Year-on-year (y-o-y), revenue growth stood at 7% to ₹900 crore, lower than expectations. Overall volumes fell by 5% y-o-y given the demand sluggishness in categories with lower price point. The company notes revenue contribution from products in the price range of less than ₹1,000 declined while that of over ₹2,000 grew the fastest. It should be noted here that the company's premiumization strategy has worked in its favour. This has boosted the average selling price, which was up 13% both y-o-y and sequentially to ₹772.

A large part of Bata's lower price point portfolio is open footwear, which has been disproportionately impacted due to material price inflation and GST. While the company expects demand in mass categories to rebound, effective results from its premiumization strategy would hold it in good stead. In Q3, sneakers continued to grow faster than overall business. Bata also saw increased traction in Hush Puppies and Comfit.

An increasing mix of premium products would also boost Bata's margins, which were below pre-covid levels in Q3. Gross margin stood at 54.8% versus 60.7% in Q3FY20. Bata's management noted that it will be a while before margins recoup to pre-covid level. Stability in raw material prices and cost-saving measures would aid in this endeavour.

"We believe, while Bata's focus on premiumization, improving brand perception and expanding distribution are steps in the right direction, there will be challenges along the way," said analysts at ICICI Securities in a report on 15 February.

Even so, these efforts could take time to show meaningful results in the foreseeable future. Moreover, "The footwear segment now has multiple good-quality listed names, hence historical 'scarcity premium' may not really come back," said ICICI Securities' analysts.

Investors seemed to have taken note. In the past one year, Bata's shares are down by 22%. "Most of the negatives are priced in the Bata stock. We expect some catalysts to play out from Q1FY24 given the school season and Bata's favourable base," said Sachin Bobade, an analyst at Dolat Capital Market.