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Bata India witnesses recovery
April 01, 2003 15:37 IST
Bata India witnessed slight recovery on Tuesday after the company announced improvement in profit margins for Q4 on the back of a cost-cutting exercise.
The scrip of the footwear major put on 2.2% to Rs 26.75 by the end of two hours of trading on BSE. Bata India had hit a high of Rs 27.20 earlier in the day. Volumes of 5,022 shares were recorded on the counter on BSE.
The stock has been moving in a range of Rs 26-46 over the last few months and is currently trading at that lower end of that range. It had plunged to a 52-week low of Rs 26.15 on Monday 31 March 2003.
For Q4 ended 31 December 2002, despite a 10% fall in sales to Rs 169.76 crore (Rs 1.69 billion), BIL reported an operating profit of Rs 4.31 crore compared to an operating loss of Rs 1.62 crore in the corresponding period of the previous year. Significant reduction in staff cost and other expenses led to the growth in margins in Q4. This has also offset the rise in raw material costs during the period under review.
97% of the company's revenues are from the domestic market while the remainder is from exports. Bata India is the biggest player in the Indian shoe market.
The company has said that as a measure of rationalising manufacturing facilities, the company's application before the Kolkata High Court for the demerger of Faridabad and Mokamehghat units is pending approval. The effective date of approval will be 1 January 2002 which will reduce losses by Rs 4 crore.
BIL is facing increasing competition, particularly from the unorganised sector. The company is finding it difficult to maintain its market share in a highly price sensitive Indian market, despite having strong brand recall. BIL's two major problems are, the high cost of production and low emphasis on marketing. The company may be able to address the first problem through outsourcing of products.
Bata's brand image has been restricted to that of a company that emphasizes utilitarian products more than trendy ones. Customers feel the company is lacking in innovation. Hence, their preference has shifted to other local brands.
However, the company during FY 2002 tried to become aggressive in launching new products. Moreover, the products were aimed at mass marketing rather than the earlier emphasis on particular segments. The changed strategy is expected to bring in better sales. The company also intends on marketing international brands manufactured by its parent through its franchisees.
It has lately overhauled its marketing set-up into a four-tier retail structure that will be stocked with products matching the area's customer profile. A Bata outlet in an up-market place will offer a distinctly different range of footwear from another in the suburbs
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