TO THE MEMBERS
Your Directors are pleased to present the 83rd Annual Report covering the operationaland financial performance of your Company along with the Audited Financial Statements forthe year ended March 31 2016.
(Rs. in Million)
|Particulars ||Year ended on March 31 2016 ||Fifteen month period ended on March 31 2015 ||Twelve month period ended on March 31 2015 |
| ||(Audited) ||(Audited) ||* |
|Gross Turnover ||24512.59 ||27375.98 ||22318.41 |
|Less: Excise Duty on Turnover ||332.05 ||436.03 ||329.68 |
|Net Turnover ||24180.54 ||26939.95 ||21988.73 |
|Other Income ||300.84 ||432.33 ||355.79 |
|Total ||24481.38 ||27372.28 ||22344.52 |
|Profit/(Loss) before Exceptional item Depreciation and Taxation ||2989.61 ||3763.77 ||3034.91 |
|Exceptional item - Income/(Loss) ||747.07 ||315.25 ||315.25 |
|Profit/(Loss) before Depreciation and Taxation ||3736.68 ||4079.02 ||3350.16 |
|Less: Depreciation ||752.48 ||792.34 ||655.88 |
|Profit / (Loss) before Taxation ||2984.20 ||3286.68 ||2694.28 |
|Provision for Taxation: || || || |
|-Current Tax ||927.51 ||1170.24 ||945.77 |
|-Deferred Tax Charge/ (Credit) (Net) ||-130.79 ||-195.28 ||-169.17 |
|Net Profit ||2187.48 ||2311.72 ||1917.68 |
|Profit available for Appropriation ||9673.37 ||8205.76 ||8205.76 |
* Based on Limited Review by the Auditors as published in compliance with Clause 41 ofthe erstwhile Listing Agreement with the Stock Exchanges.
During the financial year ended March 31 2016 your Company recorded a gross turnoverof Rs.24512.6 Million as compared to gross turnover of Rs. 27376.0 Million during thefifteen month period ended March 312015. The Net Profit of your Company for the financialyear ended March 312016 stood at Rs. 2187.5 Million as compared to Net Profits ofRs.2311.7 Million forthe fifteen month period ended March 31 2015. The Net Profits ofyour Company for the financial year ended March 31 2016 includes Exceptional Incomeamounting to Rs.747.1 Million (as per details mentioned in Note No. 23 of the Notes toFinancial Statements of the Company attached herewith).
On a consolidation basis your Company recorded a gross turnover of Rs. 24585.7Million during the financial year ended March 312016 and achieved consolidated NetProfits of Rs. 2185.4 Million forthe said financial year.
Your Company closed its previous financial year on March 31 2015 covering a period offifteen months as compared to the last financial year ended on March 31 2016 covering aperiod of twelve months. Since the financial performance of your Company for the previousperiod is not comparable your Board therefore considered it prudent to include thefinancial performance for the twelve month period ended March 31 2015 for betterunderstanding of year-wise performance by all the stakeholders of your Company.
Your Companys turnover during the year ended March 312016 recorded a growth ofapprox. 9.8% as compared to the twelve month period ended March 312015. The Net Profitsduring the year ended March 31 2016 registered a growth of approx. 14.1% as compared tothe Net Profits achieved by your Company during the twelve month period ended March312015.
As informed in the last Annual Report your Company had to overcome the unexpectedchallenges in implementation of new supply chain IT system which led to disruption anddelay in supply of footwear from the factories and warehouses to the retail stores duringthe beginning of the financial year 2015-16 impacting the volume offootwear sold and alsoloss of market share. During the year under review several corrective measures have beentaken in order to overcome such challenges including focus on same store growthreplenishment of stock in retail stores based on store requirement/ sales liquidatinginventory level through various schemes and also cost reduction initiatives. Your Board ishappy to inform that the Company is slowly re-gaining it's lost market share and alsostarted registering volume growth from the third quarter of the financial year 2015-16.
During the last year we saw considerable changes in the external business environment.While commodity prices and inflation were under control the second continuous monsoonfailure and resulting drought reduced rural demand in several areas of the Country. Inaddition competition from both foreign and national players continued to be aggressive.In this scenario your Company continued to focus on delivering value to the customers.
In order to maintain its leadership position in the organized footwear market in Indiayour Company has been continuously improving its collection of various range of footwearacross all categories - men women and children. During the year under review yourCompany introduced various new designs of footwear which are contemporary stylish andalso affordable. The retail stores of your Company now provide a world class storeambience and delightful shopping experience to the customers. Recently your Company hasinitiated a new campaign - Bata Club which is a mobile based customer loyalty initiative.The Bata Club has approx.6.7 Million memberships and is growing rapidly resulting inincremental revenue generation for your Company.
Modernization of the factories and manufacturing processes of your Company continuedduring the year under review. Various initiatives to introduce Six Sigma in Batanagarfactory are at different stages of implementation. Your Company has also taken variousmeasures to introduce eco-friendly manufacturing processes including energy savingmeasures and consumption of minimum natural resources. The manufacturing unit of yourCompany in Batanagar is an ISO 9001 & ISO 14001 certified Unit. Your Company shallcontinue to make additional investments in its manufacturing units across the Country formodernization of infrastructure and manufacturing process in order to achieve improvedproductivity and cater to the emerging customer segments.
Your Company has decided to shift its focus from opening new retail stores to ensuringsame store growth. In order to achieve volume growth your Company shall continue itspenetration into Tier-2 and Tier-3 cities and other potential markets based oncustomer-centric market surveys and insights. An appropriate marketing campaign tore-ignite growth is also under preparation. Your Company is confident of maintaining itsleadership position in the organized sector of Indian Footwear Industry and shallstrengthen its position at the top in the years to come.
SHARE CAPITAL AND SUB-DIVISION OF EQUITY SHARES
Pursuant to approval of the Shareholders obtained at the Eighty Second Annual GeneralMeeting your Company has sub-divided the face value of its equity shares of Rs. 10/-each fully paid-up into two equity shares of Rs. 5/- each fully paid-up. The Share SplitCommittee of your Board of Directors had fixed October 8 2015 as the RecordDate for the purpose of ascertaining the eligible Shareholders for receiving theaforesaid sub-divided equity shares. Subsequent to the aforesaid Record Date new sharecertificates have been despatched to the Shareholders who held shares in physical mode andalso credited to the respective demat account who held shares in electronic mode.
Accordingly the Authorized Share Capital of your Company stands re-classified atRs.700000000/- divided into 140000000 equity shares of Rs.5/- each. At present theIssued Share Capital of your Company is Rs. 642850000/- divided into 128570000 equityshares of Rs. 5/- each and the Subscribed and Paid-up Share Capital is Rs. 642637700/-divided into 128527540 equity shares of Rs. 5/- each fully paid-up.
Your Board has recommended a dividend of Rs.3.50 per share (i.e. 70% on an EquityShare of Rs. 5/- each) for the financial year ended March 31 2016 as against Rs.6.50(i.e. 65% on an Equity Share of Rs. 10/- each) for the fifteen month period ended March31 2015 paid last year. The payment of aforesaid dividend is subject to approval of theMembers at the forthcoming Annual General Meeting and if declared shall be paid to theeligible Members from August 18 2016 onwards.
