COMPANY ANALYSIS OF

private LIMITED

REGIONAL COLLEGE OF MANAGEMENT (AUTONOMOUS)

Submitted under guidance of: Submitted By:

SARMISTHA MISHRA (Prof.) SURAJ KR SATPATHY

MBA (2011-13)

REGD NO.-1106247218

Company Profile

Bata India Ltd is the largest footwear retailer and the leader in the footwear industry in India. The company is engaged in the business of manufacturing and trading of footwear and accessories through their retail and wholesale network. They are having their production facilities at Batanagar in West Bengal, Patna and Hathidah in Bihar, Faridabad in Haryana, Bangalore in Karnataka and Hosur in Tamilnadu. Their wholly owned subsidiaries include Bata Properties Ltd and Coastal Commercial & Exim Ltd. The company operates in two segments, namely footwear & accessories, and investments in joint venture for surplus property development. Their Footwear & Accessories segment is engaged in the business of manufacturing and trading of footwear and accessories items through their retail and wholesale network. Their Investment in joint venture for surplus property development segment is involved in development of real estate at Batanagar. Their products include leather footwear, rubber/canvas footwear and plastic footwear. Bata India Ltd was incorporated in the year 1931 as Bata Shoe Company Pvt Ltd in Konngar, West Bengal, which was then shifted to Batanagar. Batanagar was the first manufacturing facility in the Indian shoe industry to receive the ISO 9001 certification. The company went public in 1973. They changed their name to Bata India Ltd. Over the years, the company has established a leadership position in the footwear industry and is easily the most trusted name in branded footwear. The company has entered into an agreement with Bata Ltd of Toronto, Canada for supply of technical know-how and services such as Footwear technology and design, brand development, product development, retailing and information systems for a period of ten years from January 1, 2001. The company bagged the Retailer of the year award for the year 2006 in the footwear category as a part of the Reid and Taylor Award for Retail Excellence which was presented during the Indian Retail Summit 2006. They received the country's most coveted Retail Award at the 4th Images Retail Awards (IRA) 2007. The company was honoured with Most Admired Brand of the year 2006-07 in Footwear category. They were rated as one of the Top 10 super brands in India and awarded Super Brands Award on April 12, 2007. In February 21, 2008, they were given AMITY Corporate Excellence Award 2008. This award was given for Bata's excellent performance and retail growth during 2007.

The company entered into a joint development agreement with Calcutta

Metropolitan Group Ltd for developing around 262 acres of land in Batanagar. The company formed a special purpose vehicle called Riverbank Holdings Pvt Ltd. The development of 262 acres was split into two parts, IT SEZ for 25 acres developed by Riverbank Holdings Pvt Ltd and the remaining 237 acres will be done by the new company Riverbank Developers Pvt Ltd. In the year 2009, the company opened 69 new Bata stores, which are all in large format with an average of over 3000 square feet. They also renovated 40 existing stores and closed down 73 stores which were in small format and unviable. In the year 2010, the company won the 'Consumer Awards 2010' as 'India's Most Preferred Retailer' given by CNBC Awaaz. The company opened 108 new large format stores across all major towns in India.

Indian Footwear Industry

The Footwear Industry is significant segment of the leather industry in India. India ranked second among the footwear producing countries next to China. The industry is labour intensive and is concentrated in the small and cottage industry sectors. While leather shoes and uppers are concentrated in large scale units, the sandals and chappals are produced in the household and cottage sector. India produces more of gent’s footwear while the world’s major production is in ladies footwear. In the case of sandals and chappals, use of non-leather material is prevalent in the domestic market.

The major production centers in India are Chennai, Ranipet, Ambur in Tamil Nadu, Mumbai in Maharashtra, Kanpur, Jalandhar, Agra and Delhi.

The Indian Footwear Industry is provided with institutional infrastructure support through premier institutions like central Leather research Institute, Chennai, Footwear Design & Development Institute, Noida, National Institute of Fashion Technology, New Delhi, etc in the areas of technological development, design & product development and human resource development.

