A Visit To the Relaxo Bahadurgarh Unit

FMG 19C 191124

Date: 20/10/10
A Visit To the Relaxo Bahadurgarh Unit

Table of Contents
INTRODUCTION.....................................................................................................................................2
About The Industry............................................................................................................................2
Indian Footwear Industry..............................................................................................................2
Brief history of the company.........................................................................................................3
Product Mix at Relaxo........................................................................................................................4
FOCUS AND PHILOSOPHY......................................................................................................................5
Vision & Mission................................................................................................................................5
Core Values........................................................................................................................................5
Manufacturing Units of Relaxo..........................................................................................................6
Key Findings.......................................................................................................................................6
Distribution Channel Of Relaxo..........................................................................................................7
LEARNINGS FROM THE VISIT.................................................................................................................8
Operations Management..................................................................................................................8
Financial Management......................................................................................................................8
Corporate Governance At Relaxo..................................................................................................8
Marketing Management....................................................................................................................9
Human Resource Management.......................................................................................................10
Suggestions For Improvement.........................................................................................................10

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A Visit To the Relaxo Bahadurgarh Unit

INTRODUCTION
About The Industry
Indian Footwear Industry
 The Indian market for footwear includes all producers of non-cleated, rubber and
plastic footwear designed in style or for use. The industry is a collection of smaller,
segmented, yet often overlapping markets, defined by both the price and the purpose
of the shoes.
 For instance, there are mini-markets for shoes designed for each of many sports and
other purposes: basketball, running, walking, tennis, and casual wear. The greatest
overlap between these categories is between performance shoes and casual wear.
Therefore, there is some degree of overlap between most segments. The industry is
dominated by a few large firms, while the majority of other players have less than 5%
market share.
 Reputed global brands like Florsheim, Nunn Bush, Stacy Adams, Gabor, Clarks,
Nike, Reebok, Ecco, Deichmann, Elefanten, St Michaels, Hasley, Salamander and
Colehaan are manufactured under license in India. Besides, many global retail chains
seeking quality products at competitive prices are actively sourcing footwear from
India.
 While leather shoes and uppers are produced in medium to large-scale units, the
sandals and chappals are produced in the household and cottage sector. The industry
is poised for adopting the modern and state-of-the-art technology to suit the exacting
international requirements and standards. India produces more of gent’s footwear
while the world’s major production is in ladies footwear. In the case of chapels and
sandals, use of non-leather material is prevalent in the domestic market.
 Leather footwear exported from India are dress shoes, casuals, moccasins, sport
shoes, horrachies, sandals, ballerinas, boots. Non-leather footwear exported from
India are Shoes, Sandals and Chappals made of rubber, plastic, P.V.C. and other
materials.
 With changing lifestyles and increasing affluence, domestic demand for footwear is
projected to grow at a faster rate than has been seen. There are already many new
domestic brands of footwear and many foreign brands such as Nike, Adidas, Puma,
Reebok, Florsheim, Rockport, etc. have also been able to enter the market.

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A Visit To the Relaxo Bahadurgarh Unit

 The footwear sector has matured from the level of manual footwear manufacturing
methods to automated footwear manufacturing systems. Many units are equipped with
In-house Design Studios incorporating state-of-the-art CAD systems having 3D Shoe
Design packages that are intuitive and easy to use. Many Indian footwear factories
have also acquired the ISO 9000, ISO 14000 as well as the SA 8000 certifications.
Excellent facilities for Physical and Chemical testing exist with the laboratories
having tie-ups with leading international agencies like SATRA, UK and PFI,
Germany.
 Strength of India in the footwear sector originates from its command on reliable
supply of resources in the form of raw hides and skins, quality finished leather, large
installed capacities for production of finished leather & footwear, large human capital
with expertise and technology base, skilled manpower and relatively low cost labour,
proven strength to produce footwear for global brand leaders and acquired technology
competence, particularly for mid and high priced footwear segments. Resource
strength of India in the form of materials and skilled manpower is a comparative
advantage for the country.

