Bata shares decline 7%; here's why

Shares of footwear major Bata slumped nearly 7% in the early hours of Tuesday's trade after the company announced disappointing Q2 results for the current fiscal. The stocks hit an intraday low of ₹1,090. 

Bata reported a 73% plunge in its net profits, down to ₹13.9 crore in the quarter under review, from ₹51.98 crore in the corresponding quarter last year. 

Consolidated revenue from operations for the quarter also declined to ₹801.33 crore, compared to ₹837.14 crore in Q2FY25, citing "deferment of purchases by channel partners and customers since the announcement of GST rate rationalisation" as the reason. According to the latest Motilal Oswal report, the revenue was 7% below analysts' expectations. 

Ebidta also saw a noticeable fall—from ₹191.8 crore for Q2FY25 to ₹166.4 crore, missing Motilal Oswal's estimates by 31%. The company stated that the inventory clearance before the festive period and higher marketing investments led to lower margins. 

The results for the quarter also included a one-time expenditure of up to ₹8.3 crore towards VRS in one factory. " In line with our long-term strategy towards bringing best-in-class efficiency standards, we have undertaken another VRS in one of our manufacturing units," said Gunjan Shah, MD and CEO, Bata India Limited. 

Commenting on the Q2 performance, Shah said, "With the rollout of GST 2.0 and pre-festive buying enthusiasm, the demand has started to revive. While overall Q2 did have muted demand adversely impacted by the GST 2.0 transition, we are seeing positive signs of recovery this festive season post 22nd September." 

Backing the growth areas in an otherwise muted performance, Shah noted that the company reported a revenue of ₹801.33 crore on the back of its premium products like Hush Puppies and Power, while the Victoria Ballerina campaign added 1% in the sales mix. The GST benefits were passed on to the customers much before the official announcements, to unclog the demand pipeline.

The footwear maker also added 30 franchise stores in the quarter, continuing to expand in smaller towns and semi-urban markets. Inventory days improved to 83 in H1FY26 (compared to 89 in H1FY25), supported by better inventory clearance. Core working capital remained broadly steady at nearly 60 days.

Shah stated that the company is cautiously optimistic about recovery towards the balance of this year, backed by strong market positioning and a wide network, while maintaining a strong focus on cost efficiencies.

The stocks are currently trading at ₹1,129.40, making up for the initial losses incurred in the early hours of trade, yet are priced below by 3.16% from their previous closing.