https://bata.in/0/pdf/Bata-WhistleBlowerPolicy.pdf.A Vigil Mechanism Committee under the Chairmanship of the Audit Committee Chairman hasbeen constituted. The Policy provides access to the Legal Head of the Company and to theChairman of the Audit Committee.
No person has been denied an opportunity to have access to the VigilMechanism Committee and the Audit Committee Chairman.
POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
Your Company has adopted a Policy under the Sexual Harassment of Womenat Workplace (Prevention Prohibition and Redressal) Act 2013 and Rules framedthereunder. Your Company is committed to provide a safe and secure environment to itswomen employees across its functions and other women stakeholders as they are consideredas integral and important part of the Organization.
An Internal Complaints Committee (ICC) with requisite number ofrepresentatives has been set up to redress complaints relating to sexual harassment ifany received from women employees and other women associates. All employees (permanentcontractual temporary trainees) are covered under this policy which also extends tocover all women stakeholders of the Company.
The following is a summary of sexual harassment complaints received anddisposed off satisfactorily during the financial year ended March 31 2018:
No. of Complaints received : 2
No. of Complaints disposed off : 2
Your Company has been conducting awareness campaign across all itsmanufacturing units warehouses retail stores and office premises to encourage itsemployees to be more responsible and alert while discharging their duties.
RISK MANAGEMENT AND ADEQUACY OF INTERNAL FINANCIAL CONTROLS
Your Company's internal financial control ensures that all assetsofthe Company are safeguarded and protected proper prevention and detection of frauds anderrors and all transactions are authorized recorded and reported appropriately. YourCompany operates through definitive Chart of Authorities (COAs) and Standard OperatingProcedures (SOPs) in respect of its operations including financial transactions. Such COAsand SOPs are regularly monitored and if required modified from time to time depending onbusiness requirements.
Your Company has an adequate system of internal financial controlscommensurate with its size and scale of operations procedures and policies ensuringorderly and efficient conduct of its business including adherence to the Company'spolicies safeguarding of its assets prevention and detection of frauds and errorsaccuracy and completeness of accounting records and timely preparation of reliablefinancial information.
Such practice provides reasonable assurance that transactions arerecorded as necessary to permit preparation of Financial Statements in accordance with theapplicable legislations and that the same are well within the COAs and SOPs withoutexception. Your Company also monitors through its Internal Audit Team the requirements ofprocesses in order to prevent or timely detect unauthorized acquisition use ordisposition of the Company's Assets which could have a material effect on the FinancialStatements of the Company. The Internal Audit function is responsible to assist the AuditCommittee and Risk Management Committee on an independent basis with a complete review ofthe risk assessments and associated management action plans.
Risk Management is embedded in the Company's operating framework. YourCompany believes that risk resilience is key to achieving higher growth. To this effectthere is a robust process in place to identify key risks across the Company and prioritizerelevant action plans to mitigate these risks. Risk Management framework is reviewedperiodically by the Board and the Audit Committee and Risk Management Committee whichincludes discussing the management submissions on risks prioritising key risks andapproving action plans to mitigate such risks.
The Internal Audit Report and Risk Inventory Report are reviewedperiodically by the Audit Committee of the Board of Directors. The Chief Internal Auditoris a permanent invitee to the Audit Committee Meetings. The Audit Committee advises onvarious risk mitigation exercises on a regular basis. Your Company has been maintaining aseparate Internal Audit Team headed by the Chief Internal Auditor appointed by the AuditCommittee of your Board.
Your Board has also constituted a Risk Management Committee comprisingof the Directors and Senior Executives of the Company under the Chairmanship of theManaging Director of the Company. The Terms of Reference of the Risk Management Committeeand a Risk Management Policy of the Company have also been approved and adopted.
Your Board is of the opinion that the Internal Financial Controlsaffecting the Financial Statements of your Company are adequate and are operatingeffectively.
COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS
During the year under review the Company has duly complied with theapplicable provisions of the Secretarial Standards on Meetings of the Board of Directors(SS-1) and General Meetings (SS-2) issued by The Institute of Company Secretaries of India(ICSI).