Brief history of the company

 Relaxo footwear began as a small enterprise in the year 1976 and was officially
incorporated in 1984 and further went into public listing in 1995. According to a 2008
Business Survey, it has now emerged as the second largest footwear producer in
India.
 The company commenced its journey with the manufacture of Hawaii chappals,
however it has now grown into a large-scale entrepreneurship catering to the basic
needs of the quintessential Indian citizen.
 From a modest sale figure of Rs. 1 million in 1977 to more than Rs. 5000 million last
year; the company has experienced a record-breaking growth since inception. Today,
the company manufactures over 3 lakh pairs of footwear per day, which
approximately adds up to over 10 million pairs per year. Each pair is given thorough
attention by the dedicated and skilled employees working at the 10 state-of-the-art
manufacturing units in Northern India. Thus, it is no small wonder that the annual
turnover has multiplied 2.4 times in the last 3 years from Rs. 305 crore in 2007-08 to
a whopping Rs. 550 crore in 2009-10.

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A Visit To the Relaxo Bahadurgarh Unit

 With over 30 years of experience and 100 million satisfied customers, Relaxo keenly
looks forward to achieving an estimated annual turnover of Rs. 1000 crore by the year
2012.

Product Mix at Relaxo

The product mix of Relaxo consists of 8 brands:

Hawai Flite
Sparx Schoolmate
Elena Casualz
Mary Jane Boston

7. RFL VII Bahadurgarh Canvas

8. Nu Wave Shoes Delhi Schoolmate, Casualz
9. Patel Oil Mills Delhi Canvas, Bahamas,
Sparx Fabricated
Hawaii
10. Marvel Polymers Delhi Sparx Shoes &
Sandals

FOCUS AND PHILOSOPHY

Vision & Mission
Relaxo Footwear was conceptualized with a lot of hope and hard work by an outstanding
pilot team of brilliant Indians, headed by the enterprising Dua family. Likewise, the
company’s vision and mission were as powerful as its personality.

Vision: Achieving an annual turnover of Rs 1000 crore by the end of 2012.

Mission: Ensuring customer satisfaction in keeping with the company’s motto of "Quality
Par Excellence".

Core Values
The Core Values that Relaxo lives by are exclusive in their overpowering simplicity and

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absolute effectiveness. They are:

1.Corporate Citizenship
2. Honesty
3. Transparency
4. Employee Satisfaction
5. Customer Orientation
6. Team Orientation

Corporate Objectives: Our Corporate Objectives provide a single-minded focus for every
member of the Relaxo family to aspire to. They are:

1. Developing human assets through effective training

2. Product innovation through design and development
3. Meet & exceed customer requirement (both internal & external)
4. Increased customer satisfaction
5. Quality improvement through control of rejection
6. Optimum utilization of resources
7. Waste reduction at all stages
8. To explore national and international markets
9. ISO 9000:2000 compliance

Manufacturing Units of Relaxo

Across the years since its inception, Relaxo has steadily established its production facilities
across the length and breadth of Northern India. Each state-of-the-art unit is equipped with
futuristic infrastructure powered by cutting-edge technology and progressive machinery. At
present, there are 10 actively functioning facilities at the following locations:

S No. Factory Location Products

Manufactured
1. RFL I Bahadurgarh Hawaii, Spark
Hawaii
2. RFL II Bahadurgarh Hawaii
3. RFL III Bhiwadi Hawaii
4. RFL IV Bahadurgarh Flite
5. RFL V Haridwar Sparx Shoes &
Sandals
6. RFL VI & VI B Bahadurgarh Flite, Schoolmate,

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Casualz, Sparx DIP

Key Findings
- The Indian footwear retail market is expected to grow at a CAGR of over 20% for the
period spanning from 2008 to 2011.

- Footwear is expected to comprise about 60% of the total leather exports by 2011 from over
38% in 2006-07.

- Presently, the Indian footwear market is dominated by Men’s footwear market that accounts
for nearly 58% of the total Indian footwear retail market.

- By products, the Indian footwear market is dominated by casual footwear market that makes
up for nearly two-third of the total footwear retail market.

- As footwear retailing in India remain focused on men’s shoes, there exists a plethora of
opportunities in the exclusive ladies’ and kids’ footwear segment with no organized retailing
chain having a national presence in either of these categories.

- The Indian footwear market scores over other footwear markets as it gives benefits like low
cost of production, abundant raw material, and has huge consumption market.