The availability of abandunt raw material base, large domestic market and the opportunity to cater to world markets makes India an attractive destination for technology and investements.

Company Milestones 

The company milestones achieved by the company are given in the table below: 

Timeline Milestone / Event

2003-2009

-  Enters into retailing alliance with Lee Cooper

-  Unveils new flagship store in Mumbai

-  Sets up new flagship store in Thiruvananthpuram

1990-1999

-  Installs injection moulded plant

-  Sets up export oriented unit at Hosur in Tamil Nadu

-  Ties-up with Nike for marketing the latter’s products through its retail outlet

-  Launches new ladies range ‘Sundrop’

1973-1988

-   Goes public, listed shares on BSE and NSE

-   Enters into agreement with Adidas for manufacture and marketing of sports goods and sportswear in India

-   Launches marketing of `Star' clothings designed by Murjani International, New York, U.S.A. and sourced through Inmark  Brands Pvt. Ltd.

-   Introduces a new brand “Tigre”

1942-1952

-   Sets up machinery department to manufacture shoe making machine

-   Sets up factory in Patna, Bihar

-   Sets up factory in Faridabad

1931-1937-   Incorporated at Kolkata

-   Tanning introduced at the new factory at Batanagar in Kolkata

Vision & Mission

Vision:- Vision is that igniting spark that can inspire and energise people to do better. The focus of vision is to reach out hungrily for the future and drag it into the present.

Bata India today wishes to reposition itself as a market driven, fashion conscious lifestyle. Focus on a variety of customer groups.

Mission:-A mission statement articulates the philosophy of the company with respect to the business in specific and society in general. Once the mission statement of the company is finalized and adapted, it provides a readymade guideline to employees of the organization about its principles, policies and practices.

Bata will provide its products and services to all the age groups in the community. Will also provide the finest quality through customer involvement.

Organization Structure

Employees of the Company are categorized along the following grades, in descending heirachical order:

• Directors

• Senior Managers (Senior Vice President, Vice President, General Manager)

• Middle Managers

• Junior Managers

• Selling personnel

• Shop Managers

• Shop Employees

Additionally, the Company employs direct and indirect workmen on its factory sites. The number of permanent employees currently on the payroll of the Company is 9,969 as on January 31, 2005.

Geographies

Bata has a worldwide reach, with operations across 5 continents managed by 4 regional meaningful business units (MBUs). Each unit benefits from synergies specific to their environment, such as product development, sourcing or marketing support. Each MBU is entrepreneurial in nature, and can quickly adapt to changes in the market place and seize potential growth opportunities.

Bata India is the largest company for the Bata Shoe Organization in terms of sales pairs and the second largest in terms of revenues. With 1250 stores across the country, it also has the widest retail network within the BSO.

Kolkata is located in eastern India in the Ganges Delta at an elevation ranging between 1.5 to 9 metres. Kolkata has a tropical wet-and-dry climate. The annual mean temperature is 26.8 °C (80 °F); monthly mean temperatures range from 19 °C to 30 °C (67 °F to 86 °F). Summers are hot and humid with temperatures in the low 30's and during dry spells the maximum temperatures often exceed 40 °C (104 °F) during May and June. Winter tends to last for only about two and a half months, with seasonal lows dipping to 12 °C – 14 °C (54 °F – 57 °F) between December and January. Rains brought by the Bay of Bengal branch of South-West monsoon lash the city between June and September and supplies the city with most of its annual rainfall of 1,582 mm. The highest rainfall occurs during the monsoon in August (306 mm).

Subsidiaries

Bata India Ltd has 2 subsidiaries, namely –

Bata Properties Ltd.:- BPL is a wholly owned subsidiary of Bata. BPL was originally incorporated on August 14, 1987 as Chandil Properties Private Limited. The Companyís name was subsequently changed from Chandil Properties Private Limited to Bata Properties Limited, consequent to which the Registrar of Companies, West Bengal issued a fresh Certificate of Incorporation dated September 20, 1990.

