Multi Baggers

Bata India

Bata India, a 51% subsidiary of Bata Shoe Organisation (BSO) Group, is India’s largest retailer and leading footwear manufacturer, retailing footwear and related accessories, through its 1,250-plus retail outlets, spread across the country.

The company sells over 4.5 crore pairs of footwear every year. It owns and / or operates a number of national and international brands, belonging to its parent. These include nine international brands such as Bata, Hush Puppies, Marie Claire, Bubble Gummers, Power, Sandak, North Star, Weinbrenner and Scholl, as well as domestic labels like Quovadis, Jubilee, Featherlite, Ambassador, Signor, Hawai, Naughty Boy, Tennis etc.

The company is optimizing its retail operations, with an investment of Rs. 150-200 crore, spread over the next 3 years, which will entail opening new stores, revamping existing ones and modernizing plants and equipments. Going forward, it will focus only on large-format stores, and during 2010 itself, it plans to add 70 large format stores, to its existing store network. It also plans to shut 24 non-profitable stores during the year. In 2009, the company had renovated 40 stores and closed down 73 small format stores.

It has manufacturing facilities at Bataganj and Mokameghat (Bihar), Batanagar (West Bengal), Peenya (Karnataka), Faridabad (Haryana) and Hosur (Tamil Nadu) and employs about 6,300 persons.

Through a joint venture, it is undertaking development of a modern integrated township at Batanagar in West Bengal. In April 2010, the company restructured the JV agreement, pursuant to which, it would receive an aggregate upfront amount of Rs 100 crore for its interest in the joint venture, as well as 640,000 sq. feet of constructed space free of cost.

As on 30th June 2010, the company had 6.43 crore outstanding equity shares of Rs 10 each. Foreign promoters held 51.02%, FIIs held 11.01% while domestic institutions held 17.54% in the company, of which LIC held 37.7 lakh shares, being 5.86% holding. Subsequently LIC’s holding has reduced to 3.69% due to open market sale on 6th July 2010, of 14 lakh shares of the company.

The company follows a calendar year for financial reporting. For CY09, it reported annual sales of Rs 1,090 crore with net profit of Rs 67 crore. The company earned net margin of 6.2%, reporting EPS of Rs 10.5 for the year. For CY09, it declared 30% dividend of Rs 3 per share.

For half year ended 30th June 2010, the company clocked sales of Rs 609 crore with net profit of Rs 40 crore, improving net margin to 6.6%. Quarter-on-quarter, the company’s performance has been improving both on the topline and margins front. During the second quarter of CY10, sales rose to Rs 350 crore and net profits increased to Rs 26 crore, earning net margins of 7.4%. The EPS for H1CY10 and Q2CY10 was Rs 6.3 and Rs 4, respectively.

As on 30th June 2010, the company’s networth, excluding revaluation reserve of about Rs 36 crore, was Rs 338 crore, resulting in a book value per share of Rs 53. It is a debt free company with an effective cash and bank balance of Rs 156 crore, as on date. This amounts to cash of Rs 24 per equity share of the company.

For CY10, the company is expected to post revenue of close Rs 1,300 crore and earn net profits of about Rs 96 crore, resulting in an EPS of approximately Rs 15. Being the largest footwear retailer in India, with backward integration and debt-free status, the company is presently ruling at a PE multiple of about 20 times based on its expected current year (CY10) earnings, which is an attractive value for retail play. The company has a present enterprise value (market cap less cash and bank balance) of Rs 1,780 crore.

Share, at 306.90, is recommended for 6 months investment period, during which, it has potential to touch the Rs 400 digit mark.

Disclosure: No holding in the stock.