Long Term Recommendation Bata India LTD.: The Growth Sprint

Long Term Recommendation
Bata India Ltd. The Growth Sprint…

Bata, India’s largest footwear retailer, we believe is at an inflection point driven by: a) rejig of top Sangeeta Tripathi
management; b) parent company’s sharpened focus on the India market; and c) management’s Research Analyst
potent cost rationalisation initiatives. Furthermore, with an eye on bolstering its brand’s strength sangeeta.tripathi@edelweissfin.com
and perception among young consumers, Bata has: i) overhauled its product range; ii) revitalised
visual displays; and iii) reworked its brand communication strategy. This, we believe, will boost
footfalls & conversion and spur same store sales growth. Bata’s earnings are estimated to post
CMP INR: 1255
28% CAGR over FY08-21 driven by: a) 14.7% revenue CAGR over FY18-21E; and (b)390bps margin
expansion over FY18-21E led by improvement in gross margins & operating leverage. Moreover, Rating: BUY
the asset-light business model is estimated to result in core RoCE expanding to 42.4% in FY21 from
32.8% currently. Over the long term, given its pole position and management’s potent initiatives
Target Price INR1500
to get its mojo back, Bata is likely to post industry leading growth, margins and efficiency hence, Upside: 20%
we initiate with ‘BUY’ and target price of INR 1,500.
Market leader and a one-stop footwear destination

Bata is a strong brand in India’s footwear retail market with a formidable pan-India distribution retail
network aggregating 1,400 plus stores encompassing 3 mn sq ft retail space. The company is present
across 550-600 towns & cities and offers products across price points, segments and categories.
Based on the strength of its distribution, product portfolio, width and assortment, Bata is far ahead
of peers at the national level and serves as a one-stop footwear destination.
Bloomberg: BATA:IN
Entering virtuous growth phase driven by confluence of macro and company-driven initiatives
We believe: (a) parent’s sharpened focus on India operations; (b) rejig of management & operations 52-week
1283 / 674
with clear focus on brand rejuvenation, product portfolio re-orientation & cost rationalisation; (c) range (INR):
marked improvement in merchandising, brand communication & customer engagement; and (d)
Share in issue (cr): 13
increased thrust on technology, will lead to Bata clocking industry-leading growth. Hence, we
estimate it to post 14.7% revenue and 28% earnings CAGR over FY18-21.
M cap (INR cr): 16,123
Solid balance sheet coupled with revival of growth to propel RoCE and free cash generation Avg. Daily Vol.
1079
Bata has a strong balance sheet with zero debt and cash constituting ~35% of the overall balance BSE/NSE :(‘000):
sheet. With growth revival, followed by marked improvement in margin (estimate 250 bps operating
Promoter
profit margin improvement over FY18-21), the core RoCE is likely to expand to 42.4% by FY21 from 52.96
Holding (%)
32% currently. Over the next 3 years, we estimate Bata to generate an aggregate of INR 670 cr free
cash.
Outlook and valuations: High quality proxy to play robust footwear demand; initiate with ‘BUY’
We believe that a high quality consumer brand in the growing fast fashion footwear category taking
all the right initiatives to drive growth, improve brand strength and propel earnings is likely to trade
akin to the leader in the consumer space, thus assign 42x PER multiple to FY21 earnings to arrive at
our medium term price target of INR 1,500. Further this high quality consumer brand has all the
potent ingredients in place for further surprise on growth levers, which we believe makes it a
compelling compounding story to be played over long term time frame
Year to March FY18 FY19 FY20E FY21E

Revenues (INR Cr) 2,641 2,968 3,450 3,984
Rev growth (%) 6.7 12.4 16.2 15.5
EBITDA (INR Cr) 351 484 593 685
PAT (INR Cr) 221 312 391 462
EPS (INR) 17.2 24.3 30.4 36.0
EPS Growth (%) 26.3 41.1 25.3 18.4
P/E (x) 72.7 51.5 41.1 34.7
P/B (x) 10.4 8.7 7.1 5.9
RoCE 23.8% 27.6% 28.6% 28.0%
Date: 16th January2019
Core RoCE (ex cash) 32.4% 40.6% 42.6% 42.4%
RoAE (%) 16.1% 18.7% 18.9% 18.6%
Edelweiss Professional Investor Research 1

Table of Contents
Structure ............................................................................................................................. 3
Business Value Drivers ........................................................................................................ 5
Focus Charts 1 ..................................................................................................................... 6
Focus Charts 2 ..................................................................................................................... 7
I. Bata: Market leader with products across categories and segments .............................. 8
II. Bata in the right cycle; making right moves resulting in revival of its growth phase ..... 10
III. Asset-light balance sheet + improved margin to lead to strong core RoCE expansion 24
IV. Competitive positioning ................................................................................................ 25
Outlook and Valuations ...................................................................................................... 27
Business Overview ............................................................................................................. 16
Key Management ............................................................................................................... 16
Timeline .............................................................................................................................. 18
Financials ............................................................................................................................ 30

Bata India Ltd Structure
Orient Electric Ltd Structure
Bata is estimated to clock 28% earnings CAGR over FY18-21E. This will be driven by double-digit revenue growth (led by
management’s initiatives to drive footfalls, conversion and thereby improve same store sales) and cost optimization
measures for overheads that are estimated to lead to 390bps margin expansion to 17.2% by FY21E from 13.3% in FY18.
Bata has a strong balance sheet with 35%

28% PAT CAGR will be driven by healhty A market leader in the fast-growing
in cash. Bolstered by robust business
reveue growth (aided by 8-9% same store footwear category with potent
mometum and asset-light model, the free
sales growth), premium offerings and initiatives and on growth threshold,
cash is enviaged to increase. Core RoCE is
sharpened focus on cost optimisation we expect Bata to trade at a
estimated to expand to 42.4% in FY21
premium. Assigning 42xFY21 PER we
from 32.8% in FY18
arrive at target price of INR1,500
FY18 FY19 FY20E FY21E FY18 FY19 FY20E FY21E PER FY21E EPS CMP/Target
Revenue 2,641 2,968 3,450 3,984 ROE (%) 16% 18.7% 18.9% 18.6% 42x 36 1500
EBITDA Core ROCE
13.3 16.3 -17.2 17.2 32.4% 40.6% 42.6% 42.4%
margin (%)
PAT 221 312 391 462
EPS growth of 28% over FY18-FY21  FY21E – core RoCE of 42.4%  42x FY21EPS of 36
Upside of 20%

Bata India Ltd Structure
Orient Electric Ltd Structure
Price Target INR 1500 Based on revenue CAGR of 14.7%, EBITDA margin of 17.2% and applying PER at 42x FY21E
Bull Case
Market leader on the
cusp of revival and INR 1800 Based on revenue CAGR of 14.7%, EBITDA margin of 18% and applying P/E multiple of 50x
growth curve to trade
at 50x FY21E earnings
Base Case
Bata valued at 42X
Based on revenue CAGR of 14%, EBITDA margin of 17.2% and applying PEG of 1.8x (implied
FY21E; discount to INR 1500
PER at 42x FY21E)
leaders
Bear Case
Bata to trade at a
steep discount to INR 950 Based on revenue CAGR of 11%, EBITDA margin of 15% and applying P/E of 32x FY21E
consumer staples at
32x FY21

