Relaxo Footwears Limited (NSE: RELAXO) Q2 2025 Earnings Call dated Nov. 11, 2024
Corporate Participants:
Ramesh Kumar Dua — Chairman and MD
Gaurav Kumaar Dua — Whole Time Director
Sushil Batra — CFO
Analysts:
Sameer Gupta — Analyst
Videesha Sheth — Analyst
Shirish Pardeshi — Analyst
Prerna Jhunjhunwala — Analyst
Pranshul Mittal — Analyst
Gaurav Jogani — Analyst
Ankit Kedia — Analyst
Aditya Khetan — Analyst
Jasmine — Analyst
Sachee Trivedi — Analyst
Devanshu Bansal — Analyst
Lavita — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q2 FY’25 Earnings Conference Call of Relaxo Footwears Limited, hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr Sameer Gupta from IIFL Securities Limited. Thank you, and over to you, sir.
Sameer Gupta — Analyst
Thanks, Muskaan. Good evening, everyone. We have with us the senior management of Relaxo Footwears today, Mr. Ramesh Kumar Dua, Chairman and MD; Mr. Gaurav Kumar Dua, Whole-Time Director; Mr. Sushil Batra, CFO; Mr. Ritesh Dua, Executive VP and Finance; and Mr. Ankit Jain, Company Secretary and Compliance Officer.
Without further ado, let me pass it on to Mr. Dua and team. Over to you, sir.
Ramesh Kumar Dua — Chairman and MD
Thank you, Sameer. Good evening, everyone, and thank you for joining us on our Q2 and H1 FY’25 earnings call to discuss the financial and operational performance of the company. We have already uploaded the earnings press release and the investor presentation on the stock exchange as well as on our website. And we hope that you have had an opportunity to go through them.
Before we begin the question and answer session, let me quickly go through some of the highlights of Q2 and H1 FY’25 performance beginning with Q2. Revenue from operations in Q2 FY’25 was at INR679 crores as compared to INR715 crores in Q2 FY’24, a decline of 5% year-on-year. This is mainly due to weak market demand during the quarter.
Our EBITDA for the quarter was at INR88 crores as compared to INR92 crores in the corresponding quarter in the previous year. The company maintained its EBITDA margin at 12.9% during the quarter as compared to 12.8% in Q2 FY’24 despite the subdued demand. PAT was at INR37 crores as compared to INR44 crores reported in Q2 FY’24. PAT margin for Q2 FY’25 stood at 5.4% as compared to 6.2% in Q2 FY’24. Higher depreciation in the quarter has impacted the profitability of the company.
Now moving to our H1 FY’25 performance. In H1 FY’25, we recorded a revenue of INR1,428 crores, EBITDA was at INR187 crores compared to INR199 crores in the same period of last year. EBITDA margin was at 13.1% as compared to 13.7% in H1 FY’24.
PAT for H1 FY’25 stood at INR81 crores against INR101 crores in H1 FY’24. PAT margin was at 5.7% as compared to 6.9% in H1 FY’24. The company has incurred a capex of INR49 crores till 30th September ’24. Our company continued to be net debt free and supported by positive cash flow from operations. Our company is in process of adding new distributors and focusing on the — on to improve retail network through various initiatives.
Further in line with our continued focus on cost efficiencies, we are working on optimizing our backward — back-end operations, which would enable us to deliver a sustainable performance in the future.
Thank you. The floor is now open for questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Videesha Sheth from AMBIT Capital. Please go ahead.
Videesha Sheth
Hi, thank you for the opportunity. My first question was on the commentary that you made in the press release regarding consumers downtrading to lower-priced unorganized competition and your call to not dilute prices. So how do you see that impacting volumes and market-share in the near-term?
Gaurav Kumaar Dua
This is Gaurav. We are seeing like there is a pretty poor footfall happening across the country, what we have noticed. And there is a mushrooming of local players, the unorganized players, new unorganized players have also come into the play. So there was a pressure on us to reduce the prices, which we have not. And we are in process of adding more retailers and distributor to counter that.
Videesha Sheth
So Gaurav, where I’m coming from is that during FY’23 also when we faced a lot of pressure from RM inflation, we chose to increase prices, but we also then lost market-share due to that. So do you see this call of not diluting or reducing prices impacting volumes as well or impacting our market share in the near-term?
