Bata India at record high, up 4% on institutional buying, revival hopes

Domestic investors have hiked stake in the company by 243 basis points (bps) to 17.88 per cent, while foreign shareholding increased marginally to 5.35 per cent at the end of June 2021 quarter

Shares of Bata India hit a record high of Rs 2,202.10, up 4 per cent on the BSE in intra-day trade on Wednesday  in an otherwise range-bound market on hopes of revival in revenue growth trajectory as and when the impact of the pandemic gets phased out.

Meanwhile, institutional investors led by domestic mutual funds (MFs) and foreign portfolio investors (FPIs) increased their stake in footwear company during July-September quarter (Q2FY22). In past one month, the stock has outperformed the market by surging 25 per cent, as compared to 5.5 per cent rise in the S&P BSE Sensex.

MFs hiked their holding in Bata India by 243 basis points (bps) to 17.88 per cent in Q2, against 15.45 per cent they held at the end of June 2021 quarter (Q1FY22). FPIs holding in the company increased to 5.35 per cent from 5.23 per cent in previous quarter, the shareholding pattern data shows.

Bata India is a major player in the Indian footwear market with a presence across men’s, women’s and kid’s footwear segment. Bata’s core product portfolio includes formal and fashion footwear category. While open footwear and slippers category witnessed speedy recovery (as witnessed in financials of Relaxo), fewer social gatherings and office/school closures had a material impact on performance of Bata in FY21.

Bata appears to be well placed to benefit from normalisation of demand scenario. Channel checks suggest a healthy recovery in August-September with discretionary retailers witnessing recovery rate of >80 per cent of pre-Covid levels (vs. 50 per cent in past year), analysts at ICICI Securities said.

With a gradual opening of economy, we expect premiumisation story to resume and bake in 11 per cet blended realisation CAGR in FY21-24. We believe with its strong brand patronage and pan-India retail reach, it should be able to revive its revenue growth trajectory as and when the impact of the pandemic gets phased out, the brokerage firm said.

Bata has, over the last one year, delivered 60 per cent return whereas Relaxo delivered 102% returns owing to increased market share due to enhanced consumer preference towards open footwear. Strategies like cost reduction, focus on omni channel and calibrated expansion of retail network through asset light franchisee route can be structurally positive for Bata’s business. Strong revenue growth coupled with recovery in margin profile would enable Bata to reduce the valuation gap with Relaxo, analyst said.