liberty shoes june 14
TRANSCRIPT
![Page 1: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/1.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 1/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
1
Corporate Factsheet
Promoter Background Liberty Shoes Ltd. (LSL)’s business operations are run by three promoter
families (2 Gupta Families & 1 Bansal Family). The promoters have been in the
footwear/leather business for almost 60 years.
Presence Operates out of 6 facilities – 3 in Karnal (Haryana), 1 in Poanta Sahib (Himachal
Pradesh), 1 in Dehradun and 1 in Roorkee (Uttarakhand)
Management depth Number of Promoter directors – 5. Mr. Adesh Kumar Gupta - CEO &
Executive Director; Mr. Adarsh Gupta - Executive Director; Mr. Shammi Bansal -
Executive Director; Mr. Sunil Bansal - Executive Director; Mr. Adeesh Kumar
Gupta - Executive Director
Business LSL was incorporated in September 1986 and is engaged in the business of
manufacturing, branding and selling leather and non‐leather footwear.
Corporate Structure Group Companies: Liberty Enterprise (LE), Liberty Group Marketing Division
(LGMD), and Liberty Footwear Company (LFC), all 100% held by promoters of
LSL. Subsidiary company: Liberty Foot Fashion Middle East FZE, Dubai
(Recently Liberty Retail Revolution a subsidiary was merged with LSL)
Revenue Model (FY14) Domestic (~89% sales), Exports (~11% of sales)
Capacity 6 plants together posses a capacity of ~11mn pairs of footwear per annum on
single shift basis.
Key Clientele Value for money branded premium/semi-premium footwear offerings.
Key Vendors Current distribution structure comprises of ~150 distributors, ~550 exclusive
showrooms and over ~8000 multi‐brand outlets in India. LSL products are also
sold in more than 25 countries like France, Italy, and Germany.
Key Brands Coolers, Fortune, Warrior, Gliders, Force10, Senorita, Windsor, Prefect, Tiptoppand Footfun
Credit Rating Long Term Bank Facilities – ICRA BBB+ ( Triple B Plus)
Short Term Bank Facilities - ICRA A2+ ( A two Plus)
Corporate Bankers HDFC Bank, Corporation Bank, Allahabad Bank, Indusind Bank, HSBC, Royal
Bank of Scotland.
Auditors M/S Pardeep Tayal & Co.
Market Data
Market Cap (Rs. mn) 2.8bn
Shareholding 65% Promoters, 35% Public
52-week High-Low (Rs.)188 (21st April 2014) -
70 (7 th August 2013)
All time High-Low (Rs.)321 (21st September 2005) -
19 (18 th September 2001)
3M Average Volume 301937
Stock Return (%)
Correction from 52WH 12%
Rise from 52WL 137%
F&O NA
FII limit 24%
Stock exchange list BSE-NSE
3M 6M 1Y YTD
37% 96% 88% 10%
Fundamental View
Current Market Price Rs. 166
Recommended entry
priceNA
Target Price NA
![Page 2: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/2.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 2/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
2
Key takeaways from the management interaction
Industry Scenario: The Indian footwear market continues to present lucrative opportunities fuelled by increasing income, higher propensity to
spend, urbanisation and penetration of organised retail. Industry sources predict that the organised footwear market is expected to grow at ~15%
CAGR over the next three years driven by increasing reach, conversion from unorganised market, rising premiumization and increasing per
capita usage. Liberty Shoes Limited (LSL) management too shared this growth optimism and believes their current initiatives - distribution
expansion, product extensions and increasing brand promotions would enable them to take advantage of this opportunity.Increasing Reach: Currently North and South regions contribute to ~3/4th of LSL sales, with majority coming from metro and tier1 cities as Delhi,
Chennai, Gurgaon, Noida, Mumbai, etc. Though management indicated that concentration on North and South would remain high, they also
indicated spreading into tier2/tier 3 cities in West and East India to increase the contribution from these regions. The expansion is set to be a mix
of company owned stores and franchise stores. Increasing reach coupled with expanding into new regions to be a significant growth lever.
Distribution Expansion: LSL’s current revenues are derived from Retail (~47%), Distribution (~26%) and Institutional (~28%) channels. LSL
sells through its 150 distributors, 100 company owned stores, ~450 franchisees and over 8000 multi brand outlets. Management has outlined
aggressive plans of adding ~100 exclusive outlets per year for the next three years taking the total exclusive store count to ~800 in 3 years.
