Good evening, everyone. Warm welcome, as this is my first call as the Managing Director and CEO for Bata India. I want to start by thanking the board for placing their faith in me as we take this brand to the second century in India. I would also like to thank Gunjan Shah, who was our previous CEO, for his leadership in the past five years and for the smooth transition. I am privileged to build on that and to accelerate our journey on to Reignite India 2030. In my first 72 days, I have been on a learning journey. I have visited our stores across our country in more than 10 cities, our factories, distribution centers. I have met many of our franchisee partners and have met industry leaders. Three things broadly stood out for me. First, we have room to grow. India trusts Bata.
Consumers who walk into our stores expect a product that comes in with comfort, value, quality, and with great service. Second, I am thankful to the team that I have discovered here. We have a team that really wants to win. I want to thank our frontline colleagues who are the face of Bata for about 45 million consumers who walk in through the door every year. Third, we have a reach that very few brands can match in India. I will continue to build on this as we expand in pursuit of new opportunities. If I had to put in one line what Bata stands for, it is unreasonably good shoes for everyone, everywhere, since 1931 in India and from 1894 across the globe. Trust and reach are our foundation, and my job is to make sure Bata is more relevant to every generation of Indian consumers.
You will see us focus on three things: making our stores and assortment more consumer-led to grow like-for-like growth, bringing newer, more exciting products at better value, and growing our stores through franchisee, e-comm, and youth-relevant products. Now, coming to the quarterly performance, we have already uploaded a presentation. I hope you all had a chance to go through it. We have already shared the disclaimer earlier, which is a part of the presentation. We recorded a turnover of INR 8.6 million for the quarter, recording a growth of 7.5% and maintaining the positive trajectory for the fourth consecutive quarter. While the overall growth in volume was reasonably democratic, we saw higher price points doing better, leading to growth in ASP. We also recorded growth in footfall in our stores, while the market in general faced headwinds on this.
We continue to optimize our stores and have gathered pace in addition of franchisee stores, both through organic and inorganic means. As you may have read in the press release, we recorded double-digit growth in franchisee and I&D channels. E-commerce business continues to grow at a healthy pace despite the impact of deferment of orders from selected B2B partners. I&D grew in mid-teens with handsome growth in secondary sales. On a half-yearly basis, our ad spends went up by over 4%. We recorded growth in overall reach and website hits. We continue to keep working on our inventory. Our stock turn is now higher than 2.6, and freshness in stores is over 90%. Aged inventory is close to 5%. The operational efforts that it has taken us to do this, including ZBM and Customer First project, continue to contribute to our margins.
Lastly, to top this all, the adjusted profit before tax grew by over 31% against the same quarter last year. The adjusted operating cash profit grew by over 9% versus previous year. With that, I will end my comments. Before I pass it back to the moderator, I would like to wish you all a happy Diwali. I hope you can get some time to spend with your family and friends in the next week. I hand it back to the moderator. Thank you so much.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sameer Gupta from IIFL Capital. Please go ahead.
Hi. Good evening, sir, and thanks for taking my question. I just want to hear, Sanjay, from you, what
Sorry, we couldn't hear. If you could speak a little louder. We have some audio. Yeah.
Am I audible now?
Yeah, much better. Thanks.
No worries. Thanks for this. Good evening, everyone, and thanks for taking the question. First one to Sanjay. What are the immediate near-term priorities, if you can list that? Is it improving availability at stores? We have seen that as a common complaint, although in the last store visit, I was positively surprised. Is it bringing back the margins as a company, as a whole? In each of the priorities, what would be the roadmap?
Firstly, welcome to the call, and thank you for posing the question here. As I continue through my learning phase, what I really see is going to help us is to continue pressing on the growth opportunities that are existing, which is franchising, premiumization, casualization, even as we expand our brand. I am happy as well that, as you mentioned, you are positively surprised. Thank you for that. To see that availability is really helping us, and this is providing us the overall, let us say, the tailwind to support the growth that we are witnessing now. Availability compared to last year has increased 1.33x, so that is really helping us. The other thing that we see is the store clutter is 0.71x compared to last year, two years back in the same period. Both of these are helping us.