TRANSFER OF UNPAID AND UNCLAIMED DIVIDENDS
During the year under review the unclaimed / unpaid dividend of Rs.676440/- (RupeesSix Lacs Seventy Six Thousand Four Hundred and Forty only) pertaining to the dividendforthe financial year ended December 312007 was transferred to Investor Education andProtection Fund (IEPF) of Government of India. The details including last date of claimingof unclaimed / unpaid dividend amount are given at the end of the Notice convening theEighty Third Annual General Meeting of the Company.
Your Company has no unclaimed / unpaid matured deposit or interest thereon sinceDecember 31 2013. Presently the Company is not accepting any deposits covered under'Chapter V - Acceptance of deposits by Companies' of the Companies Act 2013.
During the year under review ICRA Limited (ICRA) has revised the Credit Ratings ofyour Company. ICRA has reaffirmed the Credit Rating of [ICRA]AA+ (pronouncedas ICRA double A plus) for the Non-Fund Based Facilities of your Company. The outlook onthe Long Term Rating is 'Stable'. ICRA has withdrawn the Credit Rating of '[ICRA]AA+'(pronounced as ICRA double A plus) assigned to the Fund Based Facilities of your Companyas there is no amount outstanding against this instrument. ICRA has also withdrawn theCredit Rating of '[ICRA]A1+' (pronounced as ICRA A one plus) assigned to the CommercialPaper programme of your Company as the said instrument has not been placed by yourCompany and as such there is no amount outstanding against this instrument.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
In terms of Section 186 of the Companies Act 2013 and Rules framed thereunder detailsof the Loans given (Note no. 11) and Investments made (Note no. 9) by your Company duringthe year have been disclosed in the Audited Standalone Financial Statements. Your Companyhas not given any guarantee or provided security during the year under review.
RELATED PARTY TRANSACTIONS
During the financial year ended March 31 2016 your Companys transactions withall the Related Parties as defined under the Companies Act 2013 read with Rules framedthereunder were in the 'ordinary course of business' and 'at arms lengthbasis. Your Company does not have a material unlisted subsidiary as defined underRegulation 16(1)(c) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015. During the year under review your Company did not have any RelatedParty Transaction which required prior approval of the Shareholders.
All Related Party Transactions are placed before the Audit Committee for its priorapproval. There has been no materially significant Related Party Transactions during theyear under review having potential conflict with the interest of the Company. Necessarydisclosures required under the Accounting Standards (AS-18) have been made in the Notes toFinancial Statements.
EXTRACT OF ANNUAL RETURN
An extract of Annual Return in Form No. MGT-9 as on March 31 2016 is annexed to thisBoard's Report and marked as Annexure I.
i) Statutory Auditors
The Statutory Auditors of your Company - M/s. S. R. Batliboi & Co. LLP CharteredAccountants retire at the ensuing Annual General Meeting of the Company and have giventheir consent for re-appointment. Your Company has received a certificate from themconfirming their eligibility to be re-appointed as Auditors of the Company in terms of theprovisions of Section 141 of the Companies Act 2013 and Rules framed thereunder. Theyhave also confirmed that they hold a valid certificate issued by the Peer Review Board ofthe Institute of Chartered Accountan ts of India as required under the provisions ofRegulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. The proposal for their re-appointment has been included in the Notice convening theEighty Third Annual General Meeting of the Members of the Company.
ii) Secretarial Auditor
In terms of the provisions of Section 204 of the Companies Act 2013 read with Rule 9of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 aSecretarial Audit Report in the prescribed format obtained from a Company Secretary inpractice is required to be annexed to the Board's Report. In view thereof your Board atits Meeting held on February 10 2016 re-appointed M/s. P Sarawagi & AssociatesCompany Secretaries 27 Brabourne Road Kolkata - 700001 as the Secretarial Auditors ofyour Company to conduct the Secretarial Audit and to submit Secretarial Audit Reportthereon for the financial year ended March 31 2016. The Secretarial Audit Report in FormNo. MR-3 is annexed to this Board's Report and marked as Annexure II.
QUALIFICATION RESERVATION OR ADVERSE REMARK IN STATUTORY AUDIT REPORT AND SECRETARIALAUDIT REPORT
There is no qualification reservation or adverse remark made by the Statutory Auditorsin their Auditors Report to the Financial Statements or by the Secretarial Auditorin its Secretarial Audit Report for the financial year ended March 312016.
RESEARCH & DEVELOPMENT ACTIVITIES AND ENERGY CONSERVATION
Your Company's Research & Development activities during the year under reviewcontinued to emphasize on creating a pollution-free and a safe work environment.Technological improvement in product development material development introduction ofnew footwear moulds process improvement etc. were the key focus area in order toimprove quality of footwear and productivity in manufacturing. During the year underreview an expenditure of approx. Rs.62.2 Million was incurred on Research &Development (including product development initiatives) as against Rs.61 Million duringthe year 2014-15. Your Company has adopted a series of energy conservation measures likereplacing conventional tubes with energy efficient LED lights installation of energyefficient screw compressors etc. at its Manufacturing Units across India. Such energysaving measures led to a savings of energy cost worth approx. Rs. 11.3 Million during theyear under review as against the same savings during 2014-15. Your Company shall continueto invest on Research & Development activities and energy saving measures in itsmanufacturing units in the future as well.
EFFORTS ON REDUCING ENVIRONMENTAL IMPACT AND SUSTAINABILITY
Your Company is conscious and committed to maintain environmental and ecologicalbalances of this planet and makes its conduct subject to environment audit practices.Across all manufacturing units effluent treatment plants are working effectively andefficiently. Since Batanagar and Bataganj factories are located at the bank of RiverGanges water discharge to the River Ganga meets the norms of the "Clean Ganga"initiatives of the Central Government. All the factories are complying with stack emissionqualities and ambient air qualities. Special thrusts are given on waste managementconservation of energy and water and natural resources.
On Water Conservation initiatives Rain Water Harvesting Plant was established at thefactory at Bangalore during the year 2010 and it is working efficiently and effectivelytowards utilization of rain water. On Energy Conservation initiatives Batanagar factoryintroduced Bio-fuel Briquette fired boiler by replacing fossil fuel oil fired boiler andintroduced various low energy sensitive equipments and lamps by replacing high energyconsumed devices. Further in all factories your Company has moved to Water Based (WB)adhesives from petroleum Solvent Based (SB) adhesives.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO
A Statement containing information on conservation of energy technology absorption andforeign exchange earnings & outgo of the Company in the prescribed format underSection 134(3)(m) of the Companies Act 2013 read with Rule 8 of the Companies (Accounts)Rules 2014 is annexed to this Board's Report and marked as Annexure III.
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility (CSR) continues to be a commitment of your Company inorder to create a good impact in the society it belongs. Your Company endorses the idea ofimproving quality of lives of people in the communities in which it operates because thesociety is an essential stakeholder. Your Company believes that giving back to the societythrough CSR activities is its moral duty.
