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DIRECTORS' REPORT TO THE MEMBERS
The Directors have pleasure to present the 82nd Annual Report of your Company covering the operating and financial performance for the fifteen month period ended on March 31, 2015.
During the fifteen month period ended March 31, 2015 your Company generated total Turnover of Rs.27,375.9 Million as against the total Turnover of Rs.20,984.1 Million during the last financial year ended on December 31, 2013, covering a period of twelve months. The Net Profit of your Company for the fifteen month period ended March 31, 2015 stood at Rs.2,311.7 Million as against the Net Profit of Rs.1,907.4 Million for the twelve month period ended December 31, 2013. The Net Profit of your Company for the fifteen month period ended March 31, 2015 as mentioned above includes Exceptional Income of Rs.315.2 Million on account of, inter alia, part receipt of constructed space at Calcutta Riverside Project at Batanagar, West Bengal from the erstwhile Joint Venture Company, equivalent to Rs.239.1 Million and written back provisions of Rs.9.3 Million considered no longer required.
Your Company's total Turnover for the twelve month period ended March 31, 2015 was Rs.22,318.4 Million as against the total Turnover of Rs.21,424.6 Million for the twelve month period ended March 31, 2014 – reflecting a growth of 4.2% year–on–year. The Net Profit of your Company for the twelve month period ended March 31, 2015 was Rs.1,917.6 Million, which remained at the same level of Net Profit of Rs.1,916.8 Million for the corresponding twelve month period ended March 31, 2014.
At the beginning of the current financial period, your Company launched a 360–degree integrated marketing campaign, "Where Life Meets Style" along with an innovative TV commercial which appealed to the consumers across all age groups and demographic profiles. The new marketing campaign also reinstated your Company's commitment to deliver value, quality, aspirational and contemporary products to the customers.
The product offerings of your Company witnessed an enhanced range of footwear through 'Spring–Summer' Collection and 'Autumn–Winter' Collection. The new ranges of footwear are contemporary, stylish and targeted to appeal to the younger generation. Apart from the new range of footwear your Company also offers a wide selection of accessories like bags, belts, scarves, sunglasses, wallets, etc., to cater to the customers' life styles.
During the period under review, due to certain unexpected problems with the implementation of new supply chain IT systems, the retail stores of your Company could not be supplied with adequate stocks of footwear and accessories. As a result, the performance of your Company for the fourth and fifth quarter in 2014–15 were affected. Your Board is happy to inform that the Management had taken appropriate steps to address the issues relating to supply chain systems. Your Board believes that the Company will be able to regain the lost business during the current financial year.
In order to improve volume and profitability, various steps have been taken during the period under review, i.e., initiatives to achieve same store growth, investment behind new channels and stores, cost control and manpower rationalization. In addition, your Company has also taken various 'Margin Improvement Initiatives' which are expected to yield results in the future.
During the period under review, your Company has continued its modernization plans at its Manufacturing Units at Batanagar – West Bengal, Bataganj – Bihar and Southcan – Karnataka. The modernization plans implemented in these Manufacturing Units have improved quality of the products and also increased productivity.
Your Company has introduced Six Sigma quality initiatives at its Batanagar Manufacturing Unit. The Oil Fired Boiler at Batanagar has been substituted with Solid Briquette Fired Boiler which runs on eco–friendly green waste. Your Company has also strengthened its Quality Control team to ensure that the quality of the products is maintained and Quality Norms are strictly adhered to while manufacturing and procuring footwear and accessories.
Your Company is moving in the right direction, investing behind right activities and processes. Your Company shall continue to offer its customers a complete footwear solution for all looks and occasions like corporate, casual, evening, party and holiday wear and shall continue to launch exciting, contemporary and stylish footwear and accessories for men, women and kids.
CHANGE IN FINANCIAL YEAR
In compliance with the provisions of Section 2(41) of the Companies Act, 2013 your Company at the Board Meeting held on November 5, 2014 decided to change its financial year from 'January–December' to 'April–March'. Accordingly, the last financial year of your Company was extended up to March 31, 2015 covering a period of fifteen months commencing from January 1, 2014. Your Company shall henceforth follow its Financial Year commencing from April 1 and ending on March 31, every year.
TRANSFER TO RESERVES
Your Company has transferred a sum of Rs.231.17 Million to General Reserve as against the sum of Rs.190.7 Million transferred to General Reserve last year.
Your Board has recommended a final dividend of Rs.6.50 per share (i.e., 65% on an equity share of Rs.10/– each) for the period ended March 31, 2015, as against Rs. 6.50 per share (i.e., 65% on an equity share of Rs.10/– each) as paid last year. The payment of aforesaid dividend is subject to approval of the Members at the ensuing Annual General Meeting and if declared, shall be paid to the eligible Members from August 19, 2015 onwards.
Your Company has no unclaimed/ unpaid matured deposits or interest thereon since December 31, 2013. Presently the Company is not accepting any fixed deposits.
During the period under review, ICRA Limited has 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 'Stable.' This rating is valid till December 31, 2015.