Bata India Ltd
Business Value Drivers
Orient Electric Ltd
Business Value Drivers
Bata is one the oldest players in India’s footwear segment and has successfully navigated various business
Sustainability & economic cycles over the years. Despite increased competition, the company has retained its pole position
and currently commands 14-15% share of the overall organised footwear market.
Disproportionate We envisage Bata to clock industry-leading growth driven by: a) rejig of top management; b) parent
Future company’s sharpened focus on the India market; and c) management’s cost rationalisation initiatives.
Business Strategy With an eye on bolstering its brand’s strength and perception among young consumers, Bata has: i)
& Planned overhauled its product range; ii) revitalised visual displays; and iii) reworked its brand communication
Initiatives strategy. This, management believes, will boost footfalls & conversion and spur same store sales growth.
Bata’s earnings are estimated to post 28% CAGR over FY08-21 driven by: a) 14.7% revenue CAGR over FY18-
Near-Term 21E; and (b) 390bps margin expansion over FY18-21E led by cost rationalisation & operating leverage.
Visibility Moreover, the asset-light business model is estimated to result in core RoCE expanding to 42.4% in FY21
from 32.8% currently.
Over the long term, given Bata’s leadership and management’s potent initiatives to get back its mojo, the
Long-Term
company’s performance is likely to grow in line with the industry at ~14-15%, along with superior RoCE and
Visibility
high free cash generation.
Inventory mismanagement on account of SKU and new product introduction, risk of new merchandise failing
Near Term Risk
to appeal to younger customers.
Long Term Risk Exit of key managerial personnel, lack of focus.

Bata India Ltd Focus Charts
Orient Electric Ltd Investment Hypothesis
Part I: Story in a Nutshell
Footwear consumption growth in a sweet spot
Bata India – Strong distribiution moat ; presence across 1400

Indian footwear – INR 55,000 crore industry; expected to grow at
stores in 550 cities
CAGR of 15% over FY17-20
15 1800
1600
1400
1200
No. od EBO's
1000 Khadim Bata
12.7 Liberty
800
Metro
600
400 Relaxo
200
FY14-17 FY17-20 0 Mirza
-200 0 100 200 300 400 500 600 700
Cities Presence (Reach)
Bata’s increased focus on high growth Women and Kids

Spread across price points and category; best play
category to drive growth
23.6%
Sundrops Hush Puppies

Premium Hush Puppies Nike
Dr. Scholl Naturalizer Dr. Scholl Weinbrenner 17.8%
(>Rs 3,000) Ambassador Adidas
Clarks Clarks Sundrops Woodland
Clarks Puma Clarks
Bata
Mid-premium Bata Bata comfit Marie Claire
Bata 11.4%
(Rs 1,500)-3,500) Power Bata comfit
Mocassino North Star North Star Bata
Reebok Catwalk
Metro Red Tape Catwalk Metro
Metro
Bubblegummers
Value/Mass Sandak Footin
Bata Sparx
segment Relaxo Bata & I Relaxo Liberty
Liberty Liberty
(< 1,500) Liberty Relaxo
Men’s casual/ Sports Women’s Women’s Youth/Kids Trekking/

Mens Womens Kids
Men’s formal
comfort fashion casual/comfort Outdoor
Bata India
Growth Engine
Enhanced Instore customer Focus on High Growth

Revamp product offerings Increased Marketing Spent
experience Categories
Red Label Collection Kirti Sanon Larger Stores/Stores in High Women

Casual Collection Smriti Mandhana Footfall Areas Kids
Premium Offerings Sushant Singh Rajput Enhanced Ambiance Sports
Higher Footfalls = Higher Conversion = Higher SSG

Bata India Ltd Focus Charts
Part II Bata’s potent initiatives to revitalise business bound to spur growth
All efforts on brand rejevenutation, visual merchandising and customer engagemnet to result in double digit revenue
ahead
Sales Growth Trend
22% 23%
19%
16%
Impacted by micro + Macro 15%
15%
14% challenges 13%
10.61% 11% 11%
9%
Trending towards
6%
4% growth
3% 6 years of double digit growth 3% 2%
2%
FY04 FY05 FY06 FY7 FY8 FY9 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20 FY21
..EBITDA margin to improve on back of growth and Operating

Series of efforts undertaken to bring swagger back to Bata..
leverage ahead
The Problem Statement Operational Factors/Plan of Action Status
1.70% 0.30% 17.2%
13.30% 0.20%
Merchandise lacking novelty Identified and Addressing 2.50%
Lack of traction in same
1 store sales growth (SSSG)
Brand Fatigue Identified and Addressing
Not up to the mark Retail Experience Identified and Addressing
Reduced focus on Addressing the opportunity through B2B

2 wholesale channel distribution model
No Concrete strategy yet
High cost of retail Increase revenue base from non-rental

3 Identified and Addressing
expansion avenues -0.80%
FY18OPM
Employee Cost
Rental
Sales & Distribution
Other Overheads
FY21 OPM
Gross Profit Margin
E-Commerce strategy Manage channel conflict and focus on it

4 missing as a growth channel
Work in Progress
Rationalize rental cost, negotiate existing
spent
Operating margin rentals, re calibrate store size, etc. Identified and Addressing
5 pressures
Control Overheads
Focus from the Global leadership Identified and Addressing
6 Is Bata India important

Commitment on India business Identified and Addressing
to be parent?
Importance to Global business Identified and Addressing
Strong balance sheet; with 40% in cash ..and robust core RoCE; likley to grow further
700 50.0%
600 42.6% 42.4%
40.0% 40.6%
500
32.4%
400 30.0%
25.6% 26.9%
300 20.0%
200
10.0%
100
- 0.0%
FY15 FY16 FY17 FY18
Cash and Bank % cash to balance sheet size FY16 FY17 FY18 FY19E FY20E FY21E
Source: Edelweiss Professional Investor Research

Bata India Ltd Investment Hypothesis
(I) Bata: Market leader with products across categories and segments
In the fast-growing INR 23,000 crore branded footwear segment, Bata is the market leader with
~14-15% share. The company is present in the value for money as well premium categories, which
cumulatively constitute ~40% of the total market.in this focused segment, Bata is the market leader
with ~20% market share. The segment of mid to premium products wherein Bata is present is
growing at a higher pace than the overall footwear market , presenting opportunity to Bata to
benefit from with its increased focus
a. Bata India – Strong distribution moat ; presence across 1400 stores in 550-600 cities
Bata India is the only player in the organized footwear space with an exclusive EBO led model of
1400 stores, spread across 550-600 towns and cities. We believe this exclusive owned distribution
spread is the greatest moat of the company.
EBO a cut above MBO-focused model

EBO MBO
Product exclusivity Competition from other products
Pricing power Price comparisons
Control over brand communication Dealer driven push
Helps build brands in the long run Only creates reach with limited capex
Market Leader With Widest Reach
1800
Charles & Keith
1600
Aldo
1400
Clarks India
1200 Catwalk
Bata Nike
1000
No. od EBO's
Khadim
Liberty Puma
800
Adidas
Metro
600 Relaxo
400 Liberty
Relaxo
Metro
200
Khadim
Mirza
0 Bata
0 100 200 300 400 500 600 700
-200 0 500 1000 1500
Cities Presence (Reach)
No of Stores
b. Bata India – Widest offerings- across price points and categories

Bata offers a wide range of products across categories and segments including men, women and
kids. Presence across price points insulates the company during down turn.