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Industry structure and developments
The financial year2017-18 was an eventful year with the adoption ofGST. While there were some initial hiccups that were to be expected the implementation ofthe GST will act as a boon in the long term for the organized manufacturing industryacross the country.
The Indian footwear industry is currently under transformation phaseand moving from a traditionally labour-intensive industry to a more technological andinnovation driven industry. The footwear industry in India employs over 1.1 millionworkers making it one of the top employment generating industry in the country. Thefootwear production in India is over 22 billion pairs annually which is approximately9.6% of the total global annual footwear output. India is the second largest globalproducer of footwear after China and also the world's third-largest footwear consumerafter China and the USA. Almost 90% of the footwear manufactured in India is sold in thedomestic market. Today India is already among the world's top 10 footwear exporters andits share is growing. The organised footwear market in India is still dominated by men'sfootwear which contributes around 58% of the total retail footwear market and is expectedto grow at a CAGR of around 10% by 2020. The women's footwear segment however isprojected to grow at a much faster CAGR of around 20%. In terms of the product typecasual footwear is the largest product segment in the Indian footwear market andcontributes to approximately 67% of the total retail footwear market. The footwearindustry is dominated
by the unorganized domestic footwear manufacturers but with the fastchanging consumer behaviour growing Indian fashion and lifestyle market increase indisposable income of middle class awareness of fitness among youth urbanization anddemographic changes the organised sector footwear brands are likely to witness highergrowth in the near future.
The Indian footwear industry is in a confident phase with growth inonline shopping fitness awareness latest style fashion trends and consciousness amongconsumers. With the growing health and fitness awareness amongst urban Indians demand forfitness footwear has increased manifold and is expected to continue for several years tocome. Rapid growth was also registered in Internet retailing in India which recordeddoubledigit value share in overall footwear sales in 2017. It is expected that around 11%of total revenue in the Indian footwear market will be generated through online sales by2021. Due to rapidly increasing urbanization there is a also an opportunity in Tier IIand Tier III cities across India.
The Government of India recently approved special package of Rs 2600crore for leather and footwear sector which also includes measures for simplification oflabour laws. The package involves implementation of central scheme 'Indian FootwearLeather & Accessories Development Programme' with an approved expenditure of Rs. 2600crore over the three financial years from 2017-18 to 2019-20. The package would lead todevelopment of infrastructure for the leather sector address environmental concernsspecific to the leather sector facilitate additional investments employment generationand increase in production.
Opportunities and Threats
Being aware of the changes in the external business environment coupledwith growing competition both from domestic and foreign players in the industry yourCompany is making constant endeavours to manufacture better quality comfortable anddurable products. With an eye to improve customer shopping experience your Company isfocusing on larger format stores combined with better visual merchandising with continuousfocus on operational cost efficiency so that its able to retain its market share and growfurther. The online marketing initiatives using digital influences have already proved tobe successful mainly among the younger consumers. With the infusion of new lines in men'sand women's contemporary collection along with exciting and colorful range for teenageconsumers and a range of offerings for the sports & fitness lovers the footfalls atstores are increasing. A range of products in the casual and lifestyle offering especiallyfor working women are expected to create a sustained demand for the future.
The competition is expected to intensify in the coming years with moreand more organized players entering the market with a range of offerings in formal andfashion segment. The brick and mortar retail industry is also expected to witness intensecompetition from the innovative digital platforms.
Segment wise or product wise performance
Your Company operates in Footwear & Accessories Segment only andperformances of major business categories and key brands of your Company during thefinancial year ended March 31 2018 are highlighted below:
Your Company has followed a strategy of driving same store growth whileadding new retail stores in Malls and High Street locations to enhance its Retailfootprint. During the twelve month period ended March 31 2018 your Company added over100 new retail stores 31 franchisee stores & renovated more than 90 stores acrossIndia. These spacious new stores are located in the growing markets of the country and arebased on global design making them look enticing with contemporary display of theproducts. Your Company shall continue to make investment on renovating existing storeshence creating a delightful shopping experience for the customers by improving storelayouts on the lines of new 'Red Angela Store Concept' and creating an emphasis on keyproducts within the retail stores. Your Company plans to focus on building the Bata Brandand attract more footfalls in the retail stores through breathtaking windows in-storesactivities and amplify various new launches of products and collections. Your Company isalso focussed on improving customer service at stores through regular training of storestaff.
