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Directors Report of Bata India Ltd.

Dec 31, 2013

The Directors have pleasure to present the 81st Annual Report of your Company covering the operating and financial performance for the year ended December 31, 2013.

FINANCIAL REVIEW 2013 2012 (in Rs. millions) (in Rs. millions)

Gross Turnover 20,984.06 18,717.54

Less: Excise Duty on Turnover 332.32 293.01

Net Turnover 20,651.74 18,424.53

Other Income 313.48 299.52

Total 20,965.22 18,724.05

Profit/(Loss) before Depreciation and Taxation 3,418.21 3,033.39

Less: Depreciation 591.97 513.75

Profit / (Loss) before Taxation 2,826.24 2,519.64

Provision for Taxation:

- Current Tax 1,156.01 908.43

- Deferred Tax Charge/ (Credit) (Net) (237.20) (101.44)

- Income Tax for earlier year - (3.38) Net Profit 1,907.43 1,716.03

Profit available for Appropriation 6,576.46 5,288.76

OPERATIONS

For the first time in its history, your Company''s Turnover crossed the coveted mark of Rs. 20,000 Million. During the year 2013, your Company achieved a total turnover of Rs.20,984.1 Million as compared to the Turnover of Rs.18,717.5 Million in the year 2012 - reflecting a growth of approx. 12.1%. Your Company recorded a Net Profit of Rs.1,907.4 Million for the year 2013, which was 11.2% higher than the Net Profit of Rs.1,716.0 Million for the year 2012.

Your Company has witnessed constant growth over the past few years, which endorses its strong understanding of the consumer needs and lifestyle. Your Company has been relentlessly working on improving its product offerings through constant research and development. The footwear collection has vastly improved over the years and many contemporary and fashionable designs of footwear have been launched. The new designs have helped your Company to constantly increase its customer base while meeting the changing lifestyle needs of the loyal customers.

During the year under review, the manufacturing facilities of your Company have also been upgraded with introduction of improved quality, better technology and materials for producing footwear with a more trendy look and comfort to meet the ever-changing market requirements. In order to meet its demand for footwear, your Company has also tied up with various manufacturers to produce shoes as per its own designs and quality standards. Modernization of factories is an on-going process in your Company and the same shall continue in the future.

In its strategic pursuit, your Company continues to open approx. 100 new retail stores every year across India and shut down or relocate unviable stores. Most of the new stores are of large format having space of more than 3,000 sq. ft. and delicately designed to display each category of footwear and accessories. These large format stores provide an excellent ambience and delightful shopping experience to the customers. During the year under review, your Company opened 95 new stores, including the largest footwear store in India at Viviana Mall, Mumbai, covering an area of approx. 28,000 sq. ft. Your Company is accelerating its growth focusing on tier II and tier III cities where the potential for growth is significant.

The improved performance of your Company over the past few years is a testimony to the fact that the Company is moving in the right direction and has adopted the right model of growing its business. The Indian market offers great opportunities and challenges as well. As the Indian consumers become more and more demanding in their choices, preferences and tastes, your Company will also gear up to seize these opportunities and face the challenges with appropriate strategies. Key Priorities of your Company for the year 2014 shall be to expand its presence in existing markets as well as in tier II and tier III cities in India. Footwear offerings shall continue to focus on the latest fashion and trend at affordable prices to attract and serve the younger generation of customers.

TRANSFER TO RESERVES

Your Company has transferred a sum of 190.7 Million to General Reserve against Rs.171.6 Million transferred last year.

DIVIDEND

The Board of Directors have recommended a final dividend of Rs 6.50 per share (i.e., 65% on an equity share of Rs.10/- each) for the year ended December 31, 2013, as against Rs.6.00 (i.e.,60% on an equity share of Rs.10/- each) paid last year. The payment of aforesaid dividend is subject to approval of the shareholders at the ensuing Annual General Meeting of the Company and if declared, shall be paid to the shareholders from June 04, 2014 onwards.

FIXED DEPOSIT

During the year under review, your Company has transferred to the Investor Education & Protection Fund (IEPF) of the Central Government the entire amount of Rs. 306,808/- as matured fixed deposits and interest accrued thereon, which remained unclaimed/unpaid for a period of more than seven years, despite several reminders and communications from the Company. Accordingly, your Company has no unclaimed/unpaid matured deposits or interest thereon as on December 31, 2013. Presently the Company is not accepting any fixed deposits.

CREDIT RATINGS

During the year under review, ICRA Limited has reaffirmed the rating of [ICRA] A1 (pronounced as ''ICRA A one plus'') to your Company for its Commercial Paper (CP) programme. This is the highest-credit quality rating assigned by ICRA Limited to short term debt instruments. ICRA Limited has also reaffirmed the rating of [ICRA] AA (pronounced as ''ICRA double A'') to your Company for its Line of Credit (LOC) limits of fund based/non-fund based facilities sanctioned by the Banks. The outlook on the assigned rating is ''Positive.''

AWARDS AND RECOGNITION

Your Directors are pleased to inform that your Company continues to maintain its leadership position in the organized footwear industry in India. Your Company has been the recipient of several awards and recognitions. During the year under review, your Company received the following Awards and Recognitions:

(i) Brand Equity - The Most Trusted Brand of 2013:

''BATA'' has bagged the No. 1 position in the FOOTWEAR category - This is the second consecutive year that your Company bagged the No.1 spot. The brand BATA was catapulted in ranking from 27th position in 2012 to 16th position in 2013 - an improvement of 11 positions in overall ranking amongst the top 100 brands in India.

(ii) Images Shoes & Accessories Award- 2013:

Bata India has been awarded Images Most Admired National Footwear Retail Chain of the Year.

(iii) India''s Most Attractive Brand 2013:

Bata India has been ranked at the 11th position by DNA Newspaper on the basis of a survey conducted by research firm TRA amongst the top Brands in India.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) is a continuous commitment of your Company for overall economic development and well being of the Country. CSR plays an important role in sustainable growth of your Company and ensures that your Company discharges its duties towards development of the society. As a good corporate citizen in India, your Company participates in initiatives that preserves and protects the environment and natural resources. Your Company is one of the leading Members of the Bata Children''s Program (BCP) of Bata Shoe Organization, which contributes immensely to the development and well being of under-privileged and differently-abled children, specially the girls, across the World.

Your Company has been engaged in various CSR activities throughout the year. During the year 2013, CSR activities undertaken by your Company included the following:

1. Arranged for relief material & assistance for the flood-hit victims at Uttarakhand. Approx. 15 tons of relief material including food, utensils, warm clothes and blankets were distributed amongst the survivors of disaster victims at villages in Haridwar and Dehradun.

2. Organized Blood Donation Camps at the corporate office at Gurgaon and at manufacturing units. General Health Check-up was conducted for underprivileged children at various schools at Gurgaon and Batanagar.

3. Organized Self-Defense Training for underprivileged school girls in Gurgaon. These underprivileged girls learnt easy self-defense tricks through the volunteers to handle difficulties with simulations on managing untoward situations. The training workshop boosted the confidence of these girls and shall help them fight against various odds and challenges that they face in their daily lives.

4. Conducted Hepatitis-B Vaccination Campaigns at Jharsa Village, Gurgaon. More than 280 kids were vaccinated against Hepatitis-B which is a serious disease caused by a highly infectious virus that attacks the liver which can lead to severe illness, liver damage, etc.

5. Organized a Tree Plantation Drive at Aravalli Bio Diversity Park, Gurgaon. Approx. 700 trees were planted by the volunteers along with enthusiastic school children who were introduced to the wonders of nature and respect for sustainable resource management. Your company had also organized ''Bata Walks Green'' Campaign in manufacturing units. Our volunteers planted saplings across our factories to spread awareness about environment protection, sustenance, and eco-conscious growth.