SHARE CAPITAL AND SUB–DIVISION THEREOF
The Authorized Share Capital of your Company as on March 31, 2015 was Rs.700 Million. The Subscribed and Paid up Share Capital of your Company as on that date was Rs.642.85 Million divided into 64,263,770 Equity Shares of Rs.10/– each fully paid up. Your Company's Equity Shares are listed on The Calcutta Stock Exchange Limited (CSE), BSE Limited (BSE) and National Stock Exchange of India Limited (NSE). During the past couple of years, the share price of your Company on NSE and BSE has seen a steady rise touching an all time high of Rs.1,496/– in January–2015. In order to improve liquidity and to make it affordable to the retail investors, your Board at its meeting held on May 27, 2015 considered it expedient to sub–divide the nominal value of the Equity Shares of your Company. Accordingly, it has been proposed to sub–divide the nominal value of one share of Rs.10/– each fully paid up into two shares of Rs.5/– each, fully paid up. This proposal is subject to approval by the Members at the ensuing Annual General Meeting and all statutory and regulatory compliances.
AWARDS AND RECOGNITION
Your Directors are pleased to inform that your Company has been able to sustain its leadership position in the orgainsed footwear market by bagging several awards and recognitions. During the period under review, your Company received the following Awards and Recognitions:
1. 'Pitch Top 50 Brands 2014' Awards by Pitch Magazine– Bata India Limited received 'The Pitch Top 50 Brands 2014' award for its marketing initiatives for the year 2014. BATA was the only footwear brand amongst the other top 50 brands to receive this award.
2. 'Platinum Awards Winner–2014'– Reader's Digest Trusted Brands by India Today –Bata India Limited was coveted as a 'Platinum Award Winner' by Reader's Digest Trusted Brands for being one of the most trusted brands of the Country. This award was based on a consumer survey and BATA was the only footwear brand to receive this award.
3. 'Economic Times Best Brands Carnival–2014' by The Economic Times – Bata India Limited received the 45th rank amongst other lifestyle brands and the Number 1 rank in Footwear category in The Economic Times Best Brands Carnival Awards–2014.
4. 'The Economic Times Best 200 Brands in India' by The Economic Times – Bata India Limited received 'The Economic Times Best 200 Brands in India' award organised by The Economic Times.
5. 'Dun & Bradstreet Corporate Awards –2014' by Dun & Bradstreet – Bata India Limited received 'The Dun & Bradstreet Corporate Awards – 2014' for the best footwear brand in the Country.
6. Brand Equity – The Most Trusted Brand (Retail) – Brand Equity recognized BATA in the "Top 50 Most Trusted Brands" of the Country and recognized BATA at the 9th position.
7. 'Delhi NCR's Hot 50 Brands' Awards by Hindustan Times – Bata India Limited was declared as one of the Top 50 brands of the Delhi NCR Region by The Hindustan Times.
8. 'Golden Global Achiever's' Awards by Institute of Economic Studies – Bata India Limited received 'The Golden Global Achiever's Award' organized by the Institute of Economic Studies.
9. 'Child's Most Popular Award – 2014' by The Child Magazine – Bata India Limited was runner–up in footwear category for 'The Child's Most PopularAward – 2014' in the kidswear segment.
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility continues to be a commitment of your Company for overall economic and social development of the Country and its people. Your Company has always been committed towards improving the quality of lives of people in the communities in which it operates because it considers the society as an essential stakeholder. Your Company has a heritage to be engaged in charities and philanthropic activities, along with a number of others social activities, e.g., providing quality education to the under privileged children, upliftment of differently–abled children, etc., through Bata Children's Program (BCP) of Bata Shoe Organization.
In compliance with Section 135 of the Companies Act, 2013, Rules framed thereunder and revised Clause 49 of the Listing Agreement with the Stock Exchanges, your Board has constituted a Corporate Social Responsibility (CSR) Committee. Based on the Recommendation of the CSR Committee a Corporate Social Responsibility Policy (CSR Policy) of the Company has been adopted.
The CSR Policy of the Company is available on the website of the Company at www.bata.in and can be viewed using the link: <http://bata.in/0/pdf/CorporateSocialResponsibilityPolicy.pdf>. Your Company has initiated various CSR programs as per the CSR Policy adopted by the Board and shall monitor the same through its CSR Committee, which meets periodically.
Since the financial year of the Company commenced on January 1, 2014, the reporting of the CSR project implementation in the prescribed format shall be applicable to the Company in respect of its subsequent financial year commencing from April 1, 2015 onwards. Following are the key highlights of various CSR activities undertaken by your Company during the fifteen month period ended March 31, 2015:
1. Your Company has adopted schools in and around its areas of operations/ factories and conducted various programs designed to improve the infrastructure of the schools in order to make a conducive environment for the children to learn, to provide quality education to the children, to ensure their health and safety and to raise environmental awareness amongst children and adults.
2. A MOU has been signed with SEEDS (Sustainable Environment and Ecological Development Society), a New–Delhi based humanitarian non–profit organization working to make vulnerable communities resilient to disasters. The MOU was signed to support the rebuilding of Government Upper Primary School at District Pulwama, Kashmir, under the Jammu & Kashmir Flood Response and Recovery Initiative.
3. Employee Volunteers of the Company dedicated 4–6 hours every month to teach both curricular and extracurricular subjects towards holistic development of 280 underprivileged children. This includes teaching different sports to boost confidence of the children and instill in them values like teamwork, hard work, honesty & integrity.