Management has laid out that per store CAPEX is expected to be around Rs.~2.5mn-~4mn and that the expansion is to be funded through
internal accruals and borrowings. Management further noted that majority of expansion would be in high street rather than in shopping malls,
which we believe could assist in saving on rental yields in near term.
Margins improvement to be the key: Higher exposure to crude based commodities, operation inefficiencies and high royalty pay-out to group
companies have resulted in LSL margins being well below its peers. TOC approach and restructuring to be key to margin expansion in near term.
Financial arrangements with group companies remain an overhang: Current financial arrangements with the group companies continue to
hinder investment opportunities considering that they appear to be minority share-holder unfriendly. Though merger of Liberty Retail Revolution
(Subsidiary) seems a step in the right direction, we understand that restructuring of financial arrangements with group companies could lead to
immense value unlocking. Any restructuring which leads to LSL taking ownership of the facilities and brands/sub-brands could lead to significant
margin expansion as franchisee and licence fees become redundant. Though positive rearrangement could lead to better credit ratings and
valuation re-rating, financial considerations paid out for any such restructuring would be a key determinant on the valuations of LSL.
Our View: We believe LSL’s potential value could be unlocked only on achieving critical revenue mass and a minority shareholder friendlybusiness structure. Identifying the humungous growth potential, management has laid out a well-structured distribution expansion plan to
increase revenues, which in turn is expected to lead to operational efficiency based margin expansion. With current arrangements with the group
companies affecting the credit rating and value creation/discovery in the stock, any positive development on this aspect can lead to significant re-
rating of the business. Though there seems to be a long opportunity pathway in the offing, LSL fortunes to be determinant on whether they end
up wearing the right shoe for the right track.
![Page 3: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/3.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 3/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
3
1986• Incorporated as Public Limited Company
1988
•Obtained certificate of commencement of business
1990• 'Force 10', Liberty's first sub-brand, was launched
1991
•Sets up a joint venture in Russia to manufacture shoes in 1991 under thename of M/S Liberty &Go, with M/S Gorky Production & shoes Unit.
1994
•First direct injection soiling machine was installed with a capacity of 50000pairs per annum on single shift basis
1995•Second direct injection soiling machine was installed
2004•Liberty split its manufacturing and retail business
2004•Ventured into high fashion, by tying up with fashion designers
2005
•Liberty unveils new range of footwear, -Liberty Shoes announces a Bonus
in the Ratio of 1:1
2006•-Liberty Shoes joins hand with Pantaloons
2013• Announces merger of retail unit (LRL) with Liberty shoes
Liberty Shoes corporate timeline
Source: Company, Spark Capital
Liberty Shoes Brand Profile
Brand Price Range Type For
CoolersRs.349-
Rs.2999
Slipper, Sandal,
shoesMen
Force10Rs.399-
Rs.2499
Sandals,
ShoesMen and Women
FortuneRs.674-
Rs.3999Shoes Men and kids
GlidersRs.175-
Rs.2999
Sandal, Shoes,
Slippers
Men, Women,
Kids
TIPTOPP Rs.399-Rs.1699
Slippers,Sandals
Women
FootfunRs.175-
Rs.1999
Flipflops,
Sandals, Shoes,Kids and Men
SenoritaRs.699-
Rs.2199
Sandals Ballerina
and SlippersWomen
Warrior Rs.1350-
Rs.1799Shoes Men
PrefectRs.549-
Rs.699Shoes Kids
Windsor Rs.1649-
Rs.2999Shoes Men
Source: Company, Spark Capital
![Page 4: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/4.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 4/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
4
Poanta Sahib (Himachal
Pradesh )
Dehradun (Uttarakhand)
Karnal (Haryana), 3
plants – 1 owned, 2
lease
Liberty Shoes manufacturing locations
Source: Company, Spark Capital
Plant & Production details
6 plants together posses a capacity of 11mn pairs of footwear per annum
on a single shift basis.
Tax benefits available in Dehradun, Ponta Sahib and Roorkee plants until
December 2016
Liberty Shoes had implemented Theory Of Constraints(TOC) initiative to
streamline supply chain and ensure efficient retail inventory system , the
implementation led to
Establishing a central warehouse
Implementation of production priority system
Making retail availability paramount
Production and raw material lead times separated.