I continue to, as I mentioned in my opening remarks, continue to see we have tremendous growth opportunities. It is for us to make sure that we keep the focus on the gains that we have made in the past year, while my priority is also to make sure that we bring in the global product lines into the store as early as possible. I had a reasonably good time looking into the products that are in the pipeline at this point in time. I was in Guangzhou, China, where we looked into the products that are coming in. I would not like to give a date on when they would arrive, but this is something which is in the works, and I am very confident that as these products hit the stores, we should be able to take off in a much more stronger and robust manner.
Thank you again, Sameer.
Thank you. If I can ask another question. Just wanted to hear from you about Bata in general as a brand. Again, the feedback we have is that the younger lot in India, I mean, Bata may not be the first go-to brand. Of course, we as consumers still relate to Bata, but we are now a little older in our generation. That is a conundrum that still needs to be solved, and I heard ad spend was 4% up YoY. I mean, is it exciting enough to, a 4% growth in ad spends, is it exciting enough? Second is that, at a particular margin, I mean, we also might not be comfortable increasing advertising beyond a point. How do we then solve both these issues wherein our brand becomes more palatable to the younger lot?
Is there any data to validate that it is already becoming? How do we counter the negative impact on the margins in the near term?
I will probably pick up your last question first. We are truly committed to make sure we continue to protect our gross margins, and we are taking various measures towards that. I acknowledge your first point, which is to make the brand more relevant to the younger generation. As a parent of two teenagers, I can say that it is a hard sell for me at home as well to get them into the existing Bata products. In the answer to your earlier question, I mentioned about our focus on products. A big focus here, Sameer, is also to make sure we get into the sneakerization trend that we, I mean, sort of we missed the bus, I would say that. We are making sure that we double down on that.
I am confident based on the products that I have seen in my visit to our China office, where we had a show of the products that are coming in, reasonably confident that given the product line, the price points that we are looking at, and the trend that the youth today who has exposure to global media sees, we are bang on target there, and this should be helping us tremendously. I will also take up your question on the ad spend. Sameer, as we have seen the trends globally, marketing has changed dramatically in the AI age over the past, let us say, a year and a half or so, with the trends changing dramatically. While I do understand and agree with you, the percentage is important, we are also trying to make sure that we deploy this in the right manner and in the most efficient manner.
Firstly, to make sure that we build the right brand equity and that we ensure that the ROI on the spend that we have is reasonable enough and to give us the confidence that we are on the right track. We are working on this. Primarily, our target is to go towards community building. Bata in this country has very deep roots, and we have been working very closely with the community. This is our moat, and we want to build on this. We are right-sizing where we need to spend in marketing, and in terms of absolute numbers, we have been growing in terms of the spend that we have. I am reasonably assured that we can address all the questions and concerns that you expressed, margins, ad spend, and relevance to the younger generation. I hope that answers your question, Sameer. Thank you so much.
Very, very clear. Thanks a lot, and I will come back in the Q2 for follow-up. Best wishes on the festivals. Thanks.
Thank you so much, Sameer. Appreciate it.
Thank you. Participants who wish to ask questions may press star and one at this time. The next question is from the line of Aryan Garodia from Ambit Capital. Please go ahead.
Hi, sir. I have two questions. My first question is about the revenue growing 8% YoY in a seasonally shifted quarter with the festive calendar moving to 3Q. Could you provide the underlying breakdown between SSG volume growth and ASP increase? How much of the ASP increase reflects the 5%-6% price hike taken in the month of September to mitigate the raw material inflation? This is my first question.
Aryan, firstly, thank you for joining the call and for your question. I have noted a few points that you talked about. We would not be able to provide you deep guidance on the SSG or like-for-like, but I can assure you that we had a good single-digit growth in this. In terms of ASP, we are in the range of 5%-6%. Amit, maybe I will also ask you to join the call as we are here. So, we are also in the presence of my Chief, Amit. Maybe some of the financial and numerical aspects here, you can help us with this.
