Bata board to decide over land in closed Faridabad unit

The company has to shed Rs 21.6 crore as compensation to workers

After shutting down its Faridabad unit last year, which has freed 11 acres of land and other tangible assets, Bata India is mulling over the future of its closed plant. Among other options, the company is also considering an outright sale of the land parcel freed up with the closing of the factory.
 
“We haven’t yet taken a call on the matter; whether to utilise the available space for our own needs, or come up with a new plant or sell it. The board (of directors) will take a call on the issue,” the company’s chairman, Uday Khanna said.
 
Last year in December, the company announced a voluntary retirement scheme for its workers in the Faridabad unit which saw in 118 staff members opting for the scheme and the company shedding Rs 21.6 crore as compensation to workers. Talking about the reason for the closure of the plant, Khanna said, that the unit, which focused on manufacturing of flip-flops, canvas shoes and others, wasn’t financially viable and cost of production had spiraled. “We couldn’t do anything as long as people were there,”  he said.
 
Sameer Deshmukh, research analyst with Reliance Securities, however, said that to unlock the value of the land for real-estate projects, it needs to be considered how the company had acquired the land. “If it was via state agencies or with the help of the government, then a different valuation of the land will be done while if the company had purchased the land directly from landowners, then the valuation will be at market prices,” he said.
 
As per Makaan.com, currently the price of properties in Faridabad starts from around Rs 65,830 while the average price of properties stands at Rs 46.85 lakhs.
 
With the shutdown of the Faridabad plant, Bata India is now left with a total of four plants — one each in Batanagar in West Bengal, Bataganj in Bihar, Batashatak in Tamil Nadu and one unit in Peenya Industrial Area in Bangalore.
 
The products which were being manufactured from the Faridabad unit will be relocated to its Batanagar unit which already has the requisite machinery to manufacture these products. As a result, the relocation of product manufacturing will not entail additional investment or job creation.
 
As on March 31, 2017, the company has freehold land worth Rs 24.1 crore with its plant, buildings and equipment valued at Rs 120.4 crore. Overall, its total property, plant and equipment is valued at Rs 266.6 crore.
 
Rajat Sharma of Sana Securities is of the opinion that the plant closure and subsequent relocation of the products to West Bengal will improve the operational efficiency of the company helping it to optimise cost to further the bottomline. In the past in 2004, the company, via a joint-venture route, had converted a major portion of its land in Batanagar to develop real-estate projects which saw the total factory space being reduced from 300 acre to 46 acres.
 
Over the past several decades, the management of Bata India has been constantly challenged with workers unrest including a major lockout in its Bangalore factory in 2000 and another 124-day lock-out of its Batanagar unit. As per the company's annual report, it has a Rs  65 lakh provision for contingencies arising from cases related to labour, house tax and other civil cases.