6. Govt. Girls Primary School, Gurgaon and Primary & KG School at Batanagar were renovated. A multi-purpose Auditorium and a new Computer lab had been introduced to the students of Batanagar Primary & KG School. The renovation at Govt. Girls Primary School included hygienic classroom, safe & comfortable furniture, neat and clean classrooms with cartoon characters painted and educational messages written on walls by the volunteers.

7. Under the BCP India initiatives, successfully launched a sustainable employee volunteering initiative - "Each One Teach One Campaign" to create awareness on the rights of a girl child, moral values, co-curriculum and sport activities. 30 employees of the Company are volunteering 1 hour weekly to teach underprivileged girls in a Primary School in Gurgaon.

8. Rain Water Harvesting projects of your Company continued near Bata House, Gurgaon and at its Hosur Unit, where rain water collected from the plot is being used for recharging of borewell and rain water collected from the roof is being used for washrooms and in lawns and gardens.

Your Board is aware that the Government of India has included Section 135 under the new Companies Act, 2013, encouraging certain class of companies in India to spend 2% of average net profits of three years towards CSR. The provisions of the new Act are yet to be notified. Your Company will take appropriate steps to meet the requirements under the Companies Act, 2013 in due course.

RETAIL

The process of opening large format stores and renovating the existing stores to foster contemporary appeal continued during the year 2013. Your Company has opened 95 large format stores (approx. 3000 sq. ft. or more) and renovated/ relocated / closed unviable retail stores across India. The strategy adopted by your Company has resulted in higher sales and profitability year-on-year as demonstrated in financial results of the Company.

Your Company continues to introduce contemporary and fashionable designs in its product range. Special attention has been provided to improve the quality and style of footwear in each category. In every season throughout the year 2013, your Company improved its footwear collections in stores to suit the needs and desires of the customers. An exclusive range of ladies footwear and a variety of products for the kids and children were launched, which have been well accepted by the customers. Your Company continued to be the market leader in Men''s formal footwear, with Ambassador, Comfit, Moccasino - all brands recording a high growth. In ladies segment, Marie Claire and Sundrop brands of footwear have recorded a good growth. Your Company''s footwear range for the children - Bubblegummer and Angry Birds continued to be the most favourite brands in India. Evergreen brands of your Company, viz., Power, North Star, Scholl and Weinbrenner - all have registered growth in volume in the year 2013 as compared to the previous year 2012.

HUSH PUPPIES

Your Company''s premium Brand - Hush Puppies has been expanding in line with the overall retail expansion program and continues to open exclusive stores and shop-in-shop stores in premium departmental stores. At the end of year 2013, Hush Puppies had 34 exclusive stores and 37 shop-in-shops. Hush Puppies lives the brand vision of "Treating the World to their favorite shoes" with exclusive retail stores, unique products and exciting brand image. Hush Puppies range of footwear shall continue to focus on comfort with contemporary styling, to attract younger consumers to the brand. Your Company shall invest in various marketing plans to re-position the brand in the minds of consumer as international premium lifestyle casual footwear brand in India.

FOOTIN

Your Company''s new retail concept - FOOTIN offers a new range of footwear focusing on affordable fashion and trendy styles. In FOOTIN stores, customers can get fashionable, young looking and affordable footwear presented through a high-density display concept. It is one of the new business models with a different approach to improve volume growth of your Company. During the year under review, your Company has opened 8 new FOOTIN stores across India, with a new range of footwear for both men and women focusing on fashionable and trendy styles at an affordable price. These stores are unique in terms of display and ambience and different from other footwear retail stores in India.

E-COMMERCE

The year 2013, certainly would be counted among the most active years for E-commerce division of your Company. Your Company generated a volume growth of almost 100% in on-line business during the year 2013 as compared to the previous year 2012. Your Company''s E-Commerce business reached approx. 750 cities across India with its shipments. In order to attract more e-customers, new partnerships have been entered into by tying up with leading on-line players e.g., Flipkart, Jabong, E-bay, HomeShop18, Myntra, Rediff, Indiatimes, etc. As a part of the strategy, Cash on Delivery service was launched for the end customer to facilitate the shopping ease. Your Company''s website www.bata.in has experienced a tremendous growth in traffic of approx. 2.5 Million visitors. Customer Service remained a focused area for the E-Commerce business of your Company with a dedicated team continuing to serve its on-line patrons.

Your Company will further strengthen its E-Commerce business and establish lasting relations with the existing and new partners. The focus would remain on customer service and swift operations to ensure that the customers get their footwear in good condition and well in time. The existing website www.bata.in shall also be upgraded with new and exciting features for the customers. High importance is being given to the social media network to ensure that the customers on the social platform are satisfied with the product and services being rendered by your Company.

NON RETAIL

Your Company''s Industrial division is now recognized as the leading supplier in the safety footwear market. Not only has the division expanded its coverage in the market but also is focused towards upgrading the market with newer technology products. The product range has been refreshed by launching new moulds as well as new PU-Rubber sole collection. The customer service function has been strengthened to provide immediate response to the queries raised by the industrial buyers.

Your Company''s Institutional business has recorded better results in the year 2013 as compared to the previous year. The strategy to focus on segments like defence, canteens, education, corporate, etc. has been fruitful and resulted in achieving good market penetration. A new range for the healthcare segment has been launched with specialized footwear to be used in hospitals for Doctors, Nurses, front office staff, maintenance team, etc.

CUSTOMER CARE INITIATIVES

During the year under review, your Company has further strengthened its customer care division. Effective and satisfactory customer service continued to delight the customers at various points, i.e., starting at retail stores, during the sale interaction, post sales services at Customer Help Desk and obtaining feedback from the customers. A new initiative - "Passion to Serve" program has been adopted for the sales personnel which entitles them to periodic promotions. An exclusive Customer Help Desk has been in place to assist the customer and to locate stores, inform product availability, process online orders and to acknowledge all their valuable feedback. On the Digital Space, through Facebook, your Company has entered into over 100,000 customers'' personal space and acquired more than 150,000 "Like" on Bata Facebook page.

EXPORT

Your Company''s Export sales in 2013 were Rs.147.1 Million compared to Rs.149.8 Million in 2012. Various plans are being explored to improve Export volume of the Company in the future.

LOGISTICS

Your Company has a well-organized Supply Chain team at its Corporate Office in Gurgaon which controls the demand planning, replenishment, transportation and warehousing operations. Introduction of a new Supply Chain Planning processes has been the key highlight for the year 2013. Critical initiatives on implementation of new Supply Chain Planning processes will ensure right products at right stores at the right time in right quantities and right sizes, which will improve efficiency and reduce cost of holding inventory. This process is being implemented in a phased manner and shall cover all the Retail Distribution Centers (RDCs) of your Company. This initiative will reduce the out of stock events at retail stores thereby improving the customer service levels.

Supply Chain team has also undertaken an initiative to consolidate all the warehouses in Delhi NCR region. A detailed modernization and consolidation plan of warehouses in other regions also has been planned in the current financial year.

CAPITAL EXPENDITURE

The Capital Expenditure incurred during the year amounted to Rs. 774.6 million in 2013, which was predominantly due to opening of a number of new stores and modernization of existing stores. Capital Expenditure has also been incurred for installation of machinery and moulds to modernize our factories.

INDUSTRIAL RELATIONS AND PERSONNEL

Your Company has continuously been working to improve human resources competencies and capabilities in the company, which is critical to achieve results as per the plan. Major initiatives and interventions to this effect as taken up during the year 2013, are as under:

Building up the best team in all functional areas

During 2013 your Company has hired 171 middle and senior level Executives for its various functional areas to replace the people moving out, retiring, etc. with professionals having better qualifications and experience.

Creating bench strength and building up capability for future growth

Executive Development plan

For the fourth consecutive year, your Company pursued its aim of nurturing and developing new talent for various responsibilities. Eight Executive trainees have been hired from various retail management schools and trained for 9 months under the Executive Development Plan (EDP). Five Executive Trainees, who successfully completed their training under EDP, have been placed as District Managers across retail operations chains.