Hi, Aryan. Good afternoon.
Hi.
As Sanjay mentioned, SSG was positive for us during the quarter. Exact numbers we may not be able to divulge. In terms of your second question, the growth is as communicated. It is largely ASP-led with the volume also growing marginally. The ASP-led growth, what you see is largely coming on account of premiumization, what we are continuing to doing in terms of higher growths from premium brands like Floatz, HP, and all. The price impact, what you are talking, given that we sit on an average five to six months of inventory and the price increase started to roll out from quarter one, so that impact will start reflecting in the next quarter. So, currently, it is largely driven by premiumization and improvement in fresh sales, which are all-time high at about 84%, 85%.
Amit, thanks for that. I would also like to underline, Aryan, that this is the fourth consecutive quarter of positive growth for us. I mean, largely underlined by the LFL growths as well. We look forward to continue the momentum that we have had, as I mentioned, as we have the new products coming in as well. Thank you so much.
Got it. Sir, I have one more question. With Durga Puja and Diwali pushing a significant portion of festive consumer buying from 2Q to 3Q, what trends are you observing in retail footfalls and secondary sales during October and, say, early November?
Aryan, you are right in terms of the festive shift. It does have an impact on the business that we have. What we are looking at is, fortunately, there is, despite all the headwinds in the market, we are looking at positive footfalls. Very excited about that. As we move into the month of November, closer to the Diwali, the last weekend before Diwali, we are looking at positive trends so far. I would not be able to disclose the details, but we are pretty happy with the way it is trending in the market, and excited about what comes up in the last weekend to Diwali as we get into mid-November. Amit, was there anything you wanted to add to this? Thank you so much, Aryan.
Thank you, sir. I will rejoin the-
Enjoy Diwali. Yeah.
Thank you so much, sir. Wish you the same.
Thank you. The next question is from the line of Prerna Jhunjhunwala from DAM Capital. Please go ahead.
Hello. Thank you for the opportunity. My first question is on account of gross margin improvement. Now, gross margin improvement, is it largely on account of premiumization, or we would be also having some low-cost inventory that would have benefited gross margin in the quarter? Because you were cautiously positive last quarter, as in your comments. Should we build in improvement in gross margins going forward, or should remain cautious even in second half?
We are positive that we can continue the gross margin improvement and hold on despite the changes in the channel mix that we have. The channel mix changes overall for us, we see it as positive as we move into franchisee because it impacts the profitability in a positive manner, and that is exactly what we need to look at. Gross margin will continue to hold on while we try to improve the profitability as a result of the channel mix. If you look at it from quarter one to quarter two, our gross margin has gone up by about 700 basis points, 70 basis points.
Yeah. We continue to hold on. Amit, maybe you can 8 basis points, sorry. Just want to stand corrected. I multiplied by an additional zero there, but-
Amit, maybe if you want to add on to this.
Hi, Prerna.
Hi.
From a gross margin perspective, given that the commodity and currency volatility continues to remain, we will like to remain cautious from a gross margin expansion point of view. What we are currently doing is that whatever inefficiencies in the current ecosystem exist, which is in terms of, let's say, driving the sales of fresh inventory, that is what we are trying to do, less of markdowns, which is helping us improve our gross margin. While our gross margin expansion on a similar channel mix contribution would have been upward of about 70- 80 basis points, that's what Sanjay was referring to. While the reported number reflects an improvement of almost 8- 10 basis points, the margin gets diluted because of the channel mix.
Our distribution business, e-comm business, as well as the franchise business, they have a lower gross margin, while all the businesses are profitable by themselves and continue to improve their profitability year-on-year. Does that address?
Yeah, that addresses. Thank you.
Prerna, thank you so much. Do you have another question?
Yeah, I have one more question.
Yeah.
I just wanted to understand. Though you have been highlighting that volume growth are picking up 1.3 times in ZBM and other initiatives taken, when do we really start seeing healthy volume growth upwards of high single digit or mid-single digit to your company? And any brand-led initiatives that you would like to highlight which would contribute to this volume-led growth coming in? Obviously, premiumization you are working on, which we can see in ASP, but just wanted to check on volume as well.