Gaurav Kumaar Dua
Temporarily we can say yes. But in long-term, I think we will able to gain back the market-share. It’s because of — there is two factors. There is a poor footfalls, demand is also subdued and the raw-material prices, all these things, multiple factors, they were able to enter them. But I think now the wedding season, we are hearing like quarter three lot of weddings are happening, there will be a demand uptake in the market and things will improve.
Videesha Sheth
Got it. Got it. And the second question was if you can share your observation on the channel inventory and some granular sense on consumption trends as well, while there is overall weakness, but if you could break it down into how have you seen trends move in rural versus urban and also the competitive landscape.
Ramesh Kumar Dua
Channel inventory we are maintaining, there is an increase in the inventory as compared to, I think, March. So it has increased due to subdued demand and inventory we are carrying almost in GT and new channel at the same level, but retail it has increased little bit. So overall, there is an increase on inventory front.
Videesha Sheth
Got it. And my last question is, what would be your outlook for margins versus the earlier guidance of 15% to 16% for FY’25?
Sushil Batra
So I think company is taking lot of steps to, you know, improve the margins. They have been back-end — on back-end front, we are working very closely with the manufacturing how to really improve our productivity and add-on to our margins.
Videesha Sheth
Thank you for answering my questions. I’ll get back in the queue.
Operator
Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Shirish Pardeshi
Hi, sir, good evening. Thanks for the opportunity. On the slide in the beginning, I observed that our average realization per pair has gone up by about 6% to INR156 and the number of pairs sold is lower. So I do understand there is a demand issue and other things, but is there any regional variation because we have larger business coming from North. Is the difference between North and South and West and East is different in terms of this demand situation?
Gaurav Kumaar Dua
See, across India, we are seeing this issue of demand not being optimum. But East, like if you say talk about East is most affected. So payments are very slow coming from Eastern markets. So East is a market which has been mostly affected.
Shirish Pardeshi
Yeah. Okay. So we have been saying that we are trying to in fact improve the mix towards the premium end also. Any color, any mix you would be able to highlight at this point of time?
Ramesh Kumar Dua
Status quo. Yeah. Last year is the price is more because we revised the prices in January. That is the effect of higher ASP, — ASP.
Shirish Pardeshi
Okay. Okay. And in terms of Sparx contribution, would you specify how we should look at in second-half? Because you said that you are focusing on the distribution angle also.
Gaurav Kumaar Dua
Sparx, I think it — we are able to maintain the momentum in Sparx compared to the other open footwear. So I think Sparx should definitely be better-off compared to other two brands, that is Flite and Bahamas.
Shirish Pardeshi
Okay. So assume that first-half the situation demand downtrading, regional competition, local competition is the status quo is there, how we should be looking at second-half because even second-half was the base is benign at this point of time, but does last 30, 40 days give you some confidence that we will be able to recoup our volume growth?
Gaurav Kumaar Dua
Currently, like in October or whatever you can see the start, we have not seen the great start. So we are hoping that because of this November-December having huge number of weddings, so demand should improve.
Shirish Pardeshi
Okay. Thank you and all the best.
Operator
Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead.
Prerna Jhunjhunwala
Thank you for the opportunity. Just wanted to check on closed footwear performance now that we’ve added capacity in last year. So has the mix change taken place in the first half and second quarter?
Gaurav Kumaar Dua
So it’s — it’s same — it’s same like what it was the last year and last quarter. There’s not much of a change happening there.
Prerna Jhunjhunwala
So what is your strategy to improve our mix towards closed footwear?
Gaurav Kumaar Dua
Strategy. We talked about, again, it is like appointment of distributor, adding more channels, for example, e-commerce. We were a little slow this time because of too much of ask from Flipkart and Amazon. So we are very cautious and then we are taking steps to improve our reach in Sparx.
Prerna Jhunjhunwala
So what could be the revenue growth that you are targeting for FY’25, ’26, given that your conservative demand is also weak and you’re expecting improvement in demand coming forward in the quarters to come. So how should we see the growth coming in for you?
Gaurav Kumaar Dua
So we are really cautious of the market. And what we see is we have to grow, like we are appointing more distributors across territories. And we are hoping that we can grow around 8% to 10% in Sparx category.
