Explained: How the Dua brothers turned Relaxo into a footwear empire

The $3-bn company has grown from a small cycle parts enterprise to a shoe business with 400 outlets and 20,000 employees

February 17 marked a milestone for Relaxo Footwears. Its shares traded at an all-time high — at Rs 830.15 a piece on the Bombay Stock Exchange (BSE) — taking its market capitalisation beyond Rs 20,600 crore.

The unprecedented feat not only pushed its market cap to over 1,100 times that of the value it had 25 years ago during its initial public offer but also boosted the fortunes of Relaxo promoters, the  Dua family, taking the combined wealth of the firm to over Rs 14,600 crore (around $2 billion).

The two key promoters, Ramesh Kumar Dua and his elder brother Mukand Lal Dua, emerged as the biggest beneficiaries of the milestone. The Dua brothers’ 43.7 per cent stake in the firm was valued at well over a billion dollars (Rs 9,000 crore).

The stupendous rise of its stock in the BSE during 2019 has aided the Duas’ fortunes. During last year, Relaxo’s share price jumped 72 per cent to make it one of the top performing consumer stocks on the bourses.

As a result, despite a fall in the family’s ownership from 74.2 per cent to 70.98 per cent, the promoters’ combined wealth grew 125 per cent between end-2018 and 17 February this year.

In fact, its long-term return surpasses the broader index by an extraordinary margin — a  7,276 per cent return from Relaxo stock over 10 years, as compared to 133 per cent from the Sensex.

The superior performance by the firm in recent quarters has played a key role in attracting investors to the stock. While in the October-December quarter, Relaxo’s operating income grew 40 per cent, during the nine months between April and December, its net sales surged 18.2 per cent — much faster than its peers in the consumer goods sector most of whom are struggling to cope up with a consumption slowdown.

Relaxo’s managing director and the largest stakeholder Ramesh Kumar Dua is not exulting, however. Sitting in his office at the top floor of the firm’s headquarters in the north-western suburb of Rohini in the capital, Dua humbly gave the credit to decades of simple, honest hard work.

The importance of honestly running a business was, he said, acquired by accident. Dua recalls the event vividly. It was during the tumultuous days of the Emergency in 1975 when Dua was roaming inside Sadar Bazaar, a wholesale hub in the capital.

While most traders were running for shelter from government officials conducting raids under the infamous Maintenance Internal Security Act, Dua noticed a strikingly calm atmosphere inside the Bata shop. Compared with the tense mood outside, the manager looked almost relaxed. “When I approac­hed him to inquire why he wasn’t scared, what he said was a lesson to me”, recalled Dua. “The man said ’Why should we be scared? We follow all the rules’. That is when I realized that if one conducts one’s business honestly, then one need not to be scared of anything.”

Coming from a family that set up a cycle parts manufacturing unit in Delhi in 1954 after migrating from Pakistan, Dua’s exposure to business activities came early. But it was only in the late-1960s that a close look at the business’s finances prompted the family to focus on the new shoe unit.

It was Dua, who takes pride in being good in mathematics, who realized that the cycle parts business was not making money.

While the plan was that he would continue his studies and build a career in medicines while his brother helped the business, a split in the family occurred which forced his father to seek his help.

The initial years were tough. Not only had the trio a huge loan to pay off, lack of technical know-how kept their hands tied. Dua recalls that the annual turnover was a meagre Rs 300,000 in the early-1970s. By 1976, when they forma­lised the business under the brand Relaxo, it had quadrupled thanks to a rubber technology course that Dua took which filled some of the gaps in their technical expertise.

The first major breakthrough, however, came two decades later. Anticipating future expansion, the family had acquired land in Bahadurgarh for a large factory. The capital became a major roadblock.

Following the liberalisation of the economy in 1992, the Duas took a ‘limited risk’ and decided to go public. The IPO in 1995 fetched them Rs 4.5 crore, valuing the firm at Rs 18 crore, and paved the way for Relaxo’s journey towards beco­ming a pan-India company.

Today, the firm has over 400 branded outlets across the country and employs some 20,000 people, with annual turnover of Rs 2,300 crore. Dua is not ready to rest on his laurels yet. In fact, he still likes to spring surprises. Six years ago, he took a leap into the unknown by bringing Bollywood stars Salman Khan and Akshay Kumar on board to promote the brands.

It’s been over a decade since Relaxo challenged the global shoe­making giants — Puma, Adidas and Nike. A failed supply contract with Nike in the mid-2000s led the Duas to launch their own casual­wear shoe brand Sparx.

At 63, he is charged up with the idea of a tenth manufacturing plant and growing exports. The firm currently exports to over a dozen countries but the exports’ share in the revenue remains small.