10) The financial turnaround by G4SUK622

VIEWS: 11 PAGES: 71

									                    PEARL ACADEMY OF FASHION




                     PROJECT – Retail Financials
                      REPORT ON “Bata India”




“Submitted in partial fulfillment for the requirement of the diploma in
                  FASHION RETAIL, 2008 – 2010.”




                     Submitted to: Mr Rahul Jain
               Date of Submission: 4th December 2009.
                                                                      Retail Financials



                           ACKNOWLEDGEMENT


This report has been insightful and erudite experience that we have undergone. The
credit for the completion of this report goes to Mr Rahul Jain who has taught us and
made us competent of understanding the intricacies. Without his help this report
could not have been possible.


Submitted By-
Group IV
Chhavi Jauhari
Kumud Adhikari
Shaila Wats
Shammi Raghuvanshi
Shubhangi Kothari




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                                DECLARATION


We hereby declare and affirm that this project on Bata is our bonafide work towards
partial fulfillment of Post Graduation Programme, Fashion Retail 2008 – 2010 at
Pearl Academy of Fashion.




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                                   TABLE OF CONTENTS


Chapter Particulars                                     Page No.
No.
1.           Introduction                                     5
2.           Organization Profile                           6-12
             Company History                                 7-9
             Strategy of Bata India                          10
3.           Product Profile                               11-13
4.           Environmental Analysis                        14-24
             Internal Environment                           14-17
             External Environment                           18-19
             PEST Analysis                                  20-23
5.           Competitor’s Profile                          24-29
6.           Horizontal Analysis                           30-37
7.           Financial Ratios                              38-44
             Activity Ratio                                 38-39
             Liquidity Ratio                                40-41
             Profitability Ratio                            42-43
             Solvency Ratio                                 44-45
8.           Comparative Analysis of Bata and Liberty      46-66
9.           SWOT Analysis                                 67-70
8.           References                                      71




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                                INTRODUCTION

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.




SNAPSHOT


Business Group Name          MNC Associate


Incorporation Date           23/12/1931


Industry Name                Leather/Synthetic – Footwear


Listed on                    National Stock Exchange of India Ltd.

                             The Stock Exchange, Mumbai




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                           ORGANIZATION PROFILE

Headquartered in Calcutta, Bata India is the largest retailer and leading
manufacturer of footwear in India and is a part of the Bata Shoe Organization.

Incorporated as Bata Shoe Company Private Limited in 1931, the company was set
up initially as a small operation in Konnagar (near Calcutta) in 1932. In January
1934, the foundation stone for the first building of Bata's operation - now called
the Bata. In the years that followed, the overall site was doubled in area. This
township is popularly known as Batanagar. It was also the first manufacturing
facility in the Indian shoe industry to receive the ISO: 9001 certification.

The Company went public in 1973 when it changed its name to Bata India Limited.
Today, Bata India has established itself as India's largest footwear retailer. Its retail
network of 1250 stores gives it a reach/ coverage that no other footwear company
can match. The stores are present in good locations and can be found in all the
metros, mini-metros and towns. Bata's smart looking new stores supported by a
range of better quality products are aimed at offering a superior shopping
experience to its customers. And the new face of Bata India is now visible to the
industry as well as its customers. Today, backed by a brand perception of
experience, the company is working towards positioning itself as a vibrant and
contemporary young brand. It has significantly transformed its retail formats to
become more lifestyle-oriented, which has helped change consumer perceptions to
a large extent.

(Wright Reports) The Group's principal activity is to manufacture different types of
footwear, which includes rubber, canvas, leather and leather look alike Footwear. It
operates in two segments namely, footwear and investment in joint venture for
surplus property development. Footwear segment engaged in the business of
manufacturing and trading of footwear and non-footwear items, through its retail
and wholesale network. Investment in Joint Venture for Surplus Property
Development segment is involved in the development of real estate at Batanagar. Its
factories are located in Batanagar (West Bengal), Faridabad (Haryana), Bangalore



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(Karnataka), Patna (Bihar) and Hosur (Tamil Nadu). The company manufactures
over 33 million pairs per year.

For years, Bata’s reasonably priced, sturdy footwear has made it one of India’s best
known brands. It sells over 60 million pairs per annum in India and also exports its
products to oversea markets including the U.S.A, the U.K, Europe and Middle-East
countries. Bata India is an important operation for its Toronto, Canada based parent-
the BSO group run by Thomas Bata who owns 51% of its equity stake.

The company provided employment to over 15,000 people in its manufacturing and
sales operations throughout India. The company had a distribution network of over
1,500 retail stores and 27 wholesale depots. It outsourced over 23 million pairs per
year from various small-scale manufacturers




Company History (ICICI Direct Website)

     1894
        The Bata Shoe Organization was founded by Tomas J. Bata, a ninth
        generation shoe maker.
     1931
        The Company was incorporated in India.
     1933
        The production of footwear commenced in rented premises at Konnagar, a
        few miles away from Kolkata, where for the first time rubber and canvas
        shoes were manufactured in India.
     October 28, 1934
        The foundation stone was laid on land purchased from the Port
        Commissioners and small landowners in the outskirts of Kolkata and the first
        manufacturing unit was set up, at a place now known at Batanagar. The
        factory shifted from Konnagar to Batanagar.




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     1936
        The construction work at the Batanagar factory was completed, and factory
        operation shifted from Konnagar to Batanagar. Towards the end of 1936, the
        factory produced leather footwear for the first time.
     1937
        Batanagar tannery became operational towards the end of 1937.
     1939
        The Batanagar factory was complete in terms of every activity related to
        footwear. The Batanagar township grew to become self-sufficient with the
        acquisition of more land and the erection of schools, places of worship,
        hospitals, entertainment and recreational centres.
     1940 – 45
        During the World War II the factory's production was geared to meet war
        requirements.
     1942
        A footwear manufacture plant, a machinery department was set up at
        Batanagar, which produced the first India-made major shoe machine.
        Simultaneously, several auxiliary departments were started. This was followed
        by the setting up of the factory at Bataganj, Bihar.
     1950
        Bata successfully launched the brand ‘Hawai’.
     1951
        The rubber/canvas factory was set-up at Faridabad, Haryana.
     1952
        One of Asia's largest tanneries was set-up at Mokemehghat, Bihar.
     1988
        The Bata factory was set-up in Peenya, Bangalore.
     1993
        Batanagar factory became the first Indian shoe-manufacturing unit to receive
        the ISO 9001 certification.




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     1994
        The Company's factory at Hosur in the State of Tamil Nadu became
        operational, which was originally an Export Oriented Unit, but now caters to
        the domestic Indian market
     2002
        Withdraws lockout at Bata India's Peenya Factory on the direction of
        Government of Karnataka.
     2003
        Shareholders pass all the major nine requisite resolutions.
     2004
        Appoints Gautam Thapar Vice-chairman and MD of Ballarpur Industries Ltd on
        the Board of the company.
     2005
        Bata unveils new flagship store in Mumbai
     2006
        De-lists equity shares from the Calcutta Stock Exchange Association Ltd.
     2007
        Bata India Ltd has informed that Mr. J Carbajal has been appointed as an
        Additional Director on the Board of Bata India Limited




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Strategy of Bata India


The Company’s management has evolved the strategy of the Company after
considering the Company’s strengths and weaknesses. The Company believes that
this strategy will enable the Company to build on the opportunities in the market.


Cost optimization and margin improvement
The Company is focusing on margin improvement and cost effectiveness
programmes which have started yielding results. The Company has initiated strict
control on costs in purchases and outsourcing and is looking at global sourcing for
raw materials to improve the net realization. The Company has also been clearing
old merchandize through discount sales, write-offs, etc. which will enable it to focus
on improving sales.


Logistics and demand based production
To optimize utilization of production facilities a new logistics team focuses on
obtaining specific orders from the market for best selling designs and sizes and
ensures that all raw materials are available in the factories well in time so that the
Company can produce and place in shops the products that consumers want. Thus
the Company has been focusing on consumers and market demand which will
reduce inventories and improve sales-to-stock turnover. The Company has closed
five depots and converted them into C&F (carrying and forwarding) agents. It is also
renegotiating transport costs to ensure a competitive transportation cost of the
Company’s products to the sales outlets.




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                                 PRODUCT PROFILE


Brands with Bata (Bata India Website)

Bata has licensed brands (Hush Puppies and Dr Scholl, licensed respectively from
Wolverine Worldwide and Dr Scholl’s) besides those of its parent (such as Power,
Marie Claire and Bubblegummers).