- The footwear component industry also has enormous opportunity for growth to cater to
increasing production of footwear of various types, both for export and domestic market.

In a Nutshell:
There are nearly 4000 units engaged in manufacturing footwear in India. The industry is
dominated by small scale units with the total production of 55%. The total turnover of the
footwear industry including leather and non-leather footwear is estimated at Rs.8500-9500
crore (Euro 551.3-1723.1 Million) including Rs.1200-1400 crore (Euro 217.6-253.9 Million)
in the household segment.
India's share in global leather footwear imports is around 1.4% Major Competitors in the
export market for leather footwear are China (14%), Spain (6%) and Italy (21%).

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The footwear industry exist both in the traditional and modern sector. While the traditional
sector is spread throughout the country with pockets of concentration catering largely to the
domestic market, the modern sector is largely confined to select centres like Chennai, Ambur,
Ranipet, Agra, Kanpur and Delhi with most of their production for export.

Assembly line production is organized, and about 90% of the workforces in the mechanized
sector in South India consist of women. In fact, this sector has opened up plenty of
employment opportunities for women who have no previous experience. They are trained to
perform a particular function in the factory itself.

Distribution Channel Of Relaxo

As such Relaxo doesn’t have a long distribution channel. Our findings from the industrial
visit are:
The production unit manufactures the footwear and sends them directly to the
franchises.
The franchises then have the option to either sell the goods from their own franchise
store or act as distributors for the secondary market.

LEARNINGS FROM THE VISIT

Operations Management

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A Visit To the Relaxo Bahadurgarh Unit

Financial Management

Corporate Governance At Relaxo

Corporate Governance has occupied pivotal position at Relaxo Footwears Limited since
inception. The business has, since then, been conducted in the most transparent and ethical
manner. All the necessary steps have been taken, with changing socio-economic scenario, to
ensure that the conduct of business is as per the policies of the Management namely
“Honesty, Transparency and Ethical Behaviour”. The Company’s Policies and Practices are
aimed at efficient conduct of business and in sincerely and effectively meeting its obligations
towards its stakeholders through an effective and professional Board of Directors, complete
and timely dissemination of information through timely disclosures and maximization of
shareholders’ wealth.
The company has also formed few committees which look after its financial matters and
decisions:
Audit Committee: The Audit Committee is empowered, pursuant to the term of
reference to :

Investigate any activity within its terms of reference and to seek any information it
requires from any employee.

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Obtain legal or other independent professional advice and to secure the attendance
of outsiders with relevant experience and expertise, which is considered necessary.
Remuneration Committee: The remuneration policy of the Company is directed
towards rewarding performance, based on periodic review of performance and
achievements and is primarily based on the following criteria:
Performance of the Company, its divisions and units.

Track record, potential, personal attitude & performance of individual manager and
external competitive environment.
The remuneration policy of the Company is in line with the Industry’s practice. Objective of
the remuneration Committee is to motivate employees to excel in their performance,
recognize their contribution and retain talent in the organization.

Marketing Management
Though Relaxo has not done much in terms of branding and advertising, but it has tried to
capture as much as possible of the small and mid-size segments in India by providing a
diversified range of products. Relaxo has mentioned in its annual report that the company has
increased its production capacity as well as the number of retail outlets.

Human Resource Management

The Company during the year organised training and development programmes to boost up
the morale of employees, maintain work life balance and to create a feeling of team-work to
develop capabilities to enhance its leadership in the talent domain. Areas for focus have been
leadership development, sales and quality of services. The Industrial Relations in all the units
of the Company continued to be cordial during the year under review.

Suggestions For Improvement

Since its inception Relaxo has stuck to the low and mid-segment market, however the
need of the day requires it to diversify and cater the high end segment as well since
there are very few Indian brands in that segment and there is very vast scope for
Relaxo.

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A Visit To the Relaxo Bahadurgarh Unit

Relaxo for long has not done much of branding and advertising, so one thing that it
can do is to re-brand itself and present to the customer a new and refreshing image of
itself.
Investment in technology is also required at Relaxo since still after 34 years of
inception there is a lot of manual work going on. Investing in technology will prove as
a great future prospect for the company.

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