Prerna Jhunjhunwala
Okay. And overall revenue growth that you’re targeting?
Gaurav Kumaar Dua
Difficult to say as of now, but definitely it should be positive.
Prerna Jhunjhunwala
Okay. And what would be the distributor and retail reach increase for you in the next two years for both open footwear and closed footwear?
Gaurav Kumaar Dua
So it’s a continuous process. We keep on adding distributors and some distributor always like. So it is a continuous process. So adding retailers, like if you see two years back, we were at 55,000. Now we are at 70,000 retailers. So it’s a continuous activity, continuous process —
Prerna Jhunjhunwala
We can assume the same run rate to continue?
Gaurav Kumaar Dua
Yeah, definitely.
Prerna Jhunjhunwala
Okay. Understood. Thank you and I’ll come back in the question queue.
Operator
The next question is from the line of Pranshul Mittal [Phonetic] from [indecipherable] Enterprises. Please go ahead.
Pranshul Mittal
Yes, hi. Thanks for giving the opportunity. I wanted to ask a question that in the investor presentation, you have mentioned that in channel-wise revenue mix, the modern trade is about 10%, but recently we have seen —
Gaurav Kumaar Dua
Can you repeat your question?
Pranshul Mittal
[Foreign Speech]
Gaurav Kumaar Dua
I think this is Relaxo meet, not campus meet.
Operator
Sorry to interrupt, sir. The participant left the queue. We’ll move to the next. The next question is from the line of Sameer Gupta from IIFL Securities. Please go ahead.
Sameer Gupta
Hi, sir. Thanks for taking my question. I noticed that there is an ASP increase of 6%. I mean, I heard that you mentioned that you’ve taken a revision of price in January, but even a — from last quarter onwards, this is an increase of around 3%. So just wanted to understand, is there a change in mix that is impacting this and some more color on this.
Gaurav Kumaar Dua
See, we have introduced premium categories in some of our brands. And because of that there is an effect of increase in ASP, plus we have taken a price increase in the January in Hawai category. So — and last year the base level was also little lower.
Sameer Gupta
Okay. But there is no price increase as such taken in this quarter.
Gaurav Kumaar Dua
No, no, we have not taken price increase.
Sameer Gupta
Got it, sir. Sir, second question on this competitive intensity increasing. Now what is the trigger for this? Has there been a sharp fall in raw-material prices that has resulted in this intensity going up? And how is the company going to counter it? I mean, let’s say, it continues for a few more quarters. So do you have a strategy in place to counter it at some point or do you keep waiting like because it’s unsustainable and it will go away at some point in time?
Gaurav Kumaar Dua
So we have — you’re absolutely right, because of lower raw material prices, lot of new competitors have come in. We are working with our marketing team to devise a new portfolio, new portfolio strategy. So how to counter them. So we are working on cost optimization plus adding new products and to understand the regional needs. So we are — we are really in touch with the market, what is happening.
Sameer Gupta
And is there a role of the BIS compliance also in this that the smaller players don’t have to comply as of now, is that also impacting?
Ramesh Kumar Dua
That is also — could be a reason because all small manufacturers, they are exempt from quality control standards. So whatever quality they want to produce, they can downgrade and they can cause unethical competition also otherwise. So that also has some role.
Sameer Gupta
Got it, sir. Lastly, sir, if I may squeeze in, the other expenses have seen a decline of 3%. Just wanted to understand the broad constituents, which is resulting in this. And also let’s say, the volume growth comes back, do you see this growth in other expenses also coming back or this INR220 crore number odd is the ballpark which is here to stay?
Ramesh Kumar Dua
Other expenses, we took a calculative call, we have just reduced advertisement expenses in this period as compared to last year. So that is a major item, which has come down.
Sameer Gupta
But do you see this going up going forward if demand comes back?
Ramesh Kumar Dua
Yes, next year definitely, not this year. Next year definitely we will review and we may go back to the original percentage spend.
Sameer Gupta
So FY’25, what is the number that you’re targeting for ad spend full-year?.
Ramesh Kumar Dua
Generally, we used to spend around 4%, so this year we have just thought about 3%, 1% lower than last year.
Sameer Gupta
Got it, sir. I’ll come back in the queue for any follow-ups. Thanks, sir.
Operator
Thank you. The next question is from the line of Gaurav Jogani from JM Financial. Please go ahead.