Bubblegummers

                      Bubblegummers is the leading children's footwear brand in
                      India and has an extensive presence in Latin America, Asia and
Europe. Bubblegummers offers good quality, comfortable, funny and colourful shoes
for kids (0 to 9 years) that assure the healthy growth of a child’s foot. Developed to
the strictest standards of quality, all shoes are produced with state-of-art technology
to ensure healthy foot growth, and parents can be assured that their children will
enjoy these shoes in total comfort and safety.

Power

                     Power is an internationally acclaimed world class shoe brand
                     with “P ZONE “ technology which keeps one performing all
                     day with comfort and ease. It embodies diversity with ranges
in running, training, court, basketball, football and Outdoor that combine
functionality with creativity. International pro-skaters signature shoes are designed
to meet the demanding needs of skateboarding under the Power-Skate line.
POWER is inspired by the same passion to perform that is inherent in the
athletes who use our products. POWER as a brand stands for Durability, Trends,
Responsiveness, Performance and value. Power offers a Sporty range of basic as
well as performance -oriented shoes at unbeatable prices. It is sold across five
continents via Bata retail stores and distributors’ networks.




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Hush Puppies

                        Hush Puppies emerged as a soft, breathable and very
                        comfortable shoe in 1958. It was created by Wolwerine
                        Company. Hush Puppy is known for Relaxed, classic, modern
                        and casual design.

                        Today Hush Puppies continues to innovate bringing technical
excellence in genuine style to over 120 countries by application of various types of
technologies like:

Bounce technology for shock absorption and energy return in every step.

Wave Reflex outsoles provide complete freedom of movement for feet. Natural
latex rubber and unique reverse action design waves unite to provide ultra
flexibility.

100% relax Hush Puppies collection of innovative, authentic casual footwear, mixed
textures of soft casual leathers and rich Hush Puppies worry-free suede.

Marie Claire



                     Bata Brands is the trademark owner of Marie Claire for shoes
worldwide (except in Japan and Korea). Marie Claire, a fashion lifestyle brand of
shoes with a touch of elegance that caters to the young cosmopolitan women.
Marie Claire stands for Contemporary and modern styling, adaptive to an active
lifestyle yet elegant and feminine. Marie Claire emphasizes on its style, quality and
value.

North Star



                 North Star is synonymous with street creed. Stylish, trendy
comfortable and durable, the range is ideally suited to the urban environment.




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The designs are based on retro styles, including designs from the late 80s as well
as contemporary interpretations. It is a casual yet fashionable street-style shoes
that caters to the young at heart. North Star Shoes have graphics and prints and
are shoes of style and edge. They are available in all types of materials.




Scholl




                     The name Scholl today is synonymous with feet and foot care in
over 70 countries throughout the world. Dr Scholl's from Bata aims at providing
maximum comfort whole daylong. The unique Anatomic Insole gives feet extra
cushioning and provides support from all sides. The ribbed surface of the insole
gently massages the feet while walking and its soft sole absorbs all the shocks
while walking.




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                         ENVIORNMENTAL ANALYSIS

Internal Environment

(India Shares Report) BIL is India’s largest manufacturer and marketer of footwear
product which sold over 60 million pair per year in India and overseas market. Here
in this section we will analyze resources, capability, core competencies and value
chain of Bata India limited. By doing internal analysis we will identify strength and
weakness of Bata India limited.




1) Human resource

     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. According to SATRAT Technology Centre, among all the
         leading footwear producing countries, India has the lowest labour cost
         (Rs.8.254).

     Bata has large pool of permanent employees on payroll that is 9969 as on
         January 31, 2005.

     BIL emphasis on training and skill assessment program and created a large
         pool of trained employees.

     Company has 8 trade unions and biggest and oldest plant at Batanagar. It
         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.

     BIL has good trained manpower who is 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




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         something which has not been addressed till now or it can be communication
         gap between top level and worker.

2) Brand value

Bata has created unique image in consumer mind as footwear producer. Consumer
easily connects Bata as Shoe Company. It has positioned itself as, “one Bata, one
world”. Brand value is one core competency of Bata India limited. BIL created very
strong brand value and positioned that name connect only to shoe manufacturing
company. Bata had 60 % market share in organized sector, which shows the
customer perception about BIL.




3) Physical resources

BIL has most modern leather shoe factory at Hosur geared to make international
footwear for export. Six manufacturing locations enable company to schedule
production to meet demand for a large number and varied categories of footwear.




4) Technological resources

In 2004, Bata installed point of sale management information system (POS), for
providing sales and inventory information across the company’s stores. This provides
company to plan production and optimize inventory level.




5) Backward integration

Company’s own tanneries located in Batanagar and Mokamehghat insures
uninterrupted supply of raw material. Now they are not dependant on some third
party for procurement of raw material.




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6) Huge distribution network

Bata operated through exclusive chain of executive own and franchise stores located
in prime location countrywide. Bata owns network of 300 exclusive wholesalers who
serviced 30,000 retail outlets throughout country. Overall it has over 1,600
showrooms, 27 wholesale depots and 8 distribution centers across the country.




7) Financial resources

Company had a financial collaboration with Bata BV, Holland for all types of footwear
and footwear component.




8) Research and development

Focused on key areas of product, process, material development, footwear moulds,
tannery technology with emphasis on pollution free environment. Research resulted
in breakthrough product like comfort, wind and flexible technologies.

E.g. Dr Scholl’s from Bata has manufactured an unique Antomic Insole which gives
feet extra cushioning. The ribbed surface of the insole gently massages the feet
while walking, thus boosting blood circulation and keeping people active all day.




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9) Effective organizational structure

Employees are categorized in descending hierarchy- Director, senior manager (senior
vice president, vice president, general manager), middle manager, junior manager,
selling manager, shop manager, shop employees. Marketing department is also
divided into four zones. Senior general manager is responsible for each zone,
supported by business development manager and several district level managers.



10) The financial turnaround

Bata has had a prolonged period of poor performance; it posted net losses between
2002 and 2004, slipping into operating level losses in 2004. During this period, the
company had a troubled relationship with its labor, with lock-outs and suspension of
employees and high staff costs. Leaving out raw material, the biggest contributor to
expenditure was staff costs, taking up more than 25 per cent of sales.

Recovery from troubles has taken time, but the company managed a complete write-
off of losses by 2007 (utilizing part of its securities premium following an approved
scheme of reduction of the account). Number of unviable stores was cut by 105; a
further 74 may be on the block. About 118 stores were remodeled; manufacturing
and staff costs were brought under control.

New stores were opened on a franchise model thus limiting the capital required.
Currently, franchise stores number 143.

Efforts on the front end and cost control at the back end aided the complete
transformation of the company from a loss-making to profit-making company in
CY05. In CY06, the company paid dividends after a gap of five years as well. During
the re-structuring exercise implemented during CY04-07, the company achieved
efficiency in its high manufacturing processes, high manpower and overhead costs.
Improvement in process rationalization in form of raw material cost and cost
reduction in manpower cost resulted in 13.8% improvement in gross margin during
the period.


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External Environment

The industry is on the edge of adopting the modern and state-of-the-art technology
to suit the exacting international requirements and standards. The Indian Footwear
Industry is all set for leveraging its strengths towards maximizing benefits. Strength
of India in the footwear sector originates from its command on reliable supply of
resources in the form of raw hides and skins, quality finished leather, large installed
capacities for production of finished leather & footwear, large human capital with
expertise and technology base, skilled manpower and relatively low cost labor,
proven strength to produce footwear for global brand leaders and acquired
technology competence, particularly for mid and high priced footwear segments.
India has the competitive advantage over other countries in the form of materials
and skilled manpower.

(Research and Markets) The Indian footwear retail market is expected to grow at a
CAGR of over 20% for the period spanning from 2008 to2011. Footwear is expected
to comprise about 60% of the total leather exports by 2011 from over 38% in 2006-
07. Presently, the Indian footwear market is dominated by Men's footwear market
that accounts for nearly 58% of the total Indian footwear retail market.
By products, the Indian footwear market is dominated by casual footwear market.
As footwear retailing in India remains focused on men's shoes, there exists a
plethora of opportunities in the exclusive ladies' and kids' footwear segment. The
Indian footwear market scores over other footwear markets as it gives benefits like
low cost of production, abundant raw material, and has huge consumption market.