Pursuant to the provisions of Section 135 of the Companies Act 2013 read with theCompanies (Corporate Social Responsibility Policy) Regulations 2014 a report on CSRActivities in the prescribed format is annexed to this Board's Report marked asAnnexure IVand the same forms an integral part of the Annual Report.
Bata Properties Limited and Way Finders Brands Limited continue to be wholly-ownedsubsidiaries of your Company. Coastal Commercial & Exim Limited continues to be theonly step down wholly-owned subsidiary of your Company.
The Annual Reports of the abovementioned Subsidiaries for the financial year endedMarch 31 2016 shall be provided to the Members of the Company upon receipt of writtenrequests from them. The Annual Reports of these Subsidiary Companies will also be madeavailable for inspection by the Members of the Company at the Registered Office of theCompany at 27B Camac Street 1st Floor Kolkata - 700016 between 11:00 a.m. and 1:00 p.m.on any working day. Annual Reports along with the Audited Financial Statements of each ofthe Subsidiaries of your Company are also available on the website of the Company atwww.bata.in.
Pursuant to the provisions of Section 129(3) of the Companies Act 2013 a statementcontaining salient features of financial statements of the aforesaid Subsidiaries in FormAOC-1 is attached to the Financial Statements of your Company for the year ended March312016.
The Consolidated Financial Statements of your Company for the financial year endedMarch 31 2016 as prepared in terms of the Accounting Standard AS-21 issued by theInstitute of Chartered Accountants of India are also forming part of this Annual Report.
MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN END OF THEFINANCIAL YEAR AND DATE OF REPORT
There has been no material change and commitment affecting financial position betweenend of the financial year and the date of this Board's Report.
The Ministry of Corporate Affairs Government of India vide its Notification datedFebruary 16 2015 has issued the Companies (Indian Accounting Standards) Rules 2015 whichlays down a roadmap for companies for implementation of Indian Accounting Standards (IndAS). Every listed company and their holding and subsidiary companies (other than bankingcompanies insurance companies and non-banking financial companies) are required to complywith Ind AS in the preparation of their financial statements for accounting periodsbeginning on or after April 1 2016 with the comparatives for the periods ending March31 2016. In pursuance of the above Notification your Company and its subsidiaries haveadopted Ind AS with effect from April 1 2016. Your Company has assessed its currentfinancial reporting framework taking into consideration Ind AS and has indentified majorpoints of differences. Your Company has devised a robust implementation plan for adoptionof Ind AS.
SIGNIFICANT AND MATERIAL ORDERS
During the year under review your Company has amicably settled its protractedlitigations with Relaxo Footwear Limited relating to SPARX Trademark.Necessary consent terms have been filed with the appropriate Trademarks Authorities andbefore the Hon'ble Delhi High Court. Except this there has been no 'material' litigationoutstanding as on March 31 2016. Details of litigation on tax matters are disclosed inthe Auditors' Report and Financial Statements which are forming part of this AnnualReport.
AWARDS AND RECOGNITION
Your Board is pleased to inform that your Company has been able to maintain itsleadership position in the organized footwear market by bagging several awards andrecognitions. During the year under review your Company received several Awards andRecognitions which include the following:
The Most Trusted Brand - In 2015 Bata was awarded with the title of the mosttrusted brand according to the Brand Trust Report India Study 2015.
Best Footwear Brand - Known as the brand with outstanding e-Retail Performanceand re-design/ relaunch of the Year by Franchise India in 2015.
Delhi NCR's Hot 50 brands by Hindustan Times co-hosted by LinkedIn
Child's Most popular Award by CHILD Magazine.
SUPPORT FROM BATA SHOE ORGANIZATION
Your Company continues to receive assistance and benefits of technical research andinnovative programs of Bata Shoe Organization (BSO) through Global Footwear Services Pte.Ltd. Singapore (GFS). Your Company has renewed the Technical Collaboration Agreement withGFS with effect from January 1 2011 for a period of ten years. In terms of the saidTechnical Collaboration Agreement your Company receives guidance training of personneland services from GFS in connection with research & development marketing branddevelopment footwear technology testing & quality control store location layout& design environment health & safety risk & insurance management etc. YourCompany continues to obtain expertise and experience from the visiting senior personnel ofGFS and other BSO group companies to improve its product range and operational processesthroughout the year. In terms of the renewed Agreement as aforesaid your Company has paida technical services fee of Rs. 237.4 Million to GFS for the financial year ended March312016 equivalent to approx. 1% of the Net Turn over of your Company.
STATUS OF BATANAGAR PROJECT
As reported in the earlier Annual Reports in terms of the Order of the Government ofWest Bengal dated August 25 2014 as amended vide Memorandum dated November 28 2014completion of the remaining obligations with regard to development of an IntegratedTownship Project at Batanagar West Bengal would be the sole responsibility of RiverbankDevelopers Private Limited (RDPL) - the erstwhile Joint Venture Company of the Company andthe obligations of your Company stand satisfied. RDPL has been given time up to March312017 to fulfill the requirements as stipulated in the aforesaid Memorandum issued bythe Government of West Bengal.
As mutually agreed inter alia between RDPL and the Company vide New DevelopmentAgreement dated April 28 2010 read with Addendum Agreement dated December 5 2013 yourCompany received approx. 136955 sq. ft. of constructed space in the Project during theprevious year. In terms of the said Agreement your Company took possession of theremaining 195075 sq. ft. of constructed space in the said Project during the year underreview. Accordingly RDPL's obligation to handover 332030 sq. ft. of constructed spaceto the Company has been completed.
In view of the above your Company had written back provision for contingent liabilityamounting to Rs. 93 Million in the previous year. The remaining provision amounting toRs.123.2 Million has been written back in the financial year ended March 312016 as nolonger required.
Notwithstanding anything contained in the Order and Memorandum as aforesaid issued bythe Government of West Bengal your Company is committed to invest in the development andmodernization of manufacturing units in Batanagar and also shall continue to take allnecessary steps to rejuvenate and improve lifestyles of its employees in the State of WestBengal.
BOARD OF DIRECTORS AND BOARD MEETINGS
Your Company has a duly constituted Board of Directors which is in compliance with therequirements of the Companies Act 2013 Schedules thereto and Rules framed thereunder andalso in terms of the provisions of the SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 and provisions of the Articles of Association of theCompany. Your Board has been constituted with requisite diversity wisdom and experiencecommensurate to the scale of operations of your Company.
A total offive Meetings of the Board of Directors ofyour Company were held during theyear under review i.e. on May 27 2015; August 5 2015; August 19 2015; November 42015 and February 10 2016. The maximum interval between two meetings did not exceed 120days as prescribed in the Companies Act 2013 Clause 49 of the erstwhile ListingAgreements with the Stock Exchanges and in the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. Details of all Board / Committee Meetings are given inthe Corporate Governance Report which forms part of this Annual Report.
