Bata India Ltd Directors Report.
Your Directors are pleased to present the 86th Annual Report covering the operational and financial performance of your Company along with the Audited Financial Statements for the financial year ended March 31, 2019.
(Rs. in Million)
|Particulars||Financial Year ended on March 31, 2019||Financial Year ended on March 31, 2018|
|Revenue from operations||29,284.44||26,363.18|
|Profit / (Loss) before Taxation||4,782.65||3,400.14|
|Provision for Taxation||1,486.05||1,164.36|
|Other Comprehensive Income / (Loss) (net of tax)||1.38||(160.03)|
|Total Comprehensive Income||3,297.98||2,075.75|
Your Company has prepared the Financial Statements for the financial year ended March 31, 2019 in terms of Sections 129, 133 and Schedule II to the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. During the financial year ended March 31, 2019, your Company recorded a turnover of Rs. 29,284.44 Million as compared to the turnover of Rs. 26,363.18 Million recorded during the previous financial year ended March 31, 2018. Revenue from operations for the year ended March 31, 2019 has increased by 11% over the corresponding period last year. The Net Profit of your Company for the financial year ended March 31, 2019 stood at Rs. 3,296.60 Million as against the Net Profit of Rs. 2,235.78 Million for the financial year ended March 31, 2018. The Profit before Tax for the financial year ended March 31, 2019 reflects a growth of 41% over the corresponding Profit for the financial year ended March 31, 2018. On a consolidated basis, your Company recorded a turnover of Rs. 29,311.03 Million during the financial year ended March 31, 2019 and achieved consolidated Net Profit of Rs. 3,289.94 Million for the said financial year.
Your Company consolidated its position as the leading footwear company in India in the year under review delivering double digit sales growth and improving its profitability significantly. This has been achieved by rigorously executing our "Sweeping Angela Off her Feet" strategy through the year to help the brand emerge as more contemporary and vivacious. We made significant headway this year across its key pillars of being commercially aggressive, continuously upgrading our collections and reaching out to consumers everywhere while keeping costs in check.
This year, we significantly stepped up our marketing presence reaching out to recruit new consumers as well as strengthen our bond with our loyal consumer base. This was achieved with the use of a highly visible consumer insight based marketing campaign built around our brand ambassadors. Leveraging our excellent retail assets, traditional media channels as well new age digital media it helped us to connect with more consumers and reinforce the "Surprises" that awaited them in a Bata store. It has reflected well in our brand equity strengthening as well as footfall increase in stores. This initiative combined with new & contemporary collections in Bata Casuals, Bata Red Label, 9to9 ladies range as well as Power & North Star have helped us connect and build the brand among the youth of the country. After successfully testing the contemporary and clutter free "Red" Store design last year, we rolled out the design to over 100 stores across the country this year. These stores exude a premium feel helping us upgrade our imagery as well as our merchandise. Your company intends to further pick up speed to take this new store design to a majority of our stores in the next few years. To help us to reach out to more of India, your company also stepped up the focus on entering new towns through Franchise stores this year. We have received very enthusiastic response from current as well as new Franchise partners to open stores in new towns, helping us take Bata to more than 45 new towns in this year with many more in the pipeline. Another key pillar of reaching more consumers has been our digital push with large e-Commerce partners as well as improving the assortment and speed of our own website www.bata.in. Through Omni-Channel technology deployment we have also been able to leverage our store inventory for fulfillment as well as quick delivery!
Your companys brand popularity and consumer initiatives were recognized as we were conferred the "IMAGES Most Admired Footwear Brand of the Year 2019" at the Annual Images Fashion Awards as well as the Readers Digest Most Trusted Brand Award.
The Authorized Share Capital of your Company as on March 31, 2019 stands at Rs. 700 Million divided into 140,000,000 equity shares of Rs. 5/- each. The Issued Share Capital of your Company is Rs. 642.85 Million divided into 128,570,000 equity shares of Rs. 5/- each and the Subscribed and Paid-up Share Capital is Rs. 642.64 Million divided into 128,527,540 equity shares of Rs. 5/- each, fully paid-up.
Your Board recommends a dividend of Rs. 6.25 per Equity Share of Rs. 5/- each (i.e., 125%) for the financial year ended March 31, 2019. The dividend, if declared, by the Members at the forthcoming Annual General Meeting (AGM) shall be paid to the eligible Members of the Company from Wednesday, August 14, 2019 onwards. The total payout of aforesaid dividend amount would be approximately Rs. 968.42 Million, including the corporate dividend distribution tax, as applicable.
Dividend Distribution Policy
The recommendation of aforesaid dividend is in line with the Dividend Distribution Policy of the Company approved by your Board. The said Dividend Distribution Policy has been annexed to this Boards Report and has also been uploaded on the website of the Company at www.bata.in and is available at the link https://bata.in/0/pdf/DividendDistributionPolicy-BIL.pdf.
Investor Education and Protection Fund (IEPF)
In compliance with the provisions of Sections 124 and 125 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (IEPF Rules) as amended from time to time, the Company has deposited a sum of Rs. 12,24,176/- into the specified bank account of the IEPF, Government of India, towards unclaimed / unpaid dividend amount for the financial year ended December 31, 2010. As per the said Rules, the corresponding equity shares in respect of which Dividend remains unclaimed / unpaid for seven consecutive years or more, are required to be transferred to the Demat Account of the IEPF Authority. During the year under review, the Company has transferred 18980 underlying Equity Shares to the Demat Account of the IEPF Authority, in compliance with the aforesaid Rules.
The Company has not transferred any amount to the General Reserve during the financial year ended March 31, 2019.
MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN END OF THE FINANCIAL YEAR AND THE DATE OF THIS REPORT
Subsequent to the end of the financial year on March 31, 2019 till date, there has been no material change and / or commitment which may affect the financial position of the Company.
During the year under review, ICRA Limited (ICRA) has reaffirmed the Credit Rating of [ICRA] AA+ (pronounced as ICRA double A plus) for the Non-Fund Based Facilities of your Company. The outlook on the Long Term Rating is Stable.
Your Company has no unclaimed / unpaid matured deposit or interest due thereon since December 31, 2013. Your Company has not accepted any deposits covered under Chapter V - Acceptance of Deposits by Companies under the Companies Act, 2013 during the financial year ended March 31, 2019.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
In terms of Section 186 of the Companies Act, 2013 and Rules framed thereunder, details of the Loans given and Investments made by your Company have been disclosed in Note No. 5 of the Notes to Financial Statements for the year ended March 31, 2019, which forms part of this Annual Report. Your Company has not given any guarantee or provided any security during the year under review.
RELATED PARTY TRANSACTIONS
During the financial year ended March 31, 2019, all transactions with the Related Parties as defined under the Companies Act, 2013 read with Rules framed thereunder were in the ordinary course of business and at arms length basis. Your Company does not have a Material Subsidiary as defined under Regulation 16(1)(c) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 [Listing Regulations]. Your Board shall formulate a Policy to determine Material Subsidiary as and when considered appropriate in the future.