Training and Development

a) District Manager Training

Developing and Training of internal talents continued to be the focus area of your Company. 96 nominated District Managers across all retail chains attended 2 days District Managers'' Training program.

b) Training of Store Employees and Store Managers/K-Scheme Agents

Imparting Training to store employees to improve their knowledge and skill levels with an objective to provide better customer service in retail stores remained a key focus are in the year 2013. Training was conducted for 1,251 store employees and 317 K-Scheme Agents/Store Managers to enhance their performance and effectiveness.

FINANCE

The Earning per Share (EPS) (Basic and Diluted) of your Company at Rs.29.68 reflects an increase by approx. 11% as compared to EPS of Rs.26.70 in the previous year. As informed earlier, since April-2010, your Company does not have any Bank Borrowings and the entire capital expenditure has been funded through internal sources.

RESEARCH & DEVELOPMENT ACTIVITIES AND ENERGY CONSERVATION

Your Company continued its local Research & Development activities during the year under review. These R&D activities included technological improvement in all key areas, e.g., product development, process development, material development, footwear moulds, etc. with emphasis on creating a pollution-free work environment. Total expenditure incurred on Research & Development was approx. Rs. 7 Million during the year. Your Company continues to actively pursue energy conservation measures. During the year under review, savings of energy cost worth approx. Rs.5.5 Million was achieved through replacement of conventional tubes with energy efficient lights, installation of energy efficient screw compressors and adopting other measures in its manufacturing units.

SUPPORT FROM BATA SHOE ORGANIZATION

Your Company continues to receive assistance and benefits of technical research and innovative programmes of Bata Shoe Organization (BSO) through Global Footwear Services Pte. Ltd., Singapore (GFS). Your Company has renewed the Technical Collaboration Agreement with GFS with effect from January 01, 2011 for a period of ten years. In terms of the said Technical Collaboration Agreement, your Company receives guidance, training of personnel and services from GFS in connection with research & development, marketing, brand development, footwear technology, testing & quality control, store location, layout & design, environment, health & safety, risk & insurance management, etc. Your Company continues to obtain expertise and experience from the visiting senior personnel of GFS and other BSO group companies to improve its product range and operational processes throughout the year.

In terms of the renewed Agreement as aforesaid, your Company has paid a fee of Rs.185 Million to GFS during the calendar year 2013.

STATUTORY AUDITORS

The Statutory Auditors of the Company - Messrs. S. R. Batliboi & Co. LLP, Chartered Accountants, retire at the ensuing Annual General Meeting of the Company and have given their consent for re-appointment. Your Company has also received their confirmation pursuant to Section 224(1B) of the Companies Act, 1956.

COST AUDITORS

In compliance with the Central Government''s Order dated November 06, 2012, your Board at the Board Meeting held on February 26, 2013 has re-appointed M/s. Mani & Co., Cost Accountants to carry out the Cost Audit of the Company in respect of Footwear. However, the Cost Audit Branch of the Ministry of Corporate Affairs, Government of India is yet to make the said Order effective. Your Company will file e-Form 23C as and when the said e-Form 23C is modified by the Central Government in line with the aforesaid Order.

The Cost Audit Report of the Company for the financial year ended December 31, 2012 was filed by M/s. Mani & Co., with the Cost Audit Branch, Ministry of Corporate Affairs, Government of India, on June 11, 2013.

DIRECTORS

There has been no change in composition of your Board of Directors during the year under review. The Ministry of Corporate Affairs, Government of India has included various provisions under the Companies Act, 2013 relating to composition of the Board of Directors and Committees of the Board of Directors of Indian companies. However, these provisions of the Act are yet to be notified. Your Company will take appropriate steps to reconstitute its Board of Directors and Committees thereof to comply with the requirements of the new Companies Act, 2013 and Rules framed there under in due course.

In terms of the provisions of the Companies Act, 2013 (to the extent applicable), your Board of Directors at their Meeting held on October 30, 2013 appointed Mr. Rajeev Gopalakrishnan, Managing Director as the ''Chief Executive Officer (CEO)'' of the Company with immediate effect. At the said Board Meeting your Board has also appointed Mr. Ranjit Mathur, Director Finance as the ''Chief Financial Officer (CFO)'' of the Company with immediate effect.

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of your Company, Mr. Jorge Carbajal and Mr. Akshay Chudasama, Directors of the Company are due to retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, offer themselves for re-election. The Board of Directors of your Company are of the opinion that their continued association with the Board will be beneficial to the Company and recommend their re-election.

STATUS OF BATANAGAR PROJECT

In terms of the Order of the Government of West Bengal, total obligation on the Company towards development of employee housing colony at Batanagar was Rs.650 Million. The Company has already received 315,000 sq. ft. of constructed space at Batanagar Project from Riverbank Developers Private Limited (RDPL), the developers of the project and had recorded a liability of Rs.216.2 Million in earlier years for obligation yet to be fulfilled towards the balance 325,000 sq. ft. constructed space. As per the Development Agreement entered into between RDPL and the Company in the year 2010, any liability arising on account of non-compliance of the terms and conditions of the aforesaid Order of the Government of West Bengal will be borne by RDPL.

Your Company alongwith RDPL has approached the Government of West Bengal for extension of the time limit for completion of Batanagar Project, and obtained their in-principle approval. The revised Order is awaited. During the year, the Company has signed an Addendum to the aforesaid Development Agreement whereby the Company shall receive 332,030 sq. ft. of constructed space in Batanagar Project against the balance 325,000 sq. ft. of constructed space from RDPL.

DIRECTORS'' RESPONSIBILITY STATEMENT PURSUANT TO SECTION 217 (2AA) OF THE COMPANIES ACT, 1956

Your Directors hereby confirm:-

i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year, and of the profit of the Company for that period;

iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the Directors have prepared the Annual Accounts on a going concern basis.

SUBSIDIARY COMPANIES

Bata Properties Limited and Coastal Commercial & Exim Limited continue to be wholly owned subsidiaries of your Company. In terms of the Circular No.2/2011 dated February 8, 2011 issued by the Ministry of Corporate Affairs, Government of India, your Board of Directors at their meeting held on February 12, 2014 have given consent for not attaching, inter alia, the Balance Sheet, Statement of Profit and Loss and other relevant reports and statements of its subsidiary companies to the Balance Sheet of your Company as on December 31, 2013 and have also agreed to comply with the conditions prescribed in the said Circular.

The Annual Reports-2013 of the aforesaid subsidiaries will be made available to the shareholders of the Company upon receipt of written requests from them. The Annual Reports-2013 of the aforesaid subsidiary companies will also be kept for inspection by the shareholders of the Company at the Registered Office of the Company and its subsidiaries and also at the Company''s Office at 27B, Camac Street, 1st Floor, Kolkata - 700 016 between 09:30 a.m. and 12:30 p.m. on any working day.

In compliance with the requirements of the aforesaid Circular, a Statement showing relevant details for the year ended December 31, 2013 in respect of Bata Properties Limited and Coastal Commercial & Exim Limited, the wholly owned subsidiaries of the Company have been included in the Financial Statements of the Company which forms part of this Annual Report.

CORPORATE GOVERNANCE

In compliance with the provisions of Clause 49 of the Listing Agreement with the Stock Exchanges, the Corporate Governance Report of your Company and Corporate Governance Compliance Certificate received from M/s. S. R. Batliboi & Co., LLP, Chartered Accountants, the Statutory Auditors, are attached as separate Annexure to this Report.

CONCLUSION

Your Board places on record its sincere appreciation for the co-operation and support received from investors, shareholders, customers, business associates, bankers, vendors as well as Regulatory and Government authorities.

Your Board would like to thank the major Shareholder and other group companies of Bata Shoe Organization for their guidance, support and co-operation in smooth operations of the Company. Your Board is ever grateful to the independent Directors for sharing their valuable experience and wisdom with the Management in the process of finalizing strategic decisions and oversight of the Company.

