With the advancement of technology, the rural sector has become a sizeable market for corporates. Investments are rising in rural markets on the back of growing demand and increasing awareness for branded and high quality products. Tastes have evolved over the years as rural consumers are seeking information through multiple sources, including media and telecommunication. These consumers are estimated to be 70% of the Indian population and contribute significantly to the gross domestic product (GDP). The Indian market size is huge, with more than 650,000 villages and an inhabitation population of around 850 million consumers. No wonder the corporates are now all looking at the rural market for superlative growth in the future, owing to the favourable changes in consumption trends and the size of the rural market. Large FMCG companies like Dabur, Hindustan Unilever and Colgate generate around 40% of their revenue from the rural and semi urban areas. It is estimated that the Indian FMCG sector in rural and semi urban areas is expected to cross US$20 billion in 2018 and reach US$100 billion by the year 2025. The footwear industry has been dominated by unorganised players in the past, but now with the implementation of GST, organised players like Bata India Ltd should benefit immensely as higher compliance cost to the unorganised players will create a level playing field. The company plans to add 100 new self owned and operated stores in malls and high street locations, while it expands its presence in Tier 1 and Tier 2 cities through the franchisee route. Bata India Ltd has identified an increasing focus on youth- and women-centric designs for its products. The company intends to increase the revenue share of women’s contribution from 26% currently to over 35% in the next two years. To achieve the same, Bata is planning an aggressive advertising campaign to boost revenue in the near future. The stock price of the company hit a one-year high of Rs 610 last week on the Indian bourses, on the back of strong earnings reported for the quarter ended April-June 2017. Bata reported a 20% jump in net profit at Rs 60 crore on a revenue income of Rs 743 crore for the same quarter. The management outlook was also quite upbeat, with the company expecting margins and sales to grow in the remaining part of the year. Analysts and research experts expect the Bata share to appreciate by over 30% in the next nine months on the back of GST implementation benefit, higher product visibility, better product mix for both women and youth, opening of new stores and a significant uptick in rural consumption demand.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.