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Growth remains flat YoY, accounting change drives optical EBITDA growth (+7% YoY)

• Revenue remained flat YoY at INR9.4b (3% below our estimate).
• Gross profit declined 3% YoY to INR5b (8% miss) as gross margin contracted 140bp YoY to 53.5% (down 530bp QoQ), ~250bp below our estimate in 1QFY26.
• Other expenses declined 11% YoY, likely due to a change in royalty structure for one of the brands (~INR155m boost in 4QFY25).
• As a result, EBITDA grew 7% YoY to INR2b (2% below) with EBITDA margin expanding ~155bp YoY to 21.1% (~20bp miss).
• However, EBITDA on a like-for-like basis would likely be flat to a 1% decline YoY, with EBITDA margin expected to be stable YoY.
• Depreciation and amortization expenses surged 22% YoY due to a change in royalty structure for one of the brands, and finance costs rose 13% YoY.
• As a result, reported PAT declined 70% YoY to INR520m (27% miss) due to weaker EBITDA, higher D&A, and finance costs.
• Bata continued with its VRS program, leading to a one-time exceptional cost of INR48m. Adjusted for the same, PAT at INR568m declined 33% YoY (21% miss).

Management commentary:

• Consumption momentum remained sluggish during 1QFY26 and was also impacted by fluctuating weather patterns and geopolitical uncertainties. However, Bata continued to push ahead with its affordability initiatives across categories to drive volume-led growth.
• Premium brands such as Hush Puppies, Comfit, and Floatz showed resilience.
• Bata added 20 franchise stores in 1QFY26, with a focus on expansion into newer towns and semi-urban markets.
• Management is focused on maintaining a balance between managing nearterm challenges and investing in long-term growth drivers. It remains optimistic about consumption recovery in 2HFY26, backed by Bata’s strong market positioning and wide network, while remaining focused on cost efficiencies. We would revise our estimates and FV after Bata’s earnings call on 14th Aug’25.

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