!

India Footwear Update!

December 2013
N Mohan

December 2013
Contents!
1.  Overview of Indian Economy

2.  Status of Indian Footwear & Leather Industry

3.  History of The Tata Group & Tata International

4.  Tata International: Current Business Update

5.  Appendix
Indian Economy!
Overview"
 01
Overview!
!
Domestic economic activities have been weak due to internal challenges that have
compromised the economy’s ability to grow. India’s economic performance has been
weaker than expected due to:

•  High inflation
•  Rising fiscal and trade deficits; infrastructural deficits
•  Depreciating currency
•  Cost of production due to high cost of imported raw materials
•  Tax structures, etc..

Sector specific growth remained modest in the first quarter of the fiscal year:

•  Industrial production declined by 4.5%

•  Mining growth declined by 4.6%
•  Manufacturing declined by 1.2%
•  Electricity production grew by 3.5%

Exports are forecasted to benefit from a weaker currency.

Source: Deloitte
 02
Exchange Rates
10 year Forecasts: Currencies vs. US dollar

110.0

100.0 Japan (JPY/US$)

90.0

80.0
Currency vs. US$

70.0
India (INR/US$)
60.0

50.0

40.0 Russia (RUB/US$)

30.0

20.0

10.0 China (CNY/US$)

.0 Brazil (BRL/US$)
2013 2014 f 2015 f 2016 f 2017 f 2018 f 2019 f 2020 f 2021 f 2022 f 2023 f

Source: Business Monitor International - forecasts

 03
GDP: Real GDP growth, % change y-o-y
10 year Forecasts: 2013-2023
8

7 India

6
China

5
% change

Brazil
4

3 Russia
US
2 UK

Japan
1

0
2013 2014 f 2015 f 2016 f 2017 f 2018 f 2019 f 2020 f 2021 f 2022 f 2023 f

Source: Business Monitor International - forecasts

Status Update:!
Indian Leather "
&"
Footwear Industry"
!
 04
Indian Footwear Market Overview!
!
2 largest global producer of footwear after China;
nd

3rd largest market, worth US$ 3.94 billion

13% of global footwear production of 16 billion pairs
India produces 2065 million pairs of different categories

Leather footwear - 909 million pairs

Non-leather footwear - 1056 million pairs
Leather shoe uppers - 100 million pairs

India exports about 115 million pairs

95% of production goes to meet India’s domestic demand
1.10 million are engaged in the footwear manufacturing industry 

Source: Business Monitor International – forecasts

 05
India Leather Hubs

JALANDHAR
KARNAL
LUDHIANA
FARIDABAD
SONEPAT
AGRA
DELHI
KANPUR

KOLKATA

MUMBAI
PUNE

CHENNAI
RANIPET
AMBUR
CACICUT
ERNAKULAM

Source: Council for Leather Exports; Government of India

 Indian Footwear Market will be worth US$ 6.89 billion by 2015 06

Organized Unorganized
80% 95%

Global Indian
Footwear Footwear Unorganized
Market size US$ 181.9 b US$ 3.94 b 20%
Organized
5%
CAGR 5% 15%
Globally India

Premium
Non-
Sports
Leather
Premium 7%
Leather 3%
Children
7%
29%
Mens Mass
Ladies 58% Casuals
22%
13% 61%

Volume share in footwear Segments in Footwear

Companies Targeting Consumers 07
Based on Income Per Annum

PUMA
NIKE RICH
ADIDAS
UPPER
ACTION, LIBERTY, NIKE, ADIDAS MIDDLE
CLASS

LOWER
BATA, ACTION, LIBERTY, NIKE,
ADIDAS, RELAXO MIDDLE
CLASS

LOWER
BATA, ACTION, RELAXO INCOME
GROUP
 08
Indian Retail Sector!
Market size INR 13.3 Trillion
Leisure, 1.20%
Outside Entertainment
Food 3.40%
5%

Clothing & Fashion

Accessories
9.90%

Jewellery
5.20%
Watches, 0.30%
Footwear, 1.20%
Food & Grocery, Pharma Health & Beauty,
59.90% 3.70% 0.30%

