NEW DELHI: Bata Indiaโs Q2 performance demonstrated solid revenue growth but fell short on profitability, with EBITDA and PAT down by 8.1% and 18.9%, respectively, due to higher-than-expected costs. The footwear giant is strategically investing in premium and affordable products to drive long-term growth and profitability. However, increased raw material and operational expenses in Q2 have led to a downward adjustment in FY25 earnings estimates by 11.7%, although projections for FY26 and FY27 remain steady. Analysts maintain a โBuyโ rating for Bata India with a target price of INR 1,882, based on a 47x FY27E P/E.
Strong Premium Segment Growth Drives Revenue
Bata Indiaโs Q2 revenue rose 2.2% YoY, reaching INR 8,371 million, boosted by a strong premium segment. Although demand in the value segment (priced below INR 1,000) fell to 30% of total sales, the company saw a 16% YoY boost in eCommerce sales, particularly on Myntra with successful brand launches like Nine West. Power and Floatz brands posted YoY growth of 6% and 60%, respectively. Bataโs festival season strategy includes prominent brand collaborations, such as the Bata Red Label x *Emily in Paris* and Hush Puppies x *Peanuts*, to attract diverse customers. Analysts project an 8.5% revenue CAGR from FY24 to FY27 as Bata expands premium offerings, adds stores, and enhances its eCommerce footprint.
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Focus on Margin Recovery by FY27
Despite revenue gains, Bataโs EBITDA margin dipped 132 basis points to 20.9% and gross margin shrank 143 basis points to 56.6% due to higher franchisee costs and inventory clearance. With ongoing costs in IT and new store openings, Bata expects margins to improve gradually, targeting a 21.1% EBITDA margin in FY25, 23.7% in FY26, and 24.4% by FY27.
Store and Franchise Expansion to Fuel Growth
Expanding its footprint, Bata added 39 stores in Q2, achieving a 9.8% YoY growth and reaching a total of 1,955 stores. Franchise locations rose to 600, surpassing Bataโs initial target of 500 by 2024 and contributing 11-12% to retail revenue, while omnichannel sales add a further 5%. Bata also increased its multi-brand outlet reach to 1,560 towns, enhancing its presence across smaller markets.
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Outlook and Investment Recommendation
With its emphasis on premiumization, strategic partnerships, and store expansion, Bata India remains poised for growth despite short-term cost pressures. Analysts reiterate a โBuyโ rating with a target price of INR 1,882. However, they caution that increased competition and volume challenges may pose risks to Bataโs growth trajectory.
Prerna Jhunjhunwala is a research analyst with Elara Securities India Private Ltd.