4. A Pediatric camp was organized to diagnose the health of underprivileged children in the adopted school in Gurgaon where the Doctors emphasized on the importance of nutrition in their daily lives and sources of different dietary vitamins.
5. Computer classes were started for the children in the adopted schools. New computers and new furniture were procured. A computer teacher has been engaged to teach about 150 girl students.
6. Health Check–up camps were organized to ensure general well being of the children in the schools adopted under BCP. Volunteers educated children of the school on good oral health and hygiene and distributed free toothpaste and toothbrushes.
During the fifteen month period ended March 31, 2015, your Company opened 159 new retail stores across India. The new stores are larger in size and are based on global design, making them look complete and enticing with adequate space to display the products. Your Company plans to add around 100 new retail stores every year to increase its presence in the Malls, High Streets and also in the Tier–2 and Tier–3 cities across India. Your Company plans to open destination stores to provide a unique shopping solution to the consumers. In addition, your Company shall continue to make investment on creating a delightful shopping experience for the customers by enhancing customer service, improving store layouts and creating an emphasis on key products within the retail stores.
Your Company's premium brand 'Hush Puppies' continues to live up to its brand image of comfort, quality and style. The year 2014–15 was a milestone year for Hush Puppies as it completed 20 years of its existence in India. In addition to being available through the retail stores of your Company, the brand has expanded its presence to 63 exclusive stores and 36 shop–in–shops. During the period under review, Hush Puppies endeavoured to re–position itself as a new International Premium Lifestyle Casual Footwear brand. Your Company shall continue to focus on offering unique products under this brand, which will be more comfortable with contemporary fashionable style, making 'Hush Puppies' the most desired lifestyle brand.
Recognizing the needs of young customers, your Company's new retail concept – FOOTIN was created in the year 2012. It is a new business model with a different approach to cater to the young customers who are style conscious and trend–savvy shoppers at an affordable price. FOOTIN has become the source for current fashions at great value. FOOTIN business is growing quickly, featuring new and exciting store environments, creative shoes and accessories designs at the right price, always changing and always in style.
DIGITAL MULTI–CHANNEL BUSINESS
Your Company's digital multi–channel business division has been performing exceptionally well in terms of on–line business and generated a good volume growth. Such consistency of growth in digital multi–channel business is expected to continue considering the range and quality of products on offer coupled with excellence in delivery service.
Your Company's digital multi–channel business has reached approx.1400 cities across India with its shipments. In order to attract more on–line customers, new partnerships have been entered into by tie–up with leading on–line players e.g., Amazon, Myntra, Flipkart, etc. As a part of the strategy, 'M–Wallet' (mode of payment) service has been launched for the end customers to facilitate the shopping ease. To keep up with advancing technology in the digital age, the website of the Company www.bata.in has been re–launched to make it more user–friendly and responsive. Customers can now easily navigate, share their favourite products on social media, look at the latest trends, styles, etc. In order to generate larger customer interests, a customer connect program is being launched, with a focus to grow customer base by effectively communicating and engaging with the consumers on 24 / 7 basis. Your Company has also introduced a mobile application for user–friendly experience via an interactive user interface, an easy and faster way to browse, without the necessity of using a laptop or computer.
Taking into consideration on–line customers' interests and preferences, your Company is planning to launch exclusive product lines which will be made available only on–line at the website of the Company and also on the portals of other leading on–line players. This initiative will help in controlling the prices better and regulating the same across the business partners of your Company.
In order to make customers' on–line shopping experience more convenient, your Company is also planning to launch "Click & Collect" Service. From the comfort of home, at the click of a button, customers can now shop entire range of products available on–line, choose any product of their choice and get it delivered to local Bata Store that is convenient for them. This initiative of your company will help in driving more walk–ins to the Bata Offline stores & thereby an opportunity to sell more to such 'Click & Collect' customers.
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 designs and sole patterns 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 during the fifteen month period ended March 31, 2015 as compared to the previous year. The focus is to cater to segments like defense, canteens, education, corporate, etc. 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 period under review, your Company has further strengthened its customer care division. Following a successful pilot, a customer loyalty program, viz., 'The Bata Club' has been introduced at major metro cities. Since its inception, approx. 2.7 Million Club Membership have already been added to 'The Bata Club' from 16 cities covering 600 stores across the Country, who are now being communicated regularly about branded products of your Company and several offers have been customized for them. Also, through dedicated helpdesk the Customer Service team continued to address and support the customers regarding their queries and feedback. Enhancing quality of customer service at the retail stores shall remain one of the key focus areas for your Company going forward.
Your Company's export sales for the fifteen month period ended March 31, 2015 were Rs.276.6 Million as compared to Rs.147.1 Million for the twelve month period ended December 31, 2013. Various plans are being explored to improve export volume of the Company in the future.
Your Company has been continuously working to improve human resources competencies and capabilities in the Company, which is critical to achieve better results. Some key initiatives undertaken in this direction during the period under review are summarized below:
INDUSTRIAL RELATIONS AND PERSONNEL
Your Company has been continuously working to improve human resources competencies and capabilities in the Company, which is critical to achieve better results. Some key initiatives undertaken in this direction during the period under review are summarized below:
Building up the best team in all functional areas
Your Company has hired over 30 middle and senior level Executives in various functional areas, e.g., Retail Operations, Non–Retail and Merchandising, to replace people moving out, retiring and building capabilities. These professionals come with rich experience within and across industries.
