Liberty Shoes on Monday said the Goods and Services Tax (GST) rate cut on footwear priced under Rs 1,000 is a good news for the industry.
In an interview with CNBC-TV18, Adesh Gupta, chief executive officer, said that 20 percent of the revenue of the company is coming from footwear priced between Rs 500 and Rs 1,000.
Watch the full interview here.
Gupta said after rate cut, the volume will grow automatically and footwear priced between Rs 500 and Rs 1,000, should grow.
Edited excerpts: The threshold for the five percent slab has now been increased from Rs 500 per pair to Rs 1,000 per pair. Just explain to us what proportion of your revenues comes from this sub Rs 500 category. Now how much of your revenue comes from Rs 500-1,000 and what will the impact of this Goods and Services Tax (GST) cut be in terms of demand and volume growth?
Let me express my sincere thanks to the government, the finance minister and the GST Council for addressing this long standing issue of the GST slab rates, which has been changed from Rs 500 to Rs 1,000 now. The most important fact is that this industry or this sector is low impact on revenue, but high impact on jobs and growth per se. From Liberty perspective, what we see in the particular segment between Rs 500 and Rs 1,000 now, where the GST slab has been reduced or GST rate has been reduced from 18 percent to 5 percent will be a great significance for the industry and also for Liberty in particular.
We are seeing that there is almost about 20 percent of the revenue is coming from this particular segment between Rs 500 to Rs 1,000 and going forward, we believe this will spur the demand in the sector as well as also for the organised players, because they have been competing with unorganised players in the past, where the GST rate of 18 percent was a dampener and also the price got increased in the past. So I see that, going forward there will be volume led growth and also it will be a boon for the sector, particularly between Rs 500-1,000 price points.
You say that below Rs 1,000 the total earnings for your company, 20 percent comes from these kinds of shoes, what do you expect will be the growth in this category? Do you expect it to be grow much better because you will take unbranded market share as well?
Let me put it this way. It has come at a time when we have a monsoon season and going forward, we are getting into the peak season, which is the festive season. As we were competing with the unorganised player, so we believe that there should be growth in our volume, because we were competing on a different scale in terms of the taxation. I believe that in this particular price point, we should see some traction from the customers, who will move from unorganised players to organised players, because they were not paying taxes or they were paying less taxes, so it will create a huge impact on the organised players.
We are looking for some number, in FY18 your growth was 30 percent. This year how much can you expect overall?
We are looking for at least double digit growth in this financial year and as we are moving into the festive season, I believe this rate cut would also impact significantly improving the topline as well as the bottom line of the company. Surely, it will be double digit growth.
What about on the margins what would you expect?
Since there is a tax reduction to the level of 18 to 5 percent, so automatically we will become more competitive and also at the same time, I see some bottom line improvement as well parallelly. While the volume will grow automatically, the bottom line from this particular price point and in general should grow.
There are three verticals of the company. One is the domestic segment, other is the exclusive segment and the export segment. In export also, we have seen there is a lot of traction now, because of the oil prices getting higher, there is a spur in the demand in the let us say, oil dominating countries like middle-east and Gulf. But in the Indian market in general, we see there is a going to be volume led growth and lot of institution also are looking at Liberty. Even in a B2G segment, we expects lot growth. In general, we should grow between 12-15 percent going forward.
When you say double digit are you referring to volume or revenue and will it be like 10 percent or 15 percent?