Consumer Durables
4.30%
Furnishings
3.40%
Mobiles 2%
 09
Organized Retail Sector!
Market size INR 0.78 Trillion
Out-of-Home
Food, 7.3%
Leisure, 2.8%
Food &
Grocery, Entertainment
3.1%
11.5%
Furnishings
6.4% Bata, Liberty, Small cottage
Mobiles Adidas, Metro industry based
3.4% manufacturers

Consumer Increase in C o n s u m e r
Durables, 9.1% Clothing &
Fashion consumer spending, behav iour
Accessories, modern lifestyle shifting
Pharma 38.1%
2.0% Organized Unorganized
Footwear Sector Sector
9.9%
Health &
Beauty
0.8% CONSUMER
BEHAVIOUR
Watches
2.7% Jewellery
2.9%
 10
India’s Footwear!
Export Growth
2500

2077.27
2000
Value in Million $

1500

1000
655.35
443.85
500
119.72

0
1981-82 1991-92 2001-02 2011-12
 11
India Footwear !
Growth Drivers
CONSUMPTION PRODUCTION SOURCING
•  Increasing  disposable   •  Low-­‐cost  produc8on   •  Major  supplier  of  
income  and  number  of   •  Abundance  of  raw   medium  and  low  
middleclass  households   material   priced  footwear.    
•  Growing  fashion   •  Skilled  manpower   •  Several  footwear  
consciousness   •  Government  ini8a8ves   majors  source  parts  of  
•  Increasing  number  of   their  produc8on  and  
boos8ng  the  industry  
working  women   purchase  from  India.    
•  High  export  poten8al  
•  Increasing  penetra8on   •  Global  brands  such  as  
in  Tier  II  and  Tier  III   Florsheim,  Bush,  
ci8es   Gabor,  Clarks,  
•  Online  availability   Reebok,  Deichmann,  
Elefanten,  
Salamander,  etc..  are  
manufactured  under  
license  in  India.  
 12
Brands Sourced from India
Tata Group !
&!
Tata International Ltd.!
!
 13
TATA
Group!
Leadership with Trust

$ Revenues of US$ 100.09 billion

with 58% from overseas business
11th among the world's most reputable
companies - Reputation Institute USA, 2009

450,000 employees across 100 39th among the world's top 500 most
companies valuable brands - Brand Finance UK, 2013

Two-thirds of the equity of Tata Sons,

7 business sectors, Presence in the promoter holding company, held by
80 countries philanthropic trusts
 14
Company
Profile – Tata International!
Delivering value to all stakeholders

Incorporated Worldwide network for trading and

in 1962 distribution

Premier Trading arm 7500+ employees worldwide

of the Tata Group

Operates across 5 business verticals Drives customer focus and strategic

in leather and leather products, partnerships
metals trading, minerals trading,
distribution, agri trading
 15
Global
Presence!
39+ Countries
Emerging markets focused

Offices
India, China, UK, Thailand,
Myanmar, Portugal, Switzerland,
Ethiopia, Vietnam, Poland, USA,
Japan, South Korea, Italy,
Netherlands, Indonesia, Spain,
Russia, Taiwan

Subsidiaries
Hong Kong, UAE, Singapore,
Brazil, Cambodia, South Africa,
Kenya, Uganda, Zambia, Ghana,
Nigeria, Senegal, Mozambique,
Tanzania, Malawi, Zimbabwe,
Côte D' Ivories, Namibia,
Mauritius
Madagascar
 16
Core Businesses of Tata International Ltd. !
LEATHER &
METALS MINERALS
LEATHER DISTRIBUTION AGRI TRADE
TRADING TRADING
PRODUCTS

Existing Focus on Increases

Growth in market New area to
assets, steel and be explored
demand of value
expertise metallics across
imported addition
and select parts
coal into through
investments Opportunity of the value
India reach
to build a chain
India - a globally
focus relevant Ability to
sourcing scale Growth in offer Increasing
geography steel multiple emerging
for global Increasing production products / market
brands demand in in India develop demand
focus multiple
markets businesses
Only Focus on
automotive Good Africa and
leather Increase of sources in Focus ASEAN as
plant in profitability focus geographies source
India through geographies to invest
value and grow
addition India food
Large imports
sourcing Build multi
opportunity brand
in Africa distribution
platform
 17
At a glance
Financials!
Worldwide revenue of US$ 1.2 billion for FY 13
Consolidated Sales Breakup Vertical-wise Turnover (USD Million)
450 408
15% 15% 400
349
350
292
300
243
250
188 178
200 170 164
150
93
100
29%
34% 50 25