Creating bench strength and building up capability for future growth
Management Training Program
In order to build an internal talent pool, your Company has put in place a structured Management Training program. As part of the program, your Company has recruited design and fashion professionals as well as Management Graduates for various positions in Merchandising, Retail operations and Product Designs. Your Company has also recruited Summer Interns who worked on very specific business impact initiatives.
Training and Development
Set up of Retail Training Academy
Your Company has set up a Retail Training Academy in the month of February–2014. The Academy designs and delivers specialized courses for different roles like Sales Promoters, Store Managers, District Managers and Retail Managers. The courses have been designed to ensure comprehensive learning of Product as well as Business operations. In the year 2014 the Academy trained:
(i) 17.5 weeks' duration Advanced District Administration Professional Training (ADAPT) Program to 24 District Managers.
(ii) 7.5 weeks' duration Store Managers Advance Retail Training (SMART) Program to 111 Store Managers.
(iii) 1 week duration Fully Integrated Retail Store Training (FIRST) Program to 105 experienced Store Managers. Presently, the Retail Training Academy conducts Training Programs at Gurgaon, Bangalore, Kolkata and Mumbai.
The Earning per Share (EPS) (Basic and Diluted) of your Company for the fifteen month period ended March 31, 2015 was at Rs. 36/–. Similar EPS for the twelve month period ended December 31, 2013 – the previous financial year of your Company was approx. Rs.29.70. The EPS for the twelve month period ended March 31, 2015 and EPS for the twelve month period ended March 31, 2014 also works out to approx. Rs. 29.80. It may be noted that 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's Research & Development activities during the period under review continued to emphasize on creating a pollution–free work environment. Technological improvement in product development, material development, introduction of new footwear moulds, process improvement, etc. were the key focus area, in order to improve quality of footwear and productivity in manufacturing. During the period under review an expenditure of approx. Rs.61 Million was incurred on Research & Development, as against Rs.7 Million during the year 2013. Your Company has adopted a series of energy conservation measures, e.g., replacing conventional tubes with energy efficient lights, installation of energy efficient screw compressors, etc. at its Manufacturing Units across India. Such energy saving measures led to a saving of energy cost worth approx. Rs.11.3 Million during the period under review, as against the saving of Rs.5.5 Million for the year ended December 31, 2013. Your Company shall continue to invest on Research & Development activities and energy saving measures in its manufacturing units in the future.
SUPPORT FROM BATA SHOE ORGANIZATION
Your Company continues to receive assistance and benefits of technical research and innovative programs 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 1, 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 technical services fee of Rs.264.20 Million to GFS during the period from January 1, 2014 to March 31, 2015.
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 received a certificate confirming their eligibility to be re–appointed as Auditors of the Company in terms of the provisions of Section 141 of the Companies Act, 2013 and Rules framed thereunder. The Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India as required under the provisions of revised Clause 49 of the Listing Agreement with the Stock Exchanges.
In terms of the Order dated August 10, 2000, issued by the Ministry of Law, Justice and Company Affairs, Cost Audit Branch, Government of India, the Company was required to appoint a Cost Auditor to audit the Cost Accounts maintained by the Company in respect of 'FOOTWEAR' and submit the Cost Audit Report to the Central Government within June 30, every year. Accordingly, the Company appointed M/s. Mani & Co., Cost Accountants as the Cost Auditors of the Company and submitted the Cost Audit Reports to the Ministry of Corporate Affairs, Cost Audit Branch till the Financial Year ended December 31, 2012 and the Compliance Report for the Financial Year ended December 31, 2013 within the stipulated time. In compliance with the requirements of Section 148 of the Companies Act, 2013 read with Rule 14 of the Companies (Audit and Auditors) Rules, 2014, the remuneration paid to the Cost Auditors have been ratified by the Members at the Extraordinary General Meeting held on August 4, 2014.
The Ministry of Corporate Affairs, Government of India, Cost Audit Branch, New Delhi vide Notification dated December 31, 2014 introduced the Companies (Cost Records & Audit) Amendment Rules, 2014. According to the newly Amended Rules, the requirement of conducting Cost Audit and submission of Cost Audit Report by a Company pertaining to 'FOOTWEAR' Industry has been discontinued. In view of the above, your Company shall not be required to appoint the Cost Auditor and/or get the Cost Accounts for 'FOOTWEAR' business audited by the Cost Auditor from the financial year commencing from April 1, 2014 onwards.
In terms of the provisions of Section 204 of the Companies Act, 2013 and Rules framed thereunder, a Secretarial Audit Report in the prescribed format, obtained from a Company Secretary in practice, is required to be annexed to the Board's Report. In view thereof, your Board at its meeting held on August 5, 2014 appointed M/s. P. Sarawagi & Associates, Company Secretaries, 27, Brabourne Road, Kolkata – 700 001 (ICSI Registration No. CP – 4882) as the Secretarial Auditor of your Company. The Secretarial Auditors' Report, in the prescribed format, for the fifteen month period ended March 31, 2015 is annexed to this Directors' Report and forms part of the Annual Report.
