Indian footwear exports have high dependence on European markets: ICRA Research

Indian footwear exports have high dependence on European markets, and have been adversely affected in the recent past due to weak demand, say ICRA Research.

Footwear exports from India have grown at a CAGR of 14% in dollar terms during the five year period ending March 2015 primarily due to the rise in average selling price or ASP, and some increase in volumes.

The ASP for overall footwear exports from India is around $13 per pair, nearly three times more than $4.5 per pair for Chinese exports and even higher than $8.35 per pair for global exports, mainly because of the differences in product profile.

"Region concentration risks are high for the Indian footwear sector since it derives almost 75% of its revenues from the European continent. Footwear exports from India largely cater to their lower and middle income population for whom footwear is a necessity product rather than a luxury product. During FY14 and 1H FY15, Indian footwear export volumes witnessed a healthy rise backed by increase in orders from Europe and increased work outsourcing to countries other than China by the developed nations, especially USA," said the ICRA report adding that interactions with the management of leading footwear export companies suggest that there has been an evident increase in exports to USA, though the footwear demand from the European continent has weakened in the recent quarters which is a cause of concern.

The order book of such companies has witnessed a contraction by nearly 25% in the past year. Further, their profitability has also been affected in FY15 due to adverse foreign currency movements, under absorption of fixed expenses and increase in raw material prices which could not be entirely passed on to clients.

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