With the relaunch of Power range - XO Rise' Genesis GlideVapor & Speedy your Company is confident of attracting teenagers and youth in a bigway. As a step to building the brand "Power" your Company has opened its firststand-alone Power store in Noida and plan to open more exclusive stores next year.
Your Company also opened the first Bata Women Store in India inBengaluru focussed on catering to footwear & accessories needs of woman consumers.
Digital Multi-Channel Business
Your Company's online business has recorded a remarkable growth duringthe year under review. Your Company sold more than 8.9 lac pairs of footwear throughonline channels and achieved a turnover of Rs. 879 Million. Your Company's e-commercepresence has penetrated in 1000+ cities and towns across India.
During the financial year your Company's e-commerce divisionworked on opportunities to diversify brand reach in the existing online business models.Your Company further continued to strengthen its online customer database by reaching outto the leading telecom airline and banking players in association with affiliatedpartners. There were continuous efforts to retain the loyalty database by reaching out tothem through SMS on a week-on-week basis. Your Company's online business with partnerslike Amazon Flipkart etc. has grown across all portals - with a steep increase insecondary sales through competitive product offerings creation of interactive brandstores and rigorous marketing campaigns which in turn resulted better secondary sales onthese platforms. Various market expansion strategies were put in place like increase ofbrand presence through marketplace model by listing products on high-traffic generatingwebsites including TataCliq ShopClues GoFynd and Limeroad.
Your Company's e-commerce website www.bata.inmigrated to a secure AWS server for enhanced performance that includes features like autoscaling and elastic load balancing. The website of your Company has been further enhancedto a better UX / UI which is simple user friendly and high on fashion quotient. YourCompany has further upgraded its Mobile Application with interactive user-interfaceleading to an increase in registered mobile users. With the launch of Bata Home Deliveryyour Company has also embarked on a journey towards being a truly omni-channelorganization where consumers can view and buy our products from any platform and use ourstores as a point of service. Going forward your Company will use digital devices in ourstores to show a wider range of products to the consumers thereby improving the overallconversion of our stores.
The financial year 2017-18 saw various new initiatives for Hush Puppies- your Company's international brand known for comfort quality and style. Launchingof new 'Signature Collection' across its exclusive stores marking a new tradition ofcontemporary and fashionable shoes for the new younger generation etc. were the majorhighlights for the brand. Apart from this an increased focus on womens footwear as apremium comfort category has been introduced in the new and refreshing lines of 'The BodyShoe' for women and the new successful sporty casual collection. In addition to beingavailable through the retail stores wholesale network and e-commerce channel of theCompany the brand has now expanded its presence through 90 exclusive stores and 60shop-in-shops in premium departmental stores. During the year under review Hush Puppiescontinues to strongly reposition itself as a Premium Lifestyle Casual Footwear brand. YourCompany shall continue to focus on offering new and unique products under this brand withincreased focus on comfort contemporary fashion and style making 'Hush Puppies' the mostdesired lifestyle footwear brand in India.
In order to cater to the children's ever changing footwear demand yourCompany has been introducing many new designs and innovative footwear. Through'Bubblegummers' 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 to establish long termassociation with Bata. With 18% of the Country's population below the age of 10 yearspotential to grow in the children category of footwear is huge which makes this categoryas one of the key focus areas for your Company.
Your Company has opened its first Bubblegummers Store in Bengaluruwhich provide a unique shopping experience to shoppers with great collection of shoes andaccessories.
Your Company has further established an association with The WaltDisney Company India Pvt. Ltd. and working with a set of designers from Disney to createa complete collection covering all types of footwear ranging from casual shoes canvasshoes and Ballerinas to everyday-wear sandals and chappals. Your
Company has created exclusive 'Disney Corners' in some of its keyretail stores across major cities in India to highlight the collection and add value tothe children category of footwear range.