Your Board has a duly constituted Audit Committee in terms of Section 177 of theCompanies Act 2013 read with the Rules framed thereunder and Regulation 18 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015. The term of referenceof the Audit Committee has been approved by the Board. The Composition of the AuditCommittee no. of meetings held during the year under review brief terms of reference andother details have been mentioned in the Corporate Governance Report section which isannexed to this Annual Report. All the recommendations made by the Audit Committee wereaccepted by your Board.
NOMINATION AND REMUNERATION POLICY
The Nomination and Remuneration Policy formulated by the Nomination and RemunerationCommittee of the Board of Directors and approved by your Board provides for criteria forselection and appointment of Directors Key Managerial Personnel (KMP) and SeniorManagement Personnel (SMP). The Policy provides for criteria for the Nomination andRemuneration Committee and the Board for fixing remuneration of the Directors KMP SMP aswell as other employees of the Company. The Policy also provides points of reference forperformance evaluation of the Board of Directors the Committees of Directors andindividual Directors of the Company. Performance evaluation of all the KMP SMP and otheremployees are carried out based on the individual evaluation of Key Result Area (KRA). ThePolicy enumerates the powers roles and responsibilities of the Nomination andRemuneration Committee.
The Nomination and Remuneration Committee oversees the Company's nomination process forDirectors and in that reference identifies screens and review individuals qualified to beappointed as a Director on the Board of Directors of the Company. Your Board on therecommendations of the Nomination and Remuneration Committee appoints Director(s) of theCompany based on his / her eligibility experience and qualifications and such appointmentis approved by the Members of the Company at General Meetings. Generally the ManagingDirector and Whole-time Directors (Executive Directors) are appointed for a period of fiveyears. The Non-executive Directors (other than Independent Directors) are liable to retireby rotation at Annual General Meeting and if eligible may seek approval of the Membersfor their re-appointment. Independent Directors of the Company are appointed to hold theiroffice for a term up to five consecutive years on the Board of the Company. Based on theireligibility for re-appointment for another term of five consecutive years the outcome oftheir performance evaluation and based on the recommendation by the Nomination andRemuneration Committee the Independent Directors may be re-appointed by the Boardsubject to approval of the Members of the Company. The Directors KMP and SMP shall retireas per the applicable provisions of the Companies Act 2013 and the policy of the Company.Your Board has the discretion to retain the Directors KMP and SMP in the same position /remuneration or otherwise even after attaining the retirement age for the benefit of theCompany subject to compliance of all applicable legislations.
While determining remuneration of the Directors KMP SMP and other employees theNomination and Remuneration Committee ensures that the level and composition ofremuneration are reasonable and sufficient to attract retain and motivate them and insurethe quality required to run the Company successfully; the relationship of remuneration toperformance is clear and meets appropriate performance benchmarks; and the remuneration toDirectors KMP SMP and other employees comprises a balance between fixed and incentivepay reflecting short and long term performance objectives appropriate to the working ofthe Company and its goals. The Company follows a compensation mix offixed pay benefitsallowances perquisites performance linked incentives and retirement benefits for itsExecutive Directors KMP SMP and other employees. Performance Linked Incentive isdetermined by overall business performance of the Company. Annual increments are decidedby the Nomination and Compensation Committee within the salary scale approved by the Boardand Members of the Company. The Company pays remuneration to Independent Directors by wayof sitting fees and commission on the net profits of the Company. Non-ExecutiveNon-Independent Directors of your Company do not receive any remuneration from theCompany. Remuneration to Directors is paid within the limits as prescribed under theCompanies Act 2013 and the limits as approved by the Members of the Company from time totime.
The aforesaid Nomination and Remuneration Policy is available on the website of theCompany at www.bata.in and same is available at the link:http://bata.in/0/pdf/Remuneration-Policy_2015.pdf.
In compliance with the requirements of the provisions of Section 178 of the CompaniesAct 2013 read with Rules framed thereunder and provisions of Schedule IV to the Act aswell as the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 yourCompany has carried out a performance evaluation programme for the Board of DirectorsCommittees of the Board and individual Directors forthe financial year ended March 312016.
Such performance evaluation process was formulated in consultation with the Nominationand Remuneration Committee and approved by your Board. The performance evaluation thusincluded the following:
(i) Board Assessment;
(ii) Assessment of each of the Committees constituted by the Board;
(iii) Self-assessment by each Director;
(iv) Peer Assessment by each Director.
Your Directors were circulated performance evaluation sheets with various parameters ona rating scale and to communicate the same to the Chairman of the Board of Directors andthe Chairman / Chairperson of the respective Committees of the Board in confidentialenvelopes. The outcome of such performance evaluation was discussed at a separate meetingof the Independent Directors held on May 3 2016 and at the Board Meeting held on May 302016. Based on the aforesaid performance evaluation it was decided to continue the termsof the appointed Independent Directors and also to seek approval of the shareholders atthe forthcoming Annual General Meeting to the proposals of appointment / re-appointment ofthe Directors concerned.
DISCLOSURES ON REMUNERATION OF DIRECTORS AND EMPLOYEES OF THE COMPANY
Information as required under Section 197(12) of the Companies Act 2013 read with Rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is annexed to this Board's Report and marked as Annexure V.
A Statement containing Information on particulars of employees of the Company drawingremuneration of not less than Rs.60 Lac per annum or Rs. 5 Lac per month when employed forpart of the year as specified under Section 197(12) of the Companies Act 2013 read withRule 5(2) & 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 in the prescribed format is annexed to this Board's Report andmarked as Annexure VI.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
In terms of Section 177 of the Companies Act 2013 Rules framed thereunder andRegulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 your Company has a vigil mechanism in place for the Directors and Employees of theCompany through which genuine concerns regarding various issues relating to inappropriatefunctioning of the organization can be communicated. For this purpose your Board has aWhistle Blower Policy and the same has been uploaded on the website of the Company athttp://bata.in/0/pdf/Whistle-Blower-Policy. pdf. A Vigil Mechanism Committee under theChairmanship of the Audit Committee Chairman has been constituted. The Policy providesaccess to the Head of Legal Department of the Company and to the Chairman of the AuditCommittee in certain circumstances.
No person has been denied an opportunity to have access to the Vigil MechanismCommittee including the Audit Committee Chairman. However during the year under reviewthere has been no incidence reported which requires action by the Vigil MechanismCommittee.
POLICY ON PREVENTION OF INSIDER TRADING
Your Company has adopted a Code of Conduct for Prevention of Insider Trading with aview to regulate trading in equity shares of the Company by the Directors and designatedemployees of the Company. The said Code of Conduct is available on the website of theCompany at www.bata.in. The Code requires pre-clearance for dealing in Company's sharesand prohibits purchase or sale of shares in your Company by the Directors and designatedemployees while they are in possession of unpublished price sensitive information andalso during the period when the Trading Window remains closed.
POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
Your Company is committed to provide a safe and secure environment to its womenemployees across its functions and other women stakeholders as they are considered asintegral and important part of the Organization.
Your Company has in place an Anti Sexual Harassment Policy in line with therequirements of the Sexual Harassment of Women at the Workplace (Prevention Prohibition& Redressal) Act 2013.
