Bata India shares slump 7% post weak Q2 results; JM Financial cuts rating to 'Reduce'

Shares of Bata India Ltd fell sharply in Tuesday's trade after the footwear major reported a weak performance for the July–September quarter (Q2) of FY26. The stock declined 6.81 per cent to hit a low of Rs 1,090.50 on BSE.

In its post-results review, JM Financial downgraded the stock to a 'Reduce' rating, stating that the company's performance "missed on all grounds." The brokerage highlighted weak consumer demand, operational disruptions and cost pressures as key drags on quarterly earnings.

Bata India's revenue stood at Rs 800 crore, about 7 per cent below JM Financial's estimates and declined 4 per cent year-on-year (YoY). The brokerage attributed the decline to deferred purchases by both channel partners and customers after the announcement of GST rate rationalisation, as well as a temporary disruption in one of the company's largest warehouses in July 2025. However, it noted that the quarter ended on a relatively positive note with early signs of festive recovery.

Operating performance remained under pressure. EBITDA fell 17 per cent YoY to Rs 150 crore, coming in 26 per cent below estimates, while EBITDA margins contracted 280 basis points (bps) YoY to 18.1 per cent versus JM's forecast of 22.9 per cent. The brokerage said the margin erosion was led by higher discounts to clear pre-festive inventory, along with increased employee and marketing expenses.

On the bottom line, adjusted PAT dropped 58 per cent YoY to Rs 22 crore, about 59 per cent below JM's expectations, before accounting for a Rs 8.3 crore voluntary retirement scheme (VRS) adjustment. The earnings were weighed down by a 6 per cent rise in interest costs and a 16 per cent jump in depreciation, partly offset by a 24 per cent increase in other income.

Despite the weak quarter, Bata India reported progress on operational efficiency initiatives. Inventory management continued to improve, and the company's zero-based merchandising project was scaled up to 200 stores. Premium brands such as Hush Puppies and Power recorded strong growth, while the Victoria Ballerina campaign helped boost sales among female consumers.

The company also expanded its retail footprint, adding 30 new franchise stores during the quarter, primarily in smaller towns and semi-urban regions.

Management noted that demand had started to recover post September 22, supported by the rollout of GST 2.0 and festive buying momentum. JM said it would release a detailed report following Bata India's earnings call on October 30, 2025.