The Footwear Industry is a significant chunk of the Leather industry in India. India
ranks second among the footwear producing countries next to China. The industry is
labor 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
gents footwear while the world’s major production is in ladies footwear. In the case
of chappals and sandals, use of non-leather material is used to manufacture these in
the domestic market.



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Bata India Ltd’s Market Share

(Wiki Invest) 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.




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                                      PEST ANALYSIS

PEST analysis stands for "Political, Economic, Social, and Technological analysis"
and     describes    a   framework    of    macro-environmental     factors   used    in   the
environmental scanning component of strategic management.

       Political factors, are how and to what degree a government intervenes in
        the economy. Specifically, political factors include areas such as tax policy,
        labour law, environmental law, trade restrictions, tariffs, and political stability.
        Political factors may also include goods and services which the government
        wants to provide or be provided (merit goods) and those that the government
        does not want to be provided (demerit goods or merit bads). Furthermore,
        governments       have   great     influence   on   the   health,   education,     and
        infrastructure of a nation.

       Economic factors include economic growth, interest rates, exchange rates
        and the inflation rate. These factors have major impacts on how businesses
        operate and make decisions. For example, interest rates affect a firm's cost of
        capital and therefore to what extent a business grows and expands. Exchange
        rates affect the costs of exporting goods and the supply and price of imported
        goods in an economy

       Social factors include the cultural aspects and include health consciousness,
        population growth rate, age distribution, career attitudes and emphasis on
        safety. Trends in social factors affect the demand for a company's products
        and how that company operates. For example, an ageing population may
        imply a smaller and less-willing workforce (thus increasing the cost of labor).
        Furthermore, companies may change various management strategies to adapt
        to these social trends (such as recruiting older workers).

       Technological factors include ecological and environmental aspects, such as
        R&D activity, automation, technology incentives and the rate of technological
        change. They can determine barriers to entry, minimum efficient production



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         level and influence outsourcing decisions. Furthermore, technological shifts
         can affect costs, quality, and lead to innovation.




PEST ANALYSIS OF BATA




Political

Shoe Industry is governed by central by Central Excise and Custom, Factory act and
Labor Law, Environmental control acts, Council for leather export, Central leather
research institute and Footwear design and development institute were promoting
industry for special purpose. Political unrest, cross border unrest, terrorism in and
out of India has direct or indirect impact on industry.




        When some restriction was lifted from import then shoe industry slowed down
         from 20 % (in 90’s) to 8-10 %( in 2004).

        Increase in excise duty led to increase in cost of footwear. (1993-94, excise
         exemption was withdrawn from shoe costing below rs. 200)

        Tax holidays for period of 10 years on full excise duty and income tax, sales
         tax, land/building and plant/machinery was given by state government of
         Himachal Pradesh, Uttaranchal, Jammu & Kashmir and Assam to promote
         manufacturing.

        Conflict of management with Mazdoor union is main weakness of BIL.

Social

        Over a period of time, as disposable income increases, consumer preference
         changed but Bata failed to recognize these social changes and they continue
         with same product over long period of time.




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       Indian market is highly fragmented between rural and urban market. Rural
        market was approximately 70% of the total market but was dominated by
        multiple medium size regional shoe players and serviced through traditional
        independent dealers.

       Bata was focusing on premium segment which account very less in footwear
        industry in India.

       Consumer has such image of Bata in their mind that they connect Bata with
        shoes only.

       India produced more of gents’ footwear while world’s major production was
        ladies footwear.

Economic

       India has 10% of world’s raw material and low tanning cost made it second in
        footwear production after China and further resulted in the bulk production in
        India.

       Due to increase in cost of raw material, cost has gone up. So profit is affected
        due to increased input cost.
       Sales and distribution cost is also very high because most of shops are owned
        by Bata company itself and staffed employee.
       High value added footwear did not find acceptance in the market and led to
        drop in sale volume. So 2 million shoes were sold at a discount of 50 % at a
        loss of 41 crore.

       Consumer switched from one product to another if alternatives are available
        in same quality and performance range and have competing price or lesser
        price.BIL produces 10% of total hawai ranged from Rs. 35-110 while
        competing local brands were selling at Rs. 25-50.Again when global trade
        open then market flooded with many international brands having variety and
        competing price.




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       Being large footwear producer, Bata enjoys economy of scale that creates
        cost advantage over any new rival.

       Bata was largest player in industry with 9-10%volume share and 60% market
        share in organized segment. It had a market share of 70% in canvas shoe
        segment and 60% in leather shoe segment. Their dominant market share
        give them power over buyer.

Technological

       Company has been in existence for more than seven decades and faces a
        challenge in switching to new product technology which is becoming very
        advanced in different companies.
       The Company heavily depends on its Promoter group for its technology. The
        Company has entered into a Technical Collaboration Agreement dated
        December 29, 2000 with Bata Limited, Canada (“Bata Canada”) for a period
        of 10 years. Company does not anticipate any withdrawal of such services in
        future operations also, in case there is any withdrawal of the services, such
        withdrawal may adversely affect the business, operations and profitability of
        the Company.
       BIL differentiated it’s product from rivals product like Comfort (using dynamic
        spring pad that acted as cushion on the feet for women’s footwear), Wind (in
        build air technology that allowed feet to breath fresh air) etc.
       But in 2004, Bata installed point of sale management information system
        (POS), for providing sales and inventory information across the company’s
        stores. This provides company to plan production and optimize inventory
        level.




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                          COMPETITORS PROFILE



      Brand              Liberty




      Consumer           The target consumers of all ages, therefore covering
      profile            the footwear requirements of an entire family.
                         Providing them with comfortable, affordable, modern
                         fashionable footwear.


      Product mix & The core product is footwear, priced to cater to almost
      pricing            all budgets.




      Distribution    & Products are marketed across the globe through 150
      retail format      distributors, 350 exclusive showrooms and over 6000
                         multi-brand outlets.


      Promotion          Print as well as television advertisements. Liberty
      methods            mostly places advertisements in news papers and
                         magazines and advertisements on the internet along
                         with a website.


(Liberty Website)




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      Brand                   Khadims




      Consumer profile Targets customers of all ages.




      Product        mix   & The products range from shoes to bags, belts and
      pricing                 other small leather accessories like wallets.


      Distribution         & It has more than 470 exclusive retail outlets across
      retail format           the country. Khadims is more popular in the East
                              than other parts of the country.


      Promotion               Internet, newspapers and magazines.
      methods


(Khadim Website)




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      Brand               Lakhani Armann Group




      Consumer            Targets customers looking for shoes to cater to their
      profile             outdoor and sports requirements.




      Product        mix Shoes - Sports Shoes, PU Injected Sports Shoes, PVC
      & pricing           Injected Sports Shoes and Leather Shoes




                          Lakhani Armann group has been manufacturing sports
      Distribution &
                          shoes for Adidas for the last 10 years and it is the only
      retail format
                          suppliers in India. Lakhani Armaan group is the largest
                          manufacturer of beach slippers in India and it also is the
                          largest manufacturer & largest exporter of canvas and
                          vulcanized shoes in India.


      Promotion           Internet.
      methods



(Lakhani Armann Website)




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                                                                                  Retail Financials


      Brand                  Relaxo




      Consumer               Targets consumer of almost all ages, caters to casual,
      profile                sports, school and formal shoe requirements.


      Product mix & It started off with the manufacture of Hawaii slippers
      pricing                and   subsequently    diversified   into    manufacturing
                             casuals,   joggers,   school     and       leather     shoes.




      Distribution     & Relaxo is largely a manufacturer but it has ventured
      retail format          into retail as well and exports its shoes to Europe.