Bata is present across categories and across price points
Sundrops Hush Puppies

Premium Hush Puppies Nike
Dr. Scholl Naturalizer Dr. Scholl Weinbrenner
(>Rs 3,000) Ambassador Adidas
Clarks Clarks Sundrops Woodland
Clarks Puma Clarks
Bata
Mid-premium Bata Bata
Bata comfit Marie Claire
(Rs 1,500)-3,500) Mocassino Power Bata comfit
North Star North Star Bata
Reebok Catwalk
Metro Red Tape Catwalk Metro
Metro
Bubblegummers
Value/Mass Sandak Footin
Bata Power
segment Relaxo Bata & I Relaxo Liberty
Liberty Sparx
(< 1,500) Liberty Relaxo
Liberty
Men’s formal Men’s casual/ Sports Women’s Women’s Youth/Kids Trekking/

comfort fashion casual/comfort Outdoor

(II) Bata in the right cycle; making right moves resulting in revival of its growth
phase
Starting its journey from 1931; as a manufacturer of branded footwear; Bata has witnessed
series of ups and down in its journey and has successfully sailed through. The company
has scripted a strong turnaround every time faced with challenges and problems and
currently is the largest footwear retailer. Over FY15-18; in the last three years time frame
the company has grappled with various internal and external issues. With improving macro
environment towards consistent growth and addressing of internal problems, we believe
Bata is now at a cusp of strong earnings revival , which is likely to unfold in the profits and
returns ahead.
4,500 23% 25%

22%
4,000
19%
3,500 20%
16.2%
3,000 15% 15.5%
14% 15%
2,500 12.6%
11% 11%
10.61%
2,000 9%
10%
1,500
5.6%
1,000 4%
3% 5%
3% 2.1%
2%
500
- 0%
FY03 FY04 FY05 FY06 FY7 FY8 FY9 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E
NetSales % growth
800 20
17
700 17
16
15 16 15 15 15
600 13 13
12 12
11 11
500 10
9
400 7
6 5
300
3
200 0 0
100
-5
0 -6
FY03 FY04 FY05 FY06 FY7 FY8 FY9 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E
-100 Core Operating profit opm (%) -10
Restructuring Strong double digit growth Weak economy + Series of efforts

undertaken, VRS result of efforts and initiative company grappling undertaken from improved
under taken and undertaken also resulting in with internal issues product, increased
increasing marked improvement in OPM like inventory, weak customer engagement,
consumer focus from 2.6% in FY06 to 16% in product profile and increased marketing spent
FY13 low consumer and slew of cost
engagement rationalization drive to
yield results ahead..
10

(a) Rejig at the top level with enhanced focus from the parent
Over the past 24-36 months, Bata India has been gaining marked Importance in the global parent’s
portfolio with Mr. Thomas Archer Bata (Global Chief Marketing Officer) ) visiting India multiple
times for store launches and other events. This is led by strong growth opportunity presented by
the Indian market; by end FY19; Bata India would emerge as the largest market of Bata global. To
drive on this robust growth and get Bata India into the fashion index, it has inducted talent at the
top level to drive growth
Name Designation Profile
Currently, Alexis Nasard is the CEO of Bata global and comes with 24 years’ experience in the consumer
goods business and six years’ experience in Heineken. He heads the business since August 2016. This is for
Alexis Nasard Global CEO the first time that Thomas Bata has inducted some body from outside to lead the company. The current CEO
has visited India a couple of times and has maintained that India is one of the most important markets for
Bata.
Sandeep Kataria was inducted and elevated to CEO’s position at the India level in order to drive the brand’s
equity strength, improve customer engagement and marketing quotient to contemporise the brand’s image.
Sandeep Kataria has strong academic background (IIT Kanpur+ XLRI Jamshedpur) and rich experience in the
Sandeep Kataria CEO
consumer industry. His previous assignments include Vodafone India, Yum brands and Unilever. He was
inducted as country manager in August 2017 and within three months was elevated to the CEO’s office to
handle revenue growth and brand rejuvenation.
The CFO Mr. Ram Kumar Gupta (R.K. Gupta) has rejoined Bata. He has been associated with the company
since 1986 and has worked in different positions. In August 2015, he was Director-Finance, before he
Executive Director relocated to Kenya as Director- Finance of Bata Shoe Kenya. R.K. Gupta is one of the key people involved in
Ram Kumar Gupta
Finance and CFO Bata’s major restructuring over 2005-12. Post rejoining Bata, despite macro setbacks like demonetisation
and GST hitting the entire domestic consumption space, R.K. Gupta has managed to undertake a slew of cost
rationalisation initiatives which have led to earnings growth.
Rajeev Gopalakrishnan has been President of Asia South at Bata India since August 1, 2017, and serves as its
President of Asia Managing Director. He served as the CEO and Managing Director of Bata India from October 1, 2011 to
Rajeev
South at Bata August 1, 2017. He has been associated with Bata since the start of his career and has served in various
Gopalakrishnan
India Limited positions including Managing Director of Bata Bangladesh. He holds a Bachelor of Engineering (Mechanical)
degree from the University of Kerala.
Head Visual Design graduate from New Delhi- 1998 Batch ; Has worked in senior position across industry with over 20
Deepak Chakravarty Merchandising & years’ experience His experience includes working in companies like ITC and Adidas group as head
Retail Marketing merchandising
Anand Narag has been roped in from Reliance Jio. He will be taking care of marketing and customer
service/loyalty at Bata. His mandate is to drive footfalls in stores and create clutter-breaking campaigns. He
Anand Narag VP Marketing will also be closely looking at customer behaviour to strengthen the brand—customer interactions and hence
drive category business. Anand Narag has over two decades of experience and has worked with big
companies such as Nokia, Huawei Technologies, Bharti Airtel and Comverse.
11

(b) Revitalising the brand
Over the past 18-24 months, Bata has identified the problem areas and has been addressing them
to drive revenue and profitability. We list below details of the same and our view.
The problem and the company’s solution
The Problem Statement Operational Factors/Plan of Action Status
Merchandise lacking novelty Identified and Addressing

Lack of traction in same
1 store sales growth (SSSG)
Brand Fatigue Identified and Addressing
Not up to the mark Retail Experience Identified and Addressing
Reduced focus on Addressing the opportunity through B2B