An Internal Complaints Committee (ICC) with requisite number of representatives hasbeen set up to redress complaints relating to sexual harassment if any received fromwomen employees and other women associates. All employees (permanent contractualtemporary trainees) are covered under this policy which also extends to cover all womenstakeholders of the Company.
The following is a summary of sexual harassment complaints received and disposed offduring the financial year ended March 312016:
| No. of Complaints received ||: NIL |
| No. of Complaints disposed off ||: Not Applicable |
Your Company has been conducting awareness campaign across all its manufacturing unitswarehouses retails stores and office premises to encourage its employees to be moreresponsible and alert while discharging their duties.
RISK MANAGEMENT AND ADEQUACY OF INTERNAL FINANCIAL CONTROLS
Your Company operates through definitive Chart of Authorities (COAs) and StandardOperating Procedures (SOPs) in respect of its operations including financial transactions.Such COAs and SOPs are regularly monitored and if required modified from time to timedepending on business requirements.
Your Company has an adequate system of internal financial controls commensurate withits size and scale of operations which includes policies and procedures pertaining tomaintenance of records containing reasonable details accurate and fair reflections offinancial transactions and dispositions of the assets of the Company. Such practiceprovides reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that the same are well within the COAs and SOPs without exception. YourCompany also monitors through its Internal Audit Team the requirements of processes inorder to prevent or timely detect unauthorized acquisition use or disposition of theCompany's Assets which could have a material effect on the Financial Statements of theCompany.
The Audit Committee of your Board has devised a Risk Management Policy approved byyour Board which outlines the risk management framework for the functions involved withinyour Company. As per the said Policy Risk Management Committee of your Board has beenentrusted with the role and responsibilities to formulate monitor and review riskmanagement plans of your Company.
Your Companys internal financial control ensures that all assets of the Companyare safeguarded and protected proper prevention and detection of frauds and errors andall transactions are authorized recorded and reported appropriately.
The Internal Audit Report and Risk Inventory Report are reviewed periodically by theAudit Committee of the Board of Directors. The Chief Internal Auditor is a permanentinvitee to the Audit Committee Meetings. The Audit Committee advises on various riskmitigation exercises on a regular basis. Your Company has been maintaining a separateInternal Audit Team headed by the Chief Internal Auditor appointed by the Audit Committeeof your Board.
Your Board has also constituted a Risk Management Committee comprising of the Directorsand Senior Executives of the Company under the chairmanship of the Managing Director ofthe Company. The Terms of Reference of the Risk Management Committee and a Risk ManagementPolicy of the Company have also been approved and adopted. The Risk Management Committeeheld their first meeting on May 30 2016.
Your Board considers that the Internal Financial Controls affecting the FinancialStatements of your Company are adequate and are operating effectively.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Your Board at its meeting held on May 27 2015 appointed Mr. Ravindra Dhariwal and Mr.Shaibal Sinha as Additional Directors with effect from May 27 2015. Subsequently at theEighty Second Annual General Meeting of your Company held on August 5 2015 appointmentof Mr. Shaibal Sinha was approved by the Members of the Company as a Director of theCompany whose period of office is liable to determination by retirement of directors byrotation at the Annual General Meetings. In terms of the requirements of Section 149 ofthe Companies Act 2013 read with Schedule IV to the Act and Rules framed thereunder theMembers of the Company at the aforesaid Annual General Meeting appointed Mr. RavindraDhariwal as an Independent Director of your Company for a term of five consecutive yearseffective from May 27 2015. Your Company has formalized the appointment of Mr. RavindraDhariwal as an Independent Director of your Company by issuing an Appointment Letter tohim and the same is available on the website of the Company www.bata.in.
Subsequent to his attaining superannuation Mr. Jorge Carbajal stepped down as aNon-Executive Director of your Company with effect from August 19 2015. Mr. RanjitMathur Director Finance & Chief Financial Officer Mr. Kumar Nitesh ManagingDirector-Retail and Mr. Jack G. N. Clemons Non-Executive Director resigned from the Boardof Directors of your Company with effect from August 19 2015 November 4 2015 andNovember 12 2015 respectively. Your Board places on record its deep appreciation for thecontributions made by Mr. Jorge Carbajal Mr. Ranjit Mathur Mr. Kumar Nitesh and Mr. JackG. N. Clemons during their tenure as Directors of the Company and wishes them success intheir future endeavours.
Consequent upon resignation of Mr. Ranjit Mathur at the Board Meeting held on August19 2015 your Board appointed Mr. Ram Kumar Gupta as an Additional Director of theCompany with effect from August 19 2015 to hold office up to the date of the forthcomingAnnual General Meeting. At the said Board Meeting pursuant to Section 196 of theCompanies Act 2013 read with applicable Rules Mr. Ram Kumar Gupta has also beenappointed as a Whole-time Director designated as the Director Finance of the Company for aperiod of five years with effect from August 19 2015 subject to approval of theShareholders at the ensuing Annual General Meeting. In terms of Section 152(6) of theCompanies Act 2013 read with the provisions of the Articles of Association of theCompany Mr. Ram Kumar Gupta shall be liable to retire by rotation at Annual GeneralMeetings. At the same Board Meeting pursuant to Section 203 of the Companies Act 2013Mr. Ram Kumar Gupta was also appointed as the Chief Financial Officer and a Key ManagerialPerson of the Company for a period of five consecutive years with effect from August 192015.
At the Board Meeting held on February 10 2016 your Board appointed Mr. ChristopherKirk Chairman of Bata Shoe Organization as an Additional Director of the Company witheffect from February 10 2016 to hold office up to the date of the forthcoming AnnualGeneral Meeting. Your Board recommends appointment of Mr. Christopher Kirk as aNonExecutive Director of the Company at the ensuing Annual General Meeting whose periodof office would be liable to determination by retirement of directors by rotation.
Your Directors welcome Mr. Christopher Kirk and Mr. Ram Kumar Gupta on the Board andwishes a successful association with them during their tenure as the Directors of theCompany.
The Company has received Notices under Section 160 of the Companies Act 2013 fromMembers of the Company along with requisite deposits signifying the candidature of Mr.Christopher Kirk and Mr. Ram Kumar Gupta for their respective appointments as Directors ofthe Company at the ensuing Annual General Meeting.
Mr. Rajeev Gopalakrishnan Managing Director was appointed for a period of five yearswith effect from February 23 2011 in terms of the Shareholders approval obtained at theSeventy Eighth Annual General Meeting held on June 28 2011 and accordingly held officetill February 22 2016. Your Board at its Meeting held on February 10 2016 in accordancewith Sections 196 203 and applicable provisions of the Companies Act 2013 and Schedule Vthereto read with Rules framed thereunder re-appointed Mr. Rajeev Gopalakrishnan as theManaging Director a Key Managerial Person of the Company with revised remuneration for aperiod of five consecutive years with effect from February 23 2016 subject to approvalof the Members of the Company at the ensuing Annual General Meeting.
In accordance with the provisions of Section 152 of the Companies Act 2013 Rulesframed thereunder and the Articles of Association of your Company Mr. Shaibal SinhaDirector is due to retire by rotation at the ensuing Annual General Meeting and beingeligible offers himself for re-appointment.
