F

Bata India Ltd BUY

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C.M.P: Target Price:
Rs.298.25 Rs.345.00
August 11th, 2010 R
1 Year Comparative Graph SYNOPSIS S
• Bata India manufactures different types of
footwear including rubber/canvas footwear, T
leather footwear and plastic footwear. Bata
also markets apparel under the brand
names of `North Star`, `Power` and
C
`Ambassador`.

Bata India Ltd BSE SENSEX

A
• During this year, the Company opened 69
new Bata stores, which are all in large
Stock Data format with an average size of over 3000 L
Sector Footwear square feet.
Face Value Rs. 10.00
• During the quarter, Bata India was chosen
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52 wk. High/Low (Rs.) 316.50/146.25 by consumers as India’s Most Preferred
Volume (2 wk. Avg.) 229000 Exclusive Retailer and received this award
BSE Code 500043 under the prestigious CNBC AWAAZ
Market Cap (Rs.In mn) 19166.74
Consumer Awards 2010. R
Share Holding Pattern • Bata continued to focus on continuous
improvement of its shoe designs for the E
youth and women segments.

• Net Sales and PAT of the company are

S
expected to grow at a CAGR of 12% and 15%
over 2008 to 2011E respectively. E
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Financials
V.S.R. Sastry
(Rs.in.mn) CY09 CY10E CY11E R
Equity Research Desk Net Sales 10919.1 12229.4 13819.3
vsrsastry@firstcallindiaequity.com EBIDTA 1322.5 1561.3 1745.4 C
Dr. V.V.L.N. Sastry Ph.D. PAT 672.2 778.0 877.8
Chief Research Officer 10.46 12.11 13.66
drsastry@firstcallindia.com
EPS
H
P/E 28.51 24.64 21.83

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Peer Group Comparison
Market
Name of the company CMP(Rs.) Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Bata India Ltd 298.25 19166.74 12.11 24.64 5.10 30.00

Mirza International Ltd 16.10 1492.60 2.65 6.08 1.09 10.00

Liberty Shoes 103.90 1770.50 5.76 18.04 1.34 0.00

Crew Bros Products 114.80 1471.50 17.67 6.50 1.09 0.00

Investment Highlights

Results Updates (Q2 CY10) (Standalone)

For the second quarter, the top line of the company increased 14%YoY and stood
at Rs.3512.03mn against Rs.3089.96mn of the same period of the last year. The
bottom line of the company for the quarter stood at Rs.259.05mn from
Rs.183.48mn of the corresponding period of the previous year i.e. an increase of
41%YoY.

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EPS of the company for the quarter stood at Rs.4.03 for equity share of Rs.10.00
each.

Expenditure for the quarter stood at Rs.3053.81mn, which is around 11% higher
than the corresponding period of the previous year. Raw material cost of the
company for the quarter accounts for 16% of the sales of the company and stood
at Rs.577.50mn from Rs.600.87mn of the corresponding period of the previous
year i.e., a decrease of 4%YoY. Employee cost increased 8%YoY to Rs.465.70mn
from Rs.429.88mn. and accounts for 13% of the revenue of the company for the
quarter.

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 OPM and NPM for the quarter stood at 13% and 7% respectively from 11% and
6% respectively of the same period of the last year.

Step out in style this monsoon season with Bata

Bata India Ltd, the name synonymous with footwear has launched a new range of
vibrant footwear for the monsoon season. The colorful collection has a range of
vibrant jelly bellies, trendy ballerinas, studded slippers and comfortable flip flops
for those who do not want to compromise on fashion and style this monsoon.

Restructured its Agreement

Bata India Ltd. (BIL) had, in 2005, established a Joint Venture Company with
Calcutta Metropolitan Group Ltd (CMGL) on a 50:50 shareholding basis. The
objective of the Joint Venture Company was to create an integrated township that
will serve as an economic catalyst for the region.

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Company Profile

Bata India is the largest retailer and leading manufacturer of footwear in India and is
a part of the Bata Shoe Organisation.

Incorporated as Bata Shoe Company Private Limited in 1931, the company was set up
initially as a small operation in Konnagar (near Calcutta) in 1932. In January 1934,
the foundation stone for the first building of Bata's operation - now called the Bata.
This township is popularly known as Batanagar. It was also the first manufacturing
facility in the Indian shoe industry to receive the ISO: 9001 certification.

Bata operates 5 manufacturing plant in india, sells through over 1200 retail stores
and finally serves over 120000 customers every day. The company currently sells over
45 million pairs of shoes every year and has an annual sales turnover of more than Rs
8000 million (USD 178 million).

Facilities
The company has five manufacturing facilities in the country. They are locates in the
following locations: Batanagar (West Bengal), Bataganj (Bihar), Faridabad (Haryana),
Peenya (Karnataka), Hosur (Tamil Nadu). At all its manufacturing facilities the
company produces quality leather, rubber, canvas and PVC shoes in wide-ranging
designs and styles at affordable prices. Bata India has an in-house tannery at
Mokamehghat in Bihar, which is the second largest in Asia.