2 wholesale channel distribution model
No Concrete strategy yet
High cost of retail Increase revenue base from non-rental

3 expansion avenues
Identified and Addressing
E-Commerce strategy Manage channel conflict and focus on it

4 missing as a growth channel
Work in Progress
Rationalize rental cost, negotiate existing

Operating margin rentals, re calibrate store size, etc. Identified and Addressing
5 pressures
Control Overheads
Focus from the Global leadership Identified and Addressing
6 Is Bata India important

Commitment on India business Identified and Addressing
to be parent?
Importance to Global business Identified and Addressing
12

(i) Improved /enhanced product offerings – Despite being a strong brand with sturdy quality
image, Bata remained largely a non stylish and a fuddy duddy brand in the Indian context. The
aspirational quotient both on the product and the brand image was lacking, Over the last 24-
36 months , lot of effort has undergone to change this image and make the brand more trendy
, stylish and palatable to the younger and the millennial audience The complete revamp of
offerings in each category (Men, Women, Kids and sports) is done to woo the consumers along
with keeping the pricing equation intact.
It has refreshed its products in various categories – In power it has launched power walking
collection with memory foam, trendy power shoes for women.
It introduced new stylish range of ladies footwear under the new collection naming the same as
the Red label collection
Under the Hush puppies brand, further premiumization and range is being added towards higher
price points
New launches in the youth oriented spaces under its brands like Power, Weinbrenner, Footin etc
13

(ii) Brand building to spur revenue growth
Revamped marketing - For any consumer brand, in order to drive mind share along with
wallet share of the consumer, it is imperative to continuously engage the consumer with
its products, communication and aspirational quotient. FMCG/ consumer facing
companies spent a substantial amount of their revenue, which drives revenue growth for
the company.
Historically seen that Over FY06-12, Bata posted revenue CAGR of 15.4% driven by increased
branding and new store addition aggression. It was during this period that the company’s
advertising and marketing spends increased substantially. Its advertisement spends averaged 1.5%,
which was pivotal in driving footfalls and conversion at the store level.
However, over FY13-Y17, Bata under-invested in brand building and communication—ad spends
largely remained range bound at 0.9-1.0% of sales. But, over the past 12-18 months, the company
has made efforts to improve its marketing quotient along with improvement in product offerings—
advertisement cost to sales increased from less than 1.0% to 1.5% in FY18.
Bata’s advertisement spent is increasing

45 2.0%
40 Advertisment Ad to sales 1.8%

1.7%
1.7% 1.5%
35 1.6%
1.4% 1.4%
30 Under investment in brands
1.3%
1.2%
25 Investment in 1.1%
(INR cr)
brand, results in 1.0% 1.0%

1.0% 1.0%
20 0.9%
0.8%
15 0.7%
0.6%
10 0.4%
5 0.2%
0 0.0%
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY15 FY16 FY17 FY18
For 9MFY19, Bata has spent around INR 50 crores (2-2.5%) of its revenue towards advertisement
and brand building, which has resulted in strong footfalls and better conversion, visible in the last
six months revenue performance. For Q3FY19, Bata reported a Same store Sales growth of 12%.
Enthused by the response on the revamped positioning,, the company has upped its ante further
and for FY20, it aims to increase its advertisement and brand building spent to around 3%, to further
drive revenue, and enhance its brand image.
14

Bata’s spent on advertising still lower than other discretionary players- Increase to propel
growth (Percentage to Revenue)
4.7 4.8
4.4
3.8 3.9
3.4
2.8 3.0
2.0 1.8
HAVELLS
ABFRL
BATA
METRO
ASIAN PAINTS
SHEELA FOAM
RELAXO Footwear
TRENT
TITAN
FOODWORKS
JUBILANT
It has roped in bollywood actress Kirti Sanon as its brand ambassador for fashion forward women’s
footwear. It has also appointed Smriti Mandhana (India’s youngest woman cricketer) as the
ambassador for its sports brand Power. In men’s footwear, while the company is still largely known
for its formal range, the shifting trend in favour of casual footwear has led to the company
improving its range in the latter; to communicate the same, it has roped in bollywood actor Sushant
Rajput as brand ambassador.
Kiriti Sanon- Surpisingly Bata TVC
Sushant Rajput – Casual collection Smirit Mandhana- Power collection
15

(iv) Improved instore consumer expereince to enhance brand image and drive growth -
Bata India over last 2-3 years has been working on improving its instore expereince right from
opening bigger stores, opening stores in high footfall areas like malls/ High streets.Over FY16-18, it
has added 165 stores, while in the same period it has also closed smaller stores (~1,000 sq ft.
The bigger stores provide a complete range of products, further with enhanced visual merchandise
and improved product placement the store and the shopping experience improves manifold for a
customer. All this aids to higher revenue and better margins
It aims to continue its expansion spree and has guided to add around l 100 stores. Of these, ~50
will be company owned & operated and balance 50 will follow the new franchisee store model
which Bata is exploring to reach out in tier 3 & 4 towns and cities.,
Along with opening new stores, it would also continue to renovate existing stores and improve
layouts with the objective of increasing same store sales growth.
By FY21, we expect Bata to reach 1575 stores with an aggregate 3.4mn sqft area
1800 4.0
1575
1600 1510
1445 3.5
1400
1400 1295
1235 3.4 3.0
1200
(No. of Stores)
3.0 2.5
1000
2.4 2.0
800
1.5
600
400 1.0
200 0.5
0 -
FY16 FY17 FY18 FY19E FY20E FY21E
Overall Total Retail space (mn sq ft)
We believe, Bata’s efforts to: (a) improving product portfolio; (b) enhance visual merchandising,
look & feel of its stores; and (c) improvement in communication & marketing layout, will boost
footfalls & higher conversion and lead to double digit revenue growth.
16

Larger stores with improved layout and premium merchandise
17

v) Focusing on high growth categories to drive growth
 Women share to increase to 35% in next three years
Currently, while women’s footwear constitutes ~30-35% of the overall market, men’s
constitutes ~55-60%. However, the former category is growing at ~18-20%, almost 2x the latter.
Thus, it becomes imperative for any footwear player to focus on the ~INR 20,000 crore
women’s footwear segment.
Women and kids category to grow at faster pace
23.6%
17.8%
11.4%
Mens Womens Kids

This segment contributes 26% to Bata’s revenue as the company was largely focused on the men’s
segment. Over the past three years, it has started focusing on this category and aims to take its
share to 35%. We believe this strategy, underpinned by appropriate customer engagement, better
products and wise pricing, will fetch rich returns.
 Kids category focus to drive growth

Around 18% of India’s population falls between 0 and 14 years and currently this (kids)
category forms ~9% of the total footwear market, which is highly unorganised. Shift to
formalisation of this segment is expected to drive strong growth for this category. Industry
estimates peg the kids category to grow at the fastest pace of ~23.6% over FY17-20. Kids’
overall share in the footwear segment is estimated to increase to 11%.
Bata is focusing on this huge market with its Bubblegummer brand and expects strong traction
from this category. Kids contribute less than 9% to Bata’s revenue, which it envisages to
increase to ~11%.
18

