The Power of I 2014

A global footprint

Superhouse grew out of nothing to become a leather export behemoth. Now, it is hoping to grow through acquisitions

His grandfather made handcrafted saddles for the cavalry regiment of the Scindia army in Gwalior. His father entered the finished leather business and started Super Tannery Ltd in Kanpur in the early 1950s. But when Mukhtarul Amin decided to set up a business on his own in 1985, he wasn’t sure what line to get into. Playing it safe, he registered a company name that would fit just about anything — Superhouse. But the call of blood, perhaps, proved too strong. Amin, like his father and grandfather, also entered the leather goods business. 

Thirty years later, as the 59-year-old leans back in his dark leather chair and gestures at the nine LED screens in a corner of his large office — each showing live scenes of a different shop floor — there’s no sign of that earlier, initial indecisiveness. Superhouse Ltd is now a ₹517-crore company that employs 3,000 people. The company makes shoes for brands such as Diesel, Mango, Zara, Top Shop, Next, United Colors of Benetton and many more and exports to over 80 countries around the world. “We want to cross revenues of ₹2,000 crore in the next three years. And the footwear business should grow to over ₹1,000 crore in the next four years,” Amin declares. How did he get here and how does he plan to get there? 

Getting started

Based in Unnao, Uttar Pradesh, some 20-odd km from leather hub Kanpur, Superhouse now makes 20,000 pairs of shoes a day, of which 15,000 are exported (the company is present in the domestic market with the Allen Cooper brand of men’s footwear). It has two tanneries, with a combined capacity of processing 230,000 sq ft of leather every month. Other leather products include 75,000 garments every year for high-end brands such as Donna Karan, Ralph Lauren, Gap, Esprit and Paul Smith, among others, as well as accessories such as belts and wallets (about 600,000 pieces each every year). There’s also a ₹70-crore business in equestrian products, and the company claims to be the world leader in manufacturing breeches, riding boots and riding products (including chaps, rigs, halters, leads etc.)

It’s a far cry from when Amin started the company. “I didn’t know what to make, didn’t have the capital required or even a parcel of land,” he recalls. The first order was for manufacturing shoe uppers for a client in the UK. “They helped us technologically as well and gave us a huge headstart in the business,” he says. But lack of funds was holding back expansion and so, in 1986, Superhouse went in for a public issue and raised about ₹1 crore. Not a huge sum, but enough to set up its first tannery. The choice of location was easily decided — the Uttar Pradesh State Industrial Development Corporation offered land in Unnao at just ₹10 per sq m. The group now has 10 manufacturing facilities in the city, in addition to the tanneries, and seven more in Agra, Noida and Kanpur.

The big break came in the early 1990s, when Amin attended a fashion footwear fair in Birmingham. An importer there put him in touch with his buying agent in Mumbai and Superhouse got its first order for fully made-up shoes. “The initial days were difficult, thanks to middlemen and tight finances. But luckily, I always had the support of bankers. Also, we made sure we maintained a good range of products and delivered on time. This helped build goodwill,” says Amin.

Around the same time, the company also ventured into manufacturing safety footwear. It now produces injection-moulded safety shoes at four Desma plants, with a range that includes waterproof, non-metallic and combat footwear, as well as a special range of executive and ladies’ footwear. With a capacity of 1.2 million pairs a year, supplying to brands such as Hauf, Progressive Safety, Stabilus and Secura, safety boots bring in over ₹55 crore a year. “We are the largest exporter of safety shoes from India,” claims Amin.

Making the shoe fit

At first glance, the Superhouse men’s footwear assembly line doesn’t look like some of the world’s most popular shoe brands could originate here. It lacks the sparkling, many-labelled sophistication of multinational shop floors. The almost dimly-lit aisles are filled with workers — mostly men, all wearing sweaters, mufflers and caps — who brush against boxes and metal shelves that are scattered through the shop floor. There’s no sense of urgency or frenetic activity as workers cut, glue, fit, sew and shape leather in the mechanised line — even the assembly line winds its way across the floor at an unhurried pace. But look closely, and you see the shoe boxes bearing labels of big brands and workers slapping on price tags in pounds and euros on the deep blue suede dress shoes that are being finished.