The main object with which BPL was incorporated was to carry on the business as dealers, owners and investors in land and building.

In the year 1990, the Company and BPL entered into a Scheme of Arrangement sanctioned by the Calcutta High Court with effect from July 1, 1990, whereby the Real Estate Division of the Company consisting of properties situated at Calcutta, Raigunj, New Delhi, Agra and Kanpur were transferred to BPL. BPL, as consideration for the transfer, issued 5,250,000 equity shares to the Company of Rs. 10/- each, credited as fully paid-up. The said properties were transferred to BPL for better development and management of the property.

By another Scheme of Arrangement sanctioned by the Calcutta High Court with effect from November 1, 1991, whereby further properties belonging to the Company and situated at Uttar Pradesh, Jaipur, Chandausi, Calcutta and Jabalpur, were transferred to BPL. BPL, as consideration for the transfer, issued 3,600,000 equity shares to the Company of Rs. 10/- each, credited as fully paid-up. 41 BPLís subsequently reduced its share capital from Rs. 88,510,000/- consisting of 8,851,000 equity shares of Rs. 10/- each to Rs. 48,510,000/- consisting of 4,851,000 equity shares of Rs. 10/- each. This reduction was sanctioned by the Calcutta High Court vide its Order dated September 18, 1995. Currently, BPL is engaged in the business of development, improving, and effectively utilising the properties of Bata in a planned manner and to acquire further properties for development of retail business of Bata throughout India.

The Board of Directors of BPL as on January 31, 2005 consists of:

• Mr. S. J. Davies;

• Mr. Pradip Kumar Nag; and

• Mr. Hemant Sultania

Coastal Commercial & Exim Ltd.:- CCEL was incorporated as Coastal Commercial & Exim Private Limited on October 11, 1991. The companyís name was changed to Coastal Commercial & Exim Limited, for which the Registrar of Companies, West Bengal issued a Fresh Certificate of Incorporation dated September 6, 2001. The main objects of CCEL is, inter alia, to carry on business as Exporters, Importers, buyers, traders, suppliers, and merchants.

The Board of Directors of CCEL as on January 31, 2005 consists of: Mr. Pradip Kumar Nag, Chairman;

• Mr. M. J .Z. Mowla;

• Mr. Hemant Sultania

Products of BATA India Limited

Leather Footwear Rubber / Canvas Footwear Plastic Footwear Accessories, Garment & Others Bags and Luggages Belts

Financial condition of Bata India Ltd

Year over year, Bata India Ltd. has been able to grow revenues from 12.8B to 15.5B. Most impressively, the company has been able to reduce the percentage of sales devoted to selling, general and administrative costs from 32.28% to 21.40%. This was a driver that led to a bottom line growth from 883.7M to 2.6B .

P/E Ratio

The PE ratio is much more sensitive to changes in expected growth rates when interest rates are low than when they are high. The reason is simple. Growth produces cash flows in the future and the present value of these cash flows is much smaller at high interest rates. Consequently the effect of changes in the growth rate on the present value tend to be smaller.

Operating Profit

During the year 2010 your Company achieved a total turnover of Rs. 12,770.9 million as compared to Rs.11,125.9 million in 2009, which reflects a growth of around 15%.

Company has undergone a transformation in all areas of its business whether it is sales, profitability, shoe line, visibility and the ambience of its stores. In the last 4 years, 72% of the stores have been renovated.

Due to the continuous and ongoing process of restructuring being adopted

by your Company in all areas of its operations, there has been improvement in manufacturing, changes in sourcing, credit management, retail restructuring, labour union - management relationship, retail expansion programs, training and development, team building, internal controls, borrowings, working capital management, business processes, corporate governance, de-risking the business of the Company and now introduction of the Home Delivery Service of shoes for the convenience, comfort and choice of our valued customers. Using this service, customers can now place orders

for any footwear which they are unable to find in a Bata store and get it home delivered through courier with no extra cost.