Exclusive 2 kids stores in Banaglore
Marked increase in the space dedicated towards kids
19

Sharpening focus on sportswear category to Power growth
INR 8,000 crore sports and athleisure category growing in double digits: The sports and athleisure
category in India is growing in strong double digits. Though a formal size and estimates are not
available, industry sources peg the market at INR 8,000 crore, constituting ~20% of the overall
footwear market. This segment is dominated by global players with Adidas leading the pack with
INR 1,100 crore (for FY18) revenue. Though Bata was present in this category through its franchisee
Power brand, focus on the category was missing. With growth in the category and rising domination
of global players, Bata has rejuvenated its focus on its Power brand.
Exploiting sports category via brand Power: Currently, the Power brand contributes ~10% to Bata’s
overall revenue. With swift growth in the category coupled with the company’s focus to take the
brand out of Bata stores to an exclusive format is likely to propel Power’s growth. In order to
resonate with the youth and sport enthusiasts, Bata has roped in Indian women cricket batsman
Smriti Mandhana as its brand ambassador.
Using online channel to expand reach, coverage and growth: Another notable trend in India’s
footwear industry is the spectacular growth in the online segment. The sportswear category has
embraced this distribution channel to the hilt. Currently, the online channel contributes ~20-22%
to total sports footwear sales. Initially, the company was in denial mode and hence lost revenue
and market share to the fast growing online mode. Over the last 18 months, the company has
focused on the online mode and now all its products are available across all market place model –
Amazon, Flipkart, Jabong and also it has its own exclusive online portal. The sports category has
highest online share at the industry level (at 18-20%), while Bata currently has only less than 3% of
the revenue from this mode, the growth potential is high with focus and leverage on this
distribution mode.
Exclusive formats: Sensing the opportunity in the category, Bata has enlarged its collection of
Power offerings for men, women and kids. Also, to create a brand identity & uniqueness in line with
its strategy of Hush Puppies, it is planning to open exclusive Power stores as well as those that will
display the entire width and depth of the product.
Exclusive Power stores
20

Power to contribute 18-20% to turnover in next five years: With this mix of well placed strategy
and positive macros, we expect brand Power to grow in higher double digits and double its share
from current 10% to ~18% over the ensuing five years.
Top Sports Footwear brands in India (INR Cr) Geographical presence
1,100 800
1,000 900
450
500 360
300 250 250
Adidas Puma Nike Reebok Power Bata Power Adidas Puma Nike Reebok
Source- RoC; industry estimates
Bata India
Growth Engine
Enhanced Instore customer Focus on High Growth

Revamp product offerings Increased Marketing Spent
experience Categories
Red Label Collection Kirti Sanon Larger Stores/Stores in High Women

Casual Collection Smriti Mandhana Footfall Areas Kids
Premium Offerings Sushant Singh Rajput Enhanced Ambiance Sports
Higher Footfalls = Higher Conversion = Higher SSG
We estimate Bata to post 14.7% revenue CAGR over FY18-21 driven by high single digit same store
sales growth and an annual 60 new store additions.
Bata India: expected to grow at CAGR of 14.7% over FY18-21E

5,000 20.0
15.0
4,000
10.0
3,000 5.0
(INR cr)
(%)
2,000 -
(5.0)
1,000
(10.0)
- (15.0)
FY16 FY17 FY18E FY19E FY20E FY21E
Net Sales % growth
21

Premiumization trend to result in higher gross margin
Over the years, shopping preferences of consumers have changed from price sensitive to fashion
quotient. Bata’s positioning has always been of a sturdy, but low fashion quotient brand. The
company has now consciously changed this perception with trendier and much more fashionable
merchandise. Towards this end, it has exited value category of footwear (MRP < 200; in plastic and
rubber categories) and entering high fashion and premium products.
Brand wise revenue mix (%) Price wise revenue mix (%)
Acessories,
10
Power, 10 20%
30% INR 1500+
INR 1000+ - 1500
Hush
Puppies, 10 INR 500+- 1000
Bata, 70 27%
INR > 500
20%

Within each category and sub segment, Bata is moving towards the premium range and has vacated
the low end of the market. Currently the premium portfolio contributes around 30% to the company
revenue and with increasing focus in driving growth for this segment, the share is likely to reach
45% in the next three years time frame .
The premium collection for Bata is Hush Puppies, Naturalizer, European Collection, Power
International Range and North Star. Bata has also entered collections of casual, daily wear, sports
and outdoor categories for the 10-14 year age group.
Premium product portfolio helps push the brand quotient on one hand with better connect with
spending millennial class, while on the other hand it leads to higher gross margin and thereby
propels overall margin in higher orbit.
A continuous focus on the premium segment, has resulted in Bata’s per pair realisation growing at
a CAGR of 7.7% from INR 485 per pair in FY15 to INR 562 in FY18, and we expect the same to increase
by 8-10% further in the ensuing years to reach around INR 660 by FY21
Further towards this drive, we expect this to impact gross profit margin positively. Historically as
well, Bata’s gross profit margin has improved from 52.5% in FY16 to 55.9% in FY18 (expansion of
340bps over four years). We believe, the trend is likely to sustain with further aggression and hence
estimate the company to post 56.7% gross margin by FY21.
Improving Average Realization (INR per pair) 562

526
485
FY16 FY17 FY18
22

Expanding Gross margins (%)
56.7 56.7
55.9 56.0
54.2
53.2
52.5
FY16 FY17 FY18 9MFY19 FY19E FY20E FY21E
Cost rationalisation efforts to result in huge operating leverage benefits

Despite clocking 54% plus gross margin, Bata’s current operating margin is ~13%. For FY18, ~40%
of the total cost is largely fixed. Rentals and employees are major fixed costs for Bata constituting
13.3% and 11.2% of revenue, respectively. Evaluation of discretionary and retail players indicates
that this ratio of rentals to revenue is extremely high for Bata.
Bata’s rental remain high visa-vis other retailers…providing scope for improvement
13.7%
12.1%
10.1% 10.8%
7.5% 7.6%
4.4%
V-Mart Metro Future Retail Future Lifestyle Jubilant Trent Bata

Foodworks
However, we expect it to improve on: (a) improvement in sales per sq ft; (b) renegotiation of lease
rentals across stores; (c) rationalisation of store size to improve store economies; and (c)
renegotiation with suppliers. These efforts to rationalise overheads coupled with the ongoing
premiumisation drive will positively impact margin.
We estimate Bata’s operating profit margin to expand by 390 bps over the ensuing 9 quarters to
17.2% by FY21.
Journey of operating profit margin from 13.3% in FY18 to 17.2% in FY21E

1.70% 17.2%
0.20% 0.30%
2.50%
13.3%
-0.80%
FY18OPM Gross Profit Employee Cost Rental Sales & Other FY21 OPM
Margin Distribution Overheads
spent
23