Your Board is of the opinion that continued association of Mr. Rajeev Gopalakrishnanand Mr. Shaibal Sinha with the Board will be of immense benefit to your Company andtherefore recommends their re-appointment.
In terms of Section 102 of the Companies Act 2013 Regulation 36 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 and the Secretarial Standardson General Meetings (SS-2) issued by the Institute of Company Secretaries of India briefprofiles of Mr. Christopher Kirk Mr. Rajeev Gopalakrishnan Mr. Ram Kumar Gupta and Mr.Shaibal Sinha have been annexed to the Notice convening the Eighty Third Annual GeneralMeeting of the Members of the Company and the same form an integral part of this AnnualReport.
Mr. Uday Khanna Mr. Ravindra Dhariwal Mr. Akshay Chudasama and Ms. Anjali BansalIndependent Directors of your Company have declared to the Board of Directors that theymeet the criteria of Independence in terms of Section 149(6) of the Companies Act 2013and that there is no change in their status of Independence.
Your Board has appointed Mr. Rajeev Gopalakrishnan Managing Director (Chief ExecutiveOfficer) Mr. Ram Kumar Gupta Director Finance (Chief Financial Officer) and Mr. MaloyKumar Gupta Company Secretary & Compliance Officer as the Key Managerial Personnel ofyour Company.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to provisions of Section 134 of the Companies Act 2013 your Directors herebyconfirm that:
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed;
(b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the company at the end of the financial year and of the profitand loss of the company for that period;
(c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
(d) they have prepared the annual accounts on a going concern basis;
(e) they have laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and were operating effectively; &
(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
(a) Industry structure and developments
The Global Footwear Market by geography is divided into four regions: North AmericaEurope Asia Pacific and Rest of the World. In terms of volume Asia Pacific is thelargest contributor to the market accounting for a market share of approximately 40%. Themajor reason is attributed to increasing middle class population and rapid expansion offootwear industry in emerging countries such as China and India among others. Presentlyin terms of revenue Global Footwear Market is valued at approx. USD 210 Billion and isexpected to grow at a CAGR of 2.5% from 2015 to 2023. In terms of volume Global FootwearMarket is approx. 10 Billion pairs which may cross 12 Billion pairs in 2023 by growing ata CAGR of2.3%.
India is the second largest producer of footwear in the world next to China and has anever-growing domestic market. Annually India produces about 2.1 Billion pairs and it isestimated that production of footwear will exceed 4 Billion pairs by 2020. The per capitaconsumption of footwear in India is set to grow rapidly from its existing level of 1.7pairs per annum. The global average per capita consumption of footwear is 3 pairs perannum whereas the same for developed countries in the World is more than 5 pairs perannum.
The footwear industry is an important driver in the economic growth of India and is asignificant segment of the leather industry. The Indian Footwear Market is divided intoorganized and unorganized segment where the latter occupies about 65% of the overallmarket. In the recent past the organized footwear sector has witnessed a faster growthand is expected to grow at 15% over the next few years.
The Government of India now allows 100% Foreign Direct Investment (FDI) in Footwearmanufacturing sector through the Automatic Route. The Indian Government is also boostingthe Footwear Industry by reducing excise duty on certain category of footwear. Governmentof India in its Finance Budget 2016 has proposed reduction in excise duty for rubbersheets for soles and heels from 12.5% to 6% and an increase in abatement from retail salesprice for calculating excise duty for footwear from 25% to 30%. Such step by theGovernment is creating a conducive investment climate towards attracting overseasinvestments and increasing employment potential within the Country.
(b) Opportunities and Threats
While India is the second largest footwear manufacturers of the World only 10%footwear produced in India are being exported and the remaining 90% of the production aresold within the Country for domestic consumption. China continues to be leading country inthe World as an exporter. Indian footwear industry is exploring ways to increase exportsand the growth in export of footwear will depend on quality and cost competitiveness.
India is attracting various established fashion brands of the World as well asretailers who are re-orienting their focus on the domestic footwear market which has ledto a significant increase in the number of retail outlets nationwide. Furthermore growingfashion consciousness and increasing demand for innovation in design and technology offootwear products is increasing competitiveness in the Markets.
Your Company has enjoyed a presence in the Indian Footwear Industry for more than eightdecades and has established an integrated manufacturing supply chain and distributionnetwork. Your Company understands the latest trends in footwear industry and will exploitits leadership position in the organized footwear industry and take appropriate steps toovercome the challenges in the footwear industry to achieve its objectives.
(c) Segment wise or product wise performance
Your Company operates in two segments - Footwear & Accessories and Surplus PropertyDevelopment. Your Company has chosen Footwear & Accessories as its primary segment.
Performances of major business categories and key brands of your Company during thefinancial year ended March 31 2016 are highlighted below:
During the twelve month period ended March 31 2016 your Company opened 26 new retailstores across India.
The new stores are larger in size and are based on global design making them lookcomplete and enticing with adequate space to display the products. Your Company plans toadd around 30 new retail stores every year to increase its presence in the Malls and HighStreet Markets and 30 new Franchisee stores also in the Tier-2 and Tier-3 cities acrossIndia. Your Company plans to open 5 destination stores each year to provide a uniqueshopping experience with wide collection to the consumers. Such destination stores willcomprise of very large retail space located at the outskirts of the cities with allamenities like ample parking space children's play area and food-court. In addition yourCompany shall continue to make investment on renovating existing stores hence creating adelightful shopping experience for the customers by improving store layouts and creatingan emphasis on key products within the retail stores.
India has witnessed exponential growth in e-commerce business with customers preferringto shop online. This leads to a lesser footfall and decreasing conversion rate impactingthe retail business across the Country. Your Company believes that the present businessmodel of e-commerce players offering huge discount is not sustainable in the long run andexpects the customers' footfall in retail store shall increase. In order to cater to thecustomers who prefer online shopping your Company has been exploring various plans tofacilitate their shopping choices through on-line kiosks from the retail stores of theCompany.
Digital Multi-Channel Business
The business world is being digitized rapidly adding value to the customers on existingproduct offerings. Technical innovations and web-based transactions have become the key tosuccess. Your Company's Digital Multi-Channel Business has quickly adopted these changesin consumer buying pattern and invested in strengthening this segment of business.
Your Company's online business has grown well during the year under review. YourCompany sold more than 3.8 lacs pairs of footwear through online channels achieved aturnover of approx. Rs.360 Million. Your Company's e-commerce presence has penetrated inmore than 2000 cities across India.
During the year under review your Company's e-commerce Division mainly focused onincreasing its customer database by reaching out to new set of target audience and alsoestablishing successful association with many reputed companies and banks e.g. HDFCBank Standard Chartered Bank State Bank of India Deutsche Bank Samsung SpiceJetAirlines etc. Such alliances helped your Company increase its brand awareness andcustomer database. Your Company's products continued to be sold through its partners'websites including Amazon Myntra Jabong Flipkart etc. Your Company has launched a'Click and Collect' service for its Stores in Delhi NCR Region. The customers can now shopthe entire range of products available online with the click of a button and have theirpreferred footwear or accessories delivered to the local Bata retail store of theirchoice. Your Company has launched online exclusive product lines for both Spring-SummerSeason and Autumn-Winter Season generating a good response from the customers.
