Equity Research Report

February 13, 2016

BSE CODE: 500043

Bata India Limited NSE CODE: BATAINDIA
SECTOR: LEATHER PRODUCTS

CMP: Rs 460.10
Recommendation : BUY
Target Price : Rs 700
Target Period: 6 Months

Stock Details
Market Cap Rs 6,094.78 Crore
52- wk HI/L Rs 658.35 Rs 438
Avg.Volume (Monthly) 425274.33
Face Value Rs 5 About
Historical Prices Bata India Limited is an India-based company engaged in the manufacturing
1 week 1 month 3 month 6 month 1 year and retailing of footwear and accessories for women, men and kids. The
BSE 488.60 457.15 472.20 589.10 643.13
Gain/Loss Company offers various categories for women and men, which include
-3.01% 3.66% 0.36% -19.5% -26.3%
NSE 487.25 460.25 472.30 587.98 642.58 chappals, closed shoes, sandals, formal shoes and sport shoes. The
Gain/Loss
-2.64% 3.07% 0.44% -19.3% -26.2% Companys women accessories include scarves and handbags. Its men
accessories include bags, belts, wallets, shoe care, foot care, handkerchief
and socks. The Companys brands include Ambassador, Angry Birds, Bata,
Revenue (Rs Crore) Bata Lite, Bata Walks Green, Comfit, Hush Puppies, Marie Claire,
3000 2694
Naturalizer, North Star, Power, Sandak, Scholl, Sparx, Sundrops and
2065.18
1842.45
2000 1542.54 Sunshine, among others. It also operates a non-retail distribution network
1258.08
1000 through its urban wholesale division. The Way Finders Brands Limited
0 (WFBL) is a wholly owned subsidiary of the Company. Bata India gains as
Dec'10 Dec'11 Dec'12 Dec'13 Dec'15
parent company hikes stake.
EBIDTA (Rs Crore) Financial Highlights

500
361.38 343.1
409.7 Bata Indias (Bata) Q1FY16 revenues were up 9.4% YoY to Rs.
400 304.4
300
194.35
680.45 crore (I-direct estimate: 603.5 crore)
200
EBITDA for the quarter declined 11.1% YoY to Rs 86.38 crore on
100
0 account of a 294 bps YoY dip in operating margin to 12.7%. The
Dec'10 Dec'11 Dec'12 Dec'13 Dec'15
operating margin declined owing to higher rental, promotional
schemes and price discounts and higher proportion of traded goods
Profit After Tax(Rs Crore)
225.84 231.2 as a percentage of sales
250
190.7
200 171.6 PAT for the quarter stood at Rs. 92.2 crore, posting growth of
150
95.35 ~55.3% YoY (I-direct estimate: Rs. 53.2 crore). PAT was mainly
100
50 driven by exceptional income of 42.95 crore. Excluding this, there
0
Dec'10 Dec'11 Dec'12 Dec'13 Dec'15 was degrowth in PAT by 17% YoY

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 Equity Research Report
February 13, 2016

