so far the focus has been on Lower Income Group (via Hawaii) and Lower Middle Class Group (via Sparx, Flite & other brands) ; so, can the signing of high-calibre celebrities and therefore increased focus on brand-building be construed as likely increased focus of Relaxo on high-margin Upper Middle Class segment in addition to Lower Middle Class segment and on that count are we likely to see creation of another brand in the portfolio of Relaxo after Sparx or are we likely to see increased offerings in the same old brands.
(9) Bata has recently indicated shift of focus from margins towards aggressive volume growth â so, is the organised footwear market large enough to accomodate all the top players growth or Bata’s renewed focus on volume growth can become a threat to players like Relaxo ??
(10) What is the update of long pending case with Bata for Sparx brand â Has the out-of-court settlement reached as otherwise what is the rationale on such a heavy expenditure on branding of Sparx ??
(11) Company is likely to incurr ~60 cr. on building a PU plant and ~25 cr. on building a warehouse â
(a) When is the PU plant likely to commence and whats the revenue generating potential of such plant ??
(b) What is the existing PU footwear capacity and how has been the response to launch of PU footwear by Relaxo in 2HFY12 ??
© What benefits building new Warehouse will have to the company and is it for catering to increased Retail Stores presence of the company or is it for increasing the reach of company’s products pan-India via distributors ??
(12) What are the CAPEX requirements for FY13/FY14 â Break-up of CAPEX â Are we likely to meet CAPEX via internal accruals or debt is likely to increase going forward which was otherwise stagnant in FY12 thereby bringing D/E ratio down to 0.8 in FY12 ; first time below 1.0 in last seven years.
(13) Realxo brand is not fully owned by the company and last time there was talk of bringing it under company’s fold â so whats the update on this front ??
(14) Relaxo, being an aggressive 2nd Largest Footwear Co. Of India, has so f ar managed all the expansionsquite well without any sort of equity dilution â with Scale of Operations now approaching 1000 cr. Mark, is the company looking forward for any equity dilution in near future.
(15) Beacuse of closely held shareholding structure, liquidity in the company’s sares have been pathetic â Is management planning any steps to improve the liquidity in the counter ??
(16) What sort of Sales Growth we can expect in FY13/FY14 and if the raw material prices don’t play havoc, what sort of EBITDA margins company expects to achieve going forward.