In terms of the provisions of Section 161 of the Companies Act, 2013, your Board at its Meeting held on May 21, 2014 approved the appointment of Ms. Anjali Bansal and Mr. Kumar Nitesh as Additional Directors with effect from May 21, 2014. At the said Board Meeting, Mr. Kumar Nitesh was also appointed as a Whole time Director designated as "Managing Director –Retail" for a period of five years with effect from May 21, 2014. Subsequently, at an Extraordinary General Meeting (EGM) held on August 4, 2014, the Members of the Company approved the appointment of Mr. Kumar Nitesh as Managing Director –Retail and payment of his remuneration for a period of five years, with effect from May 21, 2014. Mr. Kumar Nitesh shall be liable to retire by rotation at the Annual General Meeting.
In terms of the requirements of Section 149 of the Companies Act, 2013 read with Schedule IV to the Act and Rules framed thereunder, the Members of the Company at the aforesaid EGM held on August 4, 2014 also appointed Mr. Uday Khanna, Mr. Akshay Chudasama and Ms. Anjali Bansal as Independent Directors of your Company for a term up to five consecutive years, effective from August 4, 2014. Such appointments of the Independent Directors have been formalized by issue of separate Appointment Letters and the same are available on the website of the Company, www.bata.in .
During the period under review, Mr. Atul Singh has been appointed as a Director on the Board of Bata Shoe Organization (BSO) and desired to resign from the Board of your Company as it would not be possible for him to devote sufficient time to both the companies. Accordingly, your Board accepted with regret the resignation of Mr. Atul Singh as a Director of the Company with effect from May 21, 2014. Consequently, Mr. Atul Singh ceased to be a Member of the Audit Committee and Nomination and Remuneration Committee of the Board, with effect from May 21, 2014. Your Board places on record its deep appreciation for the contributions made by Mr. Atul Singh during his tenure as an Independent Director of the Company and wishes him success in his future roles.
At the Board Meeting held on May 27, 2015, your Board appointed Mr. Ravindra Dhariwal and Mr. Shaibal Sinha as Additional Directors of the Company with effect from May 27, 2015 to hold office up to the date of the forthcoming Annual General Meeting. At the said Board Meeting, Mr. Ravindra Dhariwal has also been appointed as an Independent Director of the Company for a period of five years with effect from May 27, 2015, subject to approval of the Shareholders at the ensuing Annual General Meeting. The Company has received Notices under Section 160 of the Companies Act, 2013 from Shareholders of the Company along with requisite deposits signifying the candidature of Mr. Ravindra Dhariwal and Mr. Shaibal Sinha for their respective appointments as Directors of the Company at the forthcoming Annual General Meeting.
Brief profiles of Mr. Ravindra Dhariwal and Mr. Shaibal Sinha have been mentioned in the Explanatory Statement pursuant to Section 102 of the Companies Act, 2013 to the Notice convening the 82nd Annual General Meeting of the Members of the Company and form integral part of this Annual Report.
In accordance with the provisions of the Companies Act, 2013, Rules framed thereunder and the Articles of Association of your Company, Mr. George Nigel John Clemons (Mr. Clemons), Director is due to retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re–election. Your Board is of the opinion that continued association of Mr. Clemons with your Board will be of immense benefit to your Company and, therefore, recommends his re–election.
STATUS OF BATANAGAR PROJECT
Further to the status reported in the earlier Annual Reports, regarding an Integrated Township Project at Batanagar, West Bengal being developed by Riverbank Developers Private Limited (RDPL), the erstwhile Joint Venture Company of the Company, your Board would like to inform you that the Government of West Bengal, Land & Land Reforms Department, vide their letter dated January 29, 2015 confirmed to Riverbank Holdings Private Limited [since merged with Riverbank Developers Private Limited (RDPL)] that the obligations of your Company pertaining to the Order of the Government of West Bengal dated April 6, 2006 and Memorandum dated August 25, 2014 as amended vide Memorandum dated November 28, 2014 would be of RDPL and the obligations of your Company stand satisfied. RDPL has been given time up to March 31, 2017 to fulfill the requirements of the aforesaid Memorandums issued by the Government of West Bengal.
In terms of an Addendum Agreement dated December 5, 2013 to the New Development Agreement dated April 28, 2010 executed, inter alia, with RDPL, your Company has received approx.136,955 sq. ft. of constructed space in the Riverbank Project at Batanagar. Your Company is in the process of taking possession of the remaining 1,95,075 sq. ft. of constructed space in the Project, during the current financial year.
In view of the aforesaid letter of the Government of West Bengal and consequent upon completion of construction of the requisite space in the Project, a part of the provisions for contingent liabilities amounting to Rs.9.3 Million has been written back in the books of accounts of your Company as considered no longer necessary.
STATEMENTS UNDER SECTION 217(1)(e) and SECTION 217(2A) OF THE COMPANIES ACT, 1956
(i) Information relating to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo, etc. for the fifteen month period ended March 31, 2015 as required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is provided in an Annexure and the same forms an integral part of this Report.
(ii) The Statement of employees for the fifteen month period ended March 31, 2015 in terms of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended and applicable to your Company is annexed to this Report and forms an integral part thereof.