Company products

Bata India is providing variant numbers of products are as follows:

Sandals
Closed shoes
Hawai
Canvas shoes
Sandak
Batalite

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Financials Results
12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) CY08 CY09 CY10E CY11E

Description 12m 12m 12m 12m

Net sales 9874.35 10919.18 12229.48 13452.43

Other income 107.13 81.56 93.79 98.69

Total Income 9981.48 11000.74 12323.28 13551.12

Expenditure -9007.99 -9678.16 -10761.94 -11824.69

Operating profit 973.49 1322.58 1561.33 1726.43

Interest -65.08 -40.72 -29.31 -45.75

Gross profit 908.41 1281.86 1532.02 1680.68

Depreciation -190.01 -279.23 -335.08 -331.73

Profit Before Tax 718.40 1002.63 1196.95 1348.96

Tax -111.03 -330.36 -418.93 -431.67

Profit After Tax 607.37 672.27 778.02 917.29

Equity capital 642.60 624.64 642.64 642.64

Reserves 1891.72 2338.44 3116.46 3994.27

Face value (Rs.) 10.00 10.00 10.00 10.00

EPS 9.45 10.76 12.11 13.66

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 31-Dec-09 31-Mar-10 30-Jun-10 30-Sep-10E

Description 3m 3m 3m 3m

Net sales 2886.45 2615.70 3,512.03 3336.43

Other income 39.06 8.63 14.74 14.00

Total Income 2925.51 2624.33 3526.77 3350.43

Expenditure -2433.33 -2347.12 -3,053.81 -2919.37

Operating profit 492.18 277.21 472.96 431.06

Interest -9.19 -2.92 -2.21 -7.33

Gross profit 482.99 274.29 470.75 423.73

Depreciation -96.41 -63.92 -73.88 -83.75

Profit Before Tax 386.58 210.37 396.87 339.98

Tax -132.56 -67.07 -137.82 -117.29

Profit After Tax 254.02 143.30 259.05 222.69

Equity capital 642.64 642.64 642.64 642.64

Face value (Rs.) 10.00 10.00 10.00 10.00

EPS 3.95 2.23 4.03 3.47

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Key Ratio

Particulars CY08 CY09 CY10E CY11E

No. of Shares(In Million) 64.26 62.46 64.26 64.26

EBITDA Margin (%) 10% 12% 13% 13%

PAT Margin (%) 6% 6% 6% 6%

P/E Ratio (x) 31.56 28.51 24.64 21.83

ROE (%) 24% 23% 21% 19%

ROCE (%) 6% 6% 6% 6%

EV/EBITDA (x) 11.11 7.64 13.75 13.73

Debt equity ratio 18% 8% 6% 4%

Book Value (Rs.) 39.44 47.44 58.90 73.18

P/BV 4.27 6.43 5.10 4.13

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Charts:

• Net sales & PAT

• P/E Ratio (x)

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• P/BV (X)

• EV/EBITDA(X)

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Outlook and Conclusion

At the market price of Rs.298.25, the stock is trading at 24.64 x and 21.83 x for
FY10E and FY11E respectively.

On the basis of EV/EBDITA, the stock trades at 13.75 x for FY10E and 13.73 x
for FY11E.

EPS of the company is expected to be at Rs.12.11 and Rs.13.66 for the earnings
of FY10E and FY11E respectively.

The company’s net sales and net profit are expected to grow at a CAGR of 12%
and 13% over CY08 to CY11E.

During the quarter, Bata India was chosen by consumers as India’s Most
Preferred Exclusive Retailer and received this award under the prestigious CNBC
AWAAZ Consumer Awards 2010.

We expect that the company will keep its growth story in the coming quarters
also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.345.00 for Medium term investment.

Industry Overview
Footwear Industry

The Footwear Industry is a significant segment of the Leather Industry in India. India
ranks second among the footwear producing countries next to China. The industry is
labour intensive and is concentrated in the small and cottage industry sectors. While
leather shoes and uppers are concentrated in large scale units, the sandals and
chappals are produced in the household and cottage sector. India produces more of
gents. Footwear while the world.s major production is in ladies footwear. In the case of

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chappals and sandals, use of non-leather material is prevalent in the domestic
market. The major production centers India are Chennai, Ranipet and Ambur in Tamil
Nadu, Mumbai in Maharastra, Kanpur, Jalandhar, Agra and Delhi.

According to industry reports, the Indian footwear industry was said to be worth $1.48
billion in 2008. The country produces over two billion pairs of different categories of
footwear and nearly 95 percent of its production goes to meet its own domestic
demand. The export is targeted to reach $3.43 billion in 2008-09, and is expected to
reach $4.53 billion by 2010-11. India exports footwear to around 30 countries.

Retail Industry

Retail Sector is the most booming sector in the Indian economy. Some of the biggest
players of the world are going to enter the industry soon. It is on the threshold of
bringing the next big revolution after the IT sector. The sector contributes 10% of the
GDP, and is estimated to show 20% annual growth rate by the end of the decade as
against the current growth rate of 8.5%.

Led by the rising purchasing power, changing consumption patterns, increased access
to information and communication technology and improving infrastructure, the rural
retail market is estimated to cross US$ 45.32 billion mark by 2010 and US$ 60.43
billion by 2015. As per the National Council of Applied Economic Research (NCAER)
reports, there are 720 million consumers across 6, 27,000 villages in rural India.
India's rural markets offer a sea of opportunity for the retail sector. The urban-retail
split in consumer spending stands at 9:11, with rural India accounting for 55 per cent
of private retail consumption. Rural India accounted for almost half of the Indian retail
market, which was worth about US$ 273.64 billion in September 2008. With most of
the retail markets getting saturated in tier-I and tier-II cities, the next phase of growth
is likely to be seen in the rural markets.

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________________ ____ _________________________
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.

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