‘Expect to achieve 1 bn dollar revenue in 5 years,’ says Bata India CFO
Top footwear company Bata may have come a long way in its India journey after it began it all in 1931, but the real test comes now for the largest organised player in this Rs 55,000 crore-footwear industry as it battles a rising competition and cultural disconnect. Here in an interview with ETCFO’s Mannu Arora, Bata India CFO Ram Kumar Gupta discusses how the Indian perceived company plans to deal with all these challenges as he reflects confidence on the road ahead. Edited Excerpts:
Q: How bullish you are on the Indian economy?
Ram Kumar Gupta: I am quite optimistic. Demand for footwear is growing at a good pace. And in this climate, ample opportunities exists for Bata. It is important to note that customer experience is the key and we will continue to bring in our new collection based on choices made by consumers.
Q: You hold 6% market share in the footwear industry? Where do you see this number, say in the next two years?
RKG: I can’t anticipate the numbers right now as percentage of share we may get or not depends on how the overall competition plays out. We will continue to focus on product premiumisation and retail base expansion. Going forward, I am sure our share is only going to increase.
Q: Six months into this fiscal and your net profit has already touched Rs 100 crores? Can we expect this run-rate to continue for the rest of the year? And do you hope to beat Rs 159 crore mark achieved a year ago?
RKG: We continue to make efforts in improving our bottom line, and expect to surpass the last year figure.
Q: Can we expect the number to even surpass the Rs 200-crore mark?
RKG: Why not? Why you are putting a barrier of Rs 200 crores? It may be even more. We will continue to take cost saving initiatives which would help us improve our margins.
Q: What are those cost saving initiatives you are referring to?
RKG: For instance we have been able to keep our rental expenses flattish over the last two years in spite of new stores addition. We have over 1300 retail stores and every three years, we give a reasonable increase on lease terms.
However, since the retail sentiment has not been good over the last 2-3 years, we got some head room from landlords in terms of curtailing some of the rentals. In a year, we could save Rs 4-5 crore annualised basis but that is not visible in the books.
Q: Today’s generation does not connect with the brand Bata as much as you would like them to be? What are you doing from the brand perspective?
RKG: Product is extremely important part in our strategy. For all categories men, women, kids, we are bringing in new collections every month. Most of these product offerings are turning out to be successful. Till now (mid-November), we have brought in 250-300 new collections in this quarter alone.
Q: How crucial is marketing for you?
RKG: The marketing function in today’s era is increasingly becoming an integral part. We will continue to focus on all media for our marketing strategy, be it TV, print or digital.
For this year alone, marketing spends were more than 80% compared to last year, which is around 1% of the total retail turnover (Rs 2,100 crore on an annualised basis) and we plan to take this number to take it to 2.5% in the next year.
Q: How much are you betting on the e-commerce business?
RKG: E-commerce business is very important for our strategy. We have around 80% shoe line which is exclusive for e-commerce segment, and thus not available in offline stores. We are partnering with numerous big e-tailers such as Amazon and Flipkart to improve our online penetration. Going forward, we expect our e-commerce business, which constitutes about 4% of our total business (Rs 2,500 crore annual) to grow 50% this year and further 50% next year on the existing levels.
Q: How has your experience of GST been? You bank up on premium products. Have their sales got affected with the higher GST rates at 18%?
RKG: The ground impact has been neutral. Sales of premium products have not been affected. Though rates have gone up, we are, at the same time, getting input credits. The latest move by the government to reduce the GST rates for leather accessories to 18% as against 28% earlier is also a welcome one. We have passed on the reduction in rates to our consumers.
Q: How big a risk is changing customer preference for a company like yours?
RKG: We perceive changing customer preference as an opportunity and not as a risk. The customer has numerous choices today and our focus is to map those experiences into our products framework. We have two product development centres one each in Gurgaon and Batanagar (Kolkata) with a team of 50 and 80, respectively.
The way it works is that we have a big retail workforce of around 6000 people through our presence of over 1300 stores. They provide a constant feedback to the regional offices in all the four regions of the country in terms of the customer likes and dislikes and then the product development team incorporates this into their design framework.
Q: What do you think are the key risks for your business?
RKG: Retention of talent is a big risk. At a time when plenty of new players, especially the disorganised ones are foraying into the footwear industry, it becomes easier for them to take people from as organised a player such as us. But we are taking numerous measures including long-term incentives to ensure good talent stays with Bata.
Q: How soon can we expect you to clock in 1 billion dollar sales?
RKG: We will achieve this target. There is no doubt about this. But this will happen in the next 5-6 years. We are expecting to reach this figure and that’s why we are putting in our efforts. It is possible. And one never knows we can achieve it even earlier.