ANNUAL REPORT 1999-2000
BATA INDIA LIMITED
Ladies & Gentlemen,
IT gives me great pleasure to welcome you all at this 68th Annual General
Meeting of Bata India Limited. The Annual Accounts and the Directors'
Report have been with you for some time and, with your permission, I will
take them as read.
Before I touch upon the highlights of your Company's performance in the
year ended 31st December, 2000, let me put in perspective the overall
business environment in the country.
On January 26, 2001 the state of Gujarat was hit by an earthquake which has
now been termed as the worst natural calamity faced by the country since
its independence. Your Board would like to convey its sincere, heartfelt
sympathies and condolences to the families who have courageously withstood
this unprecedented calamity and suffering. As a good corporate citizen your
Company has contributed Rs. 10 lacs towards the Prime Minister's National
Relief Fund and 75,000 pairs of shoes to the residents of the hardest hit
areas of Gujarat.
THE ECONOMIC BACKGROUND
The real GDP growth rate in 2000-01 is estimated at 6 per compared with a
growth rate of 6.4 per cent achieved in 1999-2000 and 6.6 per cent in 1998-
99. Despite deceleration of the growth rate for the second consecutive
year. India has the distinction of being one of the fastest growing
economies in the world. The Indian economy has shown remarkable resilience
in the face of substantial increases in the international price of crude
oil over the last two years.
The reduction in the overall growth rate of GDP to 6 per cent in 2000-01 is
mainly due to a decline in the growth rate of the service sector from 9.6
percent in 1999-2000 to 8.3 per cent in the current year. During 2000-2001,
the annual rate of inflation indicated by the Wholesale Price Index has
shown an increased trend due to pressure from energy prices.
At the present juncture, the Country needs strong and good governance and
above all consistency in its policies for steady economic growth. Today's
world is changing faster than most of us can even apprehend, and if India
has to hold a place of importance in the twenty first century, decisions
at all Government levels must be taken swiftly and in the long term
interest of the nation.
The huge potential for growth, which is being offered by this country, has
continued to attract many Foreign Direct Investment into the country,
specially in the area of Information Technology. With the abolition of the
remaining Quantitative Restrictions with effect from April 1, 2000, Indian
enterpreneurs will now have to face competition in most items in the market
place. Our industry, which has remained in its own cocoon for a long time,
will now have to face this new reality. Our products must become world
class and we must learn to compete effectively in world markets. However,
competition can only take place if a level playing field is available to
With a proper exit policy yet to be framed by the Government of India and
with no changes in labour laws in tune with our times, Indian industries
have very little scope to make unhindered decisions to utilise their
assets more productively. The work force should now appreciate that real
interest lies in the growth of industry and the creation of wealth for the
nation. It is only by removing poverty and bringing education to the
masses, that our country can really grow into a superpower with a world
Indian industry and the Indian economy have the buoyancy and resilience to
withstand any challenges and this has been proved time and again. The world
has seen how India remained relatively unscathed with the meltdown of the
South Asian economies. the signs of slowing down in the U. S. economy are a
matter of concern to us and this will adversely affect our exports to that
With a cushion of US $ 43 billion in Foreign Exchange Reserves, the country
has overcome the era of foreign exchange payment crisis. What we now need
is a strong commitment to growth and the adoption of policies, which will
push India to become a powerhouse of technological excellence and globally
During 2000, your Company achieved a turnover of Rs. 760.15 crore compared
with 774.62 crore in 1999 and recorded a pre-tax profit of Rs. 25.29 crore
(Rs. 48.8 crore in 1999). Although Retail sales increased by 5% both in
value and volume, Wholesale sales declined due to restrictions of supplies
as means to recover customers' outstandings. However, the primary reason
for the slide in the Wholesale business was the result of a general
recession in the economy. The slide in the Wholesale business affected the
Company on two fronts. First, the Company did not achieve the targeted
profits in this business segment and secondly, the fixed costs, which are
inherent in such huge capacities in our factories lying underutilised,
could not be fully recovered. With the under utilisation of our factories
and unsold stocks lying in our stores and various depots the borrowings
increased to Rs. 60.0 crore in 2000 from Rs. 23.9 in 1999. However,a
judicious mix of borrowing and the reduction in prime lending rates kept
interest charges at Rs. 8.91 crore in 2000 against Rs. 6.84 crore in 1999.
Your Company has a huge capacity for exporting good quality shoes. The
Hosur factory near Bangalore has excellent machines to manufacture world
class footwear. The Company has received export orders from this factory
for Europe and North America and such orders are expected to increase in
The Bata brand, synonymous with shoes, is instantly recognised by all
people from all walks of life. The success of the 'High Volume-Low Price
segment marketing strategy has already been established. the present
emphasis continues on the core low to medium priced segment of the market
and on strengthening the established brand image by offering customers
quality shoes at reasonable prices. In order to achieve this, your company
has entered into a Technical Know-how and Services Agreement with Bata
Limited of Toronto, Canada for a period of ten years. we are receiving
valuable support from Bata Limited in product innovation, marketing and
other key areas of our operations.