Prerna, it's a good question as well as we continue to grow the LFL. Volume for me, there are two things, right? One, we are seeing that the consumers are also going up in terms of price points in what they're buying. We continue to provide all price points in the store that are accessible to different consumers. They're going up in terms of where they want to buy. As this is very democratic, we continue to support the journey that the consumer has. The low-volume products are selling much lower than the higher price points. This is something that we observe there.
Secondly, as we get in the new product lines coming in, largely this would be in H2 of FY 2027, we would see it becomes more attractive for the consumer to come in, including the younger generation that Sameer earlier referred to, and we hope that this would be helpful for us. Amit, maybe you can add on to this if I missed any other key points around this.
Yeah. Prerna, see, one of the standard things for the volume part, as you would have seen, there is a shift in the festive calendar. All the e-comm events, et cetera, are expected to impact the quarter three performance. Now, typically in e-comm, what we witness is that there is a lower ASP products with a higher volume. Therefore, in the current quarter, while the growth is about, let's say, mid-single digits, high mid-single digits, largely it is driven by ASP. As we move into the subsequent quarter, we will start seeing those volume gains.
Understood, sir. Any comment on brand-led growth that you are looking at? Any specific brands that you're focusing on to drive this? That will be helpful. What will be your sneaker contribution today?
Well, the sneaker contribution today is not as high as we would like to, which is where our emphasis is in trying to make sure that we get a strong foothold in here. At this point, our emphasis is on Bata and Hush Puppies, two brands where we see significant traction. As we go on, maybe the next quarterly results, I would be able to share more in terms of the details on where we stand in terms of sneaker brands. Having seen the products, Prerna, that I see, I feel that strongly in a great place to take advantage of this. I would call white space, where we see that we could have a strong presence and we could place ourselves in the right way. That is in the pipeline.
I will not be able to share more details around this, but I remain confident that that would help us drive the volume and then the ASP as well.
Oh, thank you so much.
Hope this answers your question.
Yeah, thank you and happy Diwali.
Thank you so much. Happy Diwali to you as well.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of [Gaurang Kakkar from Taurus Capital]. Go ahead.
Yeah, hi. Thanks for the opportunity. Sanjay, my first question is to you. Given that largely, if you look at Bata's performance over the last few years, the growth rates on a CAGR basis are low single digit, and clearly that reflects that we have been losing market share. You rightly pointed out that maybe there is some connect which is missing with the younger generation, Gen Z, et cetera, and which rightly you are going to address now. Is there some targets in terms of growth rate that you have in terms of your mind wherein when could we see a double-digit kind of a growth or maybe a two to three year kind of a growth rate, which all these initiatives largely translate into numbers that we can look forward?
Gaurang, thank you for being here at this call. As you may have, if you were in the previous calls, you may also looked into the Reignite India, which we talked about. Our ambition is to double India by 2030. We are working to have the plan in detail year- by- year. But the ambition remains that we would like to double turnover, which obviously means that in terms of CAGR rate, we are looking at mid-single, double-digit growth rate across these next four years. That remains our broad view, and we are working towards that actively. As you mentioned as well, we are looking into getting the right kind of generation into the store, and also to make ourselves more relevant across all consumers in the country.
That should be helping us get into this mode where we go for double digit, doubling the India turnover by 2030.
Got it. That helps. Largely we stick to the targets in terms of doubling 2030 revenues, and largely we should be able to see that in terms of improvement in terms of numbers.
Yeah, that is correct.
Gaurang, just to add, if you look at while historically our CAGRs are low, there is a growth momentum, and quarter- on- quarter we are trying to improve the tally from the previous quarter, current quarter being at 7.5%, while if you look at for last three quarters previous to prior to this quarter, we continue to grow. All the actions are in the direction of growing the top line in a disproportionate manner. Endeavor is to hit the mid-teens, what Sanjay is referring, because that is what the global direction is also, given the potential of the Indian market.
Got it. Thanks. This is helpful.
Thanks.
