This article first appeared on GuruFocus .
Release Date: November 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Relaxo Footwears Ltd ( BOM:530517 ) reported stable EBITDA margins at 12.9%, supported by operational efficiency and cost management.
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The company witnessed a recovery across channels, with general trade contributing a higher share to overall sales.
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The reduction in GST from 12% to 5% on footwear priced below INR 2,500 has strengthened Relaxo's competitiveness against the unorganized sector.
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Profit after tax for H1 FY26 increased by 4.9% year-on-year, with PAT margin improving by 95 basis points to 6.6%.
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The company is optimistic about future growth, expecting momentum to strengthen due to festival demand, GST benefits, and sales transformation initiatives.
Negative Points
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Revenue from operations decreased in Q2 FY26 compared to the previous year, primarily due to demand softness in the mass market segment.
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The company faces challenges with an inverted duty structure, where input duties remain higher than output duties.
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There is a delay in the impact of GST reduction on sales due to high inventory levels in distribution channels.
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Consumer sentiment remains muted, affecting overall demand and growth expectations.
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The company has not seen significant growth in closed footwear, which could potentially improve margins.
Q & A Highlights
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Q: Can you elaborate on the impact of the GST reduction on growth and inventory levels? A: Gaurav Kumar Dua, Full-time Director: The GST reduction from 12% to 5% is expected to enhance our competitiveness against unorganized players. We carry about 30-35 days of inventory, and distributors hold around 45 days. The real impact will be visible from December and January as distributors focus on liquidating older, higher-priced inventory first.
Q: How will the inverted duty structure affect margins? A: Prince Jan, CFO: With GST 2.2, our output duty is 5%, while most inputs remain at 18%, creating an inverted duty structure. We expect the refund formula to cover most of this, but some duty will not be refunded. We are monitoring the situation and do not anticipate a significant impact on margins.
Q: What are the growth expectations for the upcoming quarters? A: Ramesh Kumar Dua, Chairman and MD: We expect growth to be modest in Q3, potentially around 3-4%. However, we anticipate better performance in Q4 and a stronger growth trajectory next year, as consumer sentiment improves and we leverage our competitive pricing.
Q: Can you explain the increase in other income this quarter? A: Prince Jan, CFO: The increase in other income is due to a higher treasury base and gains from hedging due to the depreciation of the INR against the dollar. We expect similar numbers in the future, potentially boosted by lower interest rates if inflation decreases.
Q: What is the current contribution of closed footwear to sales, and are there plans to increase capacity? A: Gaurav Kumar Dua, Full-time Director: Closed footwear contributes about 20% to our sales, with open footwear making up the remaining 80%. We currently have sufficient capacity and do not plan to increase it at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