Recognising brand success and failure at short notice
Better inventory pipeline
Number of pairs produced in millions
Source: Company, Spark Capital
Roorkee (Uttarakhand)
6.6 6.26.8 6.4 6.4
5.66.7
7.7 7.7 8.3
9.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
N o o f p a
i r s p r o d u c e d ( m n )
![Page 5: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/5.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 5/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
5
Volumes have led the growth in FY14.
Source: Company, Spark Capital
Revenue drivers remain intact
Contributions from Domestic market remain robust
Source: Company, Spark Capital
Men’s variants remain the dominant offering…
Source: Company, Spark Capital
…with higher spread in North and South
Source: Company, Spark Capital
8%
-13%
9%
-8%
9%
19%
2% 9%
33%
4%
8%
12%
-3%
8%
14%
12%9%
34%
-20%
-10%
0%
10%
20%
30%
40%
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Volume Sales growth Value Sales growth
89.8% 90.9%
10.2% 9.1%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY13 FY14
Domest ic Exports
Men, 50%
Women, 30%
Kids, 20%
North & South,75%
West, 20%
East, 5%
![Page 6: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/6.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 6/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
6
Growth levers in place to tap industry opportunity
Drivers of Future Growth
Source: Company, Spark Capital
Enhanced ProductPortfolio
BrandInvestments
RetailExpansion
Realising that retail
venture has to be
matched with brand
awareness, LSL has
invested heavily
behind its brands,
mass appeal media
advertisements and
celebrity
endorsements areexpected to lead to
better traction in
semi-urban areas.
With an enhanced
product portfolio,
volumes to be driven
by popular brands
while premiumization
should lead to better
growth profile andmix.
LSL has outlined that
they would continue to
expand retail networks
to achieve revenue
growth. Given that
majority of their
revenues currently
come in from North and
South India only,
immense opportunity in
terms of expansion into
West and East regions
and distribution into tier
2/tier 3 cities could
further facilitate growth.
Given that LSL portfolio
is largely in mass and
popular ranges, growth
in tier 2/tier 3 cities to
be rapid.
![Page 7: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/7.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 7/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
7
ASSOCHAM study predicts the Indian footwear market to grow by at-
least ~15% CAGR over the next 3 years.
Source: Industry, Spark Capital
Footwear is one of the segment where acceptability for branded
products continues to be on the rise.
Source: Industry, Spark Capital
Indian demographic profile coupled with increasing per capita spend to
be key determinants to growth.
Source: Industry, Spark Capital
Volumes are expected to be a function of increasing expansion while
margins are to be a function of premiumization in urban areas.
Source: Industry, Spark Capital
0
50
100
150
200
250
300
350
400
2008 2009 2010 2011 2012 2013E 2014E 2015E
Domestic Market Size (In bn INR)
40
0%
10%
20%
30%
40%
50%
60%
70%80%
90%
100%
Clothing & Apparel
Footwear Jewellery Eyewear Timewear Food &Grocery
Leisure Consumer Electronics
Organized Unorganized
6162626261
5853
5046
4236
2923
1712
75
0 20 40 60 80
5554
555554
5149
4644
4035
2923
1813
97
020406080
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80+
Urban cities
45%
Tier 2 & Tier 3towns
55%
Potential for organized players in the Indian footwear market remains lucrative as ever…
![Page 8: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/8.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 8/18Private & Confidential
Liberty Shoes – Getting off on the right foot
8
Retail formats continue to contribute to~50% of sales…
Source: Company, Spark Capital
Though revenue growth levers are emerging, efforts to improve cost efficiency to be the key variable to success.
…with larger contribution from franchise based stores
Source: Company, Spark Capital
…which should assist in expansion over the next two years
Source: Company, Spark Capital
Wholesale,25.8%
Exclusivebrand outlets,
29.4%
Company OwnedShowroom,
17.2%
Institutional,27.5%
405455
88
100
-
100
200
300
400
500
600
FY13 FY14
Franchise Stores Company Owned Stores
555
855
100
100
0
100
200
300
400
500
600
700
800
900
FY14E FY15E FY16E FY17E
Number of Stores
![Page 9: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/9.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 9/18Private & Confidential
Liberty Shoes – Getting off on the right foot
9
Agreement to use footwear manufacturing
facilities at Karnal and export sales network for a
period of 2 years until March 31, 2015.(Licence fee paid in FY14: Rs.~11.5mn)
Agreement for use of services of fixed assets at
Karnal facility, registered exclusive trademarks
and domestic sales network for a period of 2years until March 31, 2015.