Yeah. I just have one more question in terms of margins, and largely, see, the thing is that in terms of the margin performance also, given that the growth rates in the past have been lower and because of maybe operating deleverage, we've had impact in terms of margins. Given that we are targeting like a mid double-digit kind of growth, are we reasonably confident that margins at current levels have largely bottomed out? And even in terms of margins, the trajectory should start seeing an improvement going ahead?
So, as you look at what we've been delivering in the last quarter, the ASP is gradually going up, which will be helping us in terms of the margins. As Amit mentioned, there's also a change in channel mix. This is in the larger interest to move towards profitability and to utilize the skill that we have and to reach a broader market within India. So, we are committed to keeping the margin range-bound, while there would be slight changes based on the channel mix that we will have. ASP should work on the positive side in our favor, but the channel mix, which largely is to contribute to our profitability, would see slight differences there. Amit, I don't know if you want to add on to this.
Yes. One is the commodity and the currency volatility, which continues to be extremely volatile, right? Both commodity and currency. As I said, we are extremely conscious in terms of the cost push and how to mitigate that cost push. First is looking at the inefficiencies within the system, and while ensuring to protect the margins, the calibrated price increase where we have the right to increase. So that's what I'm going to do, Gaurang. Therefore, largely I would say we will remain range-bound in terms of margin.
Got it. Thank you. If I can just squeeze one more. I think you mentioned your focus in terms of franchisee store additions. Is there a thought in terms of COCO store additions also going ahead? If any targets in terms of numbers on a yearly basis, if you can share, for store additions?
Gaurang, while we try to make sure that we utilize the franchisee opportunity to continue to grow, we are also selectively looking at opportunities that may be available for COCO. So we are not shying away from that. We are looking at, I would say, not triple digit, but like double digit in terms of new store openings in the coming year. So we will be always opportunistic openings are what we are targeting in the areas that we are there and where we see there is small, there is like a strong traction in terms of consumers and where we don't have a presence. So we have no intent to cannibalize the existing stores.
But we will also be looking out opportunistically, not only to open stores, but also to relocate to locations which are commercially better, while also trying to renovate the stores, which would all be helpful for us. So we continue to believe in the DOS stores that we have while putting the emphasis more on the franchisee side.
Got it. Thank you so much and wish you all a happy Diwali.
Gaurang, wish you the same. Thank you so much. I hope you answered all the questions that you had.
Yes. Thank you so much.
Thank you. The next question is from the line of Sudhir Kedia from ValueWise Investment Managers. Please go ahead.
Thanks for the opportunity. Sanjay, my question is to you, and it is continuation of the previous participant question. When we see Bata's performance over longer period of time, it has been pretty subdued, both on the top line as well as on the PBT. PBT over 10 years would be largely flattish. In your last few days, which you have assessed in the organization, would you say that this problem is more internal to the organization or is more external in terms of brand connect with the consumer, or there is some kind of risk management which is happening in the company which needs to be rectified? Because 10 years is a pretty long time for a brand like Bata to keep undershooting its strength.
Sudhir, firstly, thank you for joining the call. As you picked up from Gaurang and your observations over a decade, it largely does make sense, right? While we are not shying away from answering that, it's a mix of both internal and external. It's never as simple as it's internal or external. Have you seen the last decade, we also had big competitors and small competitors enter into the field. It's sort of, it's a crowded field now. While internal capabilities and the internal ambitions, this is something that we are here to raise. We continue to believe that we can do far better, as I stated in my opening remarks.
While my ambit and scope is to improve the internal capabilities while having the right team, et cetera, we are also ably supported now by the global leadership team, which has rooted and started delivering. The changes there were in place in early 2025. We've already started seeing tangible results of some of this in terms of supply chain consolidations that we've had, in terms of the new products that are coming in terms of raising the ambition, in terms of the investments that we are trying to make and we are able to make now. We are trying to work on multiple fronts. Much as you may not see all of this in the numbers that we are projecting, there's a lot going on within the company internally here in India as well as globally.