The website of the Company has been made more user-friendly in order to provide betterinterface. The website now provides facilities like easy navigation simplistic designseffortless checkout process and effective product shots. Your Company has also launchedBata Mobile Application with interactive user- interface which has also been well acceptedin the market. Your Company has strengthened its e-commerce team and had recently launchedBata Blog which acts as a style inspiration for the young audience and also providesfrequent online customer surveys and customer feedback for improved services. Goingforward your Company shall expand its Digital Multi-Channel Business through variousmeasures including placement of online kiosks in major retail stores tie-up with paymentbanks and also increasing the presence of its product offerings through partners'websites.
Your Company's international premium brand 'Hush Puppies' continues to live up to itsbrand image of comfort quality and style. The year 2015-16 was a milestone year for HushPuppies as your Company sold over a Million pair in the year 2015 itself. In addition tobeing available through the retail stores wholesale network and e-commerce channel ofyour Company the brand has been expanding its presence through 68 exclusive stores and 37shop- in-shops in premium departmental stores. During the year under review Hush Puppiesembarked on a journey of re-positioning itself as an International Premium LifestyleCasual Footwear brand. Your Company shall continue to focus on offering unique productsunder this brand which will be more comfortable with contemporary fashionable stylemaking 'Hush Puppies' the most desired lifestyle footwear brand in India.
Recognizing needs of the young consumers your Company's new retail concept - Footinwas created in the year 2012. It is a new business model with a different approach tocater to the young customers who are style conscious and trend-savvy shoppers and needquality merchandise at affordable price. Footin has become the source for currentfashionable footwear at great value. Footin business is fast growing featuring new andexciting store environments trendy shoes and accessories designs at the right price. Atpresent your Company has 35 exclusive Footin stores across the Country which arestrategically located to cater to the target group of young shoppers.
Bubblegummers and Disney
In order to cater to the children category of customers your Company has beenintroducing many new designs and innovative footwear for the children. ThroughBubblegummers brand of footwear your Company has always been striving to make qualityshoes with uncompromising comfort and features that safeguard their little feet.Bubblegummers is retailed through all Bata stores across the Country and has been thefirst point of contact to start our consumers journey and long term association withBata. With 18% of the Countrys population below the age of 10 years potential togrow in the children category of footwear is huge. Therefore it is one of the key focusareas for your Company today. With a revamped collection a dedicated team to drive thisbrand experience of being associations with brands like Angry Birds in the past and WaltDisney at present your Company has robust plans to make Bubblegummers the best childrenfootwear brand in the Country.
Your Company has established an association with The Walt Disney Company India Pvt.Ltd. and working with a set of designers from Disney to create a complete collectioncovering all types of footwear ranging from casual shoes canvas shoes and ballerinas toeveryday-wear sandals and chappals. Your Company has been exploring the possibilities tocreate exclusive 'Disney Corners' in some of the key retail stores across major cities inIndia to highlight the collection and add value to the children category of footwearrange. Your Company is confident that the young little customers will be excited andthrilled to see their favorite characters on their favorite shoes.
Your Companys urban wholesale business has recorded a good growth in turnover andprofitability during the year under review. The urban wholesale business of your Companyhas been penetrating the markets through a wide network of more than 325 distributorsacross India. Your Company offers various incentive / loyalty rewards to its existing andnew distributors for promoting the Company's brands of footwear in the areas where theCompany does not have retail presence of its own. During the year under review yourCompany has strengthened its urban wholesale business monitoring team and efforts arebeing made to increase its market share in the wholesale footwear business.
During the year under review your Company's Industrial business division has recordeda good growth in turnover and is now recognized as one of the foremost suppliers in thesafety footwear market catering to the requirements of different industries in India. Thedivision has expanded its coverage in the market and also continues to remain focusedtowards upgrading the market with newer technology products. The product range has beenrefreshed by launching new designs and new sole patterns as well as new PU-Rubber solecollection. Your Company provides more than 100000 pairs of safety shoes for Indian Navyand other defence services.
Your Companys Institutional business has recorded better results during thefinancial year ended March 31 2016 as compared to the previous financial period. Thefocus is to cater to segments like defense aviation education corporate etc. A newrange for the healthcare segment has been launched with specialized footwear to be used inhospitals for doctors nurses front office staff maintenance team etc.
Customer Care Initiatives
Your Company has a dedicated customer care team with a toll free number to attendcustomer grievances and to resolve the same amicably. In the financial year 2014-15 yourCompany introduced a new initiative of customer loyalty program viz. The BataClub'. During the year under review this loyalty program has been introduced in more than800 retail stores across 47 cities in India. Since its introduction approx. 6.7 MillionClub Memberships have already been added to The Bata Club'. These Club members arecommunicated on priority about various new marketing offers and promotions as and whenplanned by your Company. Several personalized offers have been customized for theseThe Bata Club' Members on the basis of their purchase behaviour and trends e.g.Raksha Bandhan Campaign Naturalizer product promotion Pay less - Get more Offer etc.Your Company aims to provide best in class support to its customers by addressing theirqueries and feedback through a dedicated helpdesk.
Despite a challenging retail environment and increase in competitive intensity yourCompany continued to deliver steady improvement in its performance.. Your Company istaking appropriate steps to leverage its position to achieve good growth in terms ofvolumes and profitability. Your Company has been investing to strengthen its DigitalMultiChannel Business Division along with Logistics Division with due importance fordelivery of footwear and accessories to the customers through delivery services'cash on delivery' and click and collect' services.
India has a good potential for the footwear industry in view of rapid change inlifestyle increase in disposable income of middle-class people and continuous growth innumber of working women. Customers' preference for branded products is providing a betteropportunity to the players in organized footwear markets in India.
(e) Risks and concerns
Your Company through its Audit Committee and recently constituted Risk ManagementCommittee monitors its major risks and concerns at regular intervals. Appropriate stepsare taken in consultations with all concerned to mitigate such risks. In addition to thebusiness risks some of the major risks and concerns are summarized as under:
i. Globally competitive business environment
Ever increasing competition from local and overseas players in the footwear industryremains a major challenge for your Company.