Your Company has formulated a Policy on Related Party Transactions and the said Policy has been uploaded on the website of the Company at www.bata.in and is available at the link https://www.bata .in/0/pdf/RelatedPartyTransactionPolicy.pdf . Also, your Company has an internal mechanism for the purpose of identification and monitoring of Related Party Transactions. During the year under review, your Company did not enter into any Related Party Transactions which require prior approval of the Members. All Related Party Transactions of your Company had prior approval of the Audit Committee and the Board of Directors, as required under the Listing Regulations. Subsequently, the Audit Committee and the Board have reviewed the Related Party Transactions on a quarterly basis. During the year under review, there has been no materially significant Related Party Transactions having potential conflict with the interest of the Company.
Since all Related Party Transactions entered into by your Company were in the ordinary course of business and also on an arms length basis, therefore details required to be provided in the prescribed Form AOC - 2 is not applicable to the Company. Necessary disclosures required under the Ind AS 24 have been made in Note No. 36 of the Notes to the Financial Statements for the year ended March 31, 2019.
The Company has three wholly owned subsidiaries viz., Bata Properties Limited, Coastal Commercial & Exim Limited and Way Finders Brands Limited.
The Annual Reports of these Subsidiaries will be made available for inspection by the Members of the Company at the Registered Office of your Company at 27B, Camac Street, 1st Floor, Kolkata - 700016, West Bengal between 11:00 a.m. and 1:00 p.m. on any working day upto the date of AGM. The Annual Reports along with the Audited Financial Statements of each of the Subsidiaries of your Company are also available on the website of the Company at www.bata.in. The Annual Reports of the aforesaid Subsidiaries for the financial year ended March 31, 2019 shall be provided to the Members of the Company upon receipt of written request from them.
Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing the salient features of Financial Statements of the aforesaid Subsidiaries has been provided in Form AOC-1 and forms part of this Annual Report. The Audited Consolidated Financial Statements (CFS) of your Company for the financial year ended March 31, 2019, prepared in compliance with the provisions of Ind AS 27 issued by the Institute of Chartered Accountants of India (ICAI) and notified by the Ministry of Corporate Affairs (MCA), Government of India also forms part of this Annual Report.
EXTRACT OF ANNUAL RETURN
The extract of Annual Return in the Form No. MGT-9 as on March 31, 2019 is annexed to this Boards Report and marked as Annexure I. The copy of same has also been uploaded on the website of the Company at www.bata.in and is available at the link https://www.bata .in/bataindia/a -29_s-181_c-42/investor-relations.html.
AUDIT AND AUDITORS Auditors
In terms of the provisions of Section 139 of the Companies Act, 2013 read with provisions of the Companies (Audit and Auditors) Rules, 2014 as amended, M/s. B S R & Co. LLP, Chartered Accountants (ICAI Firm Registration No. 101248W/W-100022) was appointed as the Auditors of the Company for a consecutive period of 5 (five) years from conclusion of the 84th AGM held in the year 2017 until conclusion of the 89th AGM of the Company scheduled to be held in the year 2022.
The Members may note that consequent to the changes made in the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014 by the Ministry of Corporate Affairs (MCA) vide notification dated May 7, 2018, the proviso to Section 139(1) of the Companies Act, 2013 read with explanation to sub-rule 7 of Rule 3 of the Companies (Audit and Auditors) Rules, 2014, the requirement of ratification of appointment of Auditors by the Members at every AGM has been done away with. Therefore, the Company is not seeking any ratification of appointment of M/s. B S R & Co. LLP, Chartered Accountants as the Auditors of the Company, by the Members at the ensuing AGM.
Your Company has received a certificate from M/s. B S R & Co. LLP, Chartered Accountants confirming their eligibility to continue as Auditors of the Company in terms of the provisions of Section 141 of the Companies Act, 2013 and the Rules framed thereunder. They have also confirmed that they hold a valid certificate issued by the Peer Review Board of the ICAI as required under the provisions of Regulation 33 of the Listing Regulations.
In terms of the provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Board at its meeting held on February 12, 2019 appointed M/s. P. Sarawagi & Associates, Company Secretaries, 27, Brabourne Road, Kolkata - 700001, as the Secretarial Auditors of the Company, to conduct the Secretarial Audit for the financial year ended March 31, 2019 and to submit Secretarial Audit Report in Form No. MR - 3.
A copy of the Secretarial Audit Report received from M/s. P. Sarawagi & Associates in the prescribed Form No. MR-3 is annexed to this Boards Report and marked as Annexure II.
Qualification, reservation or adverse remark in the Auditors Reports and Secretarial Audit Report
There is no qualification, reservation or adverse remark made by the Auditors in their Reports to the Financial Statements (both Standalone and Consolidated) or by the Secretarial Auditors in their Secretarial Audit Report for the financial year ended March 31, 2019.
SIGNIFICANT AND MATERIAL LITIGATIONS / ORDERS
During the year under review, there were no significant material orders passed by the Regulators / Courts and no litigation was outstanding as on March 31, 2019, which would impact the going concern status and future operations of your Company. The details of litigation on tax matters are disclosed in the Auditors Report and Financial Statements which forms part of this Annual Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
IncompliancewiththeprovisionsofSection134(3)(m)oftheCompaniesAct,2013readwithRule8oftheCompanies(Accounts) Rules, 2014, a statement containing information on conservation of energy, technology absorption, foreign exchange earnings and outgo of the Company, in the prescribed format, is annexed to this Boards Report and marked as Annexure III.
MANUFACTURING AND SOURCING
Your Company has an elaborate system driven compliance programme in place starting with strict and detailed pre-review for on-boarding procedure in case of a new manufacturing partner in sourcing and also for an associate manufacturer for our own factories. This includes clearance of documents and a thorough compliance audit prior to approval. All our factories have been audited by SGS and have been certified fully compliant by them. Our vendors have also been audited by various competent organizations in order to check their level of compliance. The Company has engaged "Lexplosion" for providing support and also ensuring that all statutory compliances are being done on time with facility of escalation in case the same is required. This software has been implemented end to end across the organization including all the manufacturing units of the Company. The software provides real-time data visibility and a compliance dashboard. Multiple other initiatives are in progress across Occupational Health, Safety & Environment related aspects of the Companys operations at any given point of time.
To upgrade our associates & our own factories, we have also embarked upon "Manufacturing Excellence" programme driven by CII (Confederation of Indian Industry) & ICME (Indian Centre for Research and Manufacturing Excellence) to build up their capability which comprehensively covers continuous improvement programs such as 5S, TEI, Integrated Quality &
Sustenance Management, etc. In regard to this, your Company was recognized in the category of "Supplier Development" at the 11th CII Confederation on National Competitiveness & Cluster Summit held in National Capital.
To remain competitive, your Company has also very strongly focused on innovation & has successfully launched products with anti-microbial properties & "ortholite" for our Power shoes to increase comfort & fitting experience. Your Company has been working continuously with TBU (Tomas Bata University) based out of Zlin, Czech Republic to improve properties of our rubber compound with better abrasion properties. Apart from such initiatives, your Company has also been using upcycled rubber for rubber soles for sports shoes through its association with "Austin Rubber" based out of U.S.A. which makes the product not only performance driven, but also eco-friendly.
