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2010BATA INDIA PVT. LTD.

Harsha Upadhyaya Roll no. : 36 2/15/2010

Table of Contents1. INTRODUCTION ..................................................................................................... 31.1 COMPANY INFORMATION ........................................................................................................... 3 1.2 INDUSTRY OVERVIEW ................................................................................................................ 4

2. THE BATA TURN AROUND - HOW SUSTAINABLE IS IT?? ................................................ 72.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 BETTER PRODUCT MIX AND MANUFACTURING EFFICIENCIES HAVE IMPROVED MARGINS............................... 7 STORE REVAMP AND EXPANSION ................................................................................................. 8 GROWTH IN CHIC RANGE .........................................................................................................10 CHASING FOOTFALLS ..............................................................................................................11 PRICING STRATEGY .................................................................................................................12 COST CONTROL TO IMPROVE EFFICIENCY......................................................................................13 FINANCIAL TURNAROUND ........................................................................................................14 JOINT VENTURE COMPANY FORMED BY BATA INDIA LIMITED .............................................................15 FULLY FUNDED FOR THE NEXT LEVEL OF GROWTH: .........................................................................16

3. CONCLUSION ....................................................................................................... 18

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BATA INDIA PVT. LTD. 1. INTRODUCTIONThe 77-year-old company is the biggest organized footwear retailer in the country with a market share of 7 per cent of the total Rs 15,712 crore footwear retail market. More importantly, with 1,200 outlets across the country, Bata is shedding its old-format, drab-looking stores and designs for a new international look and feel. Under P M Sinha, the erstwhile chief of Pepsi Foods in India who took over as chairman in 2004, the subsidiary of Bata Shoe Organization has modeled its business strategy as an FMCG player, rather than a conventional footwear manufacturer. And this move seems to have paid off. Since 2005, sales have grown 42 per cent and profitability has gone up six times. Going ahead, analysts expect Batas attempt to exploit the under-penetrated women and kids footwear segments, besides new product lines to drive the companys revenues. 1.1 COMPANY INFORMATION: Share Holding Pattern:BATA INDIA LTD. Share Holding Pattern as on : Face Value 31 Dec 2009 10.00 No. Of Shares SHARE HOLDING PATTERN 30 Sep 2009 10.00 % Holding 51.02 51.02 30 Jun 2009 10.00 No. Of Shares % Holding 51.02 51.02

Foreign Promoters Sub Total Institutional Investors Mutual Funds and UTI Banks Fin. Inst. and Insurance FII's Sub Total Private Corporate Bodies Directors/Employees Sub Total General Public GRAND TOTAL

% No. Of Shares Holding PROMOTER'S HOLDING 32785000 51.02 32785000 32785000 51.02 32785000 NON PROMOTER'S HOLDING 5624363 4295315 6641098 16560776 8.75 4087621 6.68 4945365 10.33 6772512 25.77 15805498 OTHER INVESTORS 1594595 2.48 1995529 25208 0.04 25208 1619803 2.52 2020737 13298191 20.69 13652535 64263770 100 64263770

32785000 32785000

6.36 7.70 10.54 24.59 3.11 0.04 3.14 21.24 100

3426338 4945365 7187890 15559593 1806819 25208 1832027 14087150 64263770

5.33 7.70 11.18 24.21 2.81 0.04 2.85 21.92 100

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Products:BATA INDIA LTD. Product Name Year Month PRODUCT REPORT Sales Quantity 18189 19017 10288 0 0 0 0 UOM Sales Value (Crores) 645.42 236.02 102.94 23.32 3.35 1.27 0.49 Product Mix 63.72 23.3 10.16 2.3 0.33 0.12 0.04

Leather Footwear Rubber / Canvas Footwear Plastic Footwear Accessories, Garment & Others Scrap Other Services Other Fiscal Benefits

2008 2008 2008 2008 2008 2008 2008

12 12 12 12 12 12 12

Pairs Pairs Pairs

Raw Materials:Product Name Year/Month Sales Quantity 5,065 0 5,642 2,021 4,622 1,457 UOM Sales Value (Crores) 54.92 50.93 38.63 23.00 14.03 8.48 Product Mix 28.90 26.80 20.32 12.10 7.38 4.46