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, if any;
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 fifteen month financial period , 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.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
In compliance with the requirements of Section 177 of the Companies Act, 2013 and revised Clause 49 of Listing Agreement with the Stock Exchanges, your Company has established a vigil mechanism for the Directors and Employees of the Company through which genuine concerns regarding various issues can be communicated. For this purpose, your Board has adopted a Whistle Blower Policy and the same has been uploaded on the website of the company at <http://bata.in/0/pdf/Whistle–Blower–Policy.pdf>. A Vigil Mechanism Committee under the chairmanship of the Audit Committee Chairman has been constituted. The Policy provides access to the Vice President & Head Legal of the Company and to the Chairman of the Audit Committee.
No person has been denied an opportunity to have access to the Vigil Mechanism Committee including the Audit Committee Chairman. However, during the period under review, there has been no incidence reported which requires action by the Vigil Mechanism Committee.
POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
Your Company is committed to provide a safe and secure environment to its women employees across its functions, as they are integral and important part of the organization.
Your Company has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013.
An Internal Complaints Committee (ICC) with requisite number of representatives has been set up to redress complaints relating to sexual harassment, if any, received from women employees and other women associates. All employees (permanent, contractual, temporary, trainees) are covered under this policy.
The following is a summary of sexual harassment complaints received and disposed off during the fifteen month period ended March 31, 2015:
? No. of Complaints received : Nil
? No. of Complaints disposed off : Nil
Your Company has been conducting awareness campaign across all its manufacturing units, warehouses, retails stores and office premises to encourage its employees to be more responsible and alert while discharging their duties.
POLICY ON PREVENTION OF INSIDER TRADING
Your Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre–clearance for dealing in the Company's shares and prohibits the purchase or sale of shares in your Company by the Directors and designated employees, while they are in possession of unpublished price sensitive information and also during the period when the Trading Window remains closed. All the Directors on your Board and the designated employees have confirmed compliance with the aforesaid Code of Conduct.
In compliance with the requirements of the newly introduced SEBI (Prohibition of Insider Trading) Regulations, 2015, effective from May 15, 2015, the Code of Conduct to monitor, regulate and report Insider Trading and the Code for Fair Disclosure of the Unpublished Price Sensitive Information have been adopted by your Board and the same have been uploaded on the website of the Company at www.bata.in .
During the period under review there has been no incidence of non–compliance reported under the SEBI (Prohibition of Insider Trading) Regulations, 1992.
RELATED PARTY TRANSACTION POLICY
During the fifteen month period ended March 31, 2015, your Company's transactions with the Related Parties as defined under the Companies Act, 2013, Rules framed thereunder and revised Clause 49 of the Listing Agreement with the Stock Exchanges, were in the 'ordinary course of business' and 'at arm's length' basis. Your Company does not have a material unlisted subsidiary. Accordingly, during the period under review, your Company did not have any Related Party Transaction which required prior approval of the Shareholders. Necessary disclosures required under the Accounting Standards (AS–18) have been made in the Notes to Financial Statements.
All Related Party Transactions are placed before the Audit Committee for its prior approval. There has been no materially significant Related Party Transactions during the period under review, which would have any potential conflict with the interest of the Company.
Your Board has approved and adopted a Related Party Transaction Policy which has been uploaded on the website of the Company, www.bata.in and the same can be viewed at the link: <http://bata.in/0/pdf/RelatedPartyTransactionPolicy.pdf>.
SHIFTING OF THE REGISTERED OFFICE
The Registered Office of your Company has been shifted from 6A, S.N. Banerjee Road, Kolkata–700013 to 27B Camac Street, 1st Floor, Kolkata – 700016 with effect from January 1, 2015. The new address of the Registered Office of your Company is within the local limit of Kolkata Municipal Corporation. Necessary formalities in this regard have been complied with pursuant to the provisions of Section 12 of the Companies Act, 2013 and Rules framed thereunder.
Your Company formed a new wholly owned subsidiary, viz., Way Finders Brands Limited on December 26, 2014. This new subsidiary is yet to commence its commercial operations. 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 (MCA), Government of India, your Board at its meeting held on May 27, 2015 has 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 March 31, 2015 and have also agreed to comply with the conditions prescribed in the said Circular.
The Annual Reports 2014–15 of the aforesaid subsidiaries for the fifteen month period ended March 31, 2015 will be despatched to the Shareholders of your Company upon receipt of written requests from them. The Annual Reports 2014–15 of these subsidiary companies will also be made available for inspection by the Shareholders of your Company at the
Registered Office at 27B Camac Street, 1st Floor, Kolkata – 700 016 between 11:00 a.m. and 1:00 p.m. on any working day.
In compliance with the requirements of the aforesaid MCA Circular, a Statement showing relevant details for the fifteen month period ended March 31, 2015 in respect of Bata Properties Limited and Coastal Commercial & Exim Limited and in respect of Way Finders Brands Limited details since inception up to March 31, 2015, have been included in the Notes to Financial Statements of your Company which forms part of this Annual Report. The audited Financial Statements of these three wholly owned subsidiaries are also available on the website of the Company at www.bata.in . The Consolidated Financial Statements of your Company for the fifteen month period ended March 31, 2015, as prepared in terms of the Accounting Standard AS–21 issued by the Institute of Chartered Accountants of India are also forming part of this Annual Report.
