Recommendation Review: Bata India

We had recommended Bata India at the price of Rs 806 in Issue No. 14 (dated June 30, 2013). The stock has since done well and we therefore believe that readers should book profit at the current price of Rs 930.

Bata India is one of the oldest companies in its space in the country while it has a history of 120 years in the international space. Hence, sustainability of the business is not in question. On the sectoral front, there is more demand for branded footwear and companies like Bata India would make the most of it in the future as well. To capitalise on this opportunity, Bata is all set to increase the number of its retail stores and is emphasising on its women’s and children’s segment.

The Indian footwear market has a huge potential and is showing a fantastic growth rate. According to well-known consultancy firm PricewaterhouseCoopers, the Indian footwear market is set for a compounded annual growth rate (CAGR) of 15 per cent to reach USD 7 billion by 2015. This points at the kind of growth the companies are set to witness in the next few years. These are the reasons why we had recommended Bata India.

With the unpredictable nature of markets, consumption stocks like Bata India provide safety of capital. The stock has also given decent capital appreciation and hence both the purposes have been achieved. We believe that the 15 per cent returns may have discounted the positives at the moment and hence gains may get capped, going ahead. We recommend that investors book profits at the price of Rs 930.