Your Board appreciates the invaluable contribution of the Senior Management Team for their leadership and all the employees of the Company for their indefatigable efforts which plays a pivotal role in achieving the objectives of the Company.

For and on behalf of the Board of Directors

Place : Gurgaon Uday Khanna

Date : February 12, 2014. Chairman


Dec 31, 2012

TO THE MEMBERS

The Directors have pleasure to present the 80th Annual Report of your Company covering the operating and financial performance for the year ended December 31, 2012.

FINANCIAL REVIEW:

2012 2011 (in Rs. millions) (in Rs. millions)

Gross Turnover 18,717.54 15,650.78

Less: Excise Duty on Turnover 293.01 225.43

Net Turnover 18,424.53 15,425.35

Other Income 299.52 1,309.14

18,724.05 16,734.49

Profit / (Loss) before Depreciation & Taxation 3,033.39 3,605.04

Less: Depreciation 513.75 411.01

Profit / (Loss) before Taxation 2,519.64 3,194.03

Provision for Taxation:

- Current Tax 908.43 966.79

- Deferred Tax Charge/ (Credit) (Net) (101.44) (31.15)

- Income Tax for earlier year (3.38) -

Net Profit 1,716.03 2,258.39

(Net profit of 2011 includes Rs. 837.67 Mn from surplus property development)

Profit available for Appropriation 5,288.76 4,245.71

OPERATIONS

During the year 2012 your Company achieved a total turnover of Rs. 18,717.54 million as compared to Rs. 15,650.78 million in 2011, reflecting a growth of approx. 19.6% on year-on- year.

During the year under review, your Company continues to record good growth in the performance of all its business areas. Large scale expansion of retail stores, renovation of existing stores, improvement in customer service, introduction of new value oriented products, training of employees, consolidation of manufacturing processes and focus to improve non-retail sales division, all together has yet again enabled your Company to achieve new milestones.

Your Company always endeavours to provide good quality footwear at affordable pricing to its customers. Use of modern technology in its factories and consistent improvement in its manufacturing and procuring process, enabled your Company to offer new range of trendy and fashionable footwear at a reasonable price. Your Company''s retail stores provide a great ambience and delightful shopping experience to the customers through specially designed shoe display systems, ultra-modern style, trained and friendly sales personnel and a range of attractive accessories. During the year 2012, your Company has improved its footwear collections under its existing brands to suit the requirements of its customers in all categories. Your Company has also introduced many new brands of footwear, e.g., Sundrops - a new premium range of stylish comfortable footwear for women, ''Angry Birds'' - a new collection of merchandise offering school shoes, casual shoes and accessories for children and teenagers, etc.

In addition to recording a well deserved growth in its BATA HOME delivery services during the year 2012, your Company has improved its online shopping experience by making ''cash on delivery'' and ''multiple order services'' for the customers. Your Company has also made tie-up arrangements with various e-commerce sites, e.g., Jabong, Snapdeal, India Times, Rediff, Junglee, etc., to attract potential customers online.

Your Company continues to enjoy the highest market share in organized footwear industry in India. In order to maintain its leadership position and stay ahead of growing competition, your Company will continue to innovate and move in the right direction and shall take all available measures to improve its business performance in the years to come.

TRANSFER TO RESERVES

The Company has transferred a sum of Rs.171.60 million to General Reserve against Rs.225.84 million transferred last year.

DIVIDEND

The Board of Directors has recommended a dividend of Rs.6/- per share (i.e., 60% on an equity share of par value of Rs.10/- each) for the year ended December 31, 2012 as against Rs.5/-(i.e., 50% on an equity share of par value of Rs.10/- each) paid last year (excluding special dividend of Re.1/- per share for gains from surplus property development). The payment of aforesaid dividend is subject to approval of the shareholders at the ensuing Annual General Meeting of the Company.

FIXED DEPOSIT

As on December 31, 2012 your Company had unclaimed matured deposits aggregating to Rs.0.63 million. Several reminders have been sent to the deposit holders concerned advising them to claim their matured deposits from the Company. Presently the Company is not accepting any fixed deposits.

CREDIT RATINGS

As informed in the previous Directors'' Report, ICRA has reaffirmed the rating of [ICRA] A1 (pronounced as ''ICRAA one plus'') to your Company for its CP programme. This is the highest-credit quality rating assigned by ICRA to short term debt instruments. ICRA has also reaffirmed the rating of [ICRA] AA (pronounced as ''ICRA double A'') to your Company for its Line of Credit (LOC) limits of fund based / non-fund based facilities sanctioned by the Consortium of Banks. The outlook on the assigned rating was ''Positive.''

Your Company is in the process of obtaining revised Credit Ratings from ICRA and expects to receive the same before March 31, 2013.

AWARDS AND RECOGNITION

Your Company has received the following Awards and Recognition, which has made us all proud:

1. The Most Admired Footwear Brand (Retail) - Brand equity recognized Bata as one of the ''Top most trusted brands'' in November 2012.

2. Most Admired Large Format Multi Brand Footwear Retailer of the year - National Chain Bata - Bata India was awarded the ''Most Admired Large Format Multi Brand Footwear Retailer of the Year - National Chain'' by the Images Shoes & Accessories forum held at Mumbai in March 2012.

3. Customer & Brands loyalty awards in the footwear sector - Bata India was awarded the ''Customer & Brand Loyalty Award in the Footwear Sector '' from AIMIA at the 5th Loyalty Summit, held in Mumbai in February 2012.

4. Most Trusted Brand at the 18th position - The Brand Trust Report recognized Bata India as the most trusted brand at the 18th position. This ranking is post survey of 16,000 brands out of which only 300 top brands were felicitated by the trust advisory.

CORPORATE SOCIAL RESPONSIBILITY

As a good corporate citizen in India, your Company discharges its Corporate Social Responsibilities (CSR) with due importance and considers CSR as a continuous process. Your Company is committed to preserved the nature, protect the environment, contribute to the economic development, ensure improvement in the quality of life of its employees and their families as well as the local communities where it operates and also development of the society at a large, specially for the under-previleged and differently-abled people.

The following CSR activities have been undertaken by your Company during the year 2012:

- Your Company has organized Polio Immunization Campaign, routine vaccination awareness camp and polio vaccination in slums near Bataganj factory, Patna.

- Your Company is associated with Blood Donation Camp organized by Pan India on Bata Children Program day to help children suffering from Thalassemia.

- Your Company has celebrated World Environment Day with tree plantations in Retail West office. Team also received a certificate of appreciation from United Nations Environment Program (UNEP).

- Your Company has celebrated World Literacy Day with street children by involving them into different educational fun games and donated shoes to them in Gurgaon.

- Your Company has organized Eye Check-up Camp for the children of Govt. Middle School, Ramjeechak at Bataganj, Patna and the children of Bata Nursery School at Batanagar with an eye safety awareness session.

- Orphan and blind girl children were sensitized to raise awareness about girl child rights on the occasion of First International Day of the girl child and were given shoes in Kolkata & Patna.

- Your Company saluted the spirit of bravery of young hearts by honouring the bravery award recipients who won the National Bravery Award presented by the Hon''ble Prime Minster of India on the eve of 64th Republic Day on January 26, 2013. These children were given shoes, socks and bags.

- Under Bata Children''s Program (BCP) India Initiative, this year Bata India Limited donated 250 pairs of Black School Shoes to all the differently-abled boys and girls in the age group of 7-23 years in deaf and dumb school in Gurgaon.

RETAIL

Your Company has continued its strategy of expanding its retail operations and has opened 189 new stores in 2012 across metros, tier 1 and tier 2 cities. The process of opening large format stores and renovating the existing stores to foster contemporary appeal has also continued with the majority of the stores above 3000 sq. ft. The company has renovated more than 50 retail stores and closed / relocated more than 60 retail stores. The strategy adopted by the Company has resulted in higher sales and improved profitability leading to improved financial results achieved by the Company in the year 2012. The Company has also continued expansion of its Hush Puppies brand with the opening of 15 exclusive new stores and 12 shop-in-shops stores across the country. Your Company continues to improve the strategic positioning of its retail stores to cater the needs of the customers and stay ahead of competition.