In addition to the above your Company is concerned about the current sluggish retailgrowth and slow infrastructural development in India. Many of your Company's retail storesare large formats stores located in Malls. Increases in rental costs and high cost of rawmaterials may negatively impact business performance of your Company. In order to overcomethese risks and concerns your Company has taken appropriate measures e.g. long termlease agreement for retail stores alternative sources of raw materials ensuringavailability of skilled laborers etc. Your Company believes such measures are adequate tomitigate the aforesaid risks and concerns.
ii. Risk related to changes in law and regulations
Your Company operates in a complex regulatory environment and fully abides by the lawsand regulations of the Country it operates in. Any change in the laws and regulationsgoverning the leather and footwear industry may affect the business and financialperformance of your Company.
iii. Contingent Liabilities involving Litigations
During the normal course of its business operations your Company has been subjected toseveral legal cases in connection with or incidental thereto. These litigations includecivil 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 expertsin respective areas. Your Board believes that the outcome of these cases is unlikely tocause a materially adverse effect on the Companys profitability or businessperformance. Your Company has a Contingent Liability of Rs. 949.43 Million as on March312016 as compared to Rs. 767.15 Million as on March 31 2015. Attention of theShareholders is drawn to the explanations mentioned in point no. 31 of the Notes toFinancial Statements as attached.. In view of the present status and based on legal advicereceived your Board is of the opinion that no provision is required to be made againstthese Contingent Liabilities during the year under review.
iv. Trade Unions related risks
Your Company has several recognized Trade Unions and enjoys harmonious relationshipwith all its employees. During the year under review your Company has entered into longterm agreements with its Workers' Unions at Manufacturing Units. During the year yourCompany successfully negotiated Long Term Settlements with the Workers' Union at Bataganjand with the Shop Employees' Union. The industrial relations at all the units of theCompany have been harmonious and peaceful with active involvement of the employees in thecollective bargaining process.
(f) Internal Control Systems and their adequacy
Your Company has an adequate system of internal controls commensurate with its size andscale of operations to ensure that all assets of the Company are safeguarded andprotected and that all transactions are authorized recorded and reported appropriately.The Internal Audit Report and Risk Inventory Report are reviewed periodically by the AuditCommittee of the Board of Directors. The Chief Internal Auditor is a permanent invitee tothe Audit Committee Meetings. The Audit Committee advises on various risk mitigationexercises on a regular basis. Your Company has been maintaining a separate Internal AuditTeam headed by the Chief Internal Auditor.
(g) Discussion on financial performance
Your Company has been able to achieve profitable growth continuously for a decade nowand believes that this is sustainable barring unforeseen circumstances.
The Earning per Share (EPS) (Basic and Diluted) of your Company for the financial yearended March 31 2016 was at Rs. 17.02. The EPS forthe fifteen month period ended March 312015- the previous financial year of the Company was Rs. 17.99. The EPS for the twelvemonth period ended March 312015 was approx. Rs. 14.92. As informed through earlier AnnualReports your Company does not have any Bank Borrowings since April-2010 and the entirecapital expenditure has been funded through internal sources.
Capital Expenditure incurred during the year under review amounted to Rs.794.41 Millionas compared to Rs.1538.77 Million during the fifteen month period ended March 31 2015.
(h) Material developments in human resource / industrial relations front includingnumber of people employed Industrial Relations and Personnel
Your Company has been continuously working to improve human resources skillscompetencies and capabilities in the Company which is critical to achieve results as perour strategic business ambitions. Some key initiatives have been taken in the year 2015-16in this direction. These are summarized below:
(i) Building up the best team in all functional areas
During the year your Company has hired over 25 middle and senior level Executives invarious functional areas like Retail Operations Non Retail and Merchandising. Theseprofessionals come with rich and varied domain experience within and across industries.Addition of these skills and competencies will address the gaps and take the Companytowards further growth.
(ii) Creating bench strength and building up capability for future growth ManagementTraining Program
Your Company has put in place a structured Management Training program for roles inRetail Operations Merchandising and Product Design. As part of the program the Companyhas recruited design and fashion professionals as well as Management Graduates fromwell-known Institutes. After a 12 month long training under the mentorship of experiencedleaders these Management Trainees are now ready for independent responsibilities. YourCompany continues to recruit Summer Interns who worked on very specific business impactinitiatives.
(iii) Training and Development Retail Training Academy
Your Company had set up a Retail Training Academy in February -2014. The Academydesigns and delivers specialized courses for different roles like Sales Promoters StoreManagers District Managers and Retail Managers. The courses have been designed to ensurecomprehensive learning of Product as well as Business operations. In the year 2015-16 theRetail Training Academy trained:
31 District Managers and Retail Managers under 13.5 weeks duration AdvancedDistrict Administration Professional Training (ADAPT) program
109 Store Managers under 7.5 weeks duration Store Managers Advance RetailTraining (SMART) program
204 experienced Store Managers under a week long Fully Integrated Retail StoreTraining (FIRST) program
Currently the Academy conducts programs at Gurgaon Bangalore Kolkata and Mumbai.
Passion to Serve' Training to Store Employees and Store Managers
In order to improve customer experience at our Stores your Company rolled out 'Passionto Serve' Program across Stores in key metro cities. The objective of the program is toretain and grow existing customers as well as attract new customers. The Store Managersand the Sales Promoters along with District Managers were trained in this two days'training session. The training was also followed by mystery shopping in order to assessthe impact. As part of the program a career path was also laid out for a performing SalesPromoter. During the year over 100 Store Managers and 1011 Sales Promoters were trained.
Retail Training Academy (RTA) imparts in-store Product Category specific trainingprogram to Sales Promoters across stores. Currently three different programs namely PowerChamps Comfort Champs and Non-Footwear Products Champs are being conducted that coversall technologies and products available in the Stores. So far more than 300 SalesPromoters were trained under the Champs Training Program. This program helps SalesPromoters understand products technologies and any special features thus acquiring theproduct specific selling skills.
As on March 31 2016 there were 4796 permanent employees on the rolls of yourCompany.
Statements in the Management Discussion and Analysis Report describing the estimatesexpectations or predictions may be 'forward-looking statements' within the meaning ofapplicable laws and regulations. Actual results could differ materially from thoseexpressed or implied. Important factors that would make a difference to the Company'soperations include demand-supply conditions raw material prices changes in GovernmentRegulations tax regimes economic developments within the Country and outside the Countryand other factors such as litigation and labor negotiations.
In compliance with the provisions of Regulation 34 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 read with Schedule V to the said Regulationsthe Corporate Governance Report of your Company and a Certificate on Corporate GovernanceCompliance received from M/s. S. R. Batliboi & Co. LLP Chartered Accountants theStatutory Auditors of your Company are annexed to this Annual Report.
Your Board acknowledges the support and co-operation received from all its stakeholdersincluding our dear shareholders as well as regulatory authorities of the CentralGovernment and all State Governments in India as they endeavour to create an enablingenvironment for industry and commerce to prosper.
Your Board continues to remain thankful to Bata Shoe Organization for their continuoussupport guidance and cooperation in conducting the business operations of the Company inIndia.
Your Board wishes to place on record its deep appreciation of the IndependentDirectors. All of them despite their busy schedule and other exigencies immenselycontribute to the Company through their strategic guidance and valuable suggestions inimproving the business performance of the Company.
Your Board appreciates the relentless effort of the Management Team lead by theManaging Director who steers the Company in achieving better performances year-on-year.Our employees are our biggest strength and we gratefully acknowledge their contribution tothe Company in achieving its objectives to serve our customers.
| ||For and on behalf of the Board of Directors |
| ||UDAY KHANNA |
|Place : Gurgaon ||Chairman |
|Date : May 30 2016 ||(DIN: 00079129) |