(III) Asset-light balance sheet + improved margin to lead to strong core RoCE
expansion
Bata, over the years, has evolved from a manufacturing-cum-retailer in to a mid-premium retail
branded player. It has taken a conscious decision to reduce its presence in manufacturing, thereby
creating an asset-light business model.
Currently, ~60-65% of the products sold at Bata are outsourced, resulting in better asset turns and
also margin improvement. Going forward we expect Bata’s EBITDA margin to improve from 13.3%
in FY18 to 17.2 % in FY21E.
With improvement in margin, we estimate Bata’s core RoCE to jump from 32.8% in FY18 to 42% by
FY21
40.6% 42.6% 42.4%
32.4%
25.6% 26.9%
FY16 FY17 FY18 FY19E FY20E FY21E
Strong operating cash flow generation ahead to provide scope for inorganic expansion- Driven
by strong margin expansion and stable working capital cycle, Bata is expected to generate strong
operating cash flows ahead, we expect the company to post an aggregate free cash flow of INR
670 crore over FY18-21E. This strong operating cash flow generation along with already high cash
in the books (around INR 600 crore) further strengthens Bata balance sheet. By FY21, we expect
Bata’s cash on books to almost double from present INR 600 crore to INR 1100 crore, thereby
providing it an opportunity to expand via acquisition or takeover.
FY15 FY16 FY17 FY18 FY19 FY20 FY21

Net profit 200 159 175 221 312 391 462
Add: Depreciation 79 79 65 60 67 77 88
Gross cash flow 279 238 240 281 379 467 550
Less: Changes in W. C. 77 113 226 93 209 103 114
Operating cash flow 202 125 14 188 170 365 436
24

IV. Competitive positioning
Resilient performance even during downturns
50%
40%
30%
20%
10%
0%
-10%
-20%
Bata Relaxo Khadim Metro Mirza Liberty Adidas
FY13 FY14 FY15 FY16 FY17 FY18
Amongst the best Gross Margins; likely to improve (%)
54.5 54 55
47.8
45.7
41.5
38
Bata Relaxo Khadim Metro Mirza Liberty Adidas
Scope for improvement in operating margin (%)
15.4 15.3
13.4
10.3
Bata Relaxo Khadim Metro
25

Well placed on RoCE to EBITDA profile; with scope for improvement
18%
16%
14%
12% Metro
EBITDA Margin
Relaxo
10% Bata
8% Khadim
6%
4%
2%
0%
15% 20% 25% 30% 35% 40%
RoCE
26

Bata India Ltd
Outlook and Valuation
Orient Electric Ltd
Outlook
We initiate coverage on Bata India with and Valuations
“Buy” recommendation and TP of INR 1500, entailing 20%
upside based on current market price. Our TP is based on 42x FY21 EPS of INR 36. We belevie that
Bata being a market leader in the fast growing footwear category with right intervention, strong
ROCE and strong balance sheet with 40% cash is at the cusp of growth is likely to trade at in line
with the other leading consumer plays.
Relative Valuation
Diluted EPS (INR) P/E( x) EV/EBITDA(x) ROCE
M-cap
Company EPS CAGR
(INR cr) FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E
FY18-20
Havell's India 43073 11.2 13.9 17.3 24.1 63.1 50.8 41.0 40.8 32.7 26.5 28.1 31.5 34.9
Asian Paints 133674 21.1 24.2 29.6 18.5 68.8 60.1 49.0 43.4 39.0 32.0 34.3 34.6 37.5
Pidilite Industries 55680 19.0 19.2 23.7 11.6 59.7 59.3 47.9 42.3 39.5 32.2 36.2 33.8 35.5
Jubilant Foodworks 17167 15.6 24.6 29.6 37.5 83.0 52.7 43.9 37.5 27.2 22.4 33.0 42.5 41.8
Titan Company 92241 12.6 16.3 20.3 26.8 84.6 65.4 52.6 57.2 44.6 35.9 34.0 36.8 38.7
Aditya Birla Fashion
16836 1.5 3.4 5.3 86.7 137.7 61.4 39.5 38.8 25.4 19.5 7.0 15.0 19.2
and Retail
Avenue Supermarts
91385 12.9 15.4 20.3 25.3 111.6 93.7 71.2 66.3 54.1 41.6 25.6 28.0 29.8
Limited
Trent LTD 11069 2.6 5.5 7.7 71.1 130.1 61.5 44.4 57.9 40.9 30.7 10.4 13.0 15.4
Median 26.0 83.8 60.7 46.2 42.8 39.3 31.4 30.5 32.7 35.2
Bata India 16127 17.2 24.3 30.4 33.0 73.0 51.7 41.3 38.4 28.7 22.9 32.4 40.6 42.6
Key Risks
 Exit of key management personnel: Exit of senior management (Mr. Sandeep Kataria and
senior management employees like R.K. Gupta ) is a key risk for Bata as it has played an
important role in turning around the company over the past 3 years.
 Intense competition: Bata may face intense competition from existing players in the form of
aggressive pricing, increased spending on marketing & distribution, launch of improved
products with attractive features, etc. Furthermore, entry of large international companies in
the footwear segment can lead to intense competition in the industry in the future.
 Slowdown in economy: Rise in disposable incomes is a key driver of consumer discretionary.
Hence, any slowdown in the economy could pose downside risk to Bata’s earnings.
27

Bata India Ltd
Business Overview
Orient Electric Ltd
Business Overview
Company Description
Bata, India’s largest footwear retailer, has been operating in the Indian subcontinent for around 9 decades with a retail
network of 1,400 stores across 550 cities, entailing 3 mn sq ft retail space. It has 5 manufacturing plants at West Bengal, Bihar,
Karnataka and Tamil Nadu.
Bata is a part of Bata Shoe Organization (BSO) that has presence in 70 countries and operates through 3 business units—Bata
India is the largest entity of the BSO in terms of pairs sold and will overtake Italy in FY19 in terms of revenue (currently Italy is
the largest revenue market for BSO).
BSO provides access to the technical research and innovative programmes of Global Footwear Services, Singapore. This
arrangement is currently valid up till 2021 and Bata pays 1% as a technical charge for the same.
The company retails shoes across all price points via its own EBO network of 1,300 plus stores. It
Business Model
manufactures as well as outsources products that it retails.
Strategic Positioning It has pan-India presence and strong brand equity in the minds of its target consumers.
Competitive Edge Wide product portfolio—men, women as well as kids, with store presence in key geographies.
Financial Structure Strong balance sheet, with zero debt on books and ~35% plus of the balance sheet in cash.
Key Competitors Relaxo, unorganised players.
Industry Revenue
Increasing per capita consumption of footwear along with premiumisation trend.
Drivers
Shareholder Value The company is likely to clock EPS of INR 30.4for FY20E. At valuation of 42x FY21E, we arrive at
Proposition target price of INR1500 which offers an upside of 20% from the current level.
28

Bata India Ltd Timeline
Orient Electric Ltd Timeline
Major Milestones
1931: 2002: 2012: 2015: The company tried 2017:

