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    FinShiksha

    Quick Company Analysis

    Khadim India Limited

    Disclaimer

    The purpose of this document is purely educational in nature. The idea is to help someone kick-start

    their analysis on this company. However, this is not to be construed as a recommendation of any sort

    on the company or its stock. All information has been sourced from publicly available data such as

    annual reports and news items and the veracity of the sources has not been independently

    established. Kindly use your judgement while analysing further or using this document.

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    Contents Introduction ........................................................................................................................................ 2

    Business............................................................................................................................................... 2

    Revenue Drivers .................................................................................................................................. 7

    Cost Drivers ....................................................................................................................................... 12

    Ratio Analysis .................................................................................................................................... 12

    Management’s Quality ...................................................................................................................... 14

    Broad Valuation Parameters ............................................................................................................. 14

    Introduction

    • Khadim India Limited is a manufacturer and retailer of footwear in India. Company sells

    product under the brand Khadim’s. Further Khadim’s brand has 9 sub brands namely

    o British Walkers

    o Lazard

    o Turk

    o Pro

    o Sharon

    o Cleo

    o Softouch

    o Adrianna

    o Bonito

    • Khadim is the second largest footwear retailer in India in terms of number of exclusive retail

    stores operating under the ‘Khadim’s’ brand, with the largest presence in East India.

    • Company also had the largest footwear retail franchise network in India in fiscal 2016.

    Business

    In India, footwear companies operate two types of business models:

    • Exclusive retail outlets:

    Exclusive retail outlets as the name suggests are the stores exclusively for the sale of a specific

    company’s product. It will sell footwear brands of a particular company only. The exclusive stores

    can be either directly owned and operated by the company or run and managed by franchises.

    • Multi-brand retail outlets:

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    Due to intense competition in this segment, companies try to increase their penetration by selling

    their footwear through Multi-brand outlets. Multi-brand retail generally refers to selling multiple

    brands under one roof. Companies generally sell their product to distributors who in turn sell it to

    multi-brand outlets.

    Khadim operates under two business segments:

    • Retail

    • Distribution

    Retail segment:

    • Retail segment mainly comprises of B2C segment.

    • Under this segment company sells footwear through both company-owned/operated (COO)

    and franchise stores.

    • Between FY2013-18, company has added 378 retail stores, of which 79% expansion was

    through franchise model.

    • Number of retail outlets added in FY2018 are 89.

    • KHDM has the largest presence in East India and remains one of the top three players in South

    India.

    142 148 162 183

    403 464

    511 570545

    612 673

    753

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    2015 2016 2017 2018

    Break up of retail outlests- Owned vs Franchisee stores

    Company-owned/operated Franchisee stores Total

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    • Khadim plans to add 150 Retail Outlets by FY2020.

    • As of June 30, 2017, company had entered into long-term lease, leave and license or business

    conducting arrangements for 153 COOs and it operated 15 COOs from properties which are

    owned by the company.

    • This segments follows asset-light business model as company outsources manufacturing.

    Company outsourced nearly 88.9% of product requirement in 2018.

    • It has an outsourcing arrangement with around 500 small-scale footwear manufacturers. The

    Company added 10 new footwear vendors during FY2018.

    • It caters to middle and upper middle-income consumers in metros and Tier 1-3 cities.

    • Company has more than half of its retail stores located in tier 3 cities.

    • In the retail segment, maximum retail price (“MRP”) ranges from Rs.75 to Rs.3599.

    65%

    19%

    10%

    6%

    Break up of retail stores region wise

    East South West North

    20%

    13%

    16%

    51%

    Tier-wise Distribution of Retail Stores

    Metros Tier 1 Tier 2 Tier 3

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    • Company’s focus areas for accelerating growth is Maharashtra and Tamil Nadu. Where it will

    enter through flagship COO.

    • Store size ranges from 500 to 1000 Sq. feet.

    • Competitors in this segment are Bata, Liberty and Metro.

    • Khadim has tie ups with Amazon and Flipkart. It could not do a tie up with Myntra because of

    disagreement over revenue share.

    • Company also sells accessories including socks, shoe polishes and brushes, leather belts,

    wallets and laptop bags, hand bags and clutches along with its footwear, in its exclusive retail

    stores. Company’s net revenue from sale of accessories accounted for 6.19% of retail business,

    in fiscal 2017.

    • There was a decrease in foot fall in 2019Q1. Company has appointed Nielson to be on ground

    and understand the reasons for drop in footfalls.

    Distribution

    • Distribution segment mainly comprises of B2B segment.

    • Khadim started tracking distribution business as a separate business vertical since fiscal 2015.

    • Distribution business operates through a wide network of distributors catering to lower and

    middle income consumers in metros and Tier I - Tier III cities, who primarily shop in multi-

    brand-outlets (MBO).

    • Khadim’s distributors are mainly located in East India.

    291

    348 338 357

    455

    20%

    -3%

    6%

    27%

    -5%

    0%

    5%

    10%

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    30%

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    50

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    2014 2015 2016 2017 2018

    Number of distributors

    Number of distributors Year on year change in number of distributors

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