Hi fellow investor,
( Disclosure: I do not own shares of Bata India Ltd. My views on the company may be biased. Everything I conclude in the article is solely my opinion, based on publicly available information. This should not be taken as financial advice. This is purely for educational purpose.)
Let’s get straight into it.
Background
“Bata” has been such a ubiquitous brand in India, that most Indians never associated it as being a foreign company (as you may know, Bata is a Czech company, headquartered in Switzerland, more on its history here). It was amusing to learn that the same situation exists in other countries like Indonesia as well. Bata entered these countries much earlier than other brands (they entered India in 1931 and Indonesia in 1939), and ingrained itself into the society by setting up manufacturing facilities & townships around those facilities (Batanagar in India & Cali-Bata in Indonesia). They had low competition (at least early on), and the affordable nature of their products made them household names.
Bata India first went public in 1973. During that time it was known for its rubber slippers under the brand ‘Hawai’, as well as school shoes under the brands ‘Naughty Boy’ and ‘Ballerina’. In the 80s, they launched the brands North Star (youth focused), Marie Claire (women footwear) as well as Power (sport shoes). From 1991, the liberalisation policies, brought in lots of competition. To improve its image, Bata launched ‘Hush Puppies’, to showcase its premium range of products. But Bata continued to struggle, as its brand image faltered and labour issues at its factories and showrooms further hampered progress. Bata India appointed Marcelo Villagran (then the Bata Chile- CEO) as the MD in 2004, undertook massive layoffs, and shut a number of its loss making stores. The company posted losses for three consecutive years from 2002 to 2004, before coming back to profitability in 2005. They started renovating their existing stores, revamping their stock to higher margin products, and the manufacturing was streamlined to mostly specialised variety of shoes while outsourcing was increased. Marcello resigned in 2011, as he was promoted to Bata Group MD. In his 7yr tenure, Bata India saw revenues increase from Rs 7.3bn to Rs 16.9 bn (12.8% CAGR) while net profit went from loss of Rs 628 mn to profit of Rs 2.2bn. An excellent comeback!