Gaurav Jogani
Apologies for the earlier, sir. And my question is with regards to the impact of BIS. I mean, while in the shorter-term because these — the shorter players are given a relaxation of not complying with the norms. But on over longer-term, how do you see the norms impacting the industry on an overall basis and Relaxo specifically?
Ramesh Kumar Dua
Government has actually given exemption to the small industry for the time-being. It doesn’t mean they are going to grow always. So that we have to wait-and-see how they see. But as far as we are concerned, we are strictly following quality control standard prescribed by Bureau of this standards and that’s it.
Gaurav Jogani
Yeah, sir because you know because you guys are following the quality standards prescribed by the agency, then can you be marketing your products as a better-quality product and hence it is ISI or BSI mark. So can there be a marketing angle that will benefit guys at the value end who are following these norms? Is there a case for that?
Ramesh Kumar Dua
No, no on the long-term, this will benefit the company. In the short-term because of the market downtrading, look, people are not having enough money in their hands, so they are going for cheaper products. But ultimately cheaper product can never create a future. Future is always for the quality products that we are following.
Gaurav Jogani
Sure, sir. Thank you, sir.
Operator
Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go-ahead.
Prerna Jhunjhunwala
Hello. I wanted to understand the capex for the year or if — what will be the full capex for FY’25 and ’26?
Ramesh Kumar Dua
FY’25, already we have spent around INR50 CR. So it will be again in the range of INR50 CR to INR60 CR in next half, so total will be INR100 CR plus in this full-year.
Prerna Jhunjhunwala
And what is it going to be spent on INR100 crores?
Ramesh Kumar Dua
This majorly we have spent upon the — I think the regular item, which we spent around INR30 CR, INR25 CR to INR30 CR, then we are adding some machinery and some civil work also. So it’s a mix of all these.
Prerna Jhunjhunwala
Okay. Okay. Can we assume any capacity addition in this?
Ramesh Kumar Dua
No.
Prerna Jhunjhunwala
Okay. Thank you, sir. Thank you and all the best.
Operator
Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Ankit Kedia
Sir, when you say October has been a slow month for you and you’re hopeful for November, already primary sales for November would have been done now and you would be generating demand for the next month. So are we seeing pressures in primary demand from distributors and they are sitting on high stock? And if you could answer separately for open footwear and closed footwear?
Gaurav Kumaar Dua
So it is same for both open and closed footwear. Still the demand has not like we are hoping that next two months should be better compared to what has happened last quarter. So because of poor footfall, these things are happening. So it would be gradual. It cannot be just immediately, things will change.
Ankit Kedia
And sir, are we facing pressure from organized players as well like Walkaroo and Aqualite have also become aggressive in the open footwear category or it’s not from the unorganized only what you called out?
Gaurav Kumaar Dua
They are also facing challenge from unorganized. I think they are also facing a lot of issues compared to BIS of unorganized play, lower footfalls. It’s for full industry, it is same.
Ankit Kedia
And sir, three quarters back, last year when we had lost market-share, you alluded that you would go for market share gains and not for margins and now again as a strategy, you’re going for margins and not for market share gains. So what is the long-term thought process of the company on top line growth versus margins?
Gaurav Kumaar Dua
So it’s a — we are taking a balanced approach. It cannot be one way. It cannot be only margin only sales. We have to take a long-term view and take a balanced approach.
Ankit Kedia
Sure, but you know with a steady decline in volumes, consumer is downgrading and that is impacting the brand as well that?
Ramesh Kumar Dua
No, you know, on the long-term, we have to see the things. Our strategy has to be not based on what currently we are going through. We have to make quality product and we have to sustain the things. We are adding distributors, we are adding retailers, we have introduced retail app or connect with the retailer is improving and this is improving of our retailers. Our reach improves, definitely the sale will also improve.
Ankit Kedia
Sir, can you separately call-out the growth in the North market versus the West and South, if possible?
Gaurav Kumaar Dua
Repeat please.
Ankit Kedia
Can you separately call-out the revenue growth or the volume decline in North versus West and South region?
Gaurav Kumaar Dua
There has been just marginal 1% drop in some areas sustained in the West and South. So basically East, we have seen a little more dip compared to other regions.
Ankit Kedia
Sure. Thank you so much. I’ll come back in the queue.