      Promotion              Print, television and internet advertisements
      methods
(Relaxo Website)


Competitors: (Money Control Website)

                     Last Price     Market Cap. Sales               Net Profit          Total Assets
                                    (Rs. cr.)        Turnover
Bata India           179.80         1,155.46         987.44         60.74               335.80
Liberty Shoes        100.00         170.40           241.81         7.52                224.03
Mirza Intl           17.10          158.53           361.38         5.36                234.32
Crew B.O.S.          41.70          53.45            334.36         11.36               281.51
Bhartiya Inter       43.50          34.21            153.50         2.72                148.07




Fashion Retail III                                                                 Page 27 of 71
                                                                            Retail Financials


Balance Sheet                ------------------- in Rs. Cr. -------------------

                             Bata        Relaxo        Liberty     Mirza          Seax
                             India       Footwear      Shoes       Intl           Global
                                                                                  Ven

                             Dec '08     Mar '09       Mar '09     Mar '09        Mar '08


Sources Of Funds
Total Share Capital          64.26       6.00          17.04       18.54          5.75
Equity Share Capital         64.26       6.00          17.04       18.54          5.75
Share          Application 0.00          0.00          0.00        0.00           0.00
Money
Preference             Share 0.00        0.00          0.00        0.00           0.00
Capital
Reserves                     189.17      67.96         105.30      99.74          0.65
Revaluation Reserves         37.72       0.00          0.00        0.00           0.00
Networth                     291.15      73.96         122.34      118.28         6.40
Secured Loans                35.91       75.90         82.65       116.04         0.00
Unsecured Loans              8.72        32.48         19.03       0.00           0.00
Total Debt                   44.63       108.38        101.68      116.04         0.00
Total Liabilities            335.78      182.34        224.02      234.32         6.40




Application Of Funds
Gross Block                  349.34      194.10        131.73      227.91         3.96
Less:                 Accum. 232.31      53.64         47.08       66.17          2.58
Depreciation
Net Block                    117.03      140.46        84.65       161.74         1.38
Capital        Work       in 0.86        18.61         0.13        5.66           0.00
Progress
Investments                  17.25       0.06          20.34       0.90           0.00



 Fashion Retail III                                                          Page 28 of 71
                                                                Retail Financials



Inventories                 292.23   39.81    67.27    83.47         1.83
Sundry Debtors              25.89    19.73    70.43    24.75         2.36
Cash        and       Bank 8.80      2.73     5.15     2.18          0.05
Balance
Total Current Assets        326.92   62.27    142.85   110.40        4.24
Loans and Advances          96.75    15.32    28.17    23.66         1.07
Fixed Deposits              17.96    0.00     0.00     0.00          0.00
Total    CA,      Loans   & 441.63   77.59    171.02   134.06        5.31
Advances
Deffered Credit             0.00     0.00     0.00     0.00          0.00
Current Liabilities         194.36   50.19    50.78    62.25         0.07
Provisions                  54.26    4.19     1.33     5.79          0.21
Total CL & Provisions       248.62   54.38    52.11    68.04         0.28
Net Current Assets          193.01   23.21    118.91   66.02         5.03
Miscellaneous               7.65     0.00     0.00     0.00          0.00
Expenses
Total Assets                335.80   182.34   224.03   234.32        6.41

Contingent Liabilities      54.62    11.22    10.54    93.21         0.00
Book Value (Rs)             39.44    61.63    71.80    12.76         11.14



 Source : Religare Technova




 Fashion Retail III                                              Page 29 of 71
                                                                 Retail Financials



          HORIZONTAL ANALYSIS OF TWO YEARS FINANCIAL
                               STATEMENTS



                               BALANCE SHEET
                                        Base Year
   Particulars                 2008     2007        CHANGE   % CHANGE
   Source of Funds
   Equity Share Capital        64.26    64.26       0        0
   Reserves and Surplus        189.17   147.23      41.94    28.48%
   Loan Funds
   Secured Loans               35.91    45.07       -9.16    -20.32%
   Unsecured Loans             8.72     6.73        1.99     29.57%
   USES OF FUNDS
   Fixed Assets
   Gross Block                 349.34   324.52      24.82    7.65%
   Accumulated Depreciation    232.31   220.6       11.71    5.31%
   less: Revaluation Reserve   37.72    39.89       -2.17    -5.44%
   Net Block                   79.3     64.04       15.26    23.83%
   Capital Work-in-progress    0.86     0.31        0.55     177.41%
   Investments                 17.25    17.25       0        0
   Net Current Assets
   Current Assets, Loans and 441.62     412.56      29.06    7.04%
   Advances
   Less: Current Liabilities & 248.62   232.05      16.57    7.14%
   Provisions
   Total net Current Assets    193.01   180.51      12.5     6.92%
   Miscellaneous     Expenses 7.65      1.2         6.45     537.5%
   not written off
   TOTAL                       298.07   263.3       34.77    13.21%




Fashion Retail III                                                Page 30 of 71
                                                                            Retail Financials


Analysis:

    1) Reserves and Surplus increased by 28% over previous year as the company made
        certain reserves, which are:

                     Reserves & Surplus                Rs. Cr.

                     Share premium Reserves            50.14

                     General Reserves                  34.17

                     Profit & Loss Account Surplus     104.87




    2) Decrease in Secured Loans as the company made certain short term loans of Rs.
        35.91 cr.

    3) Unsecured Loans has increased from 6.73 cr to 8.72 Cr. Major reason for this growth
        is that company made fixed deposits of 8.72 Cr. during this year. Though unsecured
        loans involves very high rate of interest.

    4) Current assets increased by 7% over previous year, the assets scheduled by the
        company are:

                     Current Assets                   Rs. Cr.

                     Cash & Bank Balances             26.76

                     Trade receivables                25.89

                     Loans & Advances                 79.28

                     Inventory Raw Material           19.06

                     Inventory Finished Goods         254.95

                     Inventory – Other                0.71




Fashion Retail III                                                           Page 31 of 71
                                                                               Retail Financials


    5) Current Liabilities and Provisions increased by 7.14%, liabilities made during the year
        are:

                     Current Liabilities & provisions     Rs. Cr.

                     Current Liabilities & provisions     181.59

                     Other Current Liabilities            12.77

                     Total Provision                      54.26




    6) Increase in fixed assets by 7.64% over previous year, the assets are as follows:

                      Gross Block                       Rs. Cr.

                      Land & Building                   75.49

                      Plant & Machinery                 188.99

                      Other Assets                      84.85




Graph:

         500
         450
         400
         350
         300
         250
         200
         150
         100
          50                                                                          2008
           0                                                                          2007




Fashion Retail III                                                              Page 32 of 71
                                                             Retail Financials


                          PROFIT AND LOSS STATEMENT
                                        Base Year
Particulars                  2008       2007        CHANGE   % CHANGE
Income:
Net Operating Income         989.96     867.76      122.2    14.08%


Expenses:
Material Consumed            469.42     412.35      57.07    13.84%
Manufacturing Expenses       49.68      46.69       2.99     6.4%
Personnel Expenses           173.22     184.06      -10.84   -5.89%
Selling Expenses             60.6       47.43       13.17    27.77%
Administrative Expenses      134.55     104.97      29.58    28.18%


Cost Of Sales                887.47     795.51      91.96    11.56%


Operating Profit             102.49     72.25       30.24    41.85%


Other Recurring Income       6.43       5.12        1.31     25.59%
Adjusted PBDIT               108.91     77.37       31.54    40.77%


Depreciation                 18.91      14.92       3.99     26.74%
Other Write Offs             0.09       0.09        0        0


Adjusted PBIT                89.91      61.36       28.55    46.53%


Financial Expenses           17.3       13.54       3.76     27.77%


Adjusted PBT                 72.61      47.82       24.79    51.84%


Tax Charges                  11.1       4.06        7.04     173.4%


Adjusted PAT                 61.51      43.76       17.75    40.56%
Non Recurring Items          -4.8       7.33        -12.13   -165.48%
Other           Non    Cash 4.03        -3.64       7.67     -210.71%



Fashion Retail III                                            Page 33 of 71
                                                                                Retail Financials


Adjustments


Reported Net Profit                  60.74         47.44          13.3          28.04%


APPROPRIATIONS
Equity Dividend                      16.07         12.85          3.22          25.05%
Preference Dividend                  0             0              0
Retained Earnings                    110.94        72.56          38.38         52.9%



Analysis:

    1) Against an increase in sales of 12.6% in the year 2007, turnover further increased by
        14% in the year 2007. The growth has been substantially contributed by renovation
        of existing stores, new stores of international standard in prime locations and
        keeping shops open for longer hours and seven days in a week, wherever
        permissible.

             Increase in Net Operating by 14% over previous year, as company made
                 certain investments, like:

               Operating Income                         Rs. Cr.

               Sales Manufacture                        884.79

               Sales Trading                            126.27

               Miscellaneous Services Income            1.27

               Fiscal Benefits Received                 0.49

               Less Excise                              22.86




             The other reason behind it was, the company has made a profit before tax of
                 Rs. 7184 lacs in the year 2008. Profits of quarter ended 31st December 2007
                 included Rs. 376.8 lacs on account of one time gain on sale of assets.




Fashion Retail III                                                               Page 34 of 71
                                                                            Retail Financials




    2) Materials Consumed by the company during this year are:

                Materials Consumed                    Rs. Cr.

