Bata India fell 1.87% to Rs 490 at 14:04 IST on BSE after a foreign brokerage reportedly downgraded the stock to 'reduce' from 'buy' due to long-term structural issues.
Meanwhile, the BSE Sensex was down 9.03 points, or 0.03%, to 26,136.64.
On BSE, so far 45,000 shares were traded in the counter, compared with an average volume of 42,426 shares in the past one quarter.
The stock hit a high of Rs 502.85 and a low of Rs 487 so far during the day. The stock hit a record high of Rs 747.50 on 22 January 2015. The stock hit a 52-week low of Rs 457.75 on 9 November 2015.
The stock had outperformed the market over the past one month till 30 November 2015, falling 0.53% compared with 1.92% decline in the Sensex. The scrip had, however, underperformed the market in past one quarter, sliding 7.26% as against Sensex's 0.93% decline.
The mid-cap company has an equity capital of Rs 64.26 crore. Face value per share is Rs 5.
In order to account for subdued demand, increasing competition and internal issues with Bata India, the foreign brokerage reportedly lowered sales growth forecast for the fiscal year ending March 2016 (FY 2016) of the footwear maker to 8.7% year-on-year, but forecast growth of 12% for the fiscal year ending March 2017 (FY 2017) and 15% thereafter as consumption is expected to pick up and the overall macro environment is likely to improve.
Though the brokerage expects a recovery in consumption in FY 2017, the brokerage believes it might be tough for Bata India to take advantage of this, given the intense competition from foreign players as well as new players from the e-commerce channel. Apart from this, it is also worried because of recent management changes and setting of conservative growth targets.
The brokerage expects FY 2016 EBITDA (earnings before interest, taxes, depreciation and amortization) margins at 10.6% due to the company's issues with the implementation of its enterprise resource planning (ERP) programme as well as rise in other overheads. But it believes this issue can be resolved once decline in sales growth is halted. Therefore, it reportedly forecasts EBITDA margins to reach 12.6% in FY 2018 as sales pick up.
Bata India's net profit rose 38.72% to Rs 54.11 crore on 5% rise in net sales to Rs 575.15 crore in Q2 September 2015 over Q2 September 2014.
Exceptional item represents gain from sale of trademark (Sparx) of Rs 60.80 crore and charge off of expenditure incurred (except the expenditure on perpetual license) amounting Rs 29.10 crore on setbacks in implementation of enterprise resource planning (ERP) system.
Bata India is a retailer and leading manufacturer of footwear in India.
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