RESEARCH AND DEVELOPMENT ACTIVITIES AND ENERGY CONSERVATION
Research and Development activities during the year under review continued to emphasize on creating a pollution-free and a safe work environment. Technological improvement in product development, material development, introduction of new footwear moulds, process improvement, etc. were the key focus areas to improve quality of footwear and productivity in manufacturing. During the year under review, an expenditure of Rs. 66.31 Million was incurred on Research and Development (including product development initiatives), as against Rs. 57.93 Million during the financial year 2017-18. Research and Development Centres at Batanagar, Bataganj & Batashatak manufacturing units across India, are approved by the Department of Science & Technology, Government of India.
The Company has adopted a series of energy conservation measures like continuously replacing conventional tubelights with energy efficient LED lights, installation of energy efficient Variable Frequency Drive (VFD) motors in conveyors etc. at its manufacturing units across India. Such energy saving measures led to a saving of energy cost worth approx. Rs. 8.03 Million during the year under review. Your Company shall continue to invest on Research and Development activities and energy saving measures in its manufacturing units in the future as well.
CORPORATE SOCIAL RESPONSIBILITY
Your Board has constituted a Corporate Social Responsibility (CSR) Committee of the Board under the Chairmanship of an Independent Director. A CSR sub-committee comprising of Senior Executives of the Company and a dedicated CSR team undertake and monitor all CSR projects of your Company. Composition of CSR Committee of your Company and other relevant details have been provided in the Corporate Governance Report which forms part of this Annual Report.
The Company works on the belief of its founding family members that Companies should exist to serve a social purpose and enhance the quality of lives of people connected through its business. The Company has a CSR Policy in place which aims to ensure that the Company continues to operate its business in an economically, socially and environmentally sustainable manner, while recognizing the interests of all its stakeholders. It takes up CSR programmes, which benefit the communities in and around the vicinity of its operational presence resulting in enhancing the quality of lives of the people in these areas. The said CSR Policy has been uploaded on the website of the Company at www.bata.in and is available at the link https://bata.in/0/pdf/CorporateSocialResponsibilityPolicy.pdf.
Your Company has spent an amount of Rs. 64.24 Million during the financial year 2018-19 as against its 2% obligation amounting to Rs. 58.07 Million, thereby exceeding its entire CSR obligation. Your Company made significant strides to harness all its resources towards successful execution of the CSR projects across all locations.
Model Schools under Bata Childrens Programme (BCP)
Your Company worked with more than 3,000 school children at 6 schools adopted under Bata Childrens Programme (BCP) near to the factories and corporate office. BCP is a global programme which aims to work for the children from underprivileged background and is operational in 30 countries wherever Bata is operational. The focus has been to undertake various initiatives at schools to convert them into Model Schools. A holistic programme across these schools is being implemented focusing on infrastructure upgradation, STEM programme by setting up science and computer labs, life skills programme, improving overall health of the children through regular health checkup camps and awareness sessions, sports activities, etc. Especially designed programme on female adolescent healthcare, health & sanitation, life skills, sports and sessions on female centered issues have been given a priority for the girl child population at the schools. Separate sessions have been held with the parents to encourage the education of girl child and various other issues relevant to the overall development of their children. Through our concentrated initiatives and extra-curricular activities, there has been an overall development of children through a period of time. Children have become more regular to school. There has been an increase of 12.50% attendance of children in Computer Classes. At one school, after Batas support, the number of children at the school increased from 90 to 214, dropout rate reduced from 38% to 2%, teachers were able to use child friendly teaching learning pedagogy which leads to better learning environment. With implementation of better teaching methodology, nutritious meals and better facilities, the academic performance amongst the children also improved. Through our library programme, 74% of the students drastically improved in their reading skills and 67% of the students in their writing skills. As a result of the Science Centres established at the schools along with science workshops, children have improved their ability to understand scientific concepts and its application; they have become more aware and curious to understand alternative methods of learning. There was also a noticeable improvement in the knowledge and awareness levels of the children on the issues of well-being, hygiene, sanitation, substance abuse, etc.
Girl Child Empowerment through Project Nanhi Kali
In association with K. C. Mahindra Education Trust, your Company supported education of 92 underprivileged girls under project Nanhi Kali. These girls go to Nanhi Kali academic support centres after school hours, where trained tutors engage the girls in concept based learning, focusing on Mathematics and English. Regular assessments and evaluation of these girls learning level is an integral part of the project along with efficient tracking of attendance. A school kit is provided to every girl annually, thereby allowing her to attend school with dignity. This kit consists of personal clothing, notebooks, stationery, a school bag, shoes, socks, a raincoat/pullover and feminine hygiene material. The Nanhi Kali team works extensively with parents and communities to sensitize them to become collective guardians of the girls.
Happy Steps Programme
As part of Preventive Healthcare, under the Happy Steps Programme of your Company, we engaged with 11956 school children across Chennai, Bangalore and Hyderabad to conduct foot care awareness workshops. Through activities, presentations and demonstrations, children were made aware on the importance of a healthy feet as the foundation of our body, on how to take care of the feet in our daily lives, foot hygiene, foot exercises, dealing with sports injuries, various foot diseases and ways to prevent them, dealing with diabetic feet, etc. A customized Bata school kit comprising of school socks, polish, laces, brush along with instructions to keep the feet healthy and clean were also distributed amongst the children during the workshops.
Stride with Pride
A consumer engagement programme named Stride with Pride, was also introduced, wherein customers were encouraged to donate their pair of old footwear across Bata stores at selected cities. For every pair of old footwear received, Bata donated a new pair to a needy child. In order to reduce inequalities faced by socially & economically backward groups, your Company donated about 85,000 pairs of footwear to the underprivileged children.
Disaster Relief & Rehabilitation
During Kerala floods, your Company, as part of the disaster relief and rehabilitation initiative, contributed to help the people in need of the hour. Rapid response teams of employees at respective regions were formed who travelled to relief camps, distributed basic essentials and footwear. Around 8,400 pairs of footwear were donated to the affected people in Kerala and at Coorg in Karnataka. Employees of your Company came forward to donate their one days basic salary. Your Company matched the employees donation and contributed around Rs. 1. 40 Million to Kerala Chief Ministers Distress Relief Fund. In association with partners, your Company held medical camps in the affected regions to provide immediate and basic health services to the affected population and also focused on the prevention of epidemics in the region. With support from Global BCP Foundation, your Company is renovating 4 schools which got affected during Kerala floods.