(Licenc e fee paid in FY14: Rs.~84mn)
Agreement for trademark usage “LIBERTY” and
other trademarks on exclusive basis for 15 years
until March31, 2028.(Licence fee paid in FY14: Rs.~80mn)
LIBERTY ENTERPRISES (LE)
LIBERTY GROUP MARKETING
DIVISION (LGMD)
LIBERTY FOOTWEAR
COMPANY (LFC)
LIBERTY SHOES LIMITED (LSL)
LIBERTY RETAIL
REVOLUTIONS (LRR)LIBERTY FOOT FASHION
(LFF)
LIBERTY GROUP
Into retail, having a chain of ~98 high end
showrooms.(Sales :Rs~800mn, PAT: Rs~4mn)
Dormant middle east marketing
subsidiary (PAT: -1.0mn)
Liberty group intercompany license fee/franchisee fee agreements
Source: Company, Spark Capital
Subsidiary
Group
Companies
![Page 10: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/10.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 10/18Private & Confidential
Liberty Shoes – Getting off on the right foot
10
Key Related party disclosure snapshot
Type of transaction Type Of Relationship Entity/Person Nature2012-13
(Rs.mn)
2011-12
(Rs.mn)
Receiving of service
Subsidiary Liberty Retail Revolutions Limited Shoe upper production charges 2.8 3.0
Entities where key managementpersonnel has significant influence
Geofin investments private limited Rent for office Premises 10.1 9.9
Liberty Footwear Co Rent for office Premises 0.6 0.7
Sanjeev Bansal Charitable Trust Rent for office Premises 0.5 0.5
Medical Facilities for employees 0.9 0.9
Key Management personnelSh.Adesh Kumar Gupta Rent 0.0 0.0
Sh.Adesh Kumar Gupta Rent 0.1 0.1
Sale of Goods
Subsidiary Liberty Retail Revolutions Limited Sale of goods manufactured and deal in by the Company 352.8 346.6
Entities where key management
personnel has significant influenceLiberty Innovative Outfits Limited Sale of goods manufactured and deal in by the Company 23.7 6.4
License AgreementsEntities where key managementpersonnel has significant influence
Liberty enterprises Franchise fee(including Service Tax) 67.4 6.6
Liberty Group Marketing Division Franchise fee(including Service Tax) 78.7 77.2
Liberty Footwear Co License Fee(including Service Tax) 53.1 52.1
Payment of Salary Wages and
other benefits to Employees
Entities where key management
personnel has significant influenceLiberty Group Marketing Division Salary, Wages and other benefits 30.8 56.1
Key Management personnel
Sh. Adesh Kumar Gupta Salary, Wages and other benefits 1.2 1.2
Sh. Sunil Bansal Salary, Wages and other benefits 1.2 1.2
Sh. Shammi Bansal Salary, Wages and other benefits 1.2 1.2
Sh.Adeesh Kumar Gupta Salary, Wages and other benefits 1.2 0.6
Sh.Satish Kumar Goel Salary, Wages and other benefits 1.4 0.9
Relatives of key Management
Personnel
Sh.Raman Bansal Salary, Wages and other benefits 1.1 1.1
Sh.Vivek Bansal Salary, Wages and other benefits 1.1 1.1
Sh.Ayush Bansal Salary, Wages and other benefits 0.2 0.2
Sh.Manan Bansal Salary, Wages and other benefits 0.2 0.2
Sh.Pranav Gupta Salary, Wages and other benefits 0.2 0.1
Sh.Anmol Gupta Salary, Wages and other benefits 0.1 0.0
Source: FY13 Annual Report, Spark Capital
![Page 11: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/11.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 11/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
66.1 66.1 66.1 66.1 66.1 66.1 65.4 65.4 65.4 65.4 65.0 64.9
0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.1
33.8 33.8 33.8 33.8 33.8 33.9 34.6 34.6 34.6 34.5 34.9 35.0
0
10
20
30
40
50
60
70
80
90
100
Jun-11 Sep-11Dec-11Mar-12Jun-12Sep-12Dec-12Mar-13 Jun-13 Sep-13Dec-13Mar-14
Promoters DII Others
Board composition
Source: Company, Spark Capital
11
Promoter holdings have been between ~65-66%
Source: BSE, Spark Capital
Though revenue growth levers are emerging, efforts to improve cost efficiency to be the key variable to success.
