The Bata India share price fell about 1 percent at the opening on August 18, trimming some of the previous day’s 6 percent gain, after it was reported that the footwear company was in talks with Adidas for a strategic partnership.
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On August 17, CNBC-TV18 reported citing sources that Bata India was in advanced talks with the German sportswear brand for a strategic tie-up. Bata later issued a ‘clarification’ saying that the company is “continuing to explore opportunities for strategic alliance / collaborations / tie-ups for the Indian market” and would disclose this information as and when it happens. "The company has had successful long-running strategic tie-ups with various brands over the years for offering unique propositions to consumers," the statement said.
Nirmal Bang CEO Rahul Arora told Moneycontrol in an interview that the brokerage has been structurally positive on the stock. “Were this (Adidas-Bata deal) to fructify, it will be important to see how much Bata takes out of this. Adidas gets straight benefit out of Bata’s distribution,” Rahul Arora said. "If there’s co-branding with Adidas, or if there’s a top global athlete roped in for endorsements, then sky’s the limit."
Read more: Bata India 'continues to explore' tie ups, as Adidas deal talk surfaces
Bata India recently reported a 10.3 percent year-on-year decline in consolidated net profit to Rs 106.8 crore for the June quarter. Revenue for the quarter grew 1.6 percent from Rs 943 crore.
For the quarter, Bata reported earnings before interest, tax, depreciation and amortisation (EBIDTA) at Rs 239.3 crore, down by 2.2 percent, for the same fiscal. EBIDTA margin declined by 100 basis points on-year to 25 percent.
Read more: Bata India Q1 results: Net profit falls 10.3% to Rs 107.8 crore, revenue rises 1.6%
Analysts at HDFC Securities cut their FY24/25 EBITDA estimates for Bata India by 5-7 percent to account for lower growth and margins and downgraded Bata India to a 'reduce' rating with a target price of Rs 1,500 per share.
In a recent media interaction, Bata Managing Director and CEO Gunjan Shah said that the footwear major is re-entering the premium price points with fresh portfolios while it increases spending on advertising and promotions to connect with young digital savvy consumers.
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