In our endeavor to deliver the best outcomes, we partnered with specialist organizations who are experts in their field.
|SHARP (School Health Annual Report Programme)||Preventive Healthcare||BCC (Behaviour Change Communication) workshops for school children.|
|NIIT Foundation||Computer education||Hole in the Wall computer project in schools, Computer labs|
|Ingenuity EduLabs LLP||Creative science workshops||Hands on science workshops with school children|
|Agastya International Foundation||Science Education||Science Centres in schools|
|Katha||Library education||Enhancing reading writing skills|
|K. C. Mahindra Education Trust||Education of girl child||Learning centres after school hours|
|Sugam NGO||School for underprivileged children||Non-formal school for underprivileged children|
|SEEDS (Sustainable Environment and Ecological Development Society)||Disaster Management||Kerala flood school renovation|
|Sulabh Sanitation Mission Foundation and Delhi Metro Rail Corporation (DMRC)||Sanitation||Public Toilets at metro rail stations|
|Sambhav Foundation||Vocational skills||Training partner for retail sales|
|Centum Foundation||Vocational skills||Training partner for retail sales|
Pursuant to the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended, the Annual Report on CSR Activities has been annexed to this Boards Report and marked as Annexure IV.
SUPPORT FROM BATA SHOE ORGANIZATION
Your Company continues to receive support from the Holding Company - Bata (BN) B.V., Amsterdam, The Netherlands and also from Bata Shoe Organization (BSO). Your Company also enjoys the benefits of technical research through Global Footwear Services Pte. Ltd., Singapore (GFS). Your Company has renewed the Technical Collaboration Agreement with GFS with effect from January 1, 2011 for a period of ten years. In terms of the said Technical Collaboration Agreement, your Company receives guidance, training of personnel and services from GFS in connection with research & development, marketing, brand development, footwear technology, testing & quality control, store location, layout & design, environment, health & safety, risk & insurance management, etc. Your Company continues to obtain expertise and experience from the personnel of GFS and other BSO group Companies to improve its product range and operational processes throughout the year. In terms of the renewed Agreement as aforesaid, your Company has paid technical services fee of Rs. 283.96 Million to GFS during the financial year ended March 31, 2019, which is around 1% of the Turnover of your Company.
BOARD OF DIRECTORS, BOARD MEETINGS AND KEY MANAGERIAL PERSONNEL
Your Companys Board is duly constituted and in compliance with the requirements of the Companies Act, 2013, the Listing Regulations and provisions of the Articles of Association of the Company. Your Board has been constituted with requisite diversity, wisdom, expertise and experience commensurate to the scale of operations of your Company.
During the year under review, a total of four Meetings of the Board of Directors of the Company were held, i.e., on May 22, 2018; July 20, 2018; November 2, 2018 and February 12, 2019. Also, the Board of Directors have passed 2 (two) Resolutions by Circulation dated December 12, 2018 and March 31, 2019. Details of Board composition and Board Meetings held during the financial year 2018-19 have been provided in the Corporate Governance Report which forms part of this Annual Report.
At the 85th AGM with the approval of the Members, Mr. Sandeep Kataria (DIN: 05183714) was appointed as the Whole-time Director and Chief Executive Officer of the Company for a period of five consecutive years with effect from November 14, 2017. In terms of Section 152(6) of the Companies Act, 2013 read with the Articles of Association of the Company, the period of office of Mr. Kataria shall be liable to retire by rotation. During the year under review, Mr. Christopher MacDonald Kirk (DIN: 07425236), Non-Executive Director, who retired at the 85th AGM, was re-appointed as a Director of the Company. Subsequently, consequent upon his resignation from the Board of Compass Limited, Bata Shoe Organisation (BSO), Mr. Kirk had tendered his resignation as a Director of Bata India Limited (the Company) with effect from January 31, 2019. The Board expressed its deepest appreciation for the valuable contribution made by Mr. Kirk during his tenure as a Director of the Company and noted his significant contribution towards the success of the organization.
Based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company through Resolution by Circulation dated December 12, 2018 has approved the appointment of Mr. Ashok Kumar Barat (DIN: 00492930) as an Additional Director of the Company with effect from December 17, 2018 to hold office as an Independent Director of the Company for a term of 5 (five) consecutive years, subject to approval of the Members of the Company at the ensuing AGM. Based on the recommendation of Nomination and Remuneration Committee, the Board of Directors of the Company at its Meeting held on February 12, 2019 has appointed Mr. Alberto Michele Maria Toni (DIN: 08358691) as an Additional Director (Category-Non-Executive Director) of the Company with effect from February 12, 2019 to hold office up to the date of the ensuing AGM. The Company has received Notice under Section 160 of the Companies Act, 2013 from the Member(s) of the Company signifying the candidature of Mr. Barat and Mr. Toni for their appointment as Director(s) of the Company at the ensuing AGM. A brief profile along with necessary disclosures of Mr. Barat and Mr. Toni has been annexed to the Notice convening the ensuing AGM. Your Board recommends appointment of Mr. Barat as a Director and also as an Independent Director of the Company for a term of 5 (five) consecutive years commencing from December 17, 2018. Your Board also recommends appointment of Mr. Toni as a Director (Category-Non-Executive Director), liable to retire by rotation. Mr. Ram Kumar Gupta (DIN: 01125065), Director Finance and Chief Financial Officer of the Company is due to retire by rotation at the ensuing AGM and being eligible, offers himself for re-appointment. Your Board recommends re-appointment of Mr. Gupta as a Director of the Company, liable to retire by rotation. Mr. Akshay Chudasama (DIN:00010630) and Ms. Anjali Bansal (DIN:00207746) were appointed as Independent Directors of the Company at an Extraordinary General Meeting of the Company held on August 4, 2014, for a term of five (5) consecutive years each. Based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors have proposed their re-appointment for a second term of five (5) consecutive years at the ensuing AGM for the approval of the Members by way of special resolution(s). Resolutions requiring re-appointment(s) have been annexed to the Notice convening the ensuing AGM. Mr. Uday Khanna (DIN: 00079129), Chairman and Independent Director, after 13 years as a Director including the last 8 years as the Chairman has decided not to offer himself for re-appointment and will relinquish his position on the Board with effect from August 4, 2019. This is in consonance with the Companys internal convention of Bata India Chairman retiring at the age of 70, which he will reach by year end. The Board places on record its deep sense of gratitude and sincere appreciation for the immense contribution made by Mr. Khanna towards the growth and development of your Company. Mr. Uday Khanna (DIN: 00079129), Mr. Ravindra Dhariwal (DIN: 00003922), Mr. Akshay Chudasama (DIN:00010630), Ms. Anjali Bansal (DIN:00207746) and Mr. Ashok Kumar Barat (DIN: 00492930), Independent Directors of your Company have declared to the Board of Directors that they meet the criteria of Independence as laid down in Section 149(6) of the Companies Act, 2013 read with Regulations 16(1)(b) and 25(8) of the Listing Regulations and there is no change in their status of Independence and have also confirmed that they are not aware of any circumstance or situation which exists or may be reasonably anticipated that could impair or impact their ability to discharge their duties. Mr. Rajeev Gopalakrishnan (DIN: 03438046), Managing Director, Mr. Sandeep Kataria (DIN: 05183714), Whole-time Director and Chief Executive Officer, Mr. Ram Kumar Gupta (DIN: 01125065), Director Finance and Chief Financial Officer and Mr. Arunito Ganguly, Assistant Vice President, Company Secretary & Compliance Officer are the Key Managerial Personnel (KMP) of your Company. The Board of Directors confirms that the Independent Directors have affirmed compliance with the Code for Independent Directors as prescribed in Schedule IV to the Companies Act, 2013 and also with the Companys Code of Conduct applicable to all the Board Members and Senior Management Personnel of the Company for the financial year ended March 31, 2019. Necessary Resolution(s) alongwith disclosure(s) / information(s) in respect of the directors seeking appointment / re-appointment at the ensuing AGM has been annexed to the Notice convening the ensuing AGM.
