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Bata at a New All Time High


The Bata India chart looks very interesting, as it edges into 52 week (and indeed, all time) high territory. The stock has been doing well this year, up 25% since Jan, and about 80% since a year ago.

Bata chart

Bata is a shoe maker and the name is famous in India for making quality footwear at an affordable price. It sounds very Indian but it’s Czech in origin, and has been in India for a while. But enough superlatives, what’s the action?

  • Ended 2010 calendar year with about Rs. 14 EPS.
  • March quarter EPS was Rs. 17, but before your eyes pop out, note that they have 110 cr. of other income.
  • Other income: 110 cr. from the “future” sale of shares in RDPL (Riverside Developers, partly owned by Agre Developers,which is an offshoot of Pantaloon Retail). This is the JV for the development of Batanagar, where Bata has sold its ownership in the JV for 100 cr. upfront today. It still needs to get about 325,000 sq. ft. of constructed space.
  • If they actually get the 325,000 sq. ft. (things could get stalled because of interest rate issues) then even at Rs. 5,000 per sq. ft. this is worth around 160 cr.
  • They seem to pay very little interest, but consolidated balance sheet shows 76 cr. of debt. Not much clarity until we get their annual report.
  • They make a profit of around 35 cr. pre-tax on operations. (This is up from 20 cr. last year)
  • They have 6.42 cr. shares outstanding, which means the company is valued at 3200 cr.
  • That sounds like the company is quite overvalued, with over 30 P/E. They need to grow operations to 100 cr. profit per year, within a couple years, to justify current valuations. But the Batanagar property may have that upside, along with increasing operational profits.

I wouldn’t go in fundamentally, but the stock is a huge technical positive. But that means extremely short term outlooks and very strict stop losses. Of course, that means ignore the above bits and trade price and volume alone.

Disclosure: No positions. I might take a position on; I like stocks that make new highs when the market’s down.


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