Incorporated in Massive operational • Achieved annual sales of to change the inventory Further restructuring towards
Kolkata as Bata Shoes restructuring initiated – 50 mn pairs tracking system from new management, cost
Co. Batanagar plant closed down cash traditional basis to SAP rationalization efforts continued
was the first footwear drain stores, employee module, the changeover
manufacturing facility VRS, technology had problem, resulting in
to receive ISO 9001 upgradation, higher inventory pile up
certification outsourcing etc and lower sales
1931 1971 2002 2011 2012 2013 2015 2016 2017 2018
1971: 2011: 2013: 2016: 2018

Public issue and name Restructuring nearly • General slowdown and the online • Rejig at the • Marked change in the product,
was changed to Bata complete; focus shifts slaughter and weak product portfolio management level positioning, pricing and
India Limited to aggressively impacted the performance was done to fix on communication undertaken to cater
opening large format the inventory to the evolving young generation
destination stores and problem; which was
EBO’s for certain resolved
scalable sub-brands
29

Bata India Ltd Financials
Orient Electric Ltd Financials
Year to March (INR cr) FY17 FY18 FY19E FY20E FY21E
Income from operations 2,474 2,641 2,968 3,450 3,984
Direct costs 1,158 1,209 1,306 1,494 1,725
Employee costs 273 296 329 380 438
Renal expenses 357 362 365 414 478
Other expenses 408 423 484 569 657
Total operating expenses 2,196 2,290 2,484 2,857 3,299
EBITDA 278 351 484 593 685
Depreciation and amortisation 65 60 68 77 87
EBIT 213 291 416 516 598
Interest expenses 4 4 4 4 4
Other income 46 51 53 70 97
Profit before tax 255 337 465 582 691
Provision for tax 75 116 153 192 228
Core profit 180 221 311 390 463
Extraordinary items -22 0 0 0 0
Profit after tax 158 221 311 390 463
Minority Interest 0 0 0 0
Share from associates 0 0 0 0
Adjusted net profit 180 221 311 390 463
Equity shares outstanding (mn) 13 13 13 13 13
EPS (INR) basic 14 17 24 30 36
Dividend per share 4 4 4 4 4
Dividend payout (%) 29 23 17 13 11
Common size metrics- as % of net revenues

Year to March FY17 FY18 FY19E FY20E FY21E
Operating expenses 88.8 86.7 83.7 82.8 82.8
Depreciation 2.6 2.3 2.3 2.2 2.2
Interest expenditure 0.2 0.2 0.1 0.1 0.1
EBITDA margins 11.2 13.3 16.3 17.2 17.2
Net profit margins 7.3 8.4 10.5 11.3 11.6
Growth metrics (%)

Revenues 2.1 6.7 12.4 16.2 15.5
EBITDA 2.3 4.3 8.5 15.0 15.5
PBT 14.9 32.3 37.8 25.3 18.7
Net profit (27.3) 39.8 41.0 25.3 18.7
EPS 25.9 23.0 41.0 25.3 18.7
30

Balance sheet (Standalone)
As on 31st March FY18 FY19E FY20E FY21E
Equity share capital 64 64 64 64
Reserves & surplus 1,481 1,793 2,183 2,646
Shareholders funds 1,545 1,857 2,248 2,710
Long Term Borrowing - - -
Short Term Borrowing - - -
Minority interest - - -
Other Liabilties - - -
Sources of funds 1,545 1,857 2,248 2,710
Gross block 485 585 685 785
Depreciation 293 373 453 533
Net block 192 212 232 252
Capital work in progress 14 14 14 14
Total fixed assets 206 226 246 266
Intangible Assets
Deferred tax assets 105 105 105 105
Inventories 762 829 964 1,113
Sundry debtors 89 98 113 131
Cash and equivalents 636 659 867 1,135
Loans and advances 188 207 228 251
Other current assets 105 115 132 152
Total current assets 1,780 1,908 2,305 2,782
Sundry creditors and others 657 554 639 735
Provisions
Total CL & provisions 657 554 639 735
Net current assets 1,123 1,355 1,665 2,048
Uses of funds 1,545 1,857 2,247 2,710
Book value per share (INR) 120 144 175 211
Cash flow statement

Year to March FY18 FY19E FY20E FY21E
Net profit 221 312 391 462
Add: Depreciation 60 67 77 88
Add: Deferred tax
Add: Others 0 0 0
Gross cash flow 281 379 467 550
Less: Changes in W. C. 93 209 103 114
Operating cash flow 188 170 365 436
Less: Capex 83 100 100 100
Free cash flow 105 70 265 336
31

Ratios
ROAE (%) 13% 16% 19% 19% 19%
ROACE (%) 21% 24% 28% 29% 28%
Current ratio 3 3 3 4 4
Debtors (days) 10 10 11 12 12
Inventory (days) 104 103 102 102 102
Payable (days) 68 79 65 65 65
Cash conversion cycle (days) 46 34 48 49 49
Debt/EBITDA
Debt/Equity
Adjusted debt/Equity
Valuation parameters
Diluted EPS (INR) 14.0 17.2 24.3 30.4 36.0
Y-o-Y growth (%) 25.9 23.0 41.1 25.3 18.4
CEPS (INR)
Diluted P/E (x) 101.7 72.7 51.5 41.1 34.7
Price/BV(x) 12.1 10.4 8.7 7.1 5.9
EV/Sales (x) 6.3 5.8 5.2 4.4 3.7
EV/EBITDA (x) 48.0 38.4 28.7 22.9 19.1
Diluted shares O/S 12.9 12.9 12.9 12.9 12.9
Basic EPS 14.0 17.2 24.3 30.4 36.0
Basic PE (x) 101.7 72.7 51.5 41.1 34.7
Dividend yield (%) 0.32 0.32 0.32 0.32 0.32
32

I. India favourably placed to ride on the consumption boom.
Footwear consumption remain low in India
Per Capita Consumption (No. of 9.0

8.0 UK
7.0
6.0 Mexico
5.0 Indonessia USA
pairs)
4.0 Brazil
3.0 China
2.0 India
1.0
0.0
- 10,000 20,000 30,000 40,000 50,000 60,000 70,000
Per capita GDP (USD)
...And per spent on footwear is low

70,000 50
60,000
40
Per capita GDP (US$)
Spent per pair in US$

50,000
40,000 30
30,000 20
20,000
10
10,000
- 0
India Indonessia China Mexico UK Brazil USA
Per capita GDP Spent per pair
India’s per capita consumption as well as per capita spent on footwear is low, and with the growth
in the per capita GDP, the per person consumption along with the per pair spent on footwear is
likely to grow.
Indian footwear industry estimated to grow in mid-teens over medium term

Industry estimates peg the overall footwear industry at INR 55,000 crore, having clocked 12.7%
CAGR over the past five years and estimated to clock 15% CAGR till FY20. Within the industry, while
men’s category is likely to grow at 11.4%, women’s category is expected to grow at a faster clip of
17.8%; kids segment is estimated to register 23% CAGR over the ensuing three years.
33