Your Company's non-retail business division comprises of urbanwholesale industrial and institutional business divisions. The urban wholesale businessof your Company has been endeavouring to penetrate the markets through a wide network ofapproximately 350 distributors across India. During the year under review the wholesaletrade across India witnessed a slowdown as the business has been impacted by some externalfactors like GST implementation. Your Company is strengthening its urban wholesalebusiness monitoring team and efforts are being made to increase its market share in thewholesale footwear business.
Customer Care Initiatives
Your Company has a dedicated customer service team to ensure customersdon't face any inconvenience and their queries and concerns get addressed in an amicableway. A toll free customer support number is there in place so that customer can reachdirectly to the Company along with other channels like e-mail Facebook Twitter etc. YourCompany provides the best in class services to the customers all the concerns are beingresolved within minimum timelines ensuring complete transparency. Your Company's loyaltyprogramme "Bata Club" has increased its reach by registering over 19 Millionmembers. The programme ensures continuous engagement with members and rewards them specialbenefits upon purchase. These customer engagement programmes are conducted throughout theyear to drive increased footfalls and improved conversion in both retail stores and ondigital multi-channel platforms. Your Company has also started collecting customerfeedback about their shopping experience and measuring it as per the global standard tool"NPS" (Net Promoter Score) since January 2018.
Your Company has an established leadership position in the industry andis the most trusted name in branded footwear and accessories. With the change in customerpreferences shoes have become a style statement especially among the teenagers youth andthe affluent working class. The domestic demand for footwear is projected to grow at afast pace. The inclination towards purchase of products manufactured by established brandsis increasing. The digital platform presence in social media blogs and advertisementsare fast catching up with the brick and mortar sales model. Your Company is proactivelyengaged in taking appropriate steps to tap these opportunities in order to improve itsmarket share and retain its leadership position in the organized footwear and accessoriessector of the industry.
Risks and concerns and Contingent Liabilities
Your Company acknowledges the fact that competition from both domesticand international players is increasing by every passing day. In addition to increasingcompetition the changing customer behavior and impact of online marketing initiatives havean effect on your Company's performance since your Company has a huge network of retailstores Pan India. With the opportunity for employment gradually increasing people/ talentretention is considered as a challenge. Your Company also realizes that modernization ofI.T systems along with having suitable protection from risk of loss / theft of data is oneof the major areas of concern globally. Your Company monitors its major risks and concernsat regular intervals. Appropriate steps are taken in consultation with all concernedincluding the Risk Management Committee and the Audit Committee of the Board to identifyand mitigate suck risks.
During the normal course of its business operations your Company hasbeen subjected to litigations in connection with or incidental thereto. These litigationsinclude civil cases excise and customs related cases etc. filed by and against theCompany. These cases are being pursued with due importance and in consultation with legalexperts in respective areas. Your Board believes that the outcome of these cases areunlikely to cause a materially adverse effect on the Company's profitability orbusiness performance. Your Company has a Contingent Liability of Rs. 460.54 Million as onMarch 31 2018 as compared to Rs. 576.97 Million as on March 31 2017. Attention is drawnto the explanations mentioned in Note No. 32 of the Notes to Financial Statements for thefinancial year ended March 31 2018. In view of the present status and based on legaladvice obtained from time to time your Board is of the opinion that no provision isrequired to be made against these Contingent Liabilities.
Internal control systems and their adequacy
A separate paragraph on internal control systems and their adequacy hasbeen provided elsewhere in the Board's Report.
Discussion on financial performance
Your Company has been able to achieve profitable growth and believesthat this is sustainable barring unforeseen circumstances.
The Earnings per Share (EPS) (Basic and Diluted) of your Company forthe financial year ended March 31 2018 was at Rs. 17.40. The EPS for the previousfinancial year ended March 31 2017 was Rs. 12.35 which was lower primarily due toone-time exceptional expenses. Excluding such exceptional items the EPS of your Companyfor the financial year ended March 31 2017 was Rs.14.04. Your Company recorded EBITDAmargin of 13.40% during the financial year under review as compared to 11.10% during thefinancial year 2016-17.