Operator
Thank you. The next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.
Aditya Khetan
Yeah, thank you sir, for the opportunity. Sir, my first question is onto the volumes part. Sir, in H1, we had seen that the volumes have declined by almost around 5% as compared to the last year of H1. And sir, you have also stated that the muted demand and all and you are hopeful for a good wedding season. Sir, so any guidance onto the full-year volume side, if you can share so whether we can see a positive growth or it would be flattish?
Gaurav Kumaar Dua
It would be flattish because it will take time to cover-up the six months sales and volume loss.
Aditya Khetan
Okay. Okay. And sir, despite so facing this muted demand, sir, so when we look at the operational metrics like your gross profit per pair and EBITDA per pair, so that has gone up on sequential basis by around, so 3% to 4%. So I wanted to know, is there any component of the better product mix which we have seen in this quarter?
Ramesh Kumar Dua
EBITDA is via large same in the first quarter, second quarter if you compare to last year’s first-quarter and second-quarter, total H1, H2, just a 0.5% difference of EBITDA.
Aditya Khetan
Got it. On to the gross profit, sir, we have seen a good improvement. Any comments over there?
Ramesh Kumar Dua
The growth definitely there is a — there are two reasons for this. We took a price increase in January, so that is the advantage has come in the system. Raw-material were also I think eased out and third is if you see the percentage, there is an increase of inventory. So that percentage is I think 1% looks better than the last year.
So these are the three reasons. So one is the price increase, second advantage, third, that is the accounting part, you can see there is an increase of inventory around INR47 crore in this. That includes a conversion cost also. That’s why that margin looks better.
Aditya Khetan
Got it. Got it. Thank you.
Operator
Thank you. The next question is from the line of Jasmine from VT Capital. Please go ahead.
Jasmine
Hi, team. I wanted to understand your comment on the reduction of the A&P cost. My understanding is that the demand is muted, the local players are kicking-in. So what is the rationale of reducing our A&P spend when this time I believe there should be more spends to garner more market-share and hence increase our volume and sales.
Gaurav Kumaar Dua
So what we have done is we have reduced in advertisement, but increased on schemes us in sales and promotion. So because of trade push is required for an immediate scenario, so we have increased our schemes expenditure.
Jasmine
Okay, that answered my question. Thank you so much. Sorry, I didn’t get that —
Gaurav Kumaar Dua
You got the answer, I think we have adjusted with the schemes. Yeah.
Jasmine
Okay, great. Thank you so much. All the best.
Operator
The next question is from the line of Sachee from Trident Capital. Please go-ahead,
Sachee Trivedi
Can you hear me?
Operator
Yes.
Gaurav Kumaar Dua
Yeah
Sachee Trivedi
Okay. Great.. Rameshji, thank you for taking my question. Hi, Gaurav. This is Sachee Trivedi from Trident Capital Investments. My question is slightly more longer-term oriented. Now in the last two, three years, we have seen two things happening. One is the shift of demand from open to closed footwear. And the second is the shift of demand from probably the physical channels to online channels. How did you not see this coming?
Gaurav Kumaar Dua
There were multiple factors, like for example, nobody saw that there will be such poor footfall leading to poor payments from the retailers. So it’s very difficult to really gauge how the monsoon will come up, how election will — what will be the result of that and plus the lot of unorganized players coming up because of BIS issue like we never thought that government will give them you know leeway key you can come enroll after a year. So many things you cannot predict how the things will operate, how government will come with the new policies.
Sachee Trivedi
Those are like monsoon and election and BIS, I think is a very, you know, I mean, I don’t think that is frankly the crux of this. We are talking about a very structural — a very secular shift in demand from open to close footwear. You look around yourself, there’s — I mean, people are wearing shoes, those athleisure sports shoes. And there is a very structural shift on to online. In fact, online players are having disruption from being from e-commerce to quick commerce and whatnot. So there is a massive disruption happening in channel. Given how widespread you are, given how many contact points or retail points you had, I am surprised that you did not caught catch on to the changes, the tectonic shift, the structural changes that are happening in the industry.
Ramesh Kumar Dua
No. No, as far as a conflict of channel, general trade versus online channel. There is also too much of discounting pressure on online channel. So strategically, we are there, but we have to be very cautious of our general trade, our multi-brand outlet, they got suffered when they see too much of discount.