Footwear Industry expected to grow in mid teens Women and kids category to grow at faster pace
15 23.6%
17.8%
11.4%
12.7
FY14-17 FY17-20 Mens Womens Kids
The women’s and kids composition in the footwear category is likely to increase from present level of 37%/ 9% to around 41%/11%
by FY20.
Footwear
industry
Kids, 9% break-up - Kids, 11%
2020, 0%
Men, 48%
Women, Men, 54% Women,
37%
41%
The share of branded footwear in India is estimated to jump to 50% by FY20 from 42% currently led
by: (a) penetration of existing brands in tier 2 & smaller cities; (b) existing international premium
brands expanding their presence via launch of new stores; (c) deepening reach of mid & economy
brands to tier 2-3 towns & cities; and (d) demand shift from unbranded to branded.
The urban segment constitutes ~67% and within the urban cluster, top 8 cities that constitute
metros contribute ~40% to total revenue; tier 1 & 2 cumulatively contribute the next 40% of the
urban share. Broadly based on these estimates, Metro + tier 1 & 2 cities together contribute ~55-
60% to the overall footwear market and the same is estimated to have higher organised share.
Category and price point wise, around 45% of the footwear is sold at >INR 500 and the same is
growing at a higher rate than the mass footwear category (in higher single or lower double digit);
higher price point footwear is growing in double digits.
34

Breakup of Footwear Market by Price Point
Price Segments
% Share, Value (Avg. Selling Price at Retail Stores in INR)
6% Premium
(3000+)
Micl
10% (1000-3000)
Economy
30%
(800-1000)
54% Mass
<600
Footwear segment: Key trends

Rising trust in branded footwear: Though the market share of branded and non-branded footwear
in India has remained almost the same till date, brand consciousness has increased significantly. A
fast-growing economy and a rising number of affluent consumers have pushed India into the league
of most brand conscious countries globally. However, most consumers prefer a price point ranging
between INR 999 and INR 4,999 in national and international brands.
Growing opportunities in women’s segment: Though women’s footwear has only 30% market
share currently, its growth rate is double that of the men’s segment. Men’s category is expected to
grow at 10% ; while women is expected to grow at 20% for the next 3-5 years time frame
Omni-channel retailing: Retailers have started venturing in omni-channel retailin are trying in-store
marketing solutions such as beacons to enrich the shopping experience and are finding ways to
bridge the gap between offline and digital channels. In addition to engaging users on the digital
platform and influencing their merchandising decisions, many retailers are using platform not just
to showcase products, but to actually sell them. The same goes for mobile phones. Companies are
using the small screen to not just ‘get in front’ of customers (i.e., through geo-fencing and mobile-
enabled sites but also for parts of the customer journey, including order fulfilment, payments, and
loyalty.
Online Contribution
13
10 11
8
6
3
2013 2014 2015 2016 2017 2018
35

Bata India Ltd
Orient Electric Ltd
Edelweiss Broking Limited, 1st Floor, Tower 3, Wing B, Kohinoor City Mall, Kohinoor City, Kirol Road, Kurla(W)
Board: (91-22) 4272 2200
Vinay Khattar
VINAY
Digitally signed by VINAY KHATTAR
DN: c=IN, o=Personal, postalCode=400072,
st=Maharashtra,
2.5.4.20=87db74ffb17a70c89e8519a4d13e40e93
Head Research c4bcaba1a64d00f3c841d2fee3fa678,
KHATTAR
serialNumber=cd5737057831c416d2a5f7064cb6
93183887e7ff342c50bd877e00c00e2e82a1,
vinay.khattar@edelweissfin.com cn=VINAY KHATTAR

Date: 2019.02.16 20:19:38 +05'30'
Rating Expected to
Buy appreciate more than 15% over a 12-month period
Hold appreciate between 5-15% over a 12-month period
Reduce Return below 5% over a 12-month period
260
240
220
200
(Indexed)
180
160
140
120
100
80
60
Jul-14
Oct-14
Jul-15
Oct-15
Jul-16
Oct-16
Jul-17
Oct-17
Jul-18
Oct-18
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Bata Sensex
36

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Long Term Recommendation Bata India LTD.: The Growth Sprint

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Long Term Recommendation Bata India LTD.: The Growth Sprint

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Long Term Recommendation

Bata India Ltd. The Growth Sprint…

Market leader and a one-stop footwear destination

Year to March FY18 FY19 FY20E FY21E

Edelweiss Professional Investor Research 1

Business Value Drivers ........................................................................................................ 5

Focus Charts 1 ..................................................................................................................... 6

Focus Charts 2 ..................................................................................................................... 7

IV. Competitive positioning ................................................................................................ 25

Outlook and Valuations ...................................................................................................... 27

Business Overview ............................................................................................................. 16

Key Management ............................................................................................................... 16

Edelweiss Professional Investor Research 2

Bata has a strong balance sheet with 35%

Edelweiss Professional Investor Research 3

Edelweiss Professional Investor Research 4

Long Term Risk Exit of key managerial personnel, lack of focus.

Edelweiss Professional Investor Research 5

Bata India – Strong distribiution moat ; presence across 1400

Cities Presence (Reach)

Bata’s increased focus on high growth Women and Kids

Sundrops Hush Puppies

Men’s casual/ Sports Women’s Women’s Youth/Kids Trekking/

Enhanced Instore customer Focus on High Growth

Red Label Collection Kirti Sanon Larger Stores/Stores in High Women

Higher Footfalls = Higher Conversion = Higher SSG

Edelweiss Professional Investor Research 6

..EBITDA margin to improve on back of growth and Operating

Not up to the mark Retail Experience Identified and Addressing

Reduced focus on Addressing the opportunity through B2B

High cost of retail Increase revenue base from non-rental

Sales & Distribution

E-Commerce strategy Manage channel conflict and focus on it

Rationalize rental cost, negotiate existing

Focus from the Global leadership Identified and Addressing

6 Is Bata India important

Source: Edelweiss Professional Investor Research

Edelweiss Professional Investor Research 7

EBO a cut above MBO-focused model

Market Leader With Widest Reach

b. Bata India – Widest offerings- across price points and categories

Edelweiss Professional Investor Research 8

Sundrops Hush Puppies

Men’s formal Men’s casual/ Sports Women’s Women’s Youth/Kids Trekking/

Edelweiss Professional Investor Research 9

4,500 23% 25%

Restructuring Strong double digit growth Weak economy + Series of efforts

Edelweiss Professional Investor Research 10

Name Designation Profile

Edelweiss Professional Investor Research 11

The problem and the company’s solution

The Problem Statement Operational Factors/Plan of Action Status

Merchandise lacking novelty Identified and Addressing

Not up to the mark Retail Experience Identified and Addressing

Reduced focus on Addressing the opportunity through B2B

High cost of retail Increase revenue base from non-rental

E-Commerce strategy Manage channel conflict and focus on it

Rationalize rental cost, negotiate existing

Focus from the Global leadership Identified and Addressing

6 Is Bata India important

Edelweiss Professional Investor Research 12

Edelweiss Professional Investor Research 13

Bata’s advertisement spent is increasing