Earnings Per Share

The Earning per Share (EPS) (Basic and Diluted) of your Company has increased substantially by 41.87% (from Rs.10.46 in 2010 to Rs.14.84 in 2011).

Company is out of Bank Borrowings since April 2011 as against Rs.146.5 million at the end of 2009, despite the entire capital expenditure and VRS funded through internal accruals.

Quick Ratio

An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company.

The quick ratio is calculated as:

Also known as the "acid-test ratio" or the "quick assets ratio". 

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations. 

The Current Ratio formula is:

 

Also known as "liquidity ratio", "cash asset ratio" and "cash ratio".

Debt/Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.

 Sometimes only interest-bearing, long-term debt is used instead of total

Liabilities in the calculation. 

Also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as well as corporate ones. 

Particulars Dec 2011 Dec 2010 Dec 2009 Dec 2008 Dec 2007

Operational & Financial Ratios               

   Earnings Per Share (Rs) 35.14   14.84   10.46   9.45   7.38  

   Tax Rate(%) 29.29   33.32   32.95   15.46   7.89  

Margin Ratios               

   Core EBITDA Margin(%) 15.00   13.03   11.44   8.81   7.19  

   EBIT Margin(%) 21.03   11.80   9.88   8.21   6.97  

   Pre Tax Margin(%) 20.41   11.20   9.01   7.10   5.78  

   PAT Margin (%) 14.43   7.47   6.04   6.00   5.33  

   Cash Profit Margin (%) 17.06   10.01   8.55   7.88   7.12  

Financial Stability Ratios               

   Total Debt/Equity(x) 0.04   0.04   0.08   0.18   0.25  

   Current Ratio(x) 1.84   1.53   1.72   1.71   1.77  

   Quick Ratio(x) 0.84   0.78   0.64   0.53   0.46  

   Total Debt/Mcap(x) 0.01   0.01   0.02   0.06   0.03  

Bata India Ltd - Annual Profit LossAll Amount Are In Rs.(Crore)

PeriodRevenueOther IncomeMaterial ExpensesManufacturing ExpensesEmployee ExpensesOperating ProfitDepreciationInterestTaxExtra Ordinary IncomeNet ProfitDividend Rate

