Kiran Shoe Manufacturers Pvt Ltd, the producer of Nepal’s popular Goldstar footwear brand, experienced a significant drop in operating income due to a temporary suspension of exports to India, according to a credit rating report released Wednesday by Infomerics Credit Rating. The report attributed the decline to new regulatory requirements imposed by Indian authorities.
In the first half of the current fiscal year (FY) 2024/25, the company reported revenue of Rs 796 million, a sharp decrease compared to Rs 2.22 billion in the previous FY. Infomerics cited the enforcement of mandatory Bureau of Indian Standards (BIS) certification by India as the primary reason for the revenue slump. Exports, which constitute a significant portion of the company’s sales, were halted for about three to four months due to delays in obtaining the certification.
Despite the disruption, the company has since received orders worth approximately Rs 1.29 billion, suggesting a potential recovery in revenues in the latter half of the fiscal year.
Company Executive Director Vidushi Rana acknowledged the severe impact of the export stoppage, noting that even short production halts can disrupt operations in manufacturing. She added that Kiran Shoes received the BIS certification only in late December 2024, after Indian officials conducted a factory inspection, which delayed the resumption of exports.
While exports have now resumed, Rana pointed out that competition in the Indian market remains intense. Currently, India accounts for 30 to 40 percent of the company’s total footwear exports.
Despite fluctuations in annual revenue over recent years, the company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) has shown consistent growth. According to Infomerics, EBITDA rose by 12.48 percent in FY 2021/22, 18.99 percent in 2022/23, and 22.10 percent in 2023/24.
However, the agency noted that rising interest expenses on bank loans have limited net profit growth. Delays in receivables from sales have forced the company to rely heavily on bank financing, which Infomerics flagged as a structural weakness.
Another concern highlighted in the report is the company’s high dependence on a limited number of distributors. In the first half of FY 2024/25, 78 percent of Kiran Shoes’ revenue came from just ten distributors, slightly down from 84 percent in FY 2023/24. The company’s distribution in India is handled exclusively by GFPPL (India), a single authorized distributor, increasing its exposure to concentration risk.