This year, we had to actually say no to Flipkart and Amazon because they generally give too much discount and that affects them. So we have to be very cautious in the changing scenario. Things are conflicting, they are very complex also. So we are now creating separate portfolio for e-commerce.
That is the thing that in total, I mean kind of a conflicting and not complementary, but sometimes totally opposite. Whatever when we think we are general trade that gets affected the — our e-commerce and when we look for only e-commerce, the heavy discounted sale may go up, but on the long-term our general trade gets affected.
So we are grappling with this issue and trying to create a separate range for e-commerce so that this company should get minimized.
Gaurav Kumaar Dua
And plus consolidation will happen now this year or maybe last two years, you can see in online, there are multiple new brands have come up in footwear. Like earlier it was 20 brand now, they have more than 200 brands selling footwear. So consolidation will happen. Now discount war will be controlled like lot of things are happening in online, yeah.
And our two-third business is open footwear, which is — which will never go on e-commerce. Price is low-price, much is. It is not profitable to work on e-commerce all this mass is. See the disruption because of the online is a very it is something to be not taken lightly because we are seeing industry after industry being disrupted and completely changed and transformed because of this.
Sachee Trivedi
Do you feel that this could have a strong — and I mean,, given your very, very rich experience over decades, do you think this is probably the biggest challenge that you are facing now? Simply because a shift in nature of demand and the channel of demand is causing and has allowed a lot many competitors, whether it is people who are coming today and selling maybe for one season and going away.
But all of a sudden, they have the shelf-space that they could never get-in physical retail industry, right? And we are seeing in cosmetics, we are seeing in beauty products, new-age players are coming up, they have gained enough critical mass and the old legacy players are really suffering in volumes.
Do you think this is the kind of challenge that you are facing? And I’m curious to hear how you place this challenge, the size of this challenge to everything you have seen in the decades of experience that you have?
Ramesh Kumar Dua
So no doubt things are challenging. We are also mindful of the situation what is unfolding, but we have to see — we have to balance between general trade and e-commerce. In e-commerce, we can’t — at the cost of e-commerce, sorry, at the cost of general trade promote e-commerce.
E-commerce, we are mindful, we have started selling as brand as sellers where we can control our pricing also. Earlier we were selling directly to Flipkart and other distributor, there was no price control, which was affecting our general trade. So we are building our own brand as a seller and trying to sell direct to the consumer and watchful of the situation so that we can co-exist in the general trade also and e-commerce also.
Gaurav Kumaar Dua
And also you know, two-third of the articles that we manufacture, they are meant for the masses. And these masses article, they are not available to sell on e-commerce. We have to do that business will generated only
Sachee Trivedi
So then one final question from me. Some articles that the 2/3 of articles that you have for the masters now these people are probably not going online also. Why has there been no-growth in this massive category over the last almost three years now?
Ramesh Kumar Dua
No, no, after all, market open footwear across footwear is there, but in the general trade, the two years, the demand has been low. And now in this year we find lot of unorganized low-price articles have entered the market. You know, there is a problem of money in the hand of the segment at the moment, what we are witnessing.
That is why they are trying to go for cheaper alternatives. But on the long-term quality articles will also be the aim for the company and that will only help the company. We can’t go for the reducing the quality of being just for the timing., 7
Sachee Trivedi
Okay. And actually, if you don’t mind, I saw that you have tied-up with Disney and Marvel. Does it mean you are going to have some focus on the children segment?
Ramesh Kumar Dua
Yeah, that would help you. That will help in the premiumization of our article which are meant for children and others also. So we have done a slow beginning, but in the coming time, this will help us improve the ASP of the company..
Sachee Trivedi
Okay. Thank you very much.
Ramesh Kumar Dua
Okay.
Operator
Thank you. The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Devanshu Bansal
Yes, sir. Hi, thanks for taking my question. Sorry, I have joined the call late, so please pardon me if I’m repeating anything that has been answered before. Sir, I just wanted to check on your remarks that the industry has sort of witnessed an increase in lower-priced unorganized competition.
So firstly, I wanted to check what exactly is this unorganized competition. So earlier during this entire calendar year, the imports from China, et-cetera were on a decline, but now over the last couple of months, I guess, the imports of such articles have seen an increase. Are you referring to this or are you referring to all those smaller-scale MSMEs that are operating from India and they have certainly increased the competitive intensity in that space.