20111,553.7

2119.73255.17

-185.85361.37

41.100.87

93.56-

225.84-

20101,295.6

015.25

595.6632.37

176.83183.15

32.517.64

54.64-0.1995.35

25.71%

20091,094.8

410.65

483.0732.91

164.75137.88

27.929.70

39.50-0.1767.23

19.28%

2008991.63

12.84455.33

29.98170.12102.08

19.0011.2424.75

0.1660.74

16.07%

Ratios

Dec ' 10 Dec ' 09 Dec ' 08 Dec ' 07

Per share ratios

Adjusted EPS (Rs) 14.85 11.20 9.57 6.81

Adjusted cash EPS (Rs) 19.90 15.54 12.53 9.30

Reported EPS (Rs) 14.84 10.46 9.45 7.38

Reported cash EPS (Rs) 19.90 14.81 12.41 9.87

Dec ' 10 Dec ' 09 Dec ' 08 Dec ' 07

Dividend per share 4.00 3.00 2.50 2.00

Operating profit per share (Rs) 28.29 22.92 15.95 11.24

Book value (excl rev res) per share (Rs) 56.57 46.15 38.25 32.72

Book value (incl rev res) per share (Rs.) 61.97 51.78 44.12 38.93

Net operating income per share (Rs) 195.77 170.58 154.05 135.03

Free reserves per share (Rs) 46.57 36.15 28.25 22.72

Profitability ratios

Operating margin (%) 14.45 13.43 10.35 8.32

Gross profit margin (%) 11.86 10.89 8.44 6.49

Net profit margin (%) 7.50 6.09 6.09 5.43

Adjusted cash margin (%) 10.06 9.05 8.07 6.84

Adjusted return on net worth (%) 26.24 24.26 25.02 20.80

Reported return on net worth (%) 26.22 22.66 24.71 22.56

Return on long term funds (%) 43.00 41.02 34.29 28.11

Leverage ratios

Long term debt / Equity 0.03 0.03 0.03 0.03

Total debt/equity 0.03 0.08 0.17 0.24

Owners fund as % of total source 96.34 92.24 85.02 80.32

Dec ' 10 Dec ' 09 Dec ' 08 Dec ' 07

Fixed assets turnover ratio 3.01 2.93 2.83 2.67

Liquidity ratios

Current ratio 1.60 1.82 1.78 1.78

Current ratio (inc. st loans) 1.60 1.63 1.38 1.28

Quick ratio 0.77 0.64 0.53 0.45

Inventory turnover ratio 4.28 4.03 3.47 2.95

Payout ratios

Dividend payout ratio (net profit) 31.35 33.55 30.94 31.69

Dividend payout ratio (cash profit) 23.38 23.70 23.57 23.69

Earning retention ratio 68.66 68.66 69.45 65.64

Cash earnings retention ratio 76.63 77.43 76.66 74.85

Coverage ratios

Adjusted cash flow time total debt 0.10 0.25 0.55 0.86

Financial charges coverage ratio 10.13 7.40 6.29 5.71

Fin. charges cov.ratio (post tax) 7.65 5.56 5.61 5.69

Component ratios

Material cost component (% earnings) 47.57 44.28 46.33 50.89

Selling cost Component 6.32 5.81 6.12 5.46

Dec ' 10 Dec ' 09 Dec ' 08 Dec ' 07

Exports as percent of total sales 0.93 0.70 1.01 1.08

Import comp. in raw mat. consumed 2.30 1.95 3.43 3.34

Long term assets / total Assets 0.17 0.19 0.18 0.16

Revenue

Latest Financial Figures (Figures in Rs. Crores)

ET 500 Rank(2011) 409

Industry Leather/Synthetic Products

Turnover 1520.54

Profit after Tax(PAT) 205.47

MCAP (Market Capitalization)

4342.22

Assets 412.01

Bata India has 8 globally popular brands. The company has also tied up with the giant footwear company Adidas, to set up a manufacturing unit for shoes and apparels in India. Further, Bata India Ltd. and the international footwear giant, Reebok have announced an agreement to foray into retailing business jointly. 

Bata India registered net sales  1826.70 million for the quarter ended March, 2007 and the company's net profit stood at ` 53.50 million for the same period.

CSR initiatives :Saving the Ganga is a project that has made a significant contribution in this direction. Bata at a considerable cost has ensured that the effluents from the tanneries are treated in a state-of-the-art effluent treatment plants so that they do not pollute the river at Batanagar and Mokamehghat.

Bata was one of the first companies to come forward to preserve nature, when it joined hands with World Wide Fund (WWF) to protect the natural environment and its wildlife. Through an arrangement with the apex body of WWF, a part of the sale proceeds from "Power WWF" collection T-shirts were donated to the WWF.

Afforestation programme along with "Save the Ganga Project" brought many laurels and kudos to our Mokamehghat Tannery. Planting of trees is routinely carried out at all Bata Units.The factory at Bangalore was considered the best maintained garden in Peenya Industrial Area.

Market scenario

The company enjoys the highest market share in India and this is evident from the fact that the total retail presence of the company currently is more than thrice that of its closest competitor (Liberty: 381 stores).

Bata has over 15% market share in Organized Retail market and around 6.5% share in Unorganized retail.

Top 5 Competitiors

Name Last Price Market Cap.(Rs. cr.)

SalesTurnover

Net Profit Total Assets

Bata India 858.95 5,519.94 1,266.43 95.35 412.01

Relaxo Footwear 313.80 376.60 557.76 37.69 317.13

Mirza Intl 18.80 174.29 474.38 39.18 309.61

Liberty Shoes 97.15 165.54 298.14 10.64 241.63

Bhartiya Inter 52.15 54.57 167.33 5.54 180.13

Crew B.O.S. 25.80 36.10 621.01 22.43 447.96

SWOT Analysis

Strengths Largest footwear retailer in India. Largest market share in the organized footwear segment. Strong Brand Image.