The Board of Directors of your Company has duly constituted an Audit Committee in compliance with the provisions of Section 177 of the Companies Act, 2013, the Rules framed thereunder read with Regulation 18 of the Listing Regulations. The terms of reference of the Audit Committee has been duly approved by the Board of Directors. The recommendations made by the Audit Committee are accepted by your Board.
The Audit Committee consists of five Independent Directors and two Non-Executive Directors. The Audit Committee met four times during the financial year ended March 31, 2019, i.e., on May 22, 2018; July 20, 2018; November 2, 2018 and February 12, 2019. Mr. Ashok Kumar Barat, Independent Director is the Chairman of the Audit Committee.
Name of committee members, number of meetings held during the year under review, power of audit committee, terms of reference and other requisite details have been provided in the Corporate Governance Report which forms part of this Annual Report.
NOMINATION AND REMUNERATION POLICY
Your Board has adopted a Remuneration Policy for identification, selection and appointment of Directors, Key Managerial Personnel (KMPs) and Senior Management Personnel (SMPs) of your Company. The Policy provides criteria for fixing remuneration of the Directors, KMPs, SMPs as well as other employees of the Company. The Policy enumerates the powers, roles and responsibilities of the Nomination and Remuneration Committee.
Your Board, on the recommendations of the Nomination and Remuneration Committee, appoints Director(s) of the Company based on his / her eligibility, experience and qualifications and such appointment is approved by the Members of the Company at General Meetings. Generally, the Managing Director and Whole-time Directors (Executive Directors) are appointed for a period of five years. Independent Directors of the Company are appointed to hold their office for a term of upto five consecutive years on the Board of your Company. Based on their eligibility for re-appointment, the outcome of their performance evaluation and the recommendation by the Nomination and Remuneration Committee, the Independent Directors may be re-appointed by the Board for another term of five consecutive years, subject to approval of the Members of the Company. The Directors, KMPs and SMPs shall retire as per the applicable provisions of the Companies Act, 2013 and the policy of the Company. While determining remuneration of the Directors, KMPs, SMPs and other employees, the Nomination and Remuneration Committee ensures that the level and composition of remuneration are reasonable and sufficient to attract, retain and motivate them and ensure the quality required to run the Company successfully. The relationship of remuneration to performance is clear and meets appropriate performance benchmarks and such remuneration comprises a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the Company and its goals. The Company follows a compensation mix of fixed pay, benefits, allowances, perquisites, performance linked incentives and retirement benefits for its Executive Directors, KMPs, SMPs and other employees. Performance Linked Incentive is determined by overall business performance of your Company. Annual increments are decided by the Nomination and Remuneration Committee within the salary scale approved by the Board of Directors and Members of the Company. The Company pays remuneration to Independent Directors by way of sitting fees and commission on the net profits of the Company. Non-Executive Non-Independent Directors of your Company do not accept any sitting fees / commission. Remuneration to Directors is paid within the limits as prescribed under the Companies Act, 2013 and the limits as approved by the Members of the Company, from time to time. During the year under review, there was no change in the Nomination and Remuneration Policy of the Company and the said Policy has been uploaded on the website of the Company at www.bata.in and is available at the link https://bata.in/0/pdf/Remuneration-Policy_2015.pdf. Your Company conducts a Board Evaluation process for the Board of Directors as a whole, Board Committees and also for the Directors individually through self-assessment and peer assessment. The details of Board Evaluation process for the financial year 2018-19 have been provided in the Corporate Governance Report which forms part of this Annual Report.
DISCLOSURES ON REMUNERATION OF DIRECTORS AND EMPLOYEES OF THE COMPANY
Information as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and subsequent amendments thereto, is annexed to this Boards Report and marked as Annexure V.
A statement containing the information of top ten employees in terms of remuneration drawn and particulars of every employee of the Company, who was in receipt of remuneration not less than the limits specified under Section 197(12) of the Companies Act, 2013 read with Rules 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and subsequent amendments thereto, is annexed to this Boards Report and marked as Annexure VI.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to provisions of Section 134 of the Companies Act, 2013, the Directors, to the best of their knowledge and belief, hereby confirm that: (a) in the preparation of the annual accounts, the applicable accounting standards had been followed; (b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2019 and of the profit of the Company for that period; (c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets 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 and that such internal financial controls are adequate and are operating effectively; and (f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
In terms of provisions of Section 177 of the Companies Act, 2013 and Rules framed thereunder read with Regulation 22 of the Listing Regulations, your Company has a vigil mechanism in place for the Directors and Employees of the Company through which genuine concerns regarding various issues relating to inappropriate functioning of the organization can be communicated. A Vigil Mechanism Committee under the Chairmanship of the Audit Committee Chairman is also in place. Your Board has amended the existing policy and adopted the revised Whistle Blower Policy, effective from April 1, 2019 which has been uploaded on the website of the Company at www.bata.in and is available at the link https://bata.in/0/pdf/Bata-WhistleBlowerPolicy.pdf. The Policy provides access to the Legal Head of the Company and to the Chairman of the Audit Committee. No person has been denied an opportunity to have access to the Vigil Mechanism Committee and the Audit Committee Chairman.
CONFIRMATION OF COMPLIANCE ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
Your Company is committed to provide a safe and secure environment to its women employees across its functions and other women stakeholders, as they are considered as integral and important part of the organization.
In terms of provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules framed thereunder, your Company has duly adopted a Policy and has also complied with the provisions relating to the constitution of Internal Complaints Committee (ICC).
Your Company has been conducting awareness campaign across all its manufacturing units, warehouses, retail stores and office premises to encourage its employees to be more responsible and alert while discharging their duties.
A summary of the complaints dealt during the financial year ended March 31, 2019 in terms of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules framed thereunder has been provided in page no. 91 of the Corporate Governance Report which forms part of this Annual Report.
RISK MANAGEMENT AND ADEQUACY OF INTERNAL FINANCIAL CONTROLS
Your Companys internal financial control ensures that all assets of the Company are properly safeguarded and protected, proper prevention and detection of frauds and errors and all transactions are authorized, recorded and reported appropriately. Your Company operates through definitive Chart of Authorities (COAs) and Standard Operating Procedures (SOPs) in respect of its operations including financial transactions. Such COAs and SOPs are regularly monitored and if required, modified from time to time depending on business requirements.
Your Company has an adequate system of internal financial controls commensurate with its size and scale of operations, procedures and policies, ensuring orderly and efficient conduct of its business, including adherence to the Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information.