Bata India Limited

Mar Dec Investment Rationale

'15 '13
Investment Valuation Ratios Over the last seven years (CY06-CY13), Batas revenues have grown at a
Face Value 5.00 5.00 CAGR of 17.6%. This growth came on the back of an improving product
Dividend Per Share 6.50 6.50 mix, which aided the company to report realisation growth of 10.2% during
Operating Profit Per Share (Rs) 52.11 50.08 the period. Bata faced supply chain problems in FY15 (15 months),
Net Operating Profit Per Share (Rs) 419.21 321.36
particularly during October 2014-March 2015, owing to teething problems
Bonus in Equity Capital 15.24 15.24
related with its new SAP system installed at ~1274 stores. The company
Profitability Ratios
Operating Profit Margin(%) 12.43 15.58 faced connectivity issues at many stores. Hence, these stores could not
PBIT Margin(%) 9.34 12.52 receive the required quantum of supplies, thereby negatively impacting
Gross Profit Margin(%) 9.49 12.71 revenue growth. With most supply chain issues sorted out in Q1FY16, we
Cash Profit Margin(%) 10.18 12.40
expect revenue growth to revive and expect a CAGR of 18% in FY15-17E.
Adjusted Cash Margin(%) 10.18 12.40
In Feb15, the firm reinstated the old IT platform at the distribution center
Net Profit Margin(%) 8.58 9.23
Adjusted Net Profit Margin(%) 8.44 9.09 level, without changing the new SAP software at the store level. Store
Return On Capital Employed(%) 30.02 36.16 managers suggest that inventory levels, which declined 30-40% at the store
Return On Net Worth(%) 23.22 23.46 level in Oct14-Jan15, are back to normal levels from Feb15 onwards.
Return on Long Term Funds(%) 30.02 36.16 Some store managers have started reaping the intended benefits of the new
Liquidity And Solvency Ratios
software which includes improved efficiency of the distribution centers
Current Ratio 2.08 2.05
Quick Ratio 0.79 0.84 amidst a widened range of SKUs and use of store-level MIS by each store
Debt Equity Ratio -- -- manager to better prepare for upcoming demand patterns.
Debt Coverage Ratios During CY07-12, Batas volumes increased from 4.4 crore pieces to 5.2
Interest Cover 170.22 226.33 crore pieces while realisations improved significantly from Rs. 197/piece to
Total Debt to Owners Fund -- --
Rs. 343/piece. Accordingly, revenues increased from Rs. 867.5 crore to Rs.
Financial Charges Coverage Ratio 215.34 271.90
1,842.5 crore in CY12. We expect revenues to further increase to Rs. 3,011
Management Efficiency Ratios
Inventory Turnover Ratio 3.88 3.60 crore by FY17E. Volumes are likely to increase to 6.4 crore pieces with an
Debtors Turnover Ratio 49.28 43.08 average realisation of Rs. 457/piece.
Investments Turnover Ratio 3.88 3.60 After the success of the Hush Puppy stores, the company plans to launch
Fixed Assets Turnover Ratio 3.88 3.44
more brand specific stores, going forward. This helps customers to delink
Total Assets Turnover Ratio 2.71 2.54
the brand from the Bata group and, thereby, overcome the drag of a mass
Asset Turnover Ratio 2.89 2.68
Number of Days In Working Capital 76.69 86.32 market brand. On the back of these changes, we remain hopeful of a pick-
Cash Flow Indicator Ratios up in Batas sales. This will also help to enhance the brand image of the
Dividend Payout Ratio Net Profit 18.06 21.89 company and, thereby, remove the perception drag on the companys
Dividend Payout Ratio Cash Profit 13.45 16.71
impression. We expect revenue growth to revive owing to better demand,
Earning Retention Ratio 79.08 79.20
supply side concerns receding and aggressive store addition. We expect
Cash Earning Retention Ratio 85.03 83.94
Earnings Per Share 35.97 29.68 Bata to continue to command a better multiple than its peers not only
Book Value 154.89 126.52 because of its size but also owing to the better financial health. We, thereby,
maintain our BUY rating on the stock with a target price of Rs. 700.

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 Equity Research Report
February 13, 2016

Bata India Limited

Balance Sheet (INR Crores) Technical Outlook

Mar '15 Dec '13
15 mths 12 mths Bata India Limited 6 month Stock Performance
Sources Of Funds
Total Share Capital 64.26 64.26
Equity Share Capital 64.26 64.26
Share Application Money 0.00 0.00
Preference Share Capital 0.00 0.00
Reserves 931.09 748.79
Networth 995.35 813.05
Secured Loans 0.00 0.00
Unsecured Loans 0.00 0.00
Total Debt 0.00 0.00
Total Liabilities 995.35 813.05
Mar '15 Dec '13 Bata India Limited Performance Against Nifty
15 mths 12 mths
Application Of Funds
Gross Block 694.95 601.18
Less: Revaluation Reserves 26.79 27.95
Less: Accum. Depreciation 388.27 354.94
Net Block 279.89 218.29
Capital Work in Progress 48.17 23.71
Investments 4.95 4.85
Inventories 704.70 582.69
Sundry Debtors 58.42 50.92
Cash and Bank Balance 209.97 255.73
Total Current Assets 973.09 889.34
Loans and Advances 304.54 218.62 Peer Analysis
Fixed Deposits 0.00 0.00
Name Last Market Sales(Cr) Net Total
Total CA, Loans & Price Cap.(Rs) Profit Assets
1,277.63 1,107.96
Advances Bata India 473.80 6,089.63 2,694.00 231.17 1,022.14
Deferred Credit 0.00 0.00 Relaxo Footwear 399.90 4,800.39 1,480.81 103.05 578.80
Current Liabilities 539.54 453.07 Mirza Intl 97.75 906.20 918.99 51.16 496.01
Provisions 75.75 88.68 Bhartiya Inter 474.50 555.82 423.95 14.07 350.28
Total CL & Provisions 615.29 541.75 Sreeleathers 129.55 325.88 66.76 8.44 195.87
Net Current Assets 662.34 566.21 Liberty Shoes 145.90 248.61 525.69 17.06 277.47
Miscellaneous Expenses 0.00 0.00 Superhouse 138.75 158.45 710.71 32.47 392.74
Total Assets 995.35 813.06
Contingent Liabilities 130.88 111.11
Book Value (Rs) 154.89 126.52

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 Equity Research Report
February 13, 2016

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