Weaknesses ROE decreased over the last one year due to a threefold increase in

tax outgo.

Opportunities

The nation's consumption of leather products is expected to grow at around 10% per annum, which will be largely driven by the rising disposable income and the increased preference for leather footwear.

The unorganized segment constitutes 80% of this market, indicating a significant marketing opportunity for organized players.

The per capita consumption is 1.1pairs per annum, opportunity for increase in consumption.

Threats Increased competition from leading multinational players in the sports

segment.

Threat from non-specialist' retailers like apparel retailers diversifying into footwear and discount hypermarkets and retailers introducing and promoting their own brands (DoB's) at competitive prices.

Recent Developments 05-MAR-12 :- Credit rating agency, ICRA has reaffirmed the long-term rating assigned to Rs.56 crore1 fund based / non-fund based limits of Bata India (Bata) at AA. The outlook on the rating is positive. 

01-MAR-12 :- Bata India has posted consolidated net profit of Rs 2,588.59 million for the year ended December 31, 2011 as compared to Rs 883.730 million for the year ended December 31, 2010, representing an increase of 2.92times. 

31-OCT-11 :- Bata India has posted a net profit of Rs 304.23 million for the

quarter ended Sept. 30, 2011 as compared to Rs 207.24 million for the quarter ended Sept. 30, 2010, registering an increase of 46.80%. 

29-JUL-11 :- Bata India has posted a net profit of Rs 409.89 million for the quarter ended June 30, 2011 as compared to Rs 259.05 million for the quarter ended June 30, 2010 representing rise of 58.23%. 

29-JUN-11 :- Bata India has decided to directly move into the rural market for the first time for volume growth. The outgoing chairman of the company, P. M. Sinha, told shareholders at the 78 {+t} {+h} AGM that an extensive

market research report was ready. ``We have not penetrated rural India so far. 

27-OCT-10 :- Bata India has registered rise of 57.57% in net profit for the quarter ended Sep.30, 2010. Its profit for the current quarter stood at Rs 207.2 million against Rs 131.5 million for the same quarter a year ago. 

29-APR-10 :- Bata India, the largest footwear retailer and the leader in the footwear industry in India, announced its financial results for the first

quarter of the year 2010. The company continued with its strong growth momentum by posting an impressive 38.7% growth in net profit at Rs 143.3 million as against net profit of Rs 103.3 million in the same period last year. The net sales of the company grew 11.2% at Rs 2591.5 million as against net sales of Rs 2330.3 million in the same period last year. 

17-MAR-10 :- Credit rating agency, ICRA has upgraded the long-term rating assigned to Rs 1.15 billion fund based / non-fund based limits of Bata India (Bata) from LAA- to LAA. 

Future Plans

During 2010 Company has hired 71 Middle and Senior level Executives for its various functional areas and people moving out, retiring etc. had been replaced with professionals with better qualification and experience.

Creating bench strength and building up capability for future growth

Executive Development plan:- For the second consecutive year,

Company pursued its aim of nurturing and developing new talent for various responsibilities by successfully training its Executive Trainees. 13 executive trainee have been hired from various retail management schools who have gone through 9 months Executive Development Plan (EDP) which was initiated in the year 2009.

Total 13 executive trainees, who successfully completed their training, have been placed as District Managers across chains in retail operations in 2010.

Many more executives have been hired during 2010 for retail operation, merchandising and whole sale, etc.

Graduate Engineers Development Plan:- Company has also initiated process of hiring and training engineers for its manufacturing division. In the first batch of Graduate Engineer Trainees (GETs) a total of 11

graduate engineers were inducted at Batanagar. The one year duration training program is currently underway. During the initial phase of their training of 4 months at Batanagar, the trainees have been placed to different units to take up On-the-Job training in their final phase of training.