Such practice provides reasonable assurance that transactions are recorded as necessary to permit preparation of Financial Statements in accordance with the applicable legislations and that the same are well within the COAs and SOPs, without exception. Your Company also monitors through its Internal Audit Team the requirements of processes in order to prevent or timely detect unauthorized acquisition, use or disposition of the Companys Assets which could have a material effect on the Financial Statements of the Company. The Internal Audit function is responsible to assist the Audit Committee and Risk Management Committee on an independent basis with a complete review of the risk assessments and associated management action plans. Risk Management is embedded in the Companys operating framework. Your Company believes that risk resilience is key to achieving higher growth. To this effect, there is a robust process in place to identify key risks across the Company and prioritize relevant action plans to mitigate these risks. Risk Management framework is reviewed periodically by the Board, the Audit Committee and the Risk Management Committee, which includes discussing the management submissions on risks, prioritising key risks and approving action plans to mitigate such risks. An assessment of cyber security has also been carried out in compliance with the requirement of the Listing Regulations and a mitigation plan has been made to counter such risks. The Internal Audit Report and Risk Inventory Report are reviewed periodically by the Audit Committee of the Board of Directors. The Chief Internal Auditor is a permanent invitee to the Audit Committee Meetings. The Audit Committee advises on various risk mitigation exercises on a regular basis. Your Company has been maintaining a separate Internal Audit Team headed by the Chief Internal Auditor appointed by the Audit Committee of your Board.
Your Board has also constituted a Risk Management Committee comprising of the Directors and Senior Executives of the Company under the Chairmanship of the Managing Director of the Company. The terms of reference of the Risk Management Committee and a Risk Management Policy of the Company have also been approved and adopted.
Your Board is of the opinion that the Internal Financial Controls, affecting the Financial Statements of your Company are adequate and are operating effectively.
COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS
During the year under review, the Company has duly complied with the applicable 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).
NON-APPLICABILITY OF MAINTENANCE OF COST RECORDS
The Central Government has not prescribed the maintenance of cost records under Section 148(1) of the Companies Act, 2013 and Rules framed thereunder with respect to the Companys nature of business.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT Industry structure and developments
Indias resource strengths in the form of materials and skilled manpower is a comparative advantage for the country. The increasing use and variety of footwear is leading to an upsurge in demand indicating higher growth prospects for the footwear industry. While Tier I cities have always been brand centric, Tier II and Tier III cities are catching up and therefore sales of branded products are expected to grow significantly in the future.
The Indian footwear market is expected to grow at a double digit and by the year 2022, total market is expected to be around Rs. 72,000 crores with a CAGR of 11%. The Branded footwear is expected to garner substantial market share and this will be supported by the growth in both organized and online retail sale simultaneously. Branded footwear currently accounts for around 45% and unbranded dominates with 55% market share respectively. In case of online retail, Brands are also launching dedicated product range for online channel to differentiate from offline channel and are using data analytics to grow the business. The online sale of footwear is expected to grow in high double digits. The growing population and the continuous demand has made India the second largest producer of footwear in the world after China and also the worlds third-largest footwear consumer after China and the USA. It is estimated that more than 80% of the produced goods are consumed within the domestic market. The market has also witnessed expansion of existing international brands in the country and the entry of premium formal and sportswear brands. The change in lifestyle, preferences, growing health and fitness awareness amongst urban Indians has also led to a boost in the fitness footwear industry in India. As a result, products like apparel, accessories and variety of fitness equipment now tops priority in shopping lists of consumers around the country primarily including comfortable branded fitness footwear. The Indian fitness footwear segment is witnessing a steady boom and is expected to grow with rapid pace during 2019 - 21. The Indian footwear industry has been witnessing a change from a need-based industry to fashion, style and fitness oriented industry and it has also got the potential to increase its global market share in footwear export. With changing lifestyles and increasing affluence, domestic demand for footwear is projected to grow at a faster rate than it has been seen during the last 10 years.
Opportunities and Threats
Changes in the external business environment along with growing competition from domestic and foreign players in the industry has posed challenges for sustained future growth. To maintain such growth, your Company is taking necessary steps such as focusing on stylish, comfortable and durable quality products so as to be ahead of competition. Sports and Kids categories are one of the fastest growing among all categories therefore attracting traction from all footwear brands. Your Company is set to take leverage of our strong brands "Power" and "Bubblegummers" including testing of exclusive concept stores. Another opportunity is the upgradation of consumers from unorganized and low priced footwear to branded and lifestyle products thereby enhancing their experience. Your Company is uniquely placed to take advantage of this trend with its aspirational brand image, wide range of recognized brands and unparalled retail footprint.
With the infusion of new lines in mens and womens contemporary collection along with exciting and colorful range for teenage consumers and a range of offerings for the sports & fitness lovers the footfalls at stores are increasing. A range of products in the casual and lifestyle offering especially for working women are expected to create a sustained demand for the future.
The brick and mortar retail industry is also expected to witness intense competition from the innovative digital platforms. Your Company has increased its focus on consumer facing technology and rolled out a full suite of Omni-Channel solutions in 400+ stores as well as upgraded our online experience.
Segment wise or product wise performance
Your Company operates in Footwear & Accessories Segment only and performances of major business categories and key brands of your Company during the financial year ended March 31, 2019 are highlighted below:
Your Company has followed a strategy of driving same store growth while adding new retail stores in Malls and High Street locations to enhance its Retail footprint. These spacious new stores are located in the growing markets of the country and are based on the global design Red Angela Store Concept. These stores are the new face of Bata in India & the first touchpoint for consumers to experience "Surprisingly Bata". It has simple clean lines of design thinking and uses essentially 2 colours, red & white that are uniquely identified with brand Bata. Your Company shall continue to make investment on renovating existing stores hence creating a delightful shopping experience for the customers by improving store layouts and creating an emphasis on key products within the retail stores. Your Company plans to focus on building the Bata Brand and attract more footfalls in the retail stores through breathtaking windows, in-stores activities and amplify various new launches of products and collections. Your Company is also focused on improving customer service at stores through regular training of store staff. Your Company has initiated a "Store Excellence Program" which aims to improve customer journey inside the stores & improve business parameters while delivering excellent customer service. During the financial year ended March 31, 2019, your Company opened 71 new Bata retail stores, 51 Franchisee stores & renovated 47 stores across India. Your Company also relocated 14 stores and closed 28 stores. Your Company is strengthening various brands under the umbrella of Bata like Power & Bubblegummers & have continued testing these formats in couple of more locations. Now your Company operates 3 Power & Bubblegummers stores. A new concept of Bata Woman also has been tested with 2 stores in Bengaluru. These new concept stores would open new consumer segments for us in times to come.
Digital Multi-Channel Business
Your Companys online business has recorded a significant growth during the year under review. Your Company sold more than 1.5 million pairs of footwear through online channels and achieved a turnover of over Rs.1,200 Million. Your Companys e-commerce presence has penetrated in 1000+ cities and towns across India.
