Bata India Stepping Into a Bigger Shoe!

Post its announcements in the AGM

held on August 4, 2016, the footwear
giant is prepared to be the new turnout
story capturing the markets. Bata India
Ltd., a family owned global and fashion
accessory manufacturer and retailer
has incorporated a range of strategies
targeting a large and loyal customer
base- one of its key strengths.

Whats NEW?

Franchisee Model

Bata India Ltd. is modifying its expansion strategy. The company aims to have around 200
franchised stores in the coming two to three years. This footwear giant will launch 50 to 60
stores per year, compared to its earlier target of 100, and instead emphasize on increasing
revenue per store.
The franchise model will enable Bata to spread its distribution network to rural and semi-urban
areas in Tier II and III towns, without investing in own-stores and hence, without its own
finances.
Pilot surveys on this model are being run in the states of Madhya Pradesh and Gujarat, and as
per the company, the initial response is encouraging.

Online Offerings
Bata is aiming to increase the share of its digital business from 1.5 per cent(of total
sales) to five per cent in three years. In the FY 2015-16, online sales reached Rs 40 crore.
According to Gopalakrishnan, the company has started a Click and Collect option on its
website whereby the customers can get their chosen products delivered to their local Bata
stores. There are 1256 retail stores, 26 of which were set up in the last year.
To prevent cannibalization, the company has already launched a distinct portfolio of
online offerings. Moving ahead, approximately 90 out of every 100 shoe models
projected online or in stores will be exclusive to that channel.

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Expanding Foot-Prints: Rural Segment

There is a lot of demand in the rural areas. We will have to cater to a separate product line to
cater to this kind of market, which we have to some extent. However, to certain extent we will
have to develop the products. We are targeting a price point of anywhere between Rs 200 to
Rs 1,000 said Gopalakrishnan (MD and CEO of Bata India Ltd.).

Product Differentiation
Faced with intense competition, Bata India has reorganized its strategy and will now focus on
ramping up existing business rather than expanding its network.
Emphasis on improving profitability from existing outlets is a strategy shift for the company,
which in the past has harped on addition of new ones every year.
Sources are of the opinion that low consumption and enhanced competition is one of
the reasons why Bata has focused on increased profitability from the same stores.
Which product categories are aimed at generating more revenue for the company?
Volume growth will come from a range of products. The company is looking at three
categories-One is women segment, as more working women are joining the workforce.
Second is the younger audience, which is going to drive the footfall. And the third is the kids
segment.

Financial Analysis

The company has witnessed a growing EPS in the Quarter 1 of FY 2017 from 2.17 in the
last Quarter to 3.93.

A QoQ boost is well reflected in Income from operations which saw a jump of 23.85% but
the expense growth has superseded this.

The companies reported stand alone net profit of Rs 50.49 crores for the first quarter
ended June 30 as compared to Rs 50.18 crores in the same period last year.

A YoY comparison shows an absolute decline from 7.02 in Q1 of FY16 to 3.93 in Q1 of FY

17 in terms of EPS but a relative QoQ comparison hints at positivity highlighting improving
prospects.

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Future Outlook
The major tax reform, GST is said to have a neutral-to-positive impact on the company.
Although the rates have not been finalized yet, a rate of around 18% is expected.
Bata India aims to invest close to Rs 300 crores over the next 3 years to modernize its existing
manufacturing facilities and strengthen its retail network.

Investment Opinion
We recommend a buy at Rs.532 with a target of Rs.553 and stop loss at Rs.521.
Meanwhile, Bata India Share Price is currently trading at Rs. 535.45, up by 0.20%. P/E ratio of
the stock is 38.79 and Market Cap is 6868.51 crores.

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Disclaimer

The investment advice or guidance provided by way of recommendations, reports or other ways
are solely the personal views of the research team. Users are advised to use the data for the
purpose of information and rely on their own judgment while making investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022
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