-
Leather & Distribution Minerals Metals Strategic
Leather Investments
8% Products

Leather & Leather Products 2011-12

Distribution 2012-13 (Prov)
Minerals
Metals
Strategic investments
 18
LEATHER & LEATHER
PRODUCTS

JV / Partnership with Global cos

FINISHED LEATHER WOLVERIN

FOOTWEAR
LEATHER GARMENTS E

SHOE MFG RETAIL

FASHION PERFORMANCE
LEATHER LEATHER
DEWAS INDIA

MANUFACTURE MANUFACTURE CHENNAI

TRADING BACHI PORTUGAL/EU-

MOVE ON
CALSEA [Branded
Distribution/
CHINA Retail]

PORTUGAL
TATA INTERNATIONAL LTD. !
Footwear Business Updates
 19
Presence on a Global Scale
INDIA ITALY UK CHINA PORTUGAL
MANUFACTURING YES YES
DESIGN INPUTS YES YES YES YES YES
SUPPLY CHAIN OPERATIONS YES YES
MARKETING BASE YES YES YES

Profile

•  Footwear Operations spread over China, India, Italy and Portugal

•  Working with Top Global Brands and Retailers
•  Design Studio in Italy and Portugal
•  Footwear Design & Development Centre in China

Key Competencies

•  Supplier to Global Brands & Retailers

•  Support in Product Development
•  Setting global quality standards
•  Value proposition for sustainable customer relationship
•  Control, Monitoring, Operations Management in Major Production Hubs
•  Serious player and a partner for Global Organizations
•  One Stop Shop Model for Retailers
•  Experience in servicing the Major Customer Base in Europe
•  Leverage ‘Global Presence’ for becoming footwear Supply Chain Integrator
 20
Value Proposition

Product Development
Manufacturing & Supply Chain
Marketing

Product Manufacturing
Development & Supply Chain Marketing Acquisitions

500 customized 6 Mn. pairs per annum

Global Customer Base Bachi Shoes- India
Designs produced of Footwear
Move on- Portugal
per month capacities
(Production Capacity
5 Million Pairs/annum)

Capacities catering to
300 Styles
of customers
 21
TIL Footwear Business India
STYLES LADIES FOOTWEAR MEN’S FOOTWEAR
DEWAS •  LADIES BOOTS •  BATA EUROPE •  GEBRA-ALDI STORES
FOOTWEAR PLANT •  BALLERINA AND •  NEXT UK •  BUGGATI
•  MEN’S DRESS/CITY •  ALDO CANADA
1.2 MILLION PAIRS PER SHOES THROUGH FENILI
ANNUM •  RSH AUSTRALIA
•  HIGH END MEN’S •  MARKS & SPENCER
CHENNAI ELEGANT SHOES •  ZARA
FOOTWEAR UNITS •  MEN’S DRESS & MEN’S •  MASSIMO DUTTI
SMART CASUALS •  CLARKS
1.3 MILLION PAIRS PER •  WOLVERINE
ANNUM •  FLORSHEIM
•  LLOYD
•  SALAMANDER
CALSEA •  LADIES COMFORT •  MARKS & SPENCER
RANIPET SHOES •  MOVE-ON
•  SANDALS ON STITCH & •  AEROSOLES
1 MILLION PAIRS PER TURN CONSTRUCTION
ANNUM

BACHI SHOES •  CHILDREN SHOES •  STARTRITE

•  STONES & BONES
2.4 MILLION PAIRS PER •  DEICHMANN
ANNUM •  LEGERO
 22

Children Shoes
Bachi
 23

Ladies Shoes
Dewas
 24

Men's Shoes
Chennai
 24

Men's Shoes
Chennai
Tata International Ltd.!
Finished Leather !
 25
TIL Finished Leather Spread
Global Customer Base
Our product basket
Our global customer base