During the fiscal year, your Companys e-commerce division worked on identifying market opportunities for business growth in the existing online business models including B2B and B2C. Your Company has strengthened its e-commerce team for creating an edge in online marketing. From online customer segmentation, purchase behaviour analysis to direct and indirect competition analysis, the business maximized its reach to potential online buyers in footwear and accessories category. Cross-channel promotions and performance-driven e-commerce marketing campaigns got the overall websites www.bata .in business off the ground with an increase in traffic from 4.50 Million to 9 Million. Your Company strengthened its online customer database more than doubling it by reaching out to the leading telecom, airline and banking players in association with affiliate partners. Your Companys website launched Endless Aisle while connecting retail store inventory to online website with technical integration multiplying the business potential. Your Companys B2B business has grown across all partner portals - Amazon, Flipkart, Myntra and Jabong - with a steep increase in secondary sales through competitive product offerings, rigorous marketing campaigns including Cost per Click (CPC) and Cost per Million Impressions (CPM) while diligently participating in brand specific and category specific events. Various market expansion strategies were put in place like expansion of brand presence through marketplace model by listing products on high-traffic generating websites including TataCliq, ShopClues, Limeroad etc. Your Companys e-commerce website www.bata.in implemented CDN services to improve overall load time of the website which reduced from 15 sec to 7 sec per new session.
Hush Puppies entered Indian market 20 years ago & initially positioned as "Premium Mens Dress Footwear Brand". Last year also, as a team we have worked on the products, marketing, stores & overall customer experience to re-position it as "International Premium Lifestyle Brand", which is in synchronisation with current global brand positioning. Today, Hush Puppies is the biggest brand in Premium Footwear space with increasing market share on year to year basis. The Brand has traversed from being Men Dress brand to becoming a Lifestyle Casual footwear brand in last couple of years. The product mix varies from Dress to casual, from closed to open footwear in both Men & Ladies with a strong presence in Hand Bags / Socks / Accessories. It has now shoes for literally all occasions in a life of an urban consumer. Hush Puppies believe in vision of "treating the world to their favorite shoe". With increasing per capita footwear consumption & a wide variety of national & international brands operating, Indian market has become really exciting turf to play on. Hush Puppies would like to maintain its leadership position in market as well as in the heart of Indian consumers. Currently, the main focus is on urban Indians residing in Metro & Tier I and Tier II cities through Hush Puppies concept stores & through a wide Bata Network that goes up-to Tier III cities as well. Fast growing online (e-commerce) is helping us virtually reaching every corner of India & helping aspiring consumers to own a pair of Hush Puppies. This Brand is already having 90+ Company owned & managed Exclusive Brand Outlets which would cross 100 mark by the end of 2019. Hush Puppies is an aspirational brand for urban India & we will continue to attract consumers through exceptional products, beautiful stores which are in-line with Global store concepts & best in-class customer service.
In order to cater to the childrens ever changing footwear demand, your Company has been introducing many new designs and innovative footwear. Through Bubblegummers brand of footwear, your Company has always been striving to make quality shoes with uncompromising comfort and features that safeguard their little feet. Bubblegummers is retailed through all Bata stores across the Country and has been the first point of contact to start our consumers journey to establish long term association with Bata. With 18% of the Countrys population below the age of 10 years, the potential to grow in the children category of footwear is huge, which makes this category as one of the key focus areas for your Company.
Your Company has further established an association with The Walt Disney Company India Pvt. Ltd. and working with a set of designers from Disney, to create a complete collection covering all types of footwear ranging from casual shoes, canvas shoes and Ballerinas to everyday-wear sandals and chappals. Your Company has created exclusive Disney Corners in some of its key retail stores across major cities in India to highlight the collection and add value to the children category of footwear range.
Your Companys non-retail business division comprises of urban wholesale, industrial and institutional business divisions and exports. Across all the divisions, actions are taken to improve customer service, enhancing quality of Product / Packaging and Upgrading the capability of Employees.
Innovation: There are lots of legendary products with Bata which has huge consumer base built over many decades. Efforts are being made to ensure that they are available in their nearest footwear store. We have also launched some brands like Way Finder to make the brand more casual, young and aspirational.
Introduction of New Practices / Products: We have launched / upgraded about 400 articles this year which are best in class in terms of Comfort and target youth and ladies. We have also initiated changes in the way we manage our Supply chain. The Demand planning and forecasting process has been re-hauled which is helping in better customer service to our wholesalers as well as Industrial/Institutional Customer.
Expansion: The Expansion in MBOs (Multibrand Outlets) as well as in Industrial and Institutional Customer base concept has been activated which have yielded good results in last few months. During the year, Bata Product availability has got enhanced in 100 new towns across the country
. Technology Upgradation: We have initiated technological upgradation in our billing and MIS system. This has helped us taking faster decision based on right information at almost on real time basis.
Customer Care Initiatives
Customer Service and Experience has been a big focus area of the Company. There is a dedicated customer service team to ensure that customers dont face any inconvenience and their concerns are addressed in a timely and amicable way. A toll free customer support number is in place so that customers can reach out directly to the Company as well as via other channels like e-mail, facebook, twitter, etc. The Company ensures that all customer concerns are resolved within minimum timelines. The Company has also been collecting customers feedback on their shopping experience and measuring it as per the global standard tool NPS since January 2018. The Company has started an initiative to close loop Detractors (customers who give negative feedback) by calling them and addressing / resolving their queries.
The Companys loyalty programme "Bata Club" has increased over the years and currently it has over 25 Million members. The programme engages with its members continuously and rewards them with special benefits to drive repeat purchase, conversion and footfalls. The Company has also started doing various innovative technology-driven promotions to leverage big festivals and events and further increase engagement from its member base.
Your Company has an established leadership position in the industry and the most trusted name in branded footwear and accessories. With the change in customer preferences, shoes have become a style statement especially among the teenagers, youth and the affluent working class. The domestic demand for footwear is projected to grow at a fast pace. The inclination towards purchase of products manufactured by established brands is increasing. The digital platform, presence in social media, blogs and advertisements are fast catching up with the brick and mortar sales model. Your Company is proactively engaged in taking appropriate steps to tap these opportunities in order to improve its market share and retain its leadership position in the organized footwear and accessories sector of the industry.
Risks and Concerns and Contingent Liabilities
Your Company acknowledges the fact that competition from both domestic and international players is increasing by every passing day. In addition to increasing competition, the changing customers behaviour and impact of online marketing initiatives have an effect on your Companys performance since your Company has a huge network of retail stores Pan India. With the opportunity for employment, gradually increasing people / talent retention is considered as a challenge. Your Company also realizes that modernization of I.T. systems along with having suitable protection from risk of loss / theft of data is one of the major areas of concern globally. Your Company monitors its major risks and concerns at regular intervals. Appropriate steps are taken in consultation with all concerned including the Risk Management Committee and the Audit Committee of the Board to identify and mitigate such risks.
During the normal course of its business operations, your Company has been subjected to litigations in connection with or incidental thereto. These litigations include civil cases, excise and customs related cases, etc. filed by and against the Company. These cases are being pursued with due importance and in consultation with legal experts in respective areas. Your Board believes that the outcome of these cases are unlikely to cause a materially adverse effect on the Companys profitability or business performance. Your Company has a Contingent Liability of Rs. 435.89 Million as on March 31, 2019 as compared to Rs. 460.54 Million as on March 31, 2018. Attention is drawn to the explanations mentioned in Note No. 31 of the Notes to Financial Statements for the financial year ended March 31, 2019. In view of the present status and based on legal advice obtained from time to time, your Board is of the opinion that no provision is required to be made against these Contingent Liabilities.