Gaurav Kumaar Dua
Yeah, it’s actually both. Plus you know two years back there was change of from 5 to 12. Since then like you know a lot of new players on unorganized competitors have come up. There are two multiple reasons for that. One is the lower-price raw-material. You know as when the price goes down, definitely new players come in and the price goes up, they really vanish.
Plus there — definitely we can talk about these are regional players which have been having no brand not paying GST they don’t have BIS compliance. So they are taking some market-share and there are lot of import happening like what you have — what you were saying about China import, it has not reduced,
But it has increased because government have allowed them till September to import product since after that they cannot because then the BIs will be applicable. So multiple factors, not one or two.
Devanshu Bansal
I understood, sir. And secondly, I just wanted to understand from your balance sheet perspective, the inventory levels are sort of up by about 10 odd percent. So any specific reason for that?
Ramesh Kumar Dua
Due to subdued demand and we have to run the package and because there is a pressure upon the demand, that’s why inventory has increased.
Devanshu Bansal
Okay. I just wanted to check because this time around this festive season has been early despite that the inventory levels are up and receivables are down. So I just wanted to check, is it like some demand levels in festive also sort of remaining low.
Ramesh Kumar Dua
So-far demand has been subdued even in the month of September and October. We are hopeful that November onwards thing will improve.
Devanshu Bansal
Understood, sir. Thanks for taking my question.
Operator
Thank you. The next question is from the line of Lavita [Phonetic] from Mirae Asset. Please go-ahead.
Lavita
Thank you. I have two questions. So with respect to how we are positioned in the market, are we seeing any portfolio gaps in the open or closed footwear category? Since we have seen Crocs being successful last two, three years, the way customers’ preferences have changed towards more comfort wear and fashion wear. So are we looking at newer categories in any of these open and footwear space? And second question is, so continue, please continue.
Okay. So my second question is towards marketing strategies. Are we looking at any differentiated marketing strategy because we see the high-end brands have a different appeal towards the young millennials and customers. So what’s your stake on that?
Gaurav Kumaar Dua
Okay. So we are in touch with the market constantly and we are always aligning our portfolio with the market. For example, like from basic slipper, people are moving to colored and printed slippers. So we are going to launch whatever the gaps are there in the portfolio,
We are at constant touch with the market and you know, giving product accordingly. Secondly, about marketing strategy. Definitely, the way the world is moving, we are also moving from — from offline to online advertising. So we are doing a lot of branding in the digital space now.
Lavita
So my understand — so I wanted to understand more on the specific category as in is there a trend that is — that is where we have not looked at? Is there something — any space in any particular category that we have not looked at and we are approaching towards it? And in terms of marketing, more towards a different message that we can — a unique way of marketing strategy apart from being there online, which everybody else is. That’s it.
Gaurav Kumaar Dua
So when you talk about the product gaps or portfolio gaps like definitely marketing is shifting from sportswear to athleisure. So we are in touch with the market, be it people are going for chunky souls or different color, different design. So we keep on doing this analysis and introduce product accordingly.
Yeah, the sneakers, like you know the sneaker trend is there, the street fashion is there. So we are in-line with the market trend and launching products accordingly.
Lavita
Okay, understood. Thank you.
Operator
Thank you. The next question is from the line of Devanshu Bansal from Emkay Global. Please go-ahead.
Devanshu Bansal
Yes, sir. Hi, thanks for the follow-up opportunity. My question is, sir, in India, there is lot of footwear parks that are being created in Tamil Nadu, right, where all large Taiwan-based players are helping the space. Haryana, as a state also has similar advantage from a labor — cost of labor perspective, the footwear industry is quite well-established in the state.
Any thoughts around this incremental Make in India opportunity that is emerging?
So your comments on that, please?
Gaurav Kumaar Dua
So in TamilNaduor whatever structure they are coming, they are from Taiwan, they are making for multinationals and mostly they are making and then exporting. So that is not going to affect our domestic market in that manner so-far.
Devanshu Bansal
I wanted to check if we can also sort of explore as in utilizing our facilities in the lean period for such demand that may be there. Any thoughts around that?
