Acme safety-footwear capacity rose 30%, utilisation fell to 64%

Acme Universal Safezone 9 Private Limited expanded installed safety-footwear capacity by about 30% to 43,15,000 pairs a year in FY 2025-26 from 33,15,000 pairs in FY 2023-24, but utilisation fell to 64.23% from 77.71%. Acme’s proposed issue-funded capital expenditure does not add capacity, making cost and throughput delivery central.

How did Acme’s safety-footwear capacity and utilisation change?

Acme added 10,00,000 pairs of annual soling capacity between FY 2023-24 and FY 2025-26, while the share of that capacity used declined by 13.48 percentage points. The company reported these figures across all manufacturing locations, and P.L. Engineering Services, a chartered engineer, certified them on June 22, 2026.

The decline in utilisation did not result from a continuous reduction in pairs produced. Capacity utilised rose by 1,95,803 pairs, or about 7.6%, between FY 2023-24 and FY 2025-26, but installed capacity rose by about 30.2% over the same period. That difference explains why utilisation fell even as used capacity increased.

FY 2025-26 utilisation improved by 1.08 percentage points from FY 2024-25’s 63.15%, but remained below FY 2023-24’s 77.71% despite a further 2,00,000-pair increase in installed capacity. Acme identifies 43,15,000 pairs a year as its installed manufacturing capacity as of the draft prospectus date, a measure of available output capability rather than confirmed demand or sales.

Why is Acme spending without adding safety-footwear capacity?

Acme says its proposed capital expenditure will upgrade and strengthen intermediate manufacturing processes rather than increase overall installed capacity. Its stated objectives are lower per-unit manufacturing costs, improved throughput efficiency and optimisation of in-process capacity at existing facilities. Throughput is the volume moving through production stages over a specified period, while in-process capacity concerns those stages before a finished pair is completed.

Acme had 15,43,149 pairs of unused installed capacity in FY 2025-26, calculated as 43,15,000 pairs of capacity less 27,71,851 pairs utilised. In FY 2023-24, unused capacity was 7,38,952 pairs. The gap therefore more than doubled as capacity expanded, leaving the proposed programme dependent on operational gains within the current facilities rather than another increase in rated capacity.

The company cautions that anticipated lower costs and improved throughput are projections that may not materialise within planned timeframes or to the planned extent. If installed capacity remains under-used, the filing says fixed-cost absorption may be inefficient and margins may compress. Fixed-cost absorption is the allocation of expenses that do not vary directly with output across the number of units produced.

What must happen for Acme’s process-upgrade capex to work?

Acme says the process-upgrade plan depends on timely machinery procurement and installation, skilled-manpower availability, and regulatory clearances including Bureau of Indian Standards inspections for modified production lines. These are the stated conditions for achieving projected cost and throughput benefits without an increase in the 43,15,000-pair installed capacity.

The workforce data gives one indication of the manpower condition. Acme closed FY 2025-26 with 1,073 employees after hiring 130 and losing 109, producing an attrition rate of 10.26%. That was above the 7.47% rate in FY 2024-25, when the closing workforce was 1,052, but below the 14.16% rate in FY 2023-24.

Acme says it directly employs factory labour rather than relying on contractual labour, a model requiring spending on recruitment, training and development. If it cannot recruit or retain personnel needed to operate production processes, the filing says production targets, product quality and growth objectives could be affected. The workforce requirement is consequently relevant to whether machinery upgrades translate into higher throughput.

Industrial safety footwear also requires product compliance. Acme’s products must comply with IS 15298 and IS 1989:2020 for leather safety shoes under the Bureau of Indian Standards, or BIS, Quality Control Order for the footwear sector. The standards are necessary qualifications for government and GeM procurement, defence supply contracts and private-sector statutory compliance, and Acme says its BIS licences were valid and in force as of the draft prospectus date.

Which operating controls could interrupt Acme’s efficiency plan?

Acme says a BIS licence suspension, cancellation or non-renewal could immediately disqualify it from tendering for government orders. The filing identifies product recalls, quality-audit failures, non-compliance with test-laboratory standards and failure to renew as possible triggers. A modified production line therefore requires not only equipment installation but also continued compliance with the applicable inspection and certification process.

Acme also identifies operating safety controls for chemical solvents, high-temperature polyurethane and polyvinyl chloride moulding, solvent-based cementation, sole pressing and stitching machinery. Listed risks include chemical exposure, fire hazards, machinery injuries, factory-inspection non-compliance and environmental violations involving solvent effluents. An accident, closure notice or restriction on operations could reduce the throughput that the capital programme is intended to improve.

Raw-material pricing is a separate constraint on the target of lower per-unit costs. Acme procures polyurethane and polyvinyl chloride compounds, leather and steel toe caps in the open market rather than under long-term fixed-price supplier contracts. Polyurethane prices are linked to crude-oil derivatives, while leather prices can be affected by hide-market supply and demand, export-duty changes and tannery shutdowns.

Acme says it may not be able to fully pass higher raw-material costs to customers, particularly under government rate contracts where sale prices remain fixed for the contract period. This means lower costs from process upgrades would need to offset, or exceed, changes in input prices for the expected efficiency benefit to reach operating results. The filing states that sustained raw-material cost increases could compress EBITDA, or earnings before interest, tax, depreciation and amortisation, margins.

Conclusion

Acme’s disclosed operating picture is that installed soling capacity increased from 33,15,000 pairs in FY 2023-24 to 43,15,000 pairs in FY 2025-26, while utilisation moved from 77.71% to 64.23%. The company is not proposing to close that gap through further capacity addition; its stated approach is to improve intermediate processes, reduce unit costs and raise throughput within existing facilities.

The next evidence to watch is whether the disclosed prerequisites are met: timely machinery procurement and installation, skilled-manpower availability and BIS inspections for modified lines. Acme’s June 22, 2026 capacity certification provides the 43,15,000-pair baseline, while later utilisation, per-unit cost outcomes and uninterrupted certification will indicate whether the proposed process upgrades deliver the projected benefits.