…however institutional participation is negligible
Source: BSE, Spark Capital
Liberty shoes Vs Sensex returns
Source: Bloomberg, Spark Capital
Promoters64.9%
DII0.1%
Others35.0%
Category Number of directors
Executive Directors representing Promoters 5
Non-Executive Director 1
Non-Executive Independent Director 6
Total 12
0
100
200
300
400
500
600
Liberty Shoes Sensex
![Page 12: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/12.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 12/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
12
LSL has managed to outgrow its peers convincingly in FY14…
Source: Company, Spark Capital
… margins though continue to be the lowest
Source: Company, Spark Capital
Return ratios under significant pressure due to lower PAT…
Source: Company, Spark Capital
…leading to subdued valuations
Source: Bloomberg, Spark Capital
Peer Group Analysis
53.1% 52.9% 54.1%
46.9%
53.5% 54.5%
40.5%
52.6%47.7%
14.9% 14.9% 15.6%10.9% 10.9% 12.1%
8.6% 8.3% 8.5%
10% 9% 10%4.6% 4.4% 5.4%
2.3% 1.5% 2.7%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
FY12 FY13 FY14 FY12 FY13 FY14 FY12 FY13 FY14
Bata Relaxo Liberty
Gross Margin EBITDA Margin PAT Margin
15.5 18.4 20.7 8.6 10.1 12.1 3.3 3.6 4.8
21.4%18.9%
12.1%
25.0%
16.8%20.0%
11.7%8.6%
34.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
0.0
5.0
10.0
15.0
20.0
25.0
FY12 FY13 FY14 FY12 FY13 FY14 FY12 FY13 FY14
Bata Relaxo Liberty
Y o Y g r o w t h ( % )
R s . b n
Revenue % growth
27%
25%24% 23.2%
20.9%23.7%
7.6%
4.1%
9.6%
27%
25%24%
15.7%
12.5%
17.1%
9.6%8.1%
10.9%
0%
5%
10%
15%
20%
25%
30%
FY12 FY13 FY14 FY12 FY13 FY14 FY12 FY13 FY14
Bata Relaxo Liberty
ROE ROCE
Bata Relaxo Liberty
CMP 1158 370 166
Market Cap (Rs.mn) 74,392 22,192 2,829
EV (Rs.mn) 71,861 23,763 3,584
12M Trailing PE 39.0 33.8 21.4
12M Fwd PE 32.2 26.8 17.7
FY16 EV/EBITDA 15.7 12.1 7.0
![Page 13: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/13.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 13/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
Revenues have increased at~15% CAGR in the past 6 years…
Source: Company, Spark Capital
…EBIDTA margins though way below its historical high
Source: Company, Spark Capital
13
Licence fees and Franchisee fees continue to be a burden…
Source: Company, Spark Capital
…with higher interest cost further declining PAT
Source: Company, Spark Capital
Financials
1.96 2.052.22
2.48 2.412.60
2.973.32
3.62
4.85
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
46.2% 45.0%42.0%
39.4% 39.5% 39.8% 40.5%
52.6%47.7%
15.4% 14.1% 12.4%10.4% 9.4% 8.1% 8.6% 8.3% 8.5%
9.0% 7.7% 6.5%3.1% 3.7% 3.4% 3.3% 1.6% 2.8%
-10%
0%
10%
20%
30%
40%
50%
60%
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Gross Margin EBITDA Margin PAT Margin
163.8 164.2162.3 163.8
169.0
177.3 177.3175.5
7.4%
6.6% 6.7%6.3%
5.7%5.3%
4.9%
3.6%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
150
155
160
165
170
175
180
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
R s . m n
Royalty & Franchisee fees % of sales
184.9 170.2 160.5 75.5 96.7 101.5 110.4 58.0 133.7
9.0%
7.7%
6.5%
3.1%3.7%
3.4% 3.3% 1.6%2.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
0
20
40
60
80
100
120
140
160
180
200
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
PAT PAT Margin
![Page 14: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/14.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 14/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
Debt/equity ratio currently trending at 0.84
Source: Company, Spark Capital
Higher inventory & debtor days leading to inflated working capital cycle
Source: Company, Spark Capital
14
Cash flow from operations have improved in FY14…
Source: Company, Spark Capital
…so has been the return ratios
Source: Company, Spark Capital