Mr. H. Ordonez has joined us as Regional Director- Wholesale Channel Sales
Mr. A Van Es has been seconded to assist us with technical expertise for
various product lines and Mr. W. Rober has also joined us to enhance the
building of our product range.
Your Company has also entered into Technical Agreements with manufacturers
of popular international brand lines, such as ' HUsh Puppies' and Dr. ' Dr.
Scholl's' to produce and sell these lines in India.
Your Company continued to be a net foreign exchange earner for the country.
Export sales amounted to Rs.21.03 crore as against Rs.23.24 crore in 1999.
The net foreign exchange inflow was Rs.1.52 crore in 2000 as against
Rs.10.32 crores in 1999.
PRODUCT DEVELOPMENT AND RESEARCH AND DEVELOPMENT
Research and Development activities were continued by the Company during
the year in the key areas of products, processes and materials development,
footwear moulds, as well as leather and tannery technology. At the same
time, emphasis was placed on creating a better work environment. Total
expenditure incurred on Research and Development during the year was
Your Company sold over 590 lac pairs in 2000, of which over 317 lac pairs
were sourced from our five footwear manufacturing plants. The fullest
utilisation of available capacity in our own factories has been, and
remains, a priority. Fresh investments are being made to upgrade the
technology and new machinery is being introduced to ensure a competitive
edge in the market place. The Company procured over 273 lacs pairs from
contract suppliers, mainly in the Small Scale Sector.
The Industrial Relations situation remained generally harmonious during the
year. The lockout in the Peenya Factory in Karnataka was lifted with effect
from July 3, 2000. Though production is still below the agreed norms,
efforts are being made to maintain production levels by outsourcing until
the situation is normalised.
During the year numerous courses covering areas such as Retail and
Wholesale operations, Human Resources and Merchandising Strategies were
conducted to expose participants to the latest concepts. Participants also
attended BSO Overseas Courses organized by Bata Limited.
Your Board is pleased to recommend and maintain a dividend of 15% for the
year ended December 31, 2000. The Dividend, if approved, will be paid to
the Members, as registered in the books of the Company at the close of
business hours on June 6, 2001 subject, however, to the provisions of
Section 205A of the Companies Act, 1956.
I offer my compliments to Mr Chandu Morzaria, who has just taken over the
reigns of the Company from Mr Keith Weston. Mr Morzaria, I am sure, will
successfully continue the turnaround of your Company and your Company will
continue to show better performance and new achievements under his
leaderships. In the short time Mr. Morzaria has been on the Board as
Managing Director, he has through his innovative ideas, taken various
positive steps to consolidate the position of the Company and bring in a
new enthusiasm, which is being reflected down the line and the positive
outcome of such actions will be revealed in the near future. Mr Morzaria
has introduced a full range of new thinking into the marketing strategies
of the Company, which will, once again, put your Company back on a healthy
I would like to emphasise some of the important steps taken by Mr Morzaria
in this direction:
* Old stocks of footwear have been, to a very large extent, liquidated by
having "Mega" Sales to bring cash into the Company, thus reducing the level
* The Wholesale business is being streamlined to ensure that wholesalers
pay on time for the products they source from the Company.
* All efforts are being made to keep our factories loaded to reduce the
* The "Bata" brand is being further promoted to create awareness among
consumers of its high quality.
* Discipline in quality control is being reinforced by the Company on a
* New ranges of footwear are being developed in-house to give continuous
excitement to consumers.
I am certain that will these steps being taken by the Company, we will be
in a position to enhance our brand equity in the market place.
Bata India, with an established brand name and a national presence, enjoys
an edge over its competitors. Long association with the industry has given
your Company an acceptability and reach which all other brands can only
aspire to achieve. The Bata brand, synonymous with shoes, is instantly
recognised by all people from all walks of life. Some people wear it for
its quality, others love the way it feels and there are those who believe
it is a way of life. Based on this foundation, the Company intends to
strengthen its position in the branded footwear segment.
The long term aim of the Company is to strengthen its established brand
image by offering customers quality shoes at affordable prices. The aim of
the Quality Policy of Bata India is to provide satisfaction to its
customer. To this end, the Company is committed to developing, designing,
producing and marketing products and services, which cater continously to
the needs and expectations of customers, and succeeding in giving the
Companya competitive advantage.
On behalf of your Board, I take this opportunity to convey their sincere
appreciation to all the Company's employees and associates as well as to
all shareholders for their continued co-operation and support.
I would also like to offer my compliments to the management team and all
employees who have worked so hard for the Company.
I would also like to convey my personal gratitude to my colleagues on the
Board for their guidance, support and co-operation.
June 6, 2001 A L MUDALIAR