Excise duty cut boon for footwear industry: Liberty Shoes

Finance Minster Arun Jaitley in his maiden full-year Budget Saturday proposed to cut excise duty on leather footwear with retail price above Rs 1000 to 6 percent.  Hailing the move, Adesh Gupta, CEO,  Liberty Shoes  said the excise duty cut will be a boon for the footwear industry. According to him, the cut will increase manufacturing competitiveness and will aid company’s bottomline. Around 33 percent of sales for Liberty Shoes comes from leather footwear above Rs 1000, added Gupta. Below is verbatim transcript of the interview:

Q: How much of Liberty Shoes’ sales come in from footwear above Rs 1,000 and because of the cut in the excise duty how will it benefit you?
A: I think ‘Acche Din’ has come for the footwear industry. In the last Budget the finance minister reduced the duty up to Rs 1,000 from 12 percent to 6 percent and in the current Budget we are happy and excited that they have reduced the excise duty from 12 percent to 6 percent for the shoes above Rs 1,000 made out of leather. This is a boon for the footwear industry because this government has recognised that this is a thrust and priority sector because in ‘Make in India’ they recognised that this industry can create almost 2.5 million jobs in the next five years and hence these concessions are step towards improving the manufacturing competitiveness. As far as Liberty is concerned, surely Liberty has benefited from this reduction in excise duty because 33 percent of the revenue of footwear which is made out of leather particularly from MRP above Rs 1,000, which is coming from our sales in this area. There is a huge saving in terms of excise duty and surely it will boost demand as we move forward because our shoes will become cheaper and if not then surely it will add to the bottomline of the company.

Q: How would that benefit you in terms of your total volumes and would there be any price cut that you would pass on to your consumers?
A: Around 33 percent of the revenue which the company is getting from the topline accounts for leather footwear in the category above Rs 1,000 MRP, surely it will bring lot of competitiveness to us in terms of our competition because there are lot of unorganised manufacturers in the country, about 80 percent, so there will be a competitive edge vis-à-vis the unorganised sector which are not paying any excise duty or any other taxes and such cuts will boost demand for branded products. Liberty will be one of the biggest beneficiaries because the perception of the consumer is for leather footwear which comes from the house of Liberty is very good. Therefore, we believe that going forward it will not only boost our volume but also the competitive edge we are talking about, will also add a lot of value to the bottomline. We have estimated that almost 20 percent benefit can come to the bottomline of the company if entire benefit is not passed on to the consumer.

Q: In the last Budget the excise duty for shoes between Rs 500 to Rs 1000 range was cut and since then and now have you seen any dramatic increase in demand in that range?
A: You also have to look at the state of the economy. If we are able to grow by 10 percent; last year we almost grew by 33 percent. This year we are forecasting between 10 percent and 15 percent and in the current economic scenario if you are able to grow with that kind of demand, surely it is going to be positive for us and what we have seen so far in the last 11 months, our volumes are almost similar as compared to 12 months of the last year which means whatever numbers we will sell this year, this will be an additional demand for us. Therefore, we believe that the positive of the reduction in excise duty as well as the brand strength which is going to come, surely it will benefit in terms of volumes and value going forward in the next year.

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