Balance sheet ratios
155145
129
113 114 121 118112
10298 100
91
112
85106 107
9695
97 80
88
63 64 64
82
74 71
5640
60
80
100
120
140
160
FY08 FY09 FY10 FY11 FY12 FY13 FY14
Chart Title
Working Capital Days Inventory Days Debtor Days Creditor Days
228
271
154
76
108
269
151
228
97
-35
39
181
-100
-50
0
50
100
150
200
250
300
FY08 FY09 FY10 FY11 FY12 FY13
R s . m n
OCF FCF
13.8%
10.6%12.1% 8.7% 8.3% 7.9%
9.6%8.1%
10.9%
22.6%
17.2%
14.0%
6.4%7.6% 7.4% 7.6%
4.1%
9.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
ROCE ROE
1208.2
1016.9
878.3 924.6 958.1
1149.1 1179.3
1.05
0.83
0.67 0.65 0.64
0.84 0.84
0.00
0.20
0.40
0.60
0.80
1.00
1.20
0
200
400
600
800
1,000
1,200
1,400
FY08 FY09 FY10 FY11 FY12 FY13 FY14
R s . m n
Gross Debt Debt/Equity
![Page 15: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/15.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 15/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
Risks
&
Concerns
Dividend Pay-outPolicy (Declared
dividend of
Rs.~1.5/share inFY13-14 post 7
years of no payout)
Group companieshangover (Current
financialarrangements withgroup companies)
Tax benefits toexpire in Dec
2016. (Tax benefitsavailable atDehradun,
Roorkee, PoantaSahib)
Industry Risk(Any adverse
regulatory changeand increasing
competitiveintensity)
Crude Oil Pricesand Rupee Impact(Higher exposureto crude basedraw materials)
Higher WorkingCapital days andlower return ratioswhen compared to
Bata India andRelaxo Footwear
15
Risks & Concerns
Source: Company, Spark Capital
![Page 16: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/16.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 16/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
Abridged Financial Statements
Rs. mn FY11 FY12 FY13 FY14P FY11 FY12 FY13 FY14P
Profit & Loss Growth Ratios (%)
Revenue 2969 3317 3620 4850 Revenues 14% 12% 9% 34%
EBIDTA 239 285 301 410 EBIDTA -2% 19% 5% 36%
Other Income 13 10 2 3 Normalised PAT 5% 9% -47% 131%
Depreciation 68 74 104 111 Margins (%)
EBIT 184 222 199 302 Gross 39.8% 40.5% 52.6% 47.7%
Interest 82 117 143 160 EBIDTA 8.1% 8.6% 8.3% 8.5%
PBT 101 72 53 140 Normalised PAT 3.4% 3.3% 1.6% 2.8%
Normalised PAT 101 110 58 134 Leverage Ratios (x)
Balance Sheet Debt to Equity 0.7 0.6 0.8 0.8
Net Worth 1416 1493 1367 1408 Current Ratio 2.4 2.3 2.4 2.4
Loan Funds 925 958 1149 1179 Return Ratios (%)
Deffered Tax Liabilities 55 51 51 48 RoCE 7.9% 9.6% 8.1% 10.9%
Sources of Funds 2396 2501 2569 2637 RoE 7.4% 7.6% 4.1% 9.6%
Net Block 863 862 1014 991 Total Asset Turnover (x) 1.3 1.4 1.4 1.9
Capital WIP 11 1 0 0 Per Share
Goodwill 0 0 0 0 EPS (Rs.) 6.0 6.5 3.2 7.8
Investments 396 510 270 212 Dividend (Rs.) - - - 1.5
Total Current Assets 1926 1953 2231 2485 Valuation Metrics
Total Current Liabilities 802 831 946 1050 Current Market Price 166
Net Current Assets 1124 1122 1285 1435 Shares Outstanding (mn) 17 17 17 17
Application of Funds 2396 2501 2569 2637 Market Cap. (Rs. mn) 2,829
Cash Flow Enterprise Value (Rs. mn) 3,181 3,182 3,584 3,773Cash Flow from Operation 76 108 269 14 EV /Sales (x) 1.1 1.0 1.0 0.8
Cash Flow from Investments -97 -69 -184 72 Price/Earnings (x) 27.9 25.6 52.5 21.4
Free Cash Flow -35 39 181 25 Price/Book (x) 2.0 1.9 2.1 2.0
Cash Flow from Financing -3 -120 -60 -187 EV/EBIDTA (x) 13.3 11.1 11.9 9.2
Closing Cash Balance 175 96 124 23 FCF Yield -1.3% 1.4% 6.4% 0.9%
16
![Page 17: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/17.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 17/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
Spark Disclaimer
Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in investment banking, investment advisory and institutional equities. Spark Capital is registeredwith SEBI as a Stock Broker and Category 1 Merchant Banker.