                Raw Materials consumed                1899.96

                Packing Materials consumed            177.96

                Stores and other consumables 34.08
                consumed

                Purchase of trading goods             2475.36

                Decrease/(increase) in inventory      106.87




    3) Increase in Manufacturing expenses by 6.4%, the expenses made by the company
        are, Power & fuel Expenses Rs. 28.22 Cr. And Miscellaneous Manufacturing expenses
        is Rs. 21.46 Cr.

    4) Selling Expenses: sells over 45 million pairs of footwear every year, through 1200
        retail stores.

             Selling Expenses made by the company are:

                     Selling Expenses              Rs. Cr.

                     Advertising Expenses          16.35

                     Distribution Expenses         28.18

                     Other Selling Expenses        16.07




        Administrative Expenses: A Staff cost has reduced (20.6% of turnover in 2007
        against 23.3% of turnover in 2006) and the retail business has been focusing on
        continued flexibility through restructuring measures taken by the management.




Fashion Retail III                                                           Page 35 of 71
                                                                                 Retail Financials




             Other administrative expenses made by the company are:

                     Administrative Expenses                    Rs. Cr.

                     Rent & Taxes                                7.73

                     Rent Paid                                  70.58

                     Auditors Remuneration                       0.77

                     Printing & stationery                       3.02

                     Insurance Premium Paid                      3.42

                     Travelling expenses                        11.06

                     Other Administration                       37.96
                     expenses




    5) Recurring Income are interest Income Rs.1.98 Cr. And Miscellaneous Income is Rs.
        4.45 Cr.

    6) Profit & Loss Account includes an expense of Rs. 62.1 million (Inclusive of Rs 29.7
        million (net of tax) for earlier years) on account of clarification issued by the Expert
        Advisory Committee of The Institute of Chartered Accountants of India on lease rent
        equalization on rented premises as per Accounting Standard-19 .

    7) The company operates in two segments –

                     (i)    Manufacture and sale of footwear.
                     (ii)   Investment in joint venture for surplus property Development.

    8) Profit before tax for first half of the year was Rs. 3434.6 lacs has increased by 80.8%
        over the corresponding period last year

    9) The company announced a dividend of 20% (Total Dividend 20% i.e. 15%+
        additional 5% dividend to celebrate 75 years.) on equity shares on 31 march ’08.
        Later it again announced on 27 Feb’09 of 25%.



Fashion Retail III                                                                Page 36 of 71
                                                                                                     Graph:




                                                                                       1000
                                                                                              1200




                                                       200
                                                                     400
                                                                           600
                                                                                 800




                                        -200
                                                   0
                           Net Operating Income




Fashion Retail III
                             Material Consumed
                         Manufacturing Expenses
                             Personnel Expenses
                                Selling Expenses
                         Administrative Expenses
                                   Cost Of Sales
                                Operating Profit
                         Other Recurring Income
                                 Adjusted PBDIT
                                   Depreciation
                                Other Write Offs
                                  Adjusted PBIT
                              Financial Expenses
                                   Adjusted PBT
                                    Tax Charges
                                   Adjusted PAT
                            Non Recurring Items
                     Other Non Cash Adjustments
                             Reported Net Profit
                                 Equity Dividend
                               Retained Earnings
                                                       2007
                                                              2008




Page 37 of 71
                                                                                                              Retail Financials
                                                                                        Retail Financials



                                      FINANCIAL RATIOS



                                        I. ACTIVITY RATIO

                 Ratio                                 2008                            2007

Inventory Turnover Ratio                                1.77                           1.48
Fixed Assets Turnover Ratio                            12.48                           13.55
Total Assets Turnover Ratio                             3.32                           3.29
DSO                                                     9.55                           10.8



Graph:

      16
                                             13.55
      14                             12.48
      12                                                                                10.8
                                                                                9.55
      10
       8
       6
       4                                                    3.32    3.29
                1.77   1.48
       2
       0
             Inventory turnover   Fixed Assets turnover Total Assets turnover      DSO
                    ratio                 ratio                 ratio

                                                2008    2007




Fashion Retail III                                                                       Page 38 of 71
                                                             Retail Financials




Working Note:

                 Ratio                  2008               2007

 Inventory Turnover Ratio =    =519.1/292.23     =459.04/308.19
                 COGS          = 1.77            = 1.48
             Inventories
Fixed Assets Turnover Ratio=   = 989.96/79.3     = 867.76/64.04
                 Sales         =12.48            = 13.55
         Net Fixed Assets
Total Assets Turnover Ratio = = 989.96/298.07    = 867.76/263.3
                 Sales         = 3.32            = 3.29
            Total Assets
                DSO =          =                 = 25.89/(867.76/365)
             Receivables       25.89/(989.96/365) =10.8
        Avg. Sales Per Day     = 9.55




Fashion Retail III                                            Page 39 of 71
                                                                           Retail Financials


                               II.     LIQUIDITY RATIOS

Liquidity means the funds that are available to manage the day to day operations of
an organization or business. In a situation of excess liquidity, profitability will go
down as there will be idle money with the business that could have been judiciously
employed somewhere else.



             Ratio                           2008                       2007

Working Capital                              -55.61                     -51.54

Current Ratio                                 .77                        .78

Quick Ratio                                  -0.39                      -0.55




Analysis:

    1) Liquidity Ratios refers organization ability to pay short term obligations.
    2) Current Ratio indicates payment capacity of the organization obligation which
        is less than a year.
             Ideal current ratio for a firm is 2:1; in this case companies’ current
                 ratio is below the ideal level.
             Quick Ratio indicates very short term liquidity of the organizations
                 obligations less than three months. Quick assets are those assets
                 which can be quickly converted into cash. Generally a quick ratio of 1:1
                 is considered to be the ideal ratio.




Fashion Retail III                                                          Page 40 of 71
                                                                                              Retail Financials


Graph:


                                       Liquidity Ratio
                                       current Ratio     Quick Ratio


                       0.77                                     0.78




                              2008                                     2007


                                     -0.39
                                                                              -0.55




Working Note:

                     Ratio                                     2008                            2007

            Working Capital =                          = 441.62 – 248.62              = 412.56 – 232.05

 Current Assets - Current Liabilities                  = 193 Cr.                      = 180.51 Cr.

            CURRENT RATIO =

               Current Assets                          = 441.62/248.62                = 412.56/232.05

             Current Liabilities                       = 1.78                         = 1.78

              QUICK RATIO =                            = (441.62 –                    = (412.62 –
                                                       292.23)/248.62                 308.19)/232.05
      Current Assets-Inventories
                                                       = .53                          = .45
             Current Liabilities




Fashion Retail III                                                                             Page 41 of 71
                                                                        Retail Financials


                           III.   PROFITABILITY RATIOS

             Ratio                       2008                        2007

Gross Profit                            47.5%                       47.1%

Net Profit                              6.21%                       5.04%

Return on Assets                        20.37%                      18.01%

Return On Equity                        23.46%                      22.43%




Analysis:

    1) The gross profit ratio reflects the direct efficiency with which the
        management produces each unit of product. This ratio indicates the average
        spread between the cost of goods sold and the sales revenue.
    2) In this case Gross Profit of the company is almost same in both the years.
    3) The Net Profit ratio reflects the overall efficiency of the company in
        manufacturing, administering and selling the products.
    4) Net profit margin of the company increased from 5.04% to 6.21%, which
        indicates the efficiency of the company.
    5) ROA; Return on Assets indicates the efficiency of Assets in the company. It
        has increased from 20.37% to 18.01% over 2007.
    6) ROE; Return on Equity indicates the utilization of owner’s funds. It has
        increased from 23.46% to 22.43%.




Fashion Retail III                                                       Page 42 of 71
                                                                                    Retail Financials


Graph:

          50.00%      47.50%47.10%
          45.00%
          40.00%
          35.00%
          30.00%
          25.00%                                                         23.46%22.43%
                                                      20.37%
          20.00%                                            18.01%

          15.00%
          10.00%                      6.21% 5.04%
           5.00%
           0.00%
                       Gross Profit    Net Profit    Return on Assets   Return On Equity

                                            2008    2007



Working Note:

                     Ratio                             2008                          2007

           Gross Profit% =                   =(470.86/989.96)*100          =(408.72/867.76)*10
                                                                           0
 (Gross Profit/Net Sales) * 100              = 47.5 %
                                                                           = 47.1%
 Where, Gross Profit = Sales–COGS

             Net Profit% =                   = (61.51/989.96)*100          = (43.76/867.76)*100

  (Net Profit After Tax/sales) *             = 6.21%                       = 5.04
                     100

     Return On Assets = (Net                 = (60.74/298.07)*100          = (47.44/263.3)*100
     Profit/Total Assets)*100
                                             = 20.37%                      = 18.01%

     Return On Equity = (Net                 =(60.74/253.43)*100           =(47.44/211.49)*100
     Profit/Total Equity)*100
                                             = 23.76%                      = 22.43%




Fashion Retail III                                                                   Page 43 of 71
                                                                                     Retail Financials


                                   IV.      SOLVENCY RATIO




Solvency Ratio measures the riskiness of business in terms of debt gearing.