Your Company does not have any Bank Borrowings and the entire capitalexpenditure has been funded through internal sources.
The Capital Expenditure incurred during the year under review amountedto Rs. 930.77 Million as compared to Rs. 386.79 Million in the previous year.
Material developments in human resource / industrial relations frontincluding number of people employed
Your Company has been continuously working to improve human resourcesskills competencies and capabilities in the Company which is critical to achieve desiredresults in lines with its strategic business ambitions. Some key initiatives have beentaken during the financial year 2017-18 in this direction are summarized below:
Execution of Long Term Agreement (LTA) for settlement of dueswith the Worker's Union at the manufacturing units of the Company at Batanagar Kolkata.
Industrial relations at all the manufacturing units of yourCompany have been harmonious and peaceful with active involvement of the employees in thecollective bargaining process. Your Company has also encouraged wholehearted participationof the employees and union in improving productivity as well as quality of its products.
The Retail Training Academy of your Company imparted training to412 District Managers and Store Managers for 10 - 12 weeks duration. During the year 2091Sales Promoters were trained on product as well as customer service in our stores.
As part of continuous learning initiative your Companyimplemented online learning modules accessible on mobile as well as tabs for its storestaff. Each of the modules is supported by video content presentations as well asassessments. The completion of these modules leads to certification which is in turnmapped to the career map for different roles.
In order to retain good talent within the organization yourCompany has strengthened the goal setting and measurement process during the yearsupported with structured development plans for high potential people to move intodifferent roles. This has resulted in higher retention levels across the organization.
As on March 31 2018 there were 4698 permanent employees on the rollsof your Company.
There are certain Statements which have been made in the ManagementDiscussion and Analysis Report describing the estimates expectations or predictions maybe read as 'forward-looking statements' within the meaning of applicable laws andregulations. The actual results may differ materially from those expressed or implied. Theimportant factors that would make a difference to the Company's operations includedemand-supply conditions raw material prices changes in Government Policies GoverningLaws Tax regimes global economic developments and other factors such as litigation andlabour negotiations.
In compliance with the provisions of Regulation 34 of the ListingRegulations read with Schedule V to the said Regulations the Corporate Governance Reportof your Company for the financial year ended March 312018 and a Certificate from M/s. BSR& Co. LLP Chartered Accountants the Auditors on compliance with the provisions ofCorporate Governance requirements as prescribed under the Listing Regulations are annexedand forms part of this Annual Report.
BUSINESS RESPONSIBILITY REPORT (BRR)
In compliance with the provisions of Regulation 34(2)(f) of the ListingRegulations read with the SEBI Circular No. CiR/CFD/CMD/10/2015 dated November 4 2015your Company has prepared a BRR in the prescribed format for the financial year endedMarch 312018 describing initiatives undertaken by it from an environment social andgovernance perspective in the format as specified by the SEBI which is annexed to theBoard's Report and marked as Annexure VII. The BRR has been uploaded on the websiteof the Company at www.bata.in and is available at thelink https://bata.in/bataindia/a-29_s-181_c-42/investor-relations.html.
Your Board is grateful for the continuous patronage of the valuedcustomers of the Company and remains committed to delivering more style and comfort atevery step. Your Board acknowledges and appreciates the relentless efforts of theemployees workmen and staff including the management team headed by the ExecutiveDirectors who always lead from the front in achieving a commendable business performanceyear on year despite a challenging business environment.
Your Board is indebted for the unstinted support and trust reposed byyou the Members and also remains thankful to Bata Shoe Organization (BSO) for theirongoing support and guidance.
Your Board wishes to place on record its deep appreciation of theIndependent Directors and the Non-Executive Directors of the Company for their immensecontribution by way of strategic guidance sharing of knowledge experience and wisdomwhich helps your Company to take right decisions in achieving its business goals.
Your Board acknowledges the support and co-operation received from allregulatory authorities of the Central Government and all State Governments in India. YourBoard takes this opportunity to thank all its vendors suppliers dealers banks and otherstakeholders as it considers them essential partners in progress.
For and on behalf of the Board of Directors
UDAY KHANNA Chairman
Place : Gurugram Date : May 22 2018