Khadim India pursues demerger of distribution business

A leading footwear company, Khadim India is strategically pursuing the demerger of its distribution business, aiming to unlock significant value for its core retail operations.

Indrajit Chaudhuri, Chief Financial Officer, says, with approvals from stock exchanges and the NCLT pending, the demerger is expected to complete by September this year.

The demerger entails segregating the distribution business and manufacturing activities into KSR Footwear (KFL), to enhance market focus and operational efficiency. The move is expected improve Khadim India’s EBITDA margins by 100-200 basis points in the first full year of operation in FY’25-26.

Currently, Khadim's retail business contributes about 67 per cent of its total revenue through approximately 848 stores nationwide. Currently valued at Rs 500 crore, the retail segment is expected to surpass Rs 600 crore by 2025-26, opines Chaudhuri,

Constituting 33 per cent of the total turnover, the distribution business faces challenges due to the GST hike on footwear below MRP of Rs 1,000 since January 2022. With a network of 732 distributors serving lower and middle-income consumers across Tier I to Tier III cities, this segment specialises in providing affordable footwear, with 96 per cent of its products manufactured in-house.

The demerger is expected to enable each business to address its priorities effectively. With distinct focuses, Khadim India believes that separating the entities will allow for better alignment with their respective market dynamics and consumer demands.