                Ratio                               2008                            2007

Debt Equity Ratio                                      1                            .88

TIE (Times Interest Earned)                         5.197                           4.53




Analysis:

    1) Debt Equity Ratio indicates obligations that to be paid after a year, in this
        case debt equity ratio is 1 therefore it indicates lower risks.
    2) TIE; times Interest Earned or Interest Coverage ratio is used for
        knowing the solvency of the company. It increased from previous year from
        .66% which indicates lower financial risks.

Graph:


                               Debt Ratio      TIE (Times Interest Earned)


                                    5.197
                                                                             4.53




                        1                                      0.88



                            2008                                      2007




Fashion Retail III                                                                    Page 44 of 71
                                                            Retail Financials


Working Note:

                     RATIO                2008              2007

              Debt Ratio =       = 298.06/298.07   = 263.29/298.07

                Total Debt       = .999            = .88

               Total Assets

  TIE (Times Interest Earned)=   = 89.91/17.3      = 61.36/13.54

                     EBIT        = 5.197           = 4.53

           Interest Expense




Fashion Retail III                                           Page 45 of 71
                                                                      Retail Financials



                      COMPARATIVE RATIO ANALYSIS

                              (BATA AND LIBERTY)

                             I.      ACTIVITY RATIO

                                      Ratio for Bata

             Ratio                          2008                    2007
 Inventory Turnover Ratio         = 519.1/292.23         = 459.04/308.19
    = COGS/Inventories            = 1.77                 = 1.48
   Fixed Assets Turnover          = 989.96/79.3          = 867.76/64.04
  Ratio = Sales/Net Fixed         = 12.48                = 13.55
             Assets
   Total Assets Turnover          = 989.96/298.07        = 867.76/263.3
Ratio = Sales/Total Assets        = 3.32                 = 3.29
            DSO =                 = 25.89/(989.96/365)   = 25.89/ (867.76/365)
Receivables/Average sales         = 9.55                 = 10.8
            per day



                                     Ratio for Liberty

             Ratio                          2008                    2007
 Inventory Turnover Ratio         = 160.19/67.27         = 138.02/67.27
    = COGS/Inventories            = 2.38                 = 2.05
   Fixed Assets Turnover          = 248.79/85.46         = 222.43/75.01
  Ratio = Sales/Net Fixed         = 2.91                 = 2.96
             Assets
   Total Assets Turnover          = 248.79/233.19        = 222.43/224.91
Ratio = Sales/Total Assets        = 1.06                 = 0.988
            DSO =                 = 70.43/(248.79/365)   = 70.3/(222.43/365)
Receivables/Average sales         = 103.5                = 115.24
            per day



Fashion Retail III                                                     Page 46 of 71
                                                                          Retail Financials


Inventory Turnover Ratio


                           Inventory turnover ratio

                     2.5
                      2
                     1.5                                           bata

                      1                                            liberty

                     0.5
                      0
                             2008             2007




Analysis:

The inventory turnover ratio shows with what rate the inventory is turning into
receivables through sales.

The Inventory turnover of both the firms was favorable as it has gone up for Bata
from 1.48 in the year 2007 to 1.77 in the year 2008, and for liberty it increased from
2.05 in the year 2007 to 2.38 in the year 2008. This depicts the proper management
of Inventory as higher inventory turnover is always desirable.

If we compare the current figures of both the firms then, we can conclude that this
ratio of Liberty (2.38) is more than that of Bata (1.77).




Fashion Retail III                                                           Page 47 of 71
                                                                        Retail Financials


Fixed Assets Turnover Ratio


                                Fixed Asset Turnover
                                         bata   liberty


                                                      13.55
                      12.48




                                2.91                             2.96




                         2008                             2007




Analysis:

The fixed assets turnover ratio indicates the contribution of net fixed assets towards
the sales. In the case of Bata the fixed asset turnover has decreased from 13.55 in
the year 2007 to 12.48 in the year 2008, this is an unfavorable trend for bata as it
shows Bata’s inability to properly utilize its fixed assets.
Whereas the fixed asset turnover for liberty was also unfavorable as it decreased
from 2.96 in the year 2007 to 2.91 in the year 2008.
Now, seeing their current figures, Bata (12.48) is much more than Liberty’s (only
2.91) i.e. Bata’s assets are much more in amount than this domestic retailer, Liberty.




Fashion Retail III                                                       Page 48 of 71
                                                                         Retail Financials


Total Assets Turnover Ratio


                        Total Assets Turnover ratio
                                      Bata    Liberty


                     3.32                               3.29




                              1.06                               0.988




                       2008                               2007




Analysis:

Total Asset Turnover Ratio indicates the contribution of Total Assets to Sales. The
Assets ratio for Bata has increased from 3.29 in 2007 to 3.32 in 2008. This is a
favorable trend for Bata. It indicates that in the year 2008, Bata generated a sale of
Rs. 3.32 for every one rupee of net assets.
In case of Liberty, the ratio has increased in the year 2008 i.e from 0.988 to 1.06,
again showing a favorable trend.
Bata (3.32) again takes an upper hand in terms of total asset turnover than Liberty
(1.06).




Fashion Retail III                                                        Page 49 of 71
                                                                         Retail Financials


Days Sales Outstanding


                                         DSO
                                        bata   Liberty


                                                                115.24
                                103.5




                       9.55                         10.8


                         2008                            2007




Analysis:

DSO stands for day’s sales outstanding and it indicated the average collection period
of the company. A faster collection period is always desirable as it indicates prompt
payments by debtors.

Bata show a favorable figure at 9.55 days for 2008 which is a decrease from 10.8 in
2007.

Liberty group’s collection period is dangerously high at 103.5 days indicating poor
quality of debtors and a wrong credit policy, though it decreased from 115.24 to
103.5.

Between these two, Bata (only 9.55 days) is seating in a much comfortable seat
than Liberty (103.5 days).




Fashion Retail III                                                        Page 50 of 71
                                                                        Retail Financials



                         II.    LIQUIDITY RATIO

                                  Ratio for Bata

       Ratio for Bata                     2008                       2007

    Working Capital =          = 193.01 – 248.62          = 180.51 – 232.05
     Current Assets –          = -55.61                   = -51.54
     Current Liability
     Current Ratio =           = 193.01/248.62            = 180.51/232.05
Current Assets/Current         = .77                      = .78
           liability
       Quick Ratio =           = (193.01-292.23)/248.62   = (180.51 –
    (Current Assets –          = -0.39                    308.19)/232.05
 Inventories)/ Current                                    = -0.55
          Liabilities



                                  Ratio for Liberty

     Ratio for Liberty                    2008                       2007

    Working Capital =          = 125.84 – 54.75           = 124.67 – 57.94
     Current Assets –          = 71.09                    = 66.73
     Current Liability
     Current Ratio =           = 125.84/54.75             = 124.67/57.94
Current Assets/Current         = 2.30                     = 2.15
           liability
       Quick Ratio =           = (125.84 – 67.27)/54.75   = (124.67 – 67.27)/54.75
    (Current Assets –          = 1.07                     = 1.05
 Inventories)/ Current
          Liabilities




Fashion Retail III                                                       Page 51 of 71
                                                                              Retail Financials


Working Capital


                                 Working Capital

              80
              60
              40
                                                                         bata
              20
                                                                         liberty
               0
                         2008                   2007
             -20
             -40
             -60




Analysis:

Working Capital is a measure of both company’s efficiency and its short-term
financial health. The Working capital of Bata is negative which indicates that a
company currently is unable to meet its short-term liabilities with its current assets.

Liberty in this case is positive and is increasing from 66.73 in 2007 to 71.09 in 2008
which indicates that company is able to pay off its short-term liabilities.

Between both these two, now Bata (-55.61) is in trouble because compares to
Liberty (71.09) it is running short in terms working capital.