This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This document is
provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should be construed as investment orfinancial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to i n this document.
Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in thisdocument (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. This document is being supplied to you solelyfor your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report isnot directed or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,publication, availability or use would be contrary to law, regulation or which would subject Spark Capital and/or its affiliates to any registration or licensing requirement within such
jurisdiction. The securities described herein may or m ay not be eligible for sale in all jurisdictions or t o a certain category of investors. Persons in whose possession this document may come arerequired to inform themselves of and to observe such applicable restrictions. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal.
Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this document. Spark Capital ,its affiliates, and the employees of Spark Capital and its affiliates may, from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securitiesmentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in thisreport.
This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through an independent analysis by Spark Capital. While wewould endeavour to update the information herein on a reasonable basis, Spark Capital and its affiliates are under no obligation to update the information. Also, there may be regulatory,compliance or other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective directors, employees, agents or representativesshall be responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents or any errors or discrepancies herein or for any decisions oractions taken in reliance on the report or the inability to use or access our service in this report or for any loss or damages whether direct or indirect, incidental, special or consequential includingwithout limitation l oss of revenue or profits that may arise f rom or in connection with the use of or reliance on this report.
Spark Capital and/or its affil iates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, Spark Capital hasincorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:
Absolute Rating Interpretation
Buy Stock expected to provide positive returns of >15% over a 1-year horizon
AddStock expected to provide positive returns of >5% – <15% over a 1-yearhorizon
Reduce Stock expected to provide returns of <5% – -10% over a 1-year horizon
Sell Stock expected to fall >10% over a 1-year horizon
Recommendation History
Date CMP Target price Rating
17
![Page 18: Liberty Shoes June 14](https://reader033.vdocuments.us/reader033/viewer/2022052319/577cc7a01a28aba711a18178/html5/thumbnails/18.jpg)
8/12/2019 Liberty Shoes June 14
http://slidepdf.com/reader/full/liberty-shoes-june-14 18/18
Private & Confidential
Liberty Shoes – Getting off on the right foot
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the researchanalyst’s compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.
Additional Disclaimer for US Institutional Investors
This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under the SecuritiesExchange Act of 1934, as amended) only by Decker & Co, LLC, a broker-dealer registered in the US (registered under Section 15 of Securities Exchange Act of 1934, as amended). Decker & Coaccepts responsibility on the research reports and US Institutional Investors wishing to effect transaction in the securities discussed in the research material may do so through Decker & Co. Allresponsibility for the distribution of this report by Decker & Co, LLC in the US shall be borne by Decker & Co, LLC. All resulting transactions by a US person or entity should be effected througha registered broker-dealer in the US. This report is not directed at you if Spark Capital Advisors (India) Private Limited or Decker & Co, LLC is prohibited or restricted by any legislation orregulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Decker & Co, LLC and Spark Capital Advisors (India) Private Limited arepermitted to provide research material concerning investment to you under relevant legislation and regulations;
Disclosure of interest statement Yes/No
Analyst ownership of the stock No
Group/directors ownership of the stock No
Broking relationship with the company covered No
Investment banking relat ionship with the company covered No
18