Internal control systems and their adequacy
A separate paragraph on internal control systems and their adequacy has been provided elsewhere in the Boards Report.
Discussion on financial performance
Your Company has been able to achieve profitable growth and believes that this is sustainable, barring unforeseen circumstances.
The Earnings per Share (EPS-Basic and Diluted) of your Company for the financial year ended March 31, 2019 was at Rs. 25.65 as compared to the (EPS-Basic and Diluted) for the previous financial year ended March 31, 2018 was at Rs. 17.40. Your Company recorded EBITDA margin of 16.30% during the financial year under review as compared to 13.40% during the financial year 2017-18. Your Company does not have any Bank Borrowings and the entire capital expenditure has been funded through internal sources.
The Capital Expenditure incurred during the year under review amounted to Rs. 911.96 Million as compared to Rs. 930.77 Million in the previous year.
Details of significant changes in key financial ratios alongwith explanation
In compliance with the requirement of the Listing Regulations, the key financial ratios of the Company alongwith explanation for significant changes (i.e., for change of 25% or more as compared to the immediately previous financial year will be termed as significant changes), has been provided hereunder:
|(i)||Debtors to Sales (in days)||8||12|
|(ii)||Inventory to Turnover Ratio (in months)||3.44||3.47|
|(iii)||Interest Coverage Ratio||116.53||69.89|
|(v)||Debt Equity Ratio*||-||-|
|(vi)||Operating Profit Margin (%)||14.11||11.13|
|(vii)||Net Profit Margin (%)||11.26||8.48|
|(viii)||Return on Net worth (%)||18.88||15.12|
# The Government of India has implemented Goods and Services Tax (GST) from July 2017 subsuming excise duty, service tax and various other indirect taxes. Accordingly, the Revenue for the financial year ended March 31, 2019 as reported in the Statement of Profit and Loss are not comparable with the previous financial year. Therefore, the Ratio relating to Turnover are not comparable with the previous financial year.
* There is no borrowing in the Company. However, Finance cost includes interest expenses accounted for various deposits in accordance with Ind AS 109, Financial Instruments.
The significant changes in Debtor Turnover Ratio has been recorded on account of increase in turnover and reduction in receivables which resulted into reduction of outstanding receivable days.
The significant changes in Interest Coverage Ratio has been recorded due to significant increase in Earnings Before Interest and Taxes (EBIT) with reduction in finance cost of the Company. The significant changes in Operating Profit Margin (%), Net Profit Margin (%) and the Net worth Ratio (%) is due to cost efficiencies/productivity improvement and premiumisation of our product range leading to increased profits. The other financial ratios of the Company relating to previous 10 years has been provided in other part of Annual Report 2018 -19.
Material developments in human resource / industrial relations front, including number of people employed
Your Company has been continuously working to improve human resources skills, competencies and capabilities in the Company, which is critical to achieve desired results in line with our strategic business ambitions. Some key initiatives that have been taken during the financial year 2018-19 in this direction are summarized below:
Execution of Long Term Agreement (LTA) for settlement of dues with the Workers Union at the manufacturing unit of the Company at Bataganj, Patna.
Industrial relations at all the manufacturing units of your Company have been harmonious and peaceful with active involvement of the employees in the collective bargaining process. Your Company has also encouraged wholehearted participation of the employees and union in improving productivity as well as quality of its products.
The goal setting process was cascaded from the Top aligned with Countrys strategies and goals for the year. With a co-ownership of goals at the Department Head level, a complete alignment in the organization was possible. A quarterly review of scorecard helped to further strengthen the process.
Multiple set of training programmes have been designed and rolled out in phases focusing on functional and behavioral needs of an individual. Some of these include Leadership & Coaching for Leaders who manage Managers, Personal Effectiveness for all individual contributor roles, first time Leaders, Negotiation skills and B2B sales process and capability. Cross functional training is another key area of focus.
Keeping up with the philosophy of "Learning is individual driven and organization facilitated", we are now building a catalogue of online training modules which an individual can access on their own anytime.
For our store staffs, an online learning platform was launched in 2018, this now is available to over 4000 employees across 800 stores. On this 24/7 learning platform, the employees complete their Product training & certification as well as gain useful knowledge on new launches and campaigns.
Stepping Stones is our new career programme being launched which would enable an employee to make a choice of role across functions, understand the differentiating competencies and work out a learning plan. Its a tool to empower the employees take the right decision for themselves.
As on March 31, 2019, there were 4,890 permanent employees on the rolls of your Company.
There are certain Statements which have been made in the Management Discussion and Analysis Report describing the estimates, expectations or predictions, may be read as forward-looking statements within the meaning of applicable laws and regulations. The actual results may differ materially from those expressed or implied. The important factors that would make a difference to the Companys operations include demand-supply conditions, raw material prices, changes in Government Policies, Governing Laws, Tax regimes, global economic developments and other factors such as litigation and labour negotiations.
BUSINESS RESPONSIBILITY REPORT (BRR)
In compliance with the provisions of Regulation 34(2)(f) of the Listing Regulations read with the SEBI Circular No. CIR/CFD/ CMD/10/2015 dated November 4, 2015, your Company has prepared a BRR in the prescribed format for the financial year ended March 31, 2019 describing initiatives undertaken by it from an environmental, social and governance perspective, which is annexed to the Boards Report and marked as Annexure VII. The BRR has been uploaded on the website of the Company at www.bata.in and is available at the linkhttps ://bata.in/bataindia/a -29_s-181_c-42/investor-relations.html.
In compliance with the provisions of Regulation 34 of the Listing Regulations read with Schedule V to the said Regulations, the Corporate Governance Report of your Company for the financial year ended March 31, 2019 and a Certificate received from M/s. B S R & Co., LLP, Chartered Accountants, the Auditors, on compliance with the provisions of Corporate Governance requirements as prescribed under the Listing Regulations, are annexed and forms part of this Annual Report.
Your Board is grateful for the continuous patronage of our valued customers and remains committed to serving their needs by delivering more style and comfort at every step. Our Board acknowledges and appreciates the relentless efforts by employees, workmen and staff including the Management headed by the Executive Directors who have all worked together as a team in achieving a commendable business performance year on year. Your Board is also indebted to the unstinted support and trust reposed by you, our shareholders and are also thankful to the Bata Shoe Organization (BSO) for their ongoing support and guidance.
Your Board greatfully acknowledges the support and cooperation it receives from all its suppliers, vendors and dealers as well as the regulatory authorities of the Central and State Governments in India.
Your Board wishes to place on record its deep appreciation of the Independent Directors and the Non-Executive Directors of the Company for their great contribution by way of strategic guidance, sharing of knowledge, experience and wisdom, which helps your Company to take the right decisions in achieving its business goals.
|For and on behalf of the Board of Directors|
|Place : Gurugram||Chairman|
|Date : May 24, 2019||DIN: 00079129|