All the new retail stores of your Company are made as per Bata''s global format, designed by experienced designers and architects, using the latest retail techniques and the best quality of furniture to enhance stores layout and provide an attractive product display. These new stores deliver an enjoyable shopping experience to its customers in an aesthetically designed ambience with attentive, friendly and trained staff.

Customer Service continued to remain the main focus during the year 2012. Many new initiatives, e.g., Home Delivery service; E-Commerce enabled website and a dedicated call centre for customer queries and suggestions, etc., have been introduced to enhance customer satisfaction. Extensive training of store staff, customer response, research management systems and customer relationship management are some of the measures adopted by your Company for improved Customer Services.

In order to achieve volume growth your Company has opened 10 new FOOTIN stores across India during the year 2012, with a new range of footwear for both men and women focusing on fashionable and trendy styles at an affordable price. These stores are unique in terms of display and ambience and different from other footwear retail stores in India.

Most of the existing brands of footwear sold by your Company viz., Comfit, Ambassador, Mocassino, Scholl, Power, North Star, etc., have recorded a healthy growth during the year 2012. Introduction of new range of Marie Claire shoes helped your Company gain market share in the ladies footwear segment. Bubblegummer continues to remain the most favourite brands amongst the children for its comfort and attractive designs. New Brands launched in the year 2012 e.g., Sundrops,Angry Birds, etc, have generated good response in the market.

Your Company shall continue to expand its retail operations across the Country in the future. Opening of large format stores at strategic locations, making available the footwear and accessories as per customers'' choice in these retail stores and continuous improvement in the customer services, shall be the main focus area to enhance your Company''s market share in the organized retail footwear industry.

NON RETAIL

Your Company''s Industrial division has grown steadily year after year and has created a niche in the safety footwear market in the country. The Division is working with a vision to be the No.1 in the country in Industrial footwear segment. Strong initiatives have been taken in the year 2012 in the direction of creating technically superior merchandize suited to the market needs. The Division also covered newer segments by launch of new categories of products for various industrial applications and needs of industries, e.g., construction, steel, power, etc. A first time launch of product with PU-Rubber sole has been planned in the first quarter of the year 2013. This is revolutionary advancement over current products used by the smelter & chemical industry. A strong back-up support system has been put in place to provide personalized service to industrial buyers.

Your Company''s Institutional business has expanded its customer base in different segments and is now introducing specialized collections with special features for specific needs of various institutions. With its new business expansion plan and increased focus on each specific segment, e.g., education, defence, hospitality, security agencies & service sector, the division is positioning itself as a footwear solution provider.

Defence segment has also been the key focus area for the division and a large order has been received from Indian Air force.

EXPORT

Your Company''s Export sales in 2012 were Rs 149.82 million compared to Rs.169.34 million in 2011.

LOGISTICS

Your Company has a well-organized logistics team at its Corporate Office in Gurgaon which controls all transport & warehouse operations. Modernization of Retail Distribution Centre (RDC) at Bhiwandi was the highlight of the year 2012. Infrastructure at Bhiwandi RDC has been upgraded to meet the future requirements of the organization in line with growth plans.

The Logistics Team of your Company has successfully implemented the barcode enabled warehouse management system at three RDCs, i.e. Chennai, Farrukhnagar and Bhiwandi. This initiative has significantly increased the Inventory accuracy at RDCs.

Your Company is in the process of consolidating its warehouses across the business categories. The consolidation process for Industrial & Institutional business with RDCs at Farrukhnagar and Bhiwandi has been completed and a detailed consolidation plan of warehouses is currently under implementation.

CAPITAL EXPENDITURE

The Capital Expenditure incurred during the year amounted to Rs. 877.59 million as against Rs. 1,244.97 million (including Batanagar housing of Rs. 433.76 million) in 2011. The capital expenditure was predominantly due to opening a number of new stores and modernization of old stores. Capital expenditure has also been incurred for installation of machinery and moulds to modernize the factories and to produce footwear of the latest trendy designs.

INDUSTRIAL RELATIONSAND PERSONNEL

Your Company has continuously been working to improve human resources competencies and capabilities in the company to deliver results as per the plan. Major initiatives and interventions to this effect as taken up during the year 2012, are as under:

(i) Building up the best team in all functional areas

During 2012 your Company has recruited 43 Middle and Senior level Executives for its various functional areas and Executives moving out, retiring, etc. Your Company has endeavoured to get suitable replacement with competent people for each position in the organization to ensure smooth business operations.

(ii) Creating bench strength and building up capability for future growth Executive Development plan

For the third consecutive year, your Company pursued its aim of nurturing and developing new talent for various responsibilities by successfully training its Executive Trainees. 10 Executive Trainees have been hired from various retail management schools, who have undertaken training for 9 months under the Executive Development Plan (EDP) initiated by the Company in the year 2009. 7 Executive Trainees, who successfully completed their training, have been placed as District Managers across retail operations chains.

Training and Development

a) District Manager Training

Developing and Training of internal talents continued to be the focus area of your Company in 2012. During the year 94 nominated District Managers across all retail chains have attended 2 days District Manager program.

b) Training of Store Employees and Store Managers/K-Scheme Agents

Training of shop floor employees to improve their knowledge and skill levels with an objective to provide excellent customer service in the retail stores continued to remain an important aspect. Accordingly, training has been conducted for 849 store employees and 265 Store Managers / K-Scheme Agents to enhance their performance and effectiveness.

c) Training on topic ''5 S'' Japanese system at Bataganj Factory

Training session on ''5 S'' Japanese system on Good Housekeeping standards for Managerial Staff, emphasizing on the fact that this system gives the potential benefits such as safe working environment, improvement in product, etc.

(iii) New Initiatives in the year 2012

a) BEM Interchange Program 2012 successfully launched

Bata Emerging Markets (BEM) Interchange Programme has been launched in your Company in the year 2012. Under this programme, participants from different countries of Bata World underwent extensive on-the-job training for six months to enrich their skills, knowledge, abilities and gained practical expertise in their specific area of work. They have also been made familiarized with Bata India''s rich culture, values and work environment. Similarly, high performing employees from your Company have also been given opportunity to work and prove their merit in countries, viz., South Africa, Peru, Chile and Indonesia. This initiative has surely helped in identifying best talent across countries and will further aide in developing them for future roles. This program has helped create a bond in unifying Bata as "One Company", cutting across borders of geography.

b) Talented Step-Up Program

The Step-Up Program Project has commenced under the guidance of the representatives of Bata Shoe Organization (BSO) and approximately spreads over a duration of three years and is composed of three phases: the BSO Assessment, the 1.0 Talented Step Up Program and the 2.0 Talented Step Up Program. All three phases have been conducted recently. Participants for these courses comprised of various departments ranging from retail, merchandise to production. The aim of the training was to equip participants with the necessary knowledge, skills and know-how to progress from being an effective manager to a future leader. The Emotional Intelligence training was focused on developing the ability to perceive, control and evaluate the emotions. The Effective Recruitment training put emphasis on how to recruit highly skilled and competent employees. While the Strategic Planning training session included possible avenues to develop and implement effective strategies.

c) STEP-UP Bata 2012 Event

In 2012, Your Company has launched the Step-Up Bata 2012 Theme in an event where 129 employees including District Managers, Retail Managers, Buyers-Family, Flagship & Wholesale and Functional Heads were taken to a valley of dreams in the outskirts of Manesar. The objective of the Meet was to bring everyone on a common platform, build camaraderie, know each other, instil team spirit and cascade the business objectives of the Company. The Conference gave way to successful SWOT Analysis of your Company. The highlight of the event was a glittering Awards Ceremony where selected Executives were given Awards in appreciation of the business acumen and hard work displayed by them.

d) Revamped Induction Program

Your Company has successfully revamped the induction program of new joiners under the umbrella of Kaleidoscope in the year 2012. The objective was to inspire a sense of welcome among all new joiners by means of inter-departmental interactions, create awareness and familiarization with cross functional systems and processes and make all employees feel comfortable and seem no complexity in settling down at the workplace from their very first day.

e) In-House Newsletter ''Walk of Life'' Launched

Your Company''s in-house Newsletter has undergone metamorphic transformation in the year 2012. ''Walk of Life'' features snapshots from the events and campaigns organized throughout Corporate Office, Manufacturing, Retail Chains and Stores across India. It includes snapshots of Celebrations, insight into the career path of Leadership Team and their experience, stupendous feat achieved by the children of the employees of your Company, accolades won by the Company all that and much more make an interesting read inside this quarterly editions. The focus of this Newsletter has been towards representing a spectrum of identities, characters and voices which are important, informative, clear, precise and most importantly, inspirational.

