Bata India has turned out to be a safe bet for long-term investors. The stock has risen steadily from around Rs 108 in December 2009 to Rs 1,683 currently, giving returns of as much as 1458 percent.

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To put in perspective, an investment of Rs 10,000 in 2009 would have turned into Rs 1.55 lakh in 2019.

The stock, which hit its 52-week high of Rs 1,815 on October 31, 2019, and a 52-week low of Rs 1,075.55 on December 26, 2018, has rallied over 54 percent in the last 1 year. In 2019, the stock has added 50 percent.

The peers

Among its peers, only Relaxo Footwears has performed better, gaining 70 percent in the last 1 year. While, Sreeleathers has fallen 11 percent and Mirza International is down 32 percent during the period. Khadim India has declined 69 percent and Liberty Shoes has shed 19 percent in 1 year's time.

Q2 performance

Despite the slowdown, Bata India reported a decent performance in Q2. The net profit of the company rose 28.22 percent to Rs 71.37 crore as against Rs 55.66 crore during the quarter ended September 2018. Meanwhile, sales rose 7.26 percent to Rs 721.96 crore in Q2 versus Rs 673.07 crore in the year-ago quarter.

After many years of stagnant volume due to defocus on lower priced stock keeping units (SKUs), the volume has grown at 8 percent in H1FY20. This has been driven by increased momentum in the wholesale business, growing 18 percent in H1FY20, said Nirmal Bang in a report.

The future

Unlike revenue in the last many years, which was driven by average selling price (ASP) growth, Nirmal Bang believes from here on, there is going be a better mix of volume and ASP growth. This move has been in line with the strategy of the CEO, Sandeep Kataria, of growing the entire portfolio and not just the premium part, it added.

As per JM Financial, the Indian footwear industry is expected to grow at a CAGR of 11 percent over 2022 to Rs 72,000 crore. In terms of production, branded footwear currently accounts for around 45 percent and unbranded dominates with 55 percent market share respectively, the report noted.

JM Financial believes that Bata India with its strong network reach and size is well placed to participate in this growth opportunity. Over the years, the company has become one of the largest contributors to global sales at 15-16 percent. It remains one of the fastest-growing companies within the global parent’s portfolio with the potential to reach $1 billion in a few years, the brokerage explained.

It further said that Bata is a debt-free company with cash on books equivalent to 48 percent of net-worth as of FY19 and 4 percent of its market capitalisation. Going forward free cash-flows are expected to remain strong, it added.

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First Published:Dec 18, 2019 2:22 PM IST