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The scrip of Bata India hit a record high of Rs 986 intra-day on the NSE on Friday.
Analysts said that while part of the rise was due to the general surge in the markets, Bata India Ltd did have good fundamentals, provided it is able to maintain growth at 20 per cent.
“The valuation of the stock is high at the point. The company needs to revert to its earlier growth rate of 25-30 per cent and generate strong free cash flow,” said Jignesh Kampani, Research Analyst at Nirmal Bang.
The stock ended the day at Rs 977.50 on the NSE, up 3.5 per cent or Rs 33 per share. Foreign institutional investors have steadily been increasing their stake in the company.
Their holding increased to 18.57 per cent at the end of June as against 14.69 per cent at the end of June 2011.
However, domestic institutions pared their holding to 12.72 per cent (15.07 per cent).
Bata is looking to expand aggressively in India. It has already opened 119 new stores in the first half of this calendar.
Analysts said that the company plans to open 100-150 outlets every year.
However, analysts said a drop in consumer demand could impede the company’s growth trajectory.
“We believe that with declining disposable income and a high base, it would be very difficult for Bata India to maintain over 20 per cent revenue growth rate without compromising on margins and cash flow,” said a report on BIL by Nirmal Bang.
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