It’s not easy working with big brands, concedes Amin. “They are very particular about social conditions. Some times, they even conduct unannounced audits at our factories,” he says. “But we don’t mind — as more global clients have come on board, we have become more and more compliant and careful.” While some of these conditions are pretty routine, such as paying salaries on time, not hiring children, providing benefits, not forcing overtime and ensuring workers are given proper training, leather footwear exports are also subject to industry-specific conditions, such as the needle-and-nail policy. Typically, such a policy requires that suppliers designate people to be responsible for issue of sharp objects such as needles, nails and tacks, and keep track of them. They are also responsible for tracking broken needles etc. — at many factories, the final product is even passed through an x-ray machine to ensure nothing’s been left inside the shoe. 

 saving grace for Superhouse, perhaps, is that larger, India-specific issues such as pollution of the Ganga due to tanneries and exploitation of contract labour haven’t been deal-breakers. “Tanneries have very poor PR — they get blamed unnecessarily. We were the first in the state to set up a water treatment plant,” Amin declares. While its tanneries have primary effluent treatment plants, in 1993, the group — with assistance from the UP government and the World Bank — helped set up a common effluent treatment plant, the first in the state. The larger question: will the steps Superhouse has taken towards compliance be enough to bring in more clients so it can reach its revenue target of ₹2,000 crore?

Growing in size 

In the past five years, Superhouse has been growing at an average 11%. “We were present in many markets and since we have our own distribution companies in the US, UAE and Europe, which work exclusively on marketing and promoting our products, we were able to sail through the 2008-09 crisis,” says Amin. But competition is increasing as the shoe export market in India becomes more organised. Amin, however, doesn’t believe rising competition will hamper his company’s growth. “Buyers also don’t want to get into the hassle of trying out new suppliers every time. The only sure way of customer retention is to deliver quality products on time,” he says. 

In fact, going forward, rather than the threat of losing customers to China, he sees a big shift from China to India. Amin points out that while markets in Europe aren’t doing too well, Germany, France and the UK are growing, and Indian factories are still getting good business. “Chinese labour is moving up the skill ladder and asking for higher wages. Also, the Chinese currency has appreciated, while the rupee has weakened, making India more attractive.” While that will help boost Superhouse’s revenue, Amin has a two-pronged strategy for future growth: overseas acquisitions and increasing capacity.

Over the past three years, Superhouse has spent ₹80 crore on three overseas acquisitions. In 2011, the company acquired British footwear trading firm Briggs Industrial Footwear, which distributes well-known brands such as Dr Marten, Caterpillar and Timberland. This is now being used to promote Superhouse products in the UK and Europe, especially as the company seeks to tilt more towards global brands rather than international retailers, since they offer better prices (currently, its exports are evenly divided between big brands and big retailers such as Walmart, Hudson’s Bay and Auchan). 

The following year, in 2012, Superhouse took over a bankrupt Germany-based company. “We moved the machines back to India, retained the brand and sales people and started supplying shoes from here. We’ve turned the company around,” beams Amin. Now, he is shifting his attention to the other acquisition made in 2012, of Spanish safety footwear maker Linea de Seguridad — systems, processes and the supply chain are being more efficient, while production at the loss-making company has been slashed from 75,000 pairs a month to 20,000. Amin points to the strategic potential of having a brand and manufacturing facility in Europe, even if small and costly to run. “We can supply made-in-Europe shoes in the future. This will give us a lead over our rivals.”

Superhouse already has more than just a foot in the door when it comes to global footwear majors and retail chains. Whether its recent strategy of international acquisitions will prove the right fit for future growth, though, only time will tell.