Bata to use multi-channel retail strategy to reach more customers: Sandeep Kataria, CEO, Bata India

Update on the Indian Equity Market:

On Wednesday, NIFTY50 closed 0.5% higher. NIFTY50 gainers include Yes Bank (+8.3%), Ultratech Cement (+3.1%), and SBI (+2.9%). NIFTY50 losers include Infratel (-3.2%), Cipla (-2.2%), and L&T (-1.7%). Realty (-0.6%) and Media (-0.4%) were the only losing sectors while PSU BANK (+1.8%), Auto (+1.3%), and Metal (+0.9%) were the top gaining sectors.

Excerpts from an interview with Mr Sandeep Kataria, CEO, Bata India, published in the Economic Times dated 27^th November 2019:

• Bata will continue its growth journey in India with the multi-retail channel approach along with the e-commerce platform to reach out to as many customers as it can.
• The company has a retail network in 450 towns and wishes to further expand by adding new stores in smaller towns through the franchise route.
• Bata has been using three engines – a) their own stores, b) franchise partner store, which is a big drive for them in tier III & IV, and c) multi-brand outlets.
• To add to all this is their E-commerce channel, whether through their own website or through other marketplaces, that helps them to get as many customers as they can.
• The Company will strengthen its presence by adding 500 stores in the next five years, focusing mainly on small markets as it has identified tier II, III and IV cities where it has plans to broaden its sales network through the franchise model.
• India is much bigger and Bata’s brand image is also bigger. So, they have decided to expand their reach to as many Indians and take advantage of their equities.
• Online channels are providing opportunities in multiple ways to reach consumers. Bata can use digital channels to increase the productivity of their stores and enhance the satisfaction of their consumers.
• Bata is working hard to reconnect with the country’s millennials. Bata India has a whole battery of brands in Bata as North Star, Bata Red Label, Marie Claire and Footin which talk to millennials. The Company does not have to rely on Bata as the main brand.
• When asked whether Bata has any plans to introduce new brands from its global fold, Mr Kataria said the Company is not very keen to do that as there is a huge opportunity for them to play with the brands which they have here. The Company has a license for the manufacture and sale of several global brands as Hush Puppies and Naturalizer. Bata has introduced outdoor brand shoes from Caterpillar in its top selected outlets this season.

Consensus Estimate (Source: market screener website)

• The closing price of Bata India Ltd was ₹ 1,615/- as of 27-November-19. It traded at 52x/ 44x/ 36x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 30.8/ 36.9/ 44.3 respectively.