(iv) Celebration of Occasions

During the year under review your Company has celebrated many occasions across its factories, offices and retail chains. Some of the celebrations were as under:

a) Bata Children''s Program (BCP) India Initiative celebrated Christmas with differently-abled School Children in the Deaf & Dumb School in Gurgaon.

b) Employees'' Kids Day was celebrated at the Corporate Office at Gurgaon.

c) Independence Day was celebrated at the Corporate Office at Gurgaon and all other establishments of the Company across India.

d) ''Town Hall'' was organised at the Corporate Office at Gurgaon to brief all employees about your Company''s objectives, business performance and initiatives to be taken for achieving the long-term goals during the year.

FINANCE

The Earning per Share (EPS) of your Company has increased by 20.8% (from Rs. 22.11 in 2011 to Rs. 26.70 in 2012) without considering the gains from Surplus Property Development in previous year. As mentioned in the Annual Report of the previous years, since April 2010, your Company is debt-free and the entire capital expenditure has been funded through internal sources. Your Company continues to focus on cash generation to record positive cash flow during the year under review.

RESEARCH & DEVELOPMENT ACTIVITIESAND ENERGY CONSERVATION

Your Company continued its local Research & Development activities during the year in the key areas of product, process, material development, footwear moulds, leather and tannery technology with emphasis on creating a pollution-free work environment. The in-house Research & Development Units of your Company at Batanagar, Bataganj, Faridabad and Hosur have obtained recognition from the Department of Scientific & Industrial Research (DS&IR) of the Ministry of Science & Technology, Government of India. Total expenditure incurred on Research & Development was Rs. 46.89 million during the year.

Your Company continues to actively pursue energy conservation measures.

SUPPORT FROM BATA GROUP

Your Company has seamless access to the benefits of technical research and innovative programs of the Bata group from Global Footwear Services Pte. Ltd., Singapore, for which your Company has paid a fee of Rs.160 million during the calendar year 2012.

Your Company continues to receive guidance and managerial support in its various functions including store layout, marketing, shoe line, upgradation of factories, training of managers and guidance from Bata Shoe Organization (BSO).

STATUTORY AUDITORS

The Statutory Auditors of the Company - Messrs. S. R. Batliboi & Co., Chartered Accountants, retire at the ensuing Annual General Meeting of the Company and have given their consent for re-appointment. Your Company has also received their confirmation pursuant to Section 224(1B) of the CompaniesAct, 1956.

DIRECTORS'' RESPONSE TO THE COMMENTS MADE BY THE AUDITORS IN THEIR REPORT

Auditors'' Report read together with Annexure referred to in Paragraph 3 of the Auditors'' Report do not contain any qualification of significant nature. Comments under para xxi of the Annexure to the Auditors'' Report are self explanatory and, therefore, require no further comments from the Board of Directors.

COST AUDITORS

In compliance with the Order of the Central Government, your Board has appointed M/s. Mani & Co., Cost Accountants to carry out the Cost Audit of your Company in respect of Footwear. This appointment has to be made in each financial year and based on the application of your Company the Central Government has approved the re-appointment of the Cost Auditor for the financial year ended December 31, 2012. Necessary application will be made to the Central Government in due course seeking approval to the re-appointment of the Cost Auditors for the financial year ending December 31, 2013.

The Cost Audit reports of the Company for the financial year ended December 31, 2011 have been filed with the Ministry of Corporate Affairs, Cost Audit Branch, Government of India, New Delhi on December 31, 2012 within the stipulated time as extended.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of your Company, Mr. Uday Khanna and Mr. Atul Singh, Directors of the Company are due to retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-election. Your Board is of the opinion that their continued association with the Board of Directors of the Company will be beneficial to the Company and hence recommends their re-election.

Mr. Jack Clemons, a Member of your Board of Directors has been appointed as the new Chief Executive Officer of Bata Shoe Organization (BSO). Your Board is happy to have continued participation and guidance of Mr. Jack Clemons as a Non Executive Director on the Board of Directors of your Company. Mr. Clemon''s appointment as the new CEO of BSO shall help your Board in guiding your Company to achieve its objectives going forward.

At the Board Meeting held on July 26, 2012, Mr. Gigi Abraham was appointed as the Group Brands Director of the Company for a period of five years, subject to approval of the shareholders at the forthcoming Annual General Meeting. The remuneration of Mr. Abraham as Group Brands Directors fixed by your Board falls within the overall limits specified under the CompaniesAct, 1956 and as approved by the Shareholders at the 76th Annual General Meeting held on May 26, 2009.

However, Mr. Abraham vide his letter dated December 19, 2012 tendered his resignation. Your Board at their Meeting held on February 26, 2013 accepted the resignation of Mr. Abraham with effect from December 19, 2012.

Accordingly, approval of the Shareholders is being sought at the forthcoming Annual General Meeting to the appointment and payment of remuneration to Mr. Gigi Abraham as Group Brands Director during the tenure of his directorship in the Company, i.e. for the period from July 26, 2012 to December 19, 2012 (both days inclusive).

BATANAGAR PROJECT

As mentioned in the Annual Reports of earlier years, in April - 2010, your Company restructured itsAgreements with the Joint Venture Partners with revised terms and conditions for the development of the modern integrated township at Batanagar, West Bengal.

Pursuant to the restructuring of these Agreements, Riverbank Developers Private Limited (RDPL) ceased to be a jointly controlled entity during the previous year. Your Company has already fulfilled its obligation towards development of employee housing colony at Batanagar and met its obligation towards investment in the factory and retail stores in the State of West Bengal as mentioned in the said Order. The development of Batanagar Project is in progress and your Company will receive approximately 324,550 square feet of constructed space at no additional cost in a phased manner from the Developers.

Notwithstanding the aforesaid restructuring of Agreements, your Company continues to remain committed to the Government of West Bengal in terms of their approval on Batanagar Project. In order to meet its remnant obligations, your Company is carrying a liability of Rs. 216 million in its books of accounts as on December 31, 2012. Your Company will make additional investments to improve and modernize its factory at Batanagar and also for revitalization and rejuvenation of its employees at Batanagar in the years to come.

DIRECTORS'' RESPONSIBILITY STATEMENT PURSUANT TO PROVISIONS OF SECTION 217 (2AA) OF THE COMPANIESACT, 1956

Your Directors hereby confirm:-

i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year, and of the profit of the Company for that period;

iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the Directors have prepared the AnnualAccounts on a going concern basis.