So, there is a strong tailwind to continue to build these capabilities to deliver in the future. I may not be fully authorized to talk about the past. I would say that the changes are quite dramatic, and these inflection moments come once in a while in the history of a company. We are almost now, I would say, in terms of globally and the way we operate locally, we're trying to see what are the synergies as a multinational that we can leverage to find all the growth levers supported globally as well to make sure that we don't repeat the history that you talked about over the past decade. Sudhir, I don't know if it fully answers your question.
What I want to mention in brief is the dynamics have changed, and that is a time at which I'm really happy to join at this particular moment in Bata's 96-year-old history in India, where we are looking at changing completely the dynamics, benefiting from being a part of a multinational, which is really and truly working to deliver the capabilities that is required for a company that is as iconic as Bata.
Fair enough, and thanks for that elaborate answer. My question was more relevant, more from the perspective, since we are targeting of doubling the top line over next four years or five years in timeframe. If these problems are more internal to the organization, possibly these are easier to solve rather than if they are external to the organization, where the changing the perception of new consumers is significantly difficult. When you're putting the target of doubling, I was asking that question from that perspective specifically. Just to add one more question related to this, is that in that doubling of top line, how do we see the bottom line in the same timeframe? Will that be more than double, in your opinion, or in line with the top line?
Sudhir, I will take this question in phases. First one, when you talk about the perception of the brand externally. Part of this, Sudhir, I actually see it as an internal problem. It's not that the consumer gave up on us. In many ways, we need to earn this, and we need to make an effort which is harder than before. Predominantly, Sudhir, we didn't really have the product line to go to the consumer. It was not when we put the products in place and the consumer refused to buy. As we got nimbler players into the market, and then as the world moved on to sneakerization trend, we did not move there in an agile manner. That is what we need to overcome there. Part of this is what could be seen as an external problem.
In some ways, it is internal, which is where we are building capabilities and the product line, as I mentioned earlier. We see we have a strong product line coming in, and then with the brand name that we have and the presence that we have across the country, we should be in a better position to address what could be seen as an external failure to this. To me, external things are, as Amit has mentioned a couple of times, the volatility that we see in the world. That is something which is out of control, and much as we try to manage this in an agile manner, that I would see as one of the external constraints. The second is also the exchange rate, although largely we manufacture in India and we cater to India, but these are the external circumstances that I see.
But the other things in terms of the trends for the youth, et cetera, this is something we can address internally. I hope that answers your question. Was there anything else, Amit, you wanted to add to this? Yeah, okay. I think this is what I would like to share on this, Sudhir. Thanks so much. If you do not have any questions, Happy Diwali.
Sir, if you can just touch upon-
Sorry to interapt -
The second question which I asked.
Maybe request you to return to the question queue for a follow-up question.
Yeah, yeah. I had asked one more question.
I'm sorry, maybe did I miss that? I may not-
Yes, sir. I had also asked you regarding when you are guiding for doubling of top line
Yeah
would you also guide on the bottom line? Should we expect a doubling of bottom line or more than that?
We are looking at at least that, Sudhir. Our position is to maintain a sustainable and profitable growth. We would at least look at that, while as time goes on, we will be able to give you a better guideline on this, given the external factors that I mentioned, primarily which are out of our control. Exchange rate remains one of them. The global volatility is the second one, which is slightly above our capability to predict. Our internal thing is that we will continue to have effort more than the doubling in there, doubling the profits as well. We are looking at something higher than that so that we can continue to fund the investments and growth that we have.
Sure. Thank you, sir. Thank you very much, and wish you a very happy Diwali and wish you all the best. Thank you.
Sudhir, thank you so much. Wishing you and your family a happy Diwali as well.
Thank you. Ladies and gentlemen, due to time constraints, we will take that as the last question for the day. Now I would like to hand the conference over to the management for closing comments.
Hi, thank you everyone for participating. In the interest of time, we need to close today, but you can always reach out to me through Ambit or directly, and we will be happy to take up your questions. Thank you everyone, and happy Diwali from Bata. Look forward to seeing you at the stores as well.
Happy Diwali again. Thanks, Nitin.
Thank you. On behalf of Bata India, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.