MANAGEMENT DISCUSSION ANALYSIS REPORT
INDUSTRY STRUCTURE AND DEVELOPMENT
The Indian domestic footwear industry is estimated to be worth Rs.20 – Rs.25 Thousand Crores, which is mostly dominated by unorganized players. The organized footwear sector accounts for only 30% – 35% of the total footwear industry in India. Over the past few years, the organized footwear sector has witnessed a good growth as the players in the organized footwear markets are penetrating into tier–3 and tier–4 cities in the Country. In the organized sector, approx. 10–12 players jointly control majority of the market share. Over the past few years, in view of a good growth in organizing retailing in India, the overseas footwear manufactures have set their footprints in India through joint venture and other means of collaboration. This has increased competition amongst the existing players of the organized Footwear Industry in India.
India is the second largest global producer of footwear in the World, next only to China. India produces more than 2.5 Billion pairs of footwear per annum, which represents 12% of the global production of approx.16 Billion pairs of footwear every year. The per capita consumption of footwear in India is estimated to be 2 – 3 pairs, whereas such consumption in the Western Countries, like USA and UK is approx. 5 – 6 pairs. India has a good homogeneous potential due to rapid change in lifestyle, increase in disposable income of middle–class people and continuous growth in number of working women. According to an ASSOCHAM study, the Indian Footwear Industry has been growing at 15% CAGR and the said growth momentum is expected to sustain in the near future.
India exports less than 10% of its total footwear production per year, which means approx. 90% of its footwear production is utilized to meet domestic demand every year. China continues to be the leading country in the World as an exporter. USA and UK are the main contributors to the global footwear import from China and other countries.
The footwear industry across the World has felt the need to adopt eco–friendly practices while improving production methods in order to reduce carbon footprint it leaves behind. Many players in the industry have started using recycled materials in production of eco–friendly footwear. The Footwear manufacturing sector in India can generate 100% Foreign Direct Investment (FDI) through Automatic Route. The Indian Government is also boosting the Footwear Industry by reducing excise duty on certain category of footwear. Such steps by the Government shall create conducive investment climate towards attracting overseas investments and increasing cost competitiveness.
OPPORTUNITIES AND THREAT
Indian economy is poised to witness a GDP growth at 6.5% – 7.5% and has the potential to become the third largest economy in the world, after USA and China. Riding on this opportunity and considering that the European Union is facing its own challenges to keep at pace with the growth of World economy, the Indian Footwear Industry is expected to record a good growth, going forward. A large middle class population which includes the World's largest population of youth at a median age of below 35 years and availability of raw materials, skilled labour and improved technology shall help the footwear Industry to maintain its growth rate of approx. 15% CAGR in the second half of this decade. A rapid increase in urbanization and organized retailing also provide good opportunities to the Indian Footwear Industry to improve its business performance year–on–year.
However, the overall industrial growth in India remains at a very moderate rate. The ever increasing list of foreign players keeping their foothold in India is also posing a threat to the local players who find it difficult to keep pace of their growth in an acutely competitive environment. High rate of inflation which leads to increase in cost of raw materials, non availability of skilled labourers and regulatory environment also considered as challenges for the footwear industry in India. The demand for designer, trendy and comfortable footwear in India is constantly on a rise and the same needs to be made available to them at an affordable price. Catering to the ever–changing need of the Indian customers requires constant improvement of the products on offer.
Your Company enjoys its presence in Indian Footwear Industry for more than eight decades and has established an integrated manufacturing, supply chain and distribution network. Your Company will exploit its leadership position in the organized footwear industry and take appropriate steps to overcome the challenges in the footwear industry to achieve its objectives.
SEGMENT WISE OR PRODUCT WISE PERFORMANCE
Your Company operates in two segments – Footwear & Accessories and Surplus Property Development. Your Company has chosen Footwear and Accessories as its primary segment.
The outlook of Indian Footwear Industry is buoyant. Considering the population of approx. 1.3 Billion people and low per capita consumption of footwear, there is a huge potential of the industry to achieve volume growth. Presently, many small towns and rural areas are being catered by unorganized footwear manufacturers and the need of penetration in these markets by organized players is expected to witness consolidation in the Industry. Factors such as low production cost,
abundant availability of raw material, ever–evolving retail ecosystem, buying patterns and a huge consumption market set the Indian Footwear Industry apart. The Indian Footwear Industry has changed dramatically in the past few years and the Country has become a business destination for many players from across the globe. As a consequence, consumer demand have widened with the variety of choices available in each category.
On–line business in Retail Industry shall play a pivotal role in its growth and penetration in the newer markets. Very frequent changes in technology, easy availability of information at the click of a button and sharing of information at social media sites shall be key areas of growth through on–line business. Your Company is aware of the Industry it belongs and is taking appropriate steps to leverage its position to achieve good growth in terms of volumes and profitability. Your Company has been investing to strengthen its Logistics Division with due importance for delivery of footwear and accessories to the customers through 'delivery services', 'cash on delivery' and 'click and collect' services. Your Company shall introduce an exclusive product line to be made available only to the online customers.
