Relaxo Footwear’s Rise & Fall | How a 100x Stock Lost Its Shine! | CA Rachana Ranade

Relaxo Footwear: Rise, Correction and Outlook

Stock Performance and Trading Activity

• Relaxo Footwear’s share price rose nearly 100× from its 2011 listing to its November 2021 peak, increasing from approximately ₹14–15 to ₹1,400. It then fell by more than 70% by 2024.
• As of 11 July 2025, the presenter noted that July trading volume had apparently already reached an all-time high, despite most of the month remaining. The BSE surveillance team asked the company about the spike; Relaxo replied that the recent trading-volume movement appeared to be market-driven.
• The video does not identify a stock ticker.

Company Overview

Relaxo manufactures footwear under brands including Sparx, Hawaii and Flite.

The company reported production capacity of 10.5 lakh pairs per day across nine facilities in Haryana, Rajasthan and Uttarakhand. Its distribution network includes roughly 650 distributors and 70,000 retailers and multibrand outlets. Relaxo also exports to about 36 countries, has an overseas office in Dubai, and sells through online platforms.

Why the Stock Rallied

The presenter uses Relaxo as a case study in P/E rerating—when investors become willing to pay a higher valuation multiple for a company.

The rally was supported by expectations that:

• India’s growing middle class and rural consumption would drive footwear demand.
• Consumers would shift from unbranded to branded footwear.
• Premiumization would lead customers to trade up to higher-priced products.
• Capital expenditure and increased manufacturing capacity would support higher sales.

The P/E reportedly rose from about 11× in 2011 to around 148× at the 2021 peak.

Factors Behind the Decline

The video highlights five main pressures:

1. Weaker-than-expected demand and sales growth: Earlier annual sales growth included double-digit rates—roughly 20%, 22%, 15%, 19% and 18% in the periods shown. Growth slowed to 5% and then -2% around the COVID period. After a recovery in 2022, the figures shown were 4%, 4% and -4%. The presenter says post-COVID rural demand and discretionary spending weakened.
2. Premiumization challenges: The presenter compares a Sparx product priced at ₹1,249 with a Hush Puppies sneaker priced at ₹1,225, arguing that a competing brand may offer greater perceived prestige at a similar price.
3. Higher GST: In 2022, GST on footwear priced below ₹1,000 reportedly rose from 5% to 12%; footwear above ₹1,000 was subject to 18%. The presenter cautions that price-sensitive consumers may buy less often, repair footwear instead, or switch to unbranded products.
4. Higher input costs: Rising raw-material costs, including rubber and plastics, pressured operating profitability. The video says rubber prices increased from October 2022 to September 2024.
5. Lower capacity utilization and weaker returns: Capacity utilization fell from 70.7% in 2020 to roughly 48%, 47%, 46%, 50% and 46.45% in the subsequent years shown. With substantial fixed costs, underused capacity can weaken operating leverage.

The financial indicators cited also deteriorated:

• Operating profit margin: Fell from about 21% to 16%, then 12%, before recovering to around 14%.
• Net profit margin: Declined from approximately 12.3% in 2021 to figures around 8%, 5%, 6% and 6.1%.
• ROCE: Described as falling from roughly 23.74% to around 11.44%, 13% and 11.1%.
• ROE: Declined from about 18% to 8.33%, then 10.02% and 8.31%.
• Valuation: Despite the share-price correction, the P/E was still about 73×, compared with a cited median P/E of 44×.

Analytical Framework and Management Outlook

The case study’s framework is to examine whether the assumptions behind a growth story are reflected in business results:

• Identify the growth narrative and its supporting assumptions, such as demand growth, premiumization and expansion.
• Check whether those expectations translate into sales growth and an improved product mix.
• Assess capital expenditure alongside capacity utilization and sales; added capacity can hurt returns if demand does not keep pace.
• Track input costs, margins, profitability and returns on capital.
• Compare the current valuation multiple with its history and the company’s performance, rather than assuming a past rerating will continue.

Management’s initiatives, as presented in the video, include:

• Targeting 100 basis points (1 percentage point) of margin expansion through premiumization and cost efficiencies.
• Using the Relaxo Parivar app to connect directly with retailers. The company said more than 60,000 retailers were buying directly in bulk and that the app covered about 50% of Relaxo sales.
• Focusing on product development, tailoring the e-commerce range to consumer preferences, and partnering with major quick-commerce platforms to support sales.

These are management’s stated plans, not guaranteed outcomes. The video does not make a buy or sell recommendation.

Assets, Sectors and Instruments Mentioned

• Company/stock: Relaxo Footwear Ltd.
• Brands and competitors: Sparx, Hawaii, Flite, Bata and Hush Puppies.
• Sector: Footwear and consumer discretionary.
• Inputs: Rubber and plastics.
• Other relevant factors: GST, capital expenditure, valuation multiples and trading volume.

Disclosures and Cautions

• The presenter says she does not provide stock calls or advisory services and offers educational content only.
• Viewers are warned that social-media offers promising extraordinary returns through stock tips may be fraudulent.
• The video’s analysis draws on publicly available company information and should not be treated as a personal investment recommendation.

Presenter and sources: CA Rachana Ranade. Sources referenced in the video include Relaxo’s annual reports, management presentations and earnings calls, Screener, BSE surveillance correspondence, and an Amazon product listing.