Ramesh Kumar Dua
No, we have to see what is required by Indian market, Indian consumer and what kind of the masses consumer that we have, how we have to address their needs. So we are developing our article as per the needs of our customers. And we are aligning that. There is value-for-money or quality, whatever affordable quality we can buy. That is what we are focusing.
Devanshu Bansal
Understood. And sir, there were some news reports, though it was not, but there were some news reports on this GST being reduced from 12% to 5%, right, for footwear. So any thoughts around that, any representations being a leader that you have made to the government in sort of because there has been lot of disruptions, right, because of this unorganized lower-price competition that is there. Any thoughts on this, please?
Ramesh Kumar Dua
Representation by the industry is being made regularly regular internet currently also industry is take-up this matter with the government authorities.
Devanshu Bansal
Any expectations from that perspective
Ramesh Kumar Dua
_ government will never commit. These things are. You can only make representation and then we have to wait.
Devanshu Bansal
Understood, sir. Thanks for taking my question.
Operator
Thank you. The next question is from the line of Sameer Gupta from Investec IIFL Securities. Please go-ahead.
Sameer Gupta
Sir, just a follow-up on the separate portfolio for e-commerce that you have mentioned. Any timeline that you can share by when do we expect to launch this? And is it going to be margin-dilutive because this is being done primarily to bypass the e-commerce channel’s discount in nature and its effect on duty.
Ramesh Kumar Dua
So we have already bifurcated the online portfolio, e-commerce portfolio. Now we have — what about — second question is about the margin dilution. So we are not going to dilute our margins in that category.
Sameer Gupta
Then, sir, how does it address the issue, which is basically the online players discounting and that affecting the channel. How does it affect that issue? I mean, if we are not going to participate, then how is the separate portfolio going to help.
Gaurav Kumaar Dua
No, no, see participation was for the Big Billion day and the Amazon festival where they were offering huge discounts. Other small activities or any other days, we will be there. Our only thing is to protect the margin for — protect the interest of the — both channels. You know, we have to see about the brand also at what level we can give discount.
And it should be in concurrence with us how they decide the discounting policy. It cannot be wherever they want, they can give what kind of discount they can offer like, you know. So we are focusing on more of BaaS, brand as seller compared to giving outright sale to them and
Sameer Gupta
Agree, but when this separate portfolio, you will still be brand as a seller. You are not going to outright sell to the Flipkarts and Amazons.
Gaurav Kumaar Dua
In that scenario, it depends upon what will be the discounting philosophy of that brand. For example, Flipkart, we will not participate when the high discountings are happening.
Sameer Gupta
And how does it work? So the discount is born by the Flipkarts and Amazon or it’s kind of shared between you and
Gaurav Kumaar Dua
See on the special days like Big Billion day or Amazon festival they give from their side without taking any you know approval from us or sitting together and deciding the price. So they just whatever they feel like they give discounts. So we do not appreciate like this kind of discounting practice.
Ramesh Kumar Dua
We have to protect our general trade also.
Sameer Gupta
Yeah. But portfolio is bifurcated, it will protect, right? I mean how — I’m not able to understand this. So I understand the brand image part.
Ramesh Kumar Dua
So we have to be mindful of both the things. Trade once you make the article separate, okay, that thing is there, but still we have to be mindful of how we have to manage both the channels and what’s the brand image, what kind of discounting we want to allow. We have to balance out all these things and take a very cautious move.
Sameer Gupta
Got it, sir. Second question and I heard this during the course of the call that BIS for smaller players, they’ve been — you mentioned that a lever one year has been given, but my understanding that — my understanding was that right now, there is no such deadline to comply for smaller micro enterprises. Just wanted your clarification on this, sir.
Gaurav Kumaar Dua
This is what only the minister declared, but how they will do it, there is no writing on it.
Sameer Gupta
Got it. So officially there is no such deadline. Minister — the minister has said is what you’re referring to.
Ramesh Kumar Dua
That was. Our intention is that everybody has to comply, but for the timing these small payers are being exempted.
Sameer Gupta
Got it, sir. That’s all from me.
Operator
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you, you, sir.
Ramesh Kumar Dua
So this is all from our side and we thank you all for joining the call. Looking forward to joining you again. Thank you very much. Thank you, everyone.
Operator
[Operator Closing Remarks]