Market spread – US Market spread – Germany, Italy, France, Market spread – China, Taiwan,
Spain, Portugal Vietnam, Korea, Australia, India

USA Europe Far East

CUSTOMER  BASE  
 26
Finished Leather Strength

7 Mn. sq. ft. of finished Italian / European

leather for Footwear, Produces 60 new fashions are
Upholstery and Sports products every year simultaneously
Shoes per month developed in India

170,000 sq ft. Of Raw Only tannery in India, Installed capacities of

Material sourced which produces Cow producing 50 samples
everyday patent leather every day

Supply Chain Bases:

Over 250 product 6-8 colours selected in Chennai (India)
offerings & 120 MODEUROP in every Kolkata/Kanpur
satisfied customers year
Pakistan
China
Bangladesh
 27
Our Tannery at a Glance
 28
Tata USA!
!
Our new Focus Market

Concentrate on a few ‘key customers’ and build

gradually on ‘economies of scale’

Open for ‘ strategic partnerships’

Encouraging indications
Good reactions to our products & service
Plans to start work with 2 customers next year

Facilitate ‘tie ups’ with Key Manufacturers in India

Full time ‘representative' in the USA – Jack Guze
 29
Beyond
Business!
Committed global corporate citizen

Community Environment Empowerment Skills Training

•  Scholarships •  Eco friendly leather •  Computer based •  Industry

•  Maintenance of public Facilities functional literacy internships
parks, libraries •  Technical Training
•  Sophisticated effluent for women
•  Adoption of school
buildings treatment plant •  Training in shoemaking
•  Primary healthcare •  One of India’s largest to underprivileged
support Solar thermal water young women
•  Societal impact through heating systems •  Self-help groups (SHG’s)
Affirmative Action •  Promoting Bio diversity for Women
 30
Corporate Social Responsibility Initiatives
Environment & Quality
ECO FRIENDLY LEATHER
•  In house eco friendly leather manufacturing process has been
developed which is chrome free

BIO- METHANATION PLANT

•  Implemented in house developed patented technology for gainful
utilization of solid waste

ECO LABELING OF FINISHED LEATHER

•  Eco Labeling of our finished leather has been Awarded by Bureau of
Indian Standards (BIS)
•  Implemented to make our leather free from banned items like PCP,
formaldehyde, Azo dyes to meet the eco criteria
 31
Corporate Social Responsibility Initiatives
Environment & Quality
ETP TREATMENT BY NEW PROCESS
•  Process has been developed at pilot level for reducing chemical,
manpower & energy cost as well as sludge reduction.

SUBSTITUTION BY CHEAPER CHEMICALS

•  Expensive & hazardous chemicals have been replaced with cheaper &
environment friendly chemicals.
•  Chemicals from Waste Recycling

UP-GRADATION OF TECHNOLOGY
•  Adopted Reverse Osmosis technology for further improving the effluent
treated water.
•  Daily 200 M3 water as good as drinking water is supplied to boiler house.
 32
Business
Excellence!
Ensuring sustained value creation

Tata Business Excellence Model (TBEM) Awards & Certifications

Firmly committed to adoption and Recipient of prestigious national and

alignment of all processes in line with the international awards and certifications
Tata Business Excellence Model modeled for quality, sustainability projects and
after the Malcolm Baldridge Quality Award business performance.

SA 8000, ISO 9001 and ISO 14000

certifications for plants and processes
Appendix!
!
 SWOT
Indian Economy
OUTLOOK   STRENGTHS   WEAKNESSES   OPPORTUNITIES   THREATS  
•  Very large domestic •  Despite rapid economic growth, •  Emerging middle class drives •  Dependency on oil imports
market and demand India remains a poor country. demand for new goods and undermines trade balance
are major drivers of services. A wealthier society, making India vulnerable to
economic growth. •  GDP per capita: combined with tax reforms, energy price-driven
India = 1/3rd of China. would serve to boost revenue •  inflation.
•  Large supply of receipts, relieving fiscal
inexpensive and •  Agriculture inefficient and poor pressure. •  Risk of environmental
skilled labour monsoon rains slash rural incomes problems as air and water
and consumption. •  Implementation of tax reforms are heavily polluted, which
ECONOMIC   •  Around half of the in the near future would help raise questions about the
population is under 25 •  Chronic trade and fiscal deficits at boost compliance, thereby sustainability of the
years. historic highs. raising government revenue. economy's rapid growth.