Fashion Retail III                                                             Page 52 of 71
                                                                            Retail Financials


Current Ratio


                                    Current Ratio
                                        bata   liberty


                                  2.3
                                                                2.15




                         0.77                       0.78




                          2008                           2007



Analysis:

Current Ratio is the ratio between an organization’s current assets and current
liabilities and it measures the short term solvency of the business. It signifies the
firm’s ability to liquidate its assets to pay of its current liabilities. The ideal current
ratio for a firm should be 2:1.
Though the ideal current ratio for any firm is 2:1 but it is evident from the graph
that neither of the companies has achieved the ideal level.

The above graph shows the comparison between the Current Ratios of Bata and its
competitor Liberty in the years 2007 and 2008. From the above graph we see that
the there is a small change in the current ratio of Bata (from 0.78 to 0.77) while the
current ratio of Liberty has increased in 2008 from 2.15 to 2.3.

The reason for the increase is due to increase in Current Assets and reduction in
current liabilities. And the reason why the current Ratio for Liberty has increased is
due to the increase in its current assets.

Between these two companies, the ratio between assets and liabilities is more in
favor of Liberty than Bata.




Fashion Retail III                                                           Page 53 of 71
                                                                           Retail Financials


Quick Ratio




                                         Quick Ratio
                                           Bata   Liberty



                                  1.07                           1.05




                           2008                           2007
                        -0.39
                                                       -0.55




Analysis:

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. Generally a quick ratio of 1:1 is considered to be the ideal ratio.

The above graph shows that the Quick ratio for Bata is negative (-0.39 in 2008 from
-0.55 in 2007) which indicates least amount of usage of resources. However, in case
of Liberty, the quick ratio is at the ideal level (1.07 in 2008 from 1.05 in 2007).




Fashion Retail III                                                          Page 54 of 71
                                                                   Retail Financials



                          III. PROFITABILITY RATIOS

                                   Ratio for Bata

             Ratio                       2008                    2007

      Gross Profit% =         = (470.86/989.96)*100   = (408.72/867.76)*100
     (Gross Profit/Net        = 47.5%                 = 47.1%
         Sales)*100
       Net Profit% =          = (61.51/989.96)*100    = (43.76/867.76)*100
      (Net Profit After       = 6.21%                 = 5.04
      Tax/Sales)*100
Return on Assets(ROA) =       = (60.74/298.07)*100    = (47.44/263.3)*100
     (Net Profit/Total        = 20.37%                = 18.01%
        Assets)*100
Return on Equity (ROE) = = (60.74/253.43)*100         = (47.44/211.49)*100
      (Net Profit/total       = 23.76%                = 22.43%
        Equity)*100



                                  Ratio for Liberty

      Ratio for Liberty                  2008                    2007

      Gross Profit% =         = (88.6/248.79)*100     = (84.41/222.43)*100
     (Gross Profit/Net        = 35.61%                = 37.95%
         Sales)*100
       Net Profit% =          = (12.23/248.79)*100    = (17.77/222.43)*100
      (Net Profit After       = 4.92%                 = 7.98%
      Tax/Sales)*100
Return on Assets(ROA) =       = (16.05/233.19)*100    = (17.02/224.91)*100
     (Net Profit/Total        = 6.88%                 = 7.57%
        Assets)*100
Return on Equity (ROE)=       = (16.05/114.82)*100    = (17.02/98.86)*100
      (Net Profit/total       = 13.98%                = 17.22%
        Equity)*100




Fashion Retail III                                                  Page 55 of 71
                                                                           Retail Financials


Gross Profit Percent


                                   Gross Profit

              50

              40

              30                                                        Bata
                                                                        Liberty
              20

              10

               0
                        2008                   2007




The gross profit ratio tells us about the direct or operational efficiency of the
business. It reflects the efficiency with which the management produces each unit of
product.
In this case Bata shows direct efficiency with an increase of 47.5% in the year 2008
from 47.1% over 2007. In case of Liberty, Gross profit margin shows inefficiency as
gross profit has decreased to 35.61%in the year 2008 from 37.95% in the year
2007.

Bata’s (47.5) direct efficiency is more than that of Liberty (35.61) in 2008.




Fashion Retail III                                                          Page 56 of 71
                                                                        Retail Financials


Net Profit Percent


                                        Net Profit
                                         bata   Liberty

                                                                 7.98

                        6.21
                                 4.92                5.04




                          2008                            2007




Analysis:

The net profit margin tells us about the overall efficiency of the business. The net
profit ratio for Bata has increased from 5.04% in 2007 to 6.21% in 2008.
In case of Liberty the Net Profit ratio has decreased considerably from 7.98%% in
2007 to 4.92% in 2008.
Bata’s (6.21) overall efficiency in more than that of Liberty (4.92).




Fashion Retail III                                                       Page 57 of 71
                                                                      Retail Financials


Return On Assets


                              Return On Assets
                                     bata   Liberty




                     20.37
                                                 18.01




                              6.88                           7.57




                       2008                           2007




Analysis:

Return on assets indicates the efficiency of the total assets, i.e., how much the
assets are yielding. In the case of Bata, the return on assets has increased from
18.01% in 2007 to 20.37% in 2008. This indicates better and improved utilization of
total assets.
But in the case of liberty return on assets decreased from 7.57 in 2007 to 6.88 in
2008.




Fashion Retail III                                                     Page 58 of 71
                                                                       Retail Financials


Return On Equity


                               Return on Equity
                                       Bata   Liberty


                      23.76
                                                  22.43

                                                               17.22
                               13.98




                        2008                            2007




Analysis:

Return on equity indicates utilization of owner’s funds. Here total equity includes
equity share capital, share application money and the reserves & surplus. In the
above case of Bata the return on equity has increased from 22.43% in 2007 to
23.76% in 2008.


For Liberty it decreased from 17.22% in 2007 to 13.98% in 2008.




Fashion Retail III                                                      Page 59 of 71
                                                                      Retail Financials



                        IV.    SOLVENCY RATIO

                                    Ratio for Bata

            RATIO                       2008                    2007

  Debt Equity Ratio =         = 298.06/253.43          = 263.29/211.49
    Total Debt/ Total         = 1.17                   = 1.24
            Equity
   Total Debt Ratio =         = 298.06/298.07          = 263.29/263.3
   Total Debts/ Total         = .999                   =1
            Assets
   TIE (times Interest        = 89.91/17.3             = 61.36/13.54
         earned) =            = 5.197                  = 4.53
      EBIT/Interest
          Expenses



                                   Ratio for Liberty

            RATIO                       2008                    2007

  Debt Equity Ratio =         = 233.19/114.82          = 224.91/98.86
    Total Debt/ Total         = 2.03                   = 2.27
            Equity
   Total Debt Ratio =         = 233.19/233.19          = 224.91/224.91
   Total Debts/ Total         =1                       =1
            Assets
   TIE (times Interest        = 25.75/13.41            = 29.14/8.88
         earned) =            = 1.92                   = 3.2
      EBIT/Interest
          Expenses




Fashion Retail III                                                     Page 60 of 71
                                                                         Retail Financials


Debt Equity Ratio


                                 Debt Equity Ratio
                                        bata   Liberty


                                                                2.27
                                 2.03


                        1.17                        1.24




                          2008                           2007




Analysis:

Debt/ Equity ratio measures the relationship between debt and equity. A lower
debt/equity ratio indicates superior solvency or less financial risk. The debt/equity
ratio of Bata has decreased from 1.24 in 2007 to 1.17 in 2008. This indicates that
the company is working on to decrease its debts. Therefore, it indicates less financial
risk in the business and superior solvency.



From the above graph we conclude that the Debt Equity ratio for both the
companies has reduced in 2008, although more remarkably in the case of Liberty.
Bata has been able to reduce its debt equity ratio by increasing its equity while
Liberty has achieved a much lower debt equity ratio by decreasing its debt
remarkably and also increasing its equity significantly.




Fashion Retail III                                                        Page 61 of 71
                                                                      Retail Financials


Total Debt Ratio


                                Total Debt Ratio
                                      Bata   Liberty

                         1      1                      1      1




                         2008                          2007




Analysis:

Total Debt ratio measures the relationship between total debt and total assets. A
ratio of 1 show that debt and asset funding are equal whereas the ratio of 1.5 shows
that there is higher debt gearing in the business.




