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Bata India in talks with Adidas for strategic partnership in Indian market


Two footwear manufacturers—one from Germany and the second from Switzerland—are in talks over a strategic partnership that could potentially boost sportswear makers presence in the South Asian country. The footwear brand names are Bata India and Adidas. The talks are likely at an advanced stage, with final specifications in the works, according to Indian business and financial news channel, CNBC-TV18. Century-old footwear company Bata India has established its brand and store outlets through various partnerships and by setting up franchises. In FY22, Bata added over 80 franchise stores, covering 388 towns. As of June 2023, the company had 448 franchises, with a vision to have 500 in the near future.

Gunjan Shah, MD and CEO of Bata India, stated earlier in an interview that the brand was reentering the premium market with new portfolios and price points. In its latest August earnings presentation, the company highlighted aggressive network expansion: 2100 stores in close to 700 cities, with a franchise and SIS network consisting of over 38%.

With the Indian economy pacing on full throttle and probable the fastest-growing economy, the partnership might prove to be game-changing for both companies in reining in its competitor. Two companies teaming up might boost manufacturing and retail investments in India, potentially driving economic growth. The partnership could help Adidas fire up its diminishing presence in the country, potentially overtaking competitors as the top sportswear brand. Bata's extensive manufacturing and distribution networks in India could benefit Adidas, leading to cost reductions and faster time-to-market for new products. This collaboration could create a stronger entity capable of enduring more aggressive competition from other market players.

On a standalone basis, Bata is also striving for an increase in offline sales, and it anticipates that a significant portion of that growth will come from its development using the franchise model, where it wants to open 125 additional shops in FY24 and strengthen its position at multi-brand retail establishments. Bata India is starting trials for sports apparel and is optimistic about the company's future growth given the market outlook. The chairman of Bata India revealed that the company will invest Rs. 100 crore during the year to focus on 'casualisation' and 'premiumisation'. The company is also looking at the growth and expansion of franchisee and multi-brand stores, as well as investing in front-end operations, stores, back-end infrastructure, technology, design, R&D, etc.

In its latest earnings presentation, the company stated that it is focused on cost efficiency across all operations and optimising resources. The footwear maker is optimistic about the demand resurgence and plans to expand in Tier 3–5 towns, digital channels, and invest in elevating customer experience and brand marketing. The company's strategy of casualisation and premiumisation, expansion in the retail network, and accelerated investment in core technologies (ERP, merchandising) are expected to set the company up for future profitable growth.

For the first quarter of FY24, the company's net profit fell by 10%, compared to a net profit of Rs 119.3 crore in the corresponding quarter of the previous year. Revenue from operations for the quarter stood at Rs 958.1 crore, a 2% growth over Q1 FY23. Expenses were higher during the quarter, with the slowest revenue growth since March 2021.

The Bata India share increased more than 7% intraday on the news yesterday. At the time of reporting, the stock was trading at Rs. 1750.

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