•  Significant government spending on •  India will benefit from the

interest payments, salaries, manufacturing boom in the
pensions, etc., thereby limiting coming years as Chinese
spending for infrastructural labour costs rise
improvements. aggressively.

•  India, amongst the •  Despite excellence in sectors such as •  Liberalisation and deregulation •  Bidding up of local wages in
biggest recipients of IT, etc.. overall literacy rates remain could eenhance the the outsourcing sector.
FDI among emerging lower than in other key emerging competitiveness of local
markets, with market nations. industry. •  China, a major competitor
for FDI flows into India.
inflows of US$
•  Inadequate infrastructure. Poor road •  Ongoing infrastructure projects
36.5bn in FY 12. conditions, congestions. such as roads, railways and •  Excessive bureaucracy and
BUSINESS airports likely to provide poor infrastructure in
•  Inexpensive but skilled •  Red tapism and foreign investment
ENVIRONMENT   opportunities for foreign comparison with China.
English-speaking restrictions and inflexible labour investors.
labour force work for a laws. •  Security issues.
fraction of the wages
•  Government eager to reform
compared to other •  Poor protection of Intellectual the banking sector to increase
countries.
property rights. long-term financing,
particularly for large
infrastructure projects.

Source: Business Monitor International – BMI

BMI Ratings (2013)
Long Term Political Rating Long Term Economic Rating
100.0 90.0
90.0
80.0
80.0
70.0
70.0
60.0
60.0
50.0 50.0

40.0 40.0
30.0 30.0
20.0 20.0
10.0 10.0
.0 .0
Brazil China United India Japan Russia United Brazil China United India Japan Russia United
Kingdom States Kingdom States
80.0

70.0

60.0

50.0

40.0

30.0
Business Environment Rating
20.0

10.0

.0
Brazil China United India Japan Russia United
Kingdom States

Source: Business Monitor International – BMI calculations

LABOUR FORCE: Total Unemployment, %
change y-o-y (10 year forecasts)

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
13.0

Russia

8.0

3.0 China
China UK
US
UK Russia
-2.0 Brazil
Brazil Japan

Japan
-7.0 US

-12.0

Source: Business Monitor International – forecasts

Retail Sector

Retail Business-Economic Rating Retail Business-Economic Industry Risks

(2013) (2013)

90 100
80 90
80
70
70
60
60
50
50
40
40
30 30
20 20
10 10

Brazil China United India Japan Russia United Brazil China United India Japan Russia United
Kingdom States Kingdom States

Source: Business Monitor International – BMI calculations

Summary – Economic & Future Outlook
Quarterly data Q1 FY Q4 FY Q1 FY Monthly average of Q2 FY 14
13 13 14
GDP, % y-o-y 5.4 4.8 4.4 Downside risk
Real private consumption expenditure, 4.3 3.8 1.6 Downside risk
% y-o-y
Total fixed investment, % y-o-y -2.2 3.4 -1.2 No deterioration expected
Industrial production, % y-o-y -3.8 3.7 -4.5 2.1
CPI- inflation , % y-o-y 9.9 11 9.6 11.8
Trade balance, , % y-0-y -10.3 -9.6 -11.5 No deterioration expected
Quarterly data Q1 FY Q4 FY Q1 FY Monthly average of Q2 FY 14
14 14 15
10 year yield % 8.7 7.9 7.5 8.4
INR / USD 49.9 54.1 56.7 63.3
Equity index, , % y-o-y -10 10.1 15.3 8.1
Fiscal Year data FY11 FY12 FY13 FY14
Fiscal deficit, % GDP -4.8 -5.7 -4.8 Downside risk
Current account deficit, % GDP -2.8 -4.2 -4.8 No deterioration expected

High risk
Medium risk
Low risk Source: RBI Bulletin, Press Information Bureau, Government of India; Bloomberg