SUBSIDIARY COMPANIES

Bata Properties Limited and Coastal Commercial & Exim Limited continue to be wholly owned subsidiaries of your Company. In terms of the Circular No.2/2011 dated February 8, 2011 issued by the Ministry of Corporate Affairs, Government of India, a general exemption has been granted from the compliance of Section 212 of the Companies Act, 1956, requiring holding companies to attach with their balance sheet, a copy of the balance sheet, profit and loss account and other documents of each of its subsidiaries, provided that the Board of Directors of such companies have given consent, by way of a resolution, for not attaching the Accounts & Reports of the subsidiary companies concerned with the balance sheet of the Company and that the conditions prescribed in the said Circular are complied with. Your Board at their meeting held on February 26, 2013 have given their consent for not attaching, inter alia, the balance sheet, profit and loss account and other relevant reports and statements of its subsidiary companies to the balance sheet of your Company as on December 31, 2012 and have also agreed to comply with the conditions prescribed in the said Circular.

In view of the above Circular, the balance sheet, profit and loss account and other documents and statements of the aforesaid two subsidiaries have not been attached to the Balance Sheet as on December 31, 2012 of your Company. The Annual Reports -2012 of the aforesaid subsidiaries will be made available to the Shareholders of the Company upon receipt of written requests from them. The Annual Reports -2012 of the aforesaid subsidiary companies will be available for inspection by the Shareholders of the Company at the Registered Office of your Company and its subsidiaries and also at the Company''s Office at 27B, Camac Street (1st Floor), Kolkata - 700 016 between 09.30 a.m. and 12.30 p.m. on any working day.

In compliance with the requirements of the aforesaid Circular, a Statement showing relevant details for the year ended December 31, 2012 of Bata Properties Limited and Coastal Commercial & Exim Limited, the wholly owned subsidiaries of the Company have been included in the Consolidated Financial Statements of the Company which forms part of this Annual Report.

CORPORATE GOVERNANCE

Your Company believes that Corporate Governance is a way of life rather than something to be carried out under legal compulsion. Your Company is committed to the application of the best management practices, compliance with law, adherence to ethical standards and discharge of social responsibilities. Your Company has introduced adequate checks and balances in all spheres of its activities to ensure protection of all stakeholders'' interest. Your Company also endeavours to share with its stakeholders openly and transparently information on matters which have a bearing on their economic and reputational interest. This calls for a great degree of judgment and discretion so as not to put business and commercial interest of the Company at risk.

Corporate Governance Report as well as Corporate Governance Compliance Certificate received from the Statutory Auditors is provided as separate Annexure to this Report.

CONCLUSION

Your Board place on record their sincere appreciation for the cooperation and support received from investors, dear shareholders, customers, business associates, bankers, vendors as well as regulatory and government authorities.

Your Board would like to thank the Management of the Company and also thank the nominated Directors on the Board and the Major Shareholders for their complete support in smooth operations of your Company. Your Board is very grateful to the Independent Directors for their valuable contributions. All of them despite other business exigencies have shared their rich experience and knowledge with the management to take your Company forward. Your Board would also like to thank all the employees and staff of the Company and wish them all the best for achieving many new milestones in the future.

For and on behalf of the Board of Directors

Uday Khanna

Gurgaon, February 26, 2013. Chairman


Dec 31, 2009

The Directors have pleasure to present the 77th Annual Report of your Company covering the operating and financial performance for the year ended December 31,2009.

FINANCIAL REVIEW:-

2009 2008 (in Rs000) (in Rs000)

Turnover 11,125,882 10,123,323

Less: Excise Duty 209,365 253,843

Net Turnover 10,916,517 9,869,480

Other Income 84,228 111,996

11,000,745 9,981,476

Profit / (Loss) before Depreciation & Tax 1,281,868 908,410

Less: Depreciation 279,234 190,009

Profit / (Loss) before Taxation 1,002,634 718,401

Provision for Taxation :

-Current Tax 401,757 247,554

- Deferred Tax-(Net credit) (66,361) (147,521)

- Fringe Benefit Tax 1,722 11,000

- Tax for earlier years (6,756) --

Net Profit 672,272 607,368

Available for Appropriation 1,720,938 1,297,366

OPERATIONS

During the year your Company achieved a total turnover of Rs. 11,126 Million as compared to Rs. 10,123 Million in 2008, which is a growth of around 10%.

The Company continued re-engineering of all its operations with a special focus to give the best service to its customers and improve Bata brand image. During the year 2009, the Company continued with its strategy of opening new stores and renovating existing stores. These new stores are in large format and help in better display of the collection and offer better service to the customers. The Company is getting very positive response from its valued customers and they have appreciated the new quality and the improved shoe designs.

The Wholesale business has also shown commendable performance and the exclusive brands which have been created for this segment has been very well received by the customers.

It will be our endeavour to focus on the Wholesale business to give us volume growth in the future.

The company is continuing with its plans to grow its safety footwear and institutional business and is putting more resources in these areas.

TRANSFER TO RESERVES

The Company has transferred a sum of Rs 67.227 Million to General Reserve against Rs 60.737 million last year.

DIVIDEND

The Board of Directors have recommended a dividend of 30% for the year ended December 31,2009 as against 25% paid last year subject to the approval of shareholders in the ensuing Annual General Meeting of the company.

FIXED DEPOSIT

As on December 31, 2009 the Company has Rs. 1.757 million unclaimed principal deposits. Necessary reminders have been sent to deposit holders to claim their deposits from the Company. The Company presently is not accepting any fixed deposits.

CREDIT RATINGS

ICRA has reaffirmed the rating of A1+ to your company for CP programme. This is the highest-credit quality rating assigned by ICRA to short term debt instruments.

AWARDS AND RECOGNITION

Your Company has won numerous Awards / Recognitions in 2009 which signifies the strong perception and preference of its brand vis-a-vis other competing brands.

The more significant awards won by the Company in 2009 are as follows:

1. Awarded Amity Corporate Excellence Award - 2009 in a ceremony held in Amity Business School, NOIDAon February 27,2009. Bata received the award for the third time.

2. Business Week lists Bata India in list of "The worlds 25 Unsung Innovative Companies" in its May 2009 issue. The report was compiled by Boston Consulting Group, Business Weeks partner in Annual Most Innovative Companies Special.

3. Awarded Outstanding Sales performance for Year 2008 for Hush Puppies by Wolverine Group- Announced in May 2009 in Michigan.

4. Brand Equity recognized Bata in the TOP 50 Most Trusted Brands in June 2009. Bata is the only lifestyle retailer in the top 50.

5. Bata India awarded the prestigious Images award of the year for the Most Admired Retailer of the Year- Fashion & Lifestyle in Mumbai on September 16,2009.

6. Bata India awarded the Most Admired Footwear Brand by Images Fashion Forum in 2009. The ceremony was held in Mumbai on January 28,2009.

7. Bata India received the Amity HR Excellence Award for Corporate Ethics on 28th August 2009 in a ceremony held at Amity Business School, NOIDA.

8. Bata India is selected as a POWERBRAND in the POWERBRANDS 2010. The selection is done after an extensive pan India research by Indian Council for Marketing Research to select The Most Powerful Brands in India in the year 2009.

CORPORATE SOCIAL RESPONSIBILITY

The following CSR activities were undertaken by the company during the year 2009:

- Sponsorship of Rain Water Harvesting Project in Gurgaon.

- Slippers and sandals donated to children in Orphanage.

- Free Medical check up and blood donation camp organized in Batanagar.

- Distribution of blankets to poor and books to economically weak students in Ram Krishna Mission School at Batanagar.

- The company encourages entrepreneurial spirit in the small scale business located in the vicinity of its factories so that they become independent associates and partners in progress. This generates employment in the area giving opportunities for people to grow.

- The company maintains a temple, a church and a mosque where employees and people from different communities in the neighborhood participate in prayers.

- The company is providing free medical services to the people living near the factory in Bataganj (Patna) and also free drinking water facilities to the inhabitants residing around the factory.

- Bata School of Cricket provides coaching and guidance to budding talents through the services of renowned cricket personalities.

RETAIL

During this year, the Company opened 69 new Bata stores, which are all in large format with an average of over 3000 square feet. It also renovated 40 existing Stores and closed down 73 stores which were in small format and unviable.

