Leading footwear company Khadim India Ltd (KIL) is expecting to complete demerger of its distribution business by September this year and hoping that its margins expand by 100-200 basis points by FY ’26, an official said on Monday.
According to him, this calculated decision is expected to provide significant value for its primary retail company, which consists of about 848 locations operating under the Khadim brand and generates close to 67 per cent of total revenue.
“We are already in the process of demerger. Now, it is pending before the stock exchanges and then it will be placed before NCLT for its approval. We expect that the process will be completed by September. The demerger will be effected after the approvals are in place,” Khadim’s Chief Financial Officer Indrajit Chaudhuri told PTI in an interview.
KIL had previously declared its intention to split its production and distribution operations into KSR Footwear Ltd (KFL) in an effort to increase operational efficiency and market focus. Chaudhuri predicted that in FY ’25–26, Khadim India’s first full year of operation, the company’s EBITDA margin would significantly improve following the demerger, perhaps by 100–200 basis points (bps).
“Now the EBITDA margin in retail is 17 per cent and after demerger, we will be able to put greater focus, which will be reflected in the improvement of margins. We expect the retail business, which is currently at Rs. 500 crore, to surpass Rs. 600 crore by 2025-26,” he said.
Chaudhuri underscored that the aims of the two enterprises are not compatible and cannot be suitably handled by one organisation. The distribution industry is under pressure as a result of the January 2022 GST increase from 5 per cent to 12 per cent on footwear with an MRP under Rs. 1,000.
This enterprise, which has an extensive network of 732 distributors, primarily caters to middle-class and lower-class customers through its multi-brand stores throughout India. 96 per cent of its products are made in-house, and it specialised in offering branded, reasonably priced footwear in Tier-1 to Tier-3 cities, making up 33 per cent of its total turnover.
The retail business relies on Khadim’s outsourcing division to meet the dynamic demands of the market.
