Bata India, one of the oldest footwear brands in the country, has delivered 1,681 percent returns to investors in the last 10 years, the highest among all listed firms from the industry.
However, in terms of year-to-date returns, rival Relaxo Footwear has outperformed Bata India, surging 68 percent, while the latter climbed 52 percent.
In Q2FY20, Bata India reported sales growth of 7 percent year-on-year (YoY) and a net profit increase of 28 percent YoY after paying deferred tax of nearly Rs 47 crore. Relaxo Footwear remained a step ahead by reporting sales growth of 14 percent YoY and net profit surge of 79 percent.
Does this mean Bata is losing its grip?
While the competition may be intensifying in the footwear industry, Bata still continues to retain its position, enjoying a 14-15 percent share in the organised market.
Brokerages too are bullish on the company and believe that Bata is well-positioned when compared to others in the sector.
In its research report, JM Financial said, “The Indian footwear industry is expected to grow at a CAGR of 11 percent over 2022 to 720 billion. Bata has been trying to reposition its brand to appeal to the young generation. Management has indicated that the advertisement campaign has led to higher footfalls and consumer interest.”
The brokerage has recommended a 'buy’ on the stock with a target price in the range of Rs 1,710-1,740 apiece.
Listed in 1973, Bata India 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 and any monetisation of Faridabad 11-acre land will further add to the cash flows, added JM Financial.
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.
Relaxo Footwear falls behind Bata India in case of financial valuations. Bata is double the size of Relaxo and is valued at a price-to-earnings (P/E) of 60.39x with return-on-equity (RoE) of 20.54 percent. While Relaxo Footwear stands at a much expensive valuation of 73.15x with RoE of about 18 percent.
As on March 2019, Bata's cash on balance stood at Rs 840.32 crore while Relaxo's was seen at Rs 2.22 crore.
First Published: IST