RISKS AND CONCERNS
Your Company monitors its major risks and concerns at regular intervals. Appropriate steps are taken in consultations with all concerned to mitigate such risks. In addition to the business risks, some of the major risks and concerns are summarized as under:
During the normal course of its business operations, your Company has been subjected to several legal cases in connection with or incidental thereto. These litigations include civil cases, excise and customs related cases, etc. filed by and against the Company. These cases are being pursued with due importance and in consultation with legal experts in respective areas. Your Board believes that the outcome of these cases is unlikely to cause a materially adverse effect on the Company's profitability or business performance. Your Company has a Contingent Liability of Rs. 767.15 Million for the fifteen month period ended on March 31, 2015 as compared to Rs. 673.6 Million as on December 31, 2013. Attention of the Shareholders is drawn to the explanations mentioned in point no. 31 of the Notes to Financial Statements forming integral part of the Balance Sheet as on March 31, 2015 and Profit & Loss Account for the fifteen month period ended on that date. In view of the present status and based on legal advice received, your Board is of the opinion that no provision is required to be made against these Contingent Liabilities during the period under review.
Your Company has several recognized Trade Unions and enjoys harmonious relationship with all its employees. During the period under review your Company has entered into Long Term Agreements with several Trade Unions.
Globally Competitive Business Environment
Ever increasing competition from local and overseas players in the footwear industry remains a major concern for your Company. Your Company operates in a globally competitive business environment. In view of acute competition from local players as well as global giants with deep pockets, your Company considers competition as a major risk and concern.
Risk Related to changes in Law and Regulations
Your Company operates in a regulatory environment and is required to abide by the laws and regulations of the Country it operates in. Any change in the laws and regulations governing the leather and footwear industry may affect the business and financial performance of your Company.
In addition to the above, your Company is concerned about the sluggish retail growth and slow infrastructural development in India. Many of your Company's retail stores are large formats stores located in Malls. Steep increase in rental costs and high cost of raw materials may negatively impact business performance of your Company. In order to overcome these risks and concerns, your Company has taken appropriate measures, e.g., long term lease agreement for retail stores, alternative sources of raw materials, ensuring availability of skilled labourers, etc. Your Company believes such measures are adequate to mitigate the aforesaid risks and concerns.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has an adequate system of internal controls commensurate with its size and scale of operations, to ensure that all assets of the Company are safeguarded and protected and that all transactions are authorized, recorded and reported appropriately. The Internal Audit Report and Risk Inventory Report are reviewed periodically by the Audit Committee of the Board of Directors. The Chief Internal Auditor is a permanent invitee to the Audit Committee Meetings. The Audit Committee advises on various risk mitigation exercises on a regular basis. Your Company has been maintaining a separate Internal Audit Team headed by the Chief Internal Auditor appointed by the Board.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
Your Company has been maintaining its profitable growth for the eighth year in a row and believes that this is sustainable, barring unforeseen circumstances.
As mentioned in the Annual Reports of earlier years, since April–2010, Bank borrowing of your Company is Nil and the entire capital expenditure is being funded through internal accruals.
Your Board has recommended a dividend @ Rs. 6.50 per share (i.e., 65%) on equity shares for the fifteen month period ended on March 31, 2015, subject to approval of the shareholders at the ensuing Annual General Meeting.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCE / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED Industrial Relations
The overall Industrial Relations in all the manufacturing units have been cordial in 2014. Some highlights are as under:
Industrial Relation situation in the manufacturing units has been peaceful throughout the year. No man days were lost during the year.
Different HR initiatives have been undertaken in the Manufacturing Units of your Company. Some of these initiatives included "The Best Employee" Awards, Medical Camps, Long Service Awards, Sports, Celebration of National Festivals, etc.
As on March 31, 2015, there were 4,814 permanent employees on the rolls of your Company.
Statements in the Management Discussion and Analysis Report describing the estimates, expectations or predictions may be 'forward–looking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that would make a difference to the Company's operations include demand–supply conditions, raw material prices, changes in Government regulations, tax regimes, economic developments within the country and outside the country and other factors such as litigation and labour negotiations.
In compliance with the provisions of Clause 49 of the Listing Agreement with the Stock Exchanges, the Corporate Governance Report of your Company and a Certificate on Corporate Governance Compliance received from M/s. S. R. Batliboi & Co., LLP, Chartered Accountants, the Statutory Auditors of your Company, are attached as separate Annexure to this Report.
Your Board appreciates the invaluable contribution of the management team for their leadership and all employees of the Company for their indefatigable efforts which plays a pivotal role in achieving the objectives of the Company.
Your Board acknowledges the co–operation and support received from investors, shareholders, customers, business associates, bankers, vendors and the Regulatory and Government authorities.
Your Board remains thankful to Bata Shoe Organization for their continuous guidance, support and co–operation in smooth operations of the Company.
The Independent Directors of your Company were of immense benefit to your Board for sharing their valuable experience and wisdom with the management in deciding strategies and advising them to take appropriate steps towards achieving the objectives of the Company. Your Board wishes to place on record its deep appreciation of the Independent Directors for their continuous support and guidance towards improving the performance of the Company.
For and on behalf of the Board of Directors
Date: May 27, 2015