Chemicals Other Materials Leather Rubber Textiles Raw Hides

0812 0812 0812 0812 0812 0812

Kgs Not Reported KVT Kgs Sq Metres Kgs

1.2 INDUSTRY OVERVIEW: Due to low entry barriers and low-cost manufacturers, the domestic footwear market has largely been dominated by the unorganized sector. According to RNCOS, a New Delhi-based industry research firm, in 2008, the organized footwear retail market constituted around 11 per cent of the organized retail market. But things have been changing, for the good. Aided by rising brand awareness and fashion consciousness, the organized footwear retail segment grew at over 34 per cent between 2004 and 2007 to touch Rs 6,100 crore. In the same period, the unorganized footwear segment grew by around 2 percent; In fact, the organized markets volumes are expected to rise to 2.1 billion pairs by the end of 2012, at a growth rate of 8 per cent over 2007-2012. By target segment, mens footwear accounts for the largest share at 54 per cent, followed by kids and womens footwear at 32 per cent and 14 per cent, respectively. However, analysts estimate that this composition will get skewed towards childrens and womens footwear in the near future. By the end of 2012, the two segments will account for about half of the Indian4|P a ge

footwear retail market in volume terms, against 46 per cent in 2008. RNCOS estimates that between 2009 and 2012, mens footwear will grow at a slower pace of 5.2 per cent as the market is reaching saturation (in terms of penetration). The growth will be mainly due to the replacement market and not because of an increase in population. Mostly numbers of competitors are stable, especially because of high entry barriers. This adds to the rivalry among existing firm. Manufacturers watch each other carefully and make appropriate countermove to match the competitors move. Leading competitor of BIL are Lakhani shoes, liberty shoes, action shoes, woodland, paragon and relaxo in organized segment.

Company Bata India Lakhani India Liberty shoes Mirza tanners Relaxo footwears

Year ended Mar 2009 Mar 2009 Mar 2009 Mar 2009 Mar 2009

Net Sales (Rs. Cr.) 989.96 237.2 241.69 361.03 407.46

EPS(Rs.) 9.45 1.83 4.41 0.58 11.86

Footwear industry is labor intensive and concentrated in small and cottage industry area. Availability of human resource is one of important strength of Bata India limited. Below table will tell why this is strengthLabor cost in leading footwear producing countries Country India Pakistan Thailand Vietnam China Romania Indonesia Brazil Portugal Hong Kong Taiwan Korea Source- SATRA Technology Centre Rs./hr. 8.254 8.254 20.63 24.76 24.76 28.88 28.88 61.90 218.73 222.85 243.4 297.1

Bata has large pool of permanent employees on payroll that is 6800 as on 2010. BIL emphasis on training and skill assessment program and created a large pool of trained employees.5|P a ge

Company has 8 trade unions and biggest and oldest plant at batanagar witnessed industrial unrest in 1992 when there was a strike from January 3 to May 25, 2002. Strike was resolved through tripartite settlement for a term of 3 year. During the year 2002-04, company entered into agreement with its eight trade unions wherein the dearness allowance was capped. Lets have a look on major strikes in BILRETAIL Date July 31, 2002 September 28, 2002 October 2, 2002 July 31, 2004 Event/all India Bata shop (managers union) Strike Strike Strike Strike Event/all India Bata shop (employee union) Strike Strike Strike Strike duration 1 1 1 1

FACTORY Southcan - Peenya Industrial Area, Bangalore Date March 8, 2000 to July 3, 2000 July 3, 2000 to February 7, 2001 February 8, 2001 to September 30, 2001 October 1, 2001 to January 7, 2002 January 7, 2002 to October 12, 2003 Event Lockout Strike Go slow Lockout Strike Duration (in days) 117 219 234 99 662

FARIDABAD Date May 11,2000 July 31, 2002 Event Strike Strike Duration (in days) 1 1

MOKAMEHGHAT Date July 31, 2002 Event Strike Duration(in days) 1

Hence BIL has good trained manpower who are working at low daily wage, BIL is providing all facility to improve their performance, still company is facing problem of lockout, go slow and strike in retail, production unit. There is something which has not been addressed till now or it can be communication gap between top level and worker.

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2. The Bata Turn Around- How sustainable Is It??When Thomas Bata handpicked old loyalist Marcelo Villagran in 2005 from Bata's thriving subsidiary in Chile to steer Bata India, the shoe major was scuffed and worn out. The balance sheet was splattered with red ink, shareholders were disgruntled, workers were unhappy and India Shining was no longer thronging the outlets of the country's largest shoemaker But even then, Mr Bata highlighted the immense opportunities the country and its market offered for the brand. It was, perhaps, this underlying optimism and simplicity that had helped Villagran, who took the helm as Managing Director in February 2005, to steer it through one of the most dramatic turnarounds of the decade and into its longest profit making streak this decade. Recalling that fight back, from a loss of Rs 62.5 crore to a profit of Rs 12.5 crore the next year, Bata India Chairman Priya Mohan Sinha, a former head honcho of Pepsi and director of Hindustan Unilever says: "What we achieved in 2005 was nothing short of remarkable. I've