All the new and renovated stores are made as per Bata global format, using the latest retail designs and best quality furniture, which makes our stores the most well laid out and having the best display of our products.

Ably supported by various visually attractive POP, it makes for a more satisfying customer experience in our stores. These new & renovated Bata Shoe Stores continue to help in ensuring that Bata remains the most preferred brand for consumers in the footwear retail market in India.

Batas new collection, with its trendy and youthful designs and great value pricing, continued to ensure that our customers found great satisfaction and gave their patronage to our brand. While our leadership in the dress comfort segment continued, we also increased our share of the growing ladies and youth segment.

We also continued to expand our premium retail offering through the chain of Hush Puppies exclusive stores and four new outlets in Delhi, Mumbai & Chennai were opened during the year.

Our shop in shop retail format tor Hush Puppies in partnership with Department Stores has been highly successful and we opened three such locations during 2009.

This rapid expansion of the brand continues to give our customers greater accessibility to our premium range of footwear under Hush Puppies brand.

NON RETAIL

The Non Retail business has shown considerable improvement in business. New shoe line collection launched by us resulted in serving more number of customers.

The Company is concentrating on the top distributors and working with them to grow our business. New distributors were also opened in unrepresented areas to increase market penetration.

Bata Industrials & Institutional business has been steadily growing for last 2 year & is expected to grow at a healthy rate for next couple of years. Country wide distribution network has been established to harness the market potential to become market leader in next 2 years.

The Company has invested in resources in the factory to meet the stringent technical specifications of the safety footwear business and ensure that our products are the best in the market.

EXPORT

Export sales in 2009 were Rs. 77.7 million compared to Rs. 100.8 million in 2008.

LOGISTICS

The Company has a well organized Logistics Team at Gurgaon which controls the distribution process and ensures that footwear of the right size is available at the right place, at the right time, to consumers all over the country. Companys endeavour is to keep improving its distribution process through greater use of Technology inputs to track the rapid changes in consumer preference and shopping practices. To support and deliver the growth projections, the company is strengthening its Logistics infrastructure through restructuring and consolidation of the RDC space, introduction of modern infrastructure and new technologies, reduction in product transit lead-times, and faster & more frequent deliveries to stores.

CAPITAL EXPENDITURE

The Capital Expenditure incurred during the year amounted to Rs. 436.1 million as against Rs.358.6 million in 2008. The increase in capital expenditure was predominantly due to opening a number of new stores and modernization of old stores. Capital expenditure has also been incurred for installation of machinery, moulds and information technology.

INDUSTRIAL RELATIONS AND PERSONNEL

The Industrial Relations in the factories were peaceful and cordial during 2009.

To create a ready talent pool in the Retail Operations the Company has initiated Executive Development Programme consisting of 3 phases in 9 months, whereby Trainees have been recruited from prestigious Retail Business Schools, trained and developed as District Managers. Also to give impetus to the Retail Operations best talents available in the market with the best academic backgrounds have been hired.

Developing & Training of internal talents continued to be the focus area of the Company in 2009. Identified employees with potential for growth were put on specific developmental plans. Training was conducted for 1588 store employees and 195 store managers & K - agents to enhance their performance and effectiveness.

Felicitation & appreciation of top performing Store Managers was done through "Millenium Club" Recognition Programme which is a privileged membership programme at functions held at Corporate Office and Regions.

Existing employees were encouraged by the Company to become entrepreneurs and take the new stores as a franchisee. 80 new K-scheme Stores have been taken up by ex-employees under this policy. Comprehensive training on "Store Operations" for the new K - Franchisees were imparted.

Information in terms of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules 1975 is set out in an Annexure to this Report.

FINANCE

The EPS (Basic and Diluted) of the Company has increased by 10.69% (from Rs.9.45 in 2008 to Rs. 10.46 in 2009).

Bank borrowings at the year end 2009 are Rs.146.5 million against Rs.359.1 million for the corresponding period in the year 2008, despite the entire capital expenditure and VRS expenditure being funded through internal accruals.

R&D ACTIVITIES AND ENERGY CONSERVATION

The Company continued local R&D activities during the year in the key areas of product, process, material development, footwear moulds, leather and tannery technology with emphasis on creating a pollution-free work environment. Total expenditure incurred on R & D was Rs. 36.2 million during the year.

The Company continues to actively pursue energy conservation measures.

SUPPORT FROM BATA GROUP

The Company has seamless access to the benefits of technical research and innovative programs of the Bata group from Global Footwear Services, for which it paid a fee of Rs.120 million during the calendar year2009.

The Company continues to receive guidance and managerial support in its various functions including store layout, marketing, shoe line, up gradation in factory, training of managers and guidance from senior most managers of the group.

STATUTORY AUDITORS

The Auditors of the Company Messrs. S R Batliboi & Co., Chartered Accountants retire at the ensuing Annual General Meeting of the Company and have given their consent for re-appointment. The Company has also received their Certificate pursuant to Section 224(1 -B) of the Companies Act, 1956.

DIRECTORS RESPONSE TO THE COMMENTS MADE BY THE AUDITOR IN THEIR REPORT

Auditors Report read together with Annexures referred to in Paragraph 3 of the Auditors Report do not contain any qualification of significant nature and do not call for any explanation /clarification.

COST AUDITORS

In compliance with the Central Government Order your Board has appointed Messrs. Mani & Co., Cost Accountants to carry out the Cost Audit of the Company in respect of Footwear. This appointment has to be made in each financial year and an application has been forwarded to the Central Government to renew the appointment for the current financial year.

DIRECTORS -

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of your Company, Mr N Sankar and Mr J Carbajal, Directors of the Company retire by rotation at the ensuing Annual General Meeting of the Company and offer themselves for re-election. The Board of Directors are of the opinion that their continued association with the Company will be beneficial to the Board and recommends their re-election.

DIRECTORS RESPONSIBILITY STATEMENT PURSUANT TO SECTION 217 (2AA) OF THE COMPANIES ACT, 1956

The Directors hereby confirm :-

i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year, and of the profit or loss of the Company for that period;

iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the Directors have prepared the Annual Accounts on a going concern basis.

SUBSIDIARY COMPANIES

As required under Sec 212 of the Companies Act, 1956, the Audited Balance Sheet and Profit & Loss Account along with the respective Reports of the Board of Directors and the Auditors thereon of the subsidiarycompaniesfortheyearended December 31,2009 are attached.

CORPORATEGOVERNANCE

The Company believes that Corporate Governance is a way of life than something to be carried out under legal compulsion. The Company is committed to the application of best management practices, compliance with law, adherence to ethical standards and discharge of social responsibilities. The Company has in all spheres of its activities adequate checks and balance to ensure protection of interest of all stakeholders. The Company also endeavours to share with its stakeholders openly and transparently information on matters which have a bearing on their economic and reputational interest. This calls for a great degree of judgement and discretion so as not to put business and commercial interest of the Company at risk.

Corporate Governance Report as well as Corporate Governance Compliance Certificate are provided as separate Annexures to this Report.



CONCLUSION

The Directors place on record their sincere appreciation for the cooperation and support received from investors, our dear shareholders, customers, business associates, bankers, vendors as well as regulatory and governmental authorities.

The Directors appreciate the invaluable contribution of the management team in performing an outstanding job in taking the Company to greater heights and also thank the employees for the significant contribution made by them to the Companys progress.

We would like to specifically thank your Managing Director and Finance Director for the untiring work in the re-organization of our company; we also thank the nominated Directors and Bata International for their complete support in our endeavors for re-engineering. We are very grateful to our wise and experienced Independent Directors for their most valuable contribution in every aspect of the company operation, and for always targeting profitable growth and improve customer service. Your Directors look to the future with renewed confidence and optimism.

For and on behalf of the Board of Directors

P M Sinha

Gurgaon, February 24, 2010. Chairman

 
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