Instead of buying the Bata shoes, if somebody had bought the Bata stocks, would that have been a more gratifying experience?
Yes, in last one year, we have seen the stock deliver a handsome gain to our investors. However, if they have bought Bata shoes also, I am sure they will be much more comfortable in that shoe too. It is value for money.
How exactly has been the post GST scenario for the footwear industry? The unorganised players are saying that organised players are really not gaining a lot of market share we still have the advantage of cost and variety.
GST has definitely helped the organised sector. In next two to three years, entire benefits will come to the organised sector since local players will be out of the market.
Could you be specific about how exactly has the premium category done versus the non-premium category for Bata?
Bata is known as a mass category product seller. In our total basket, we sell more than 50% of mass product. But we are in the premium segment also.
We have a lot of brands — Red Label, Bata Comfy, Bata Bubblegummer for children — all are working very well, but yes, the category is more or less half-half. In general, if MRP is up to Rs 1,000, then we consider this under mass category. More than this amount ill be in the premium segment.
The margin expansion in Q3 was largely driven by volume discount from raw material and finished good suppliers. Have you been working on getting further concessions? Will that continue to bolster your margins in Q4?
For your information, this was not due to volume discount. This was one of the factors. We are taking a lot of initiatives. This was also one of the factors. We are enriching our product. We are selling more premium products and that is giving us better margin.
You have gone through a rebranding exercise. How has this helped and also going forward what will be the focus?
There will be all-around growth. Close to 90% business is from retail. In first nine months, retail growth was around 12%, while non-retail was more or less flat. We are hopeful that in the coming months, both retail and non-retail will give us better numbers.
What is the outlook on rental costs and royalty agreement with global footwear services? Could it go up in coming quarters?
As far as rentals are concerned, we are doing rent renegotiation with our existing landlords. In addition, we are doing area optimisation wherever it is necessary which have been giving us fantastic result in last couple of years. As far as GFS agreement is there, we do not expect any increase in the near future.
The category which you represent also has a disruptive element. Internet brands are getting created. What are the plans in play to deal with disruptive force of new categories and internet delivery model?
We have our own website Bata.com. At the same time, we have B2B business also. We give trade discount to players like Amazon or Flipkart. If they are giving any discount that is in their account. We offer a little bit discount like we do in our own retail stores and own website Bata.com. We are not in the discounting game. That is why our e-comm business is quite profitable. At present the contribution from e-comm business is almost 6%.
Can you explain why the overall cost trend seems to have gone higher while the margins are consolidating?
When you are selling premium product, then input cost will be a little bit higher. In addition to that, there are various factors; input prices, government policies, tax structure and manufacturing cost. At our margin point, we have to see whether we are getting sufficient margin or not. These input costs cannot be avoided.
Do you think your margins will stabilise? A couple of quarters ago, you margin was north of 20%. Now they are in 14-15% range. GST was supposed to increase margins for manufacturers. How come in your case it has not gone higher?
No, GST will not increase margins. For Bata India, GST net impact is almost neutral. In one way, turnover number will come down as initially we were paying 10% tax and now in most of the product, tax is 18%. In case turnover number is down, input cost will be same. However, we get the benefit in our overheads. The bottom line definitely is better than earlier.
Give me guidance for FY20 and FY21.
As a company policy, we do not give any forward looking statement. However, we are putting in best efforts to increase our margins, to increase turnover and as a result, increase our EBITDA also.