Fashion Retail III                                                     Page 62 of 71
                                                                         Retail Financials


TIE (Times Interest Earned)


                                           TIE

              6

              5

              4
                                                                      Bata
              3                                                       Liberty
              2

              1

              0
                        2008                     2007




Analysis:

Times interest earned ratio measures the relationship between Earnings before
interest and tax (EBIT) and total interest expenditure. Lower interest coverage ratio
or TIE indicates high financial risk as high interest is always undesirable. The Times
interest earned ratio of Bata has increased from 4.53 in 2007 to 5.197 in 2008.
Therefore, it indicates lesser financial risk in the business.
While in the case of liberty the TIE has decreased.




Fashion Retail III                                                        Page 63 of 71
                                                                    Retail Financials



                       V.   MARKET TEST RATIO



                                    Ratio for Bata

             Ratio                      2008                   2007

 Earnings Per Share =       = 60.74/6.42             = 47.44/6.42

  Net Profit after Tax/     = 9.45                   = 7.38
    Number of issued
     ordinary shares
  Dividend per Share=       = 16.07/6.42             = 12.85/6.42
 Dividends/ Number of
                            = 2.5                    =2
issued ordinary shares
     Dividend Payout        = (2.5*100)/9.45         = (2*100)/7.38
 Ratio= (Dividend per
                            = 26.45%                 = 27.1%
 share*100)/ Earnings
          per share




Fashion Retail III                                                   Page 64 of 71
                                                                       Retail Financials


Earnings per Share




                              Earning Per Share
                                           Bata   Liberty

                                   37.37                    34.51


                            9.45                     7.38


                             2008                     2007




Analysis:

The portion of a company's profit allocated to each outstanding share of common
stock. Earnings per share serve as an indicator of a company's profitability. Greater
earning per share means better returns or improved returns. The EPS of Bata has
increased to 37.37 in the year 2008 over 2007.

The Earnings per share of liberty also increased over previous year.




Fashion Retail III                                                      Page 65 of 71
                                                                     Retail Financials


Market Test Ratio




                                 Market test Ratio
                        Dividend per share   Dividend payout Ratio


                                  26.45                 27.1




                           2.5                   2


                           2008                  2007




Analysis:

For Bata dividends paid per share has increased from 2 in 2007 to 2.5 in 2008.
Whereas the dividend payout ratio decreased from 27.1 in the year 2007 to 26.45 in
the year 2008.




Fashion Retail III                                                    Page 66 of 71
                                                                             Retail Financials



                                    SWOT ANALYSIS


A SWOT analysis must first start with defining a desired end state or objective. It
may be incorporated into the strategic planning model.


        Strengths: attributes of the person or company that are helpful to achieving
         the objective.
        Weaknesses: attributes of the person or company that are harmful to
         achieving the objective.
        Opportunities: external conditions that is helpful to achieving the objective.
        Threats: external conditions which could do damage to the objective.


Identification of SWOTs is essential because subsequent steps in the process of
planning for achievement of the selected objective may be derived from the SWOTs.
First, the decision makers have to determine whether the objective is attainable,
given the SWOTs. If the objective is NOT attainable a different objective must be
selected and the process repeated.




Strengths


        The brand ‘Bata’ is closely identified with footwear by consumers
        An extensive retail network of owned and franchised stores enables the
         Company to reach out to consumers across the length and breadth of the
         country
        The Company’s own tanneries located in Batanagar and Mokamehghat
         ensures uninterrupted supply of raw materials
        Six manufacturing locations enable the Company to schedule production to
         meet demand for a large number and varied categories of footwear
        Being a part of the Bata Shoe Organization gives the Company access to new
         designs, brands and production technologies



Fashion Retail III                                                            Page 67 of 71
                                                                        Retail Financials


Weaknesses


        The Company has a large labor force resulting in high employee costs
        The Company has been in existence for more than seven decades and faces a
         challenge in switching to new production technologies


Opportunities


        India is a very large market and offers good demand potential for footwear
         which is an item of mass consumption
        Low per-capita footwear consumption in India provides opportunity to the
         Company which has large production capacity spread over six locations
        The Company sees potential in leveraging the ‘Bata’ brand for marketing
         other merchandise consumer products


Threats


        The Company faces competition from the unorganized market which is able to
         sell footwear at low cost due to lower overheads and manufacturing costs
     Opening of the Indian market to imports has resulted in the Company facing
         competition from cheap imports




Fashion Retail III                                                       Page 68 of 71
                                                                         Retail Financials


              SWOT ANALYSIS OF BATA AFTER ANALYSING RATIOS

STRENGTH

     Proper management of the company is leading to its growth in inventory
      turnover ratio indicating it is growing.

     Though the fixed assets of Bata are decreasing but the total assets are
      increasing indicating that the current assets are increasing.

     Return on assets indicates the efficiency of the total assets, i.e., how much
        the assets are yielding. In the case of Bata, the return on assets has
        increased from 18.01% in 2007 to 20.37% in 2008. This indicates better and
        improved utilization of total assets of Bata.
     Return on equity indicates utilization of owner’s funds. Return equity of Bata
        has increased from 22.43% in 2007 to 23.76% in 2008 showing that its funds
        are properly utilized.
     Total Debt ratio measures the relationship between total debt and total
      assets. A ratio of 1 show that debt and asset funding are equal of Bata.

     The EPS (Earnings per share) of Bata has increased to 37.37 in the year 2008
      over 2007. Greater earning per share means better returns or improved
      returns.

     For Bata dividends paid per share has increased from 2 in 2007 to 2.5 in 2008
        which indicates distribution of more profits to share holders.



WEAKNESS

     The ideal current ratio (total assets / total liabilities) should be equal to 2:1
      but current ratio of Bata is 0.77, showing that it is in an unsafe zone.



OPPORTUNITY

     DSO (Day sales Outstanding) of Bata is 9.55 days showing more time it has in
      its hands for collection period of the debt. A faster collection period is always
      desirable as it indicates prompt payments by debtors.




Fashion Retail III                                                        Page 69 of 71
                                                                           Retail Financials


     The gross profit ratio tells us about the direct or operational efficiency of the
        business. Bata’s direct efficiency has increased to 47.5% in the year 2008
        from 47.1% over 2007. It shows that Bata is in a safer zone.
     The net profit margin tells us about the overall efficiency of the business. The
        net profit ratio for Bata has increased from 5.04% in 2007 to 6.21% in 2008,
        showing no fear of loss with it.
     A lower debt/equity ratio indicates superior solvency or less financial risk. The
        debt/equity ratio of Bata has decreased from 1.24 in 2007 to 1.17 in 2008.
        This indicates that the company is working on to decrease its debts and can
        work on to increase its business. Therefore, it indicates less financial risk in
        the business.

THREATS

     The Working capital of Bata is negative which indicates that a company
      currently is unable to meet its short-term liabilities with its current assets.

     The Quick ratio for Bata is negative (-0.39 in 2008 from -0.55 in 2007) which
        indicates least amount of usage of resources by Bata and inability to meet its
        short term obligations with its most liquid assets. But the quick ratio of 1:1 is
        considered to be the ideal ratio.




Fashion Retail III                                                          Page 70 of 71
                                                                      Retail Financials



                                 REFERENCES


ICICI Direct, http://content.icicidirect.com/research/snapshot.asp?icicicode=BATIND,
viewed on 18 October 2009.

Wright Reports,
http://wrightreports.ecnext.com/coms2/reportdesc_COMPANY_C356BX660, viewed
on 18 October 2009.

India Catalog, http://www.indiacatalog.com/profiles/exim/bata_india_ltd.html#,
viewed on 18 October 2009.

ICMR Center for Management Research,
http://www.icmrindia.org/free%20resources/casestudies/bata-hr-problems1.htm,
viewed on 21 October 2009.

Oppapers, http://www.oppapers.com/essays/Shoe-Industry/169858, viewed on 21
October 2009.

The Hindu Business Line,
http://www.thehindubusinessline.com/iw/2009/04/19/stories/2009041950421100.ht
m, viewed on 22 October 2009.

Money Control, http://www.moneycontrol.com/annual-report/bataindia/directors-
report/BI01, viewed on 26 October 2009.

Liberty Shoes Limited, http://www.libertyshoes.com/about_liberty.asp, viewed on 26
October 2009.

Khadim’s, http://www.khadims.com/profile.html, viewed on 26 October 2009.

Relaxo, http://www.relaxofootwear.com/company.asp, viewed on 26 October 2009.

Lakhani Armaan Group, http://www.lakhaniarmaan.com/footwear.html, viewed on
26 October 2009.




Fashion Retail III                                                     Page 71 of 71

								
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