Bata India is one of the few companies to have braved the ongoing industrial recession and economic slowdown.
The Calcutta-based footwear giant, which staged a turnaround in 1996, recorded its highest-ever sales turnover and the second highest net profit in the year ended December 31, 1997. It has continued to post a better rate of growth on almost all financial fronts in the first three quarters of 1998.
Bata's sales growth which was 13.5 per cent in 1997, has risen by more or less the same pace in the first nine months of the current year. But, due to the only 10 per cent increase in total expenditure compared with a 13 per cent climb in the previous year, the company's operating profit increased by over 49 per cent compared with 26 per cent last year.
Bata India has witnessed a slide in the early nineties. It recorded a profit of a mere Rs 98 lakh in 1994. In the very next year, the company was in the red by Rs 42 crore. With this huge loss, both the management and the union were scared and agreed for a restructuring exercise which included staff cuts and a new marketing strategy.
These measures were reflected in the company's performance in 1996 when it posted a net profit of Rs 4 crore.
Bata's remarkable performance in 1997 and the first nine months of the current year can also be attributed to better financial management. The company's interest burden surged 39 per cent in 1995 and only by 2.39 per cent in 1996. In 1997, Bata managed to decrease its interest burden by over 25 per cent and in the last nine months, it has further declined by 48 per cent.
During the three quarters ended September 30, 1998, the company saw an significant increase in net profit. Despite a considerable increase in tax obligation, its bottomlines zoomed by over 169 per cent.
According to W K Weston, managing director at Bata India, the improved performance can be attributed to the company's marketing strategy which focused on volumes in the low and medium price range backed with better distribution logistics and materials management.
According to management sources, the result for first nine months could have been better if the company's export oriented unit at Hosur had not been under lockout since April 2 due to unacceptable demands of the trade unions.In the first quarter of 1998, Bata's sales turnover increased by over 8 per cent to Rs 158.4 crore from Rs 146.1 crore in the corresponding period of the previous year. Its profit after tax leaped by nearly 415 per cent _ to Rs 5.6 crore.
In the second quarter of the current year, the performance was also good with sales turnover surging to Rs 220.2 crore (Rs 195.7 crore). Net profit climbed to Rs 18.1 crore (Rs 7.1 crore).
In the third quarter of 1998, Bata's sales turnover increased nearly 18 per cent to Rs 170.5 crore (Rs 144.8 crore). Profit after tax jumped to Rs 2.76 crore (Rs 1.48 crore).
The performance in the three quarters of the current year is also reflected in the company's financial ratios. Annualised EPS increased to Rs 10.29 (Rs 3.24).
The Bata share price on the has also moved in tandem with the company's financial performance. On June 30, the stock was quoted at Rs 133.70. It surged to Rs 222.50 on July 31 before moving down to Rs 210.10 on August 31. It climbed up again to Rs 240.60 on September 30. In line with the market sentiment, the Bata scrip moved down to Rs 210.60 on October 30 and to *** Rs 206.80 on December 3.
According to Weston, Bata India sales have been rising by an average of 5 million pairs a year since 1995, when it clocked sales of 48 million pairs. The sales figure is expected to increase to Rs 731 crore in 1998 with sales climbing to 62 million pairs.
