Stepping out, Warily

Source: Economic and Political Weekly, Vol. 36, No. 29 (Jul. 21-27, 2001), p. 2728
Published by: Economic and Political Weekly
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Companies
BATA INDIA

Stepping Out,
Warily
Intensifying competition and decelerlation in the economy has affected the
footwear industry. As a result, the 68-year

old branded footwear major, Bata India

(BIL) experienced an erosion in both topline and bottom-line and consequently pressure on the profit margins for the financial

year (FY) 2000. According to the chairman A L Mudaliar, " Resistance of consumers to price rise in popular volume
products as well as discounts to clear slow-

moving stocks and underutilisation of

production capacity adversely affected the
operational results". During the year under

review, net sales declined by 1.7 per cent

as against an increase of 3 per cent last

year. On the other hand, the expenditure
particularly, the interest and manufactur-

ing and other related expenses increased.

Consequently, PAT nearly halved (48.8

per cent ) as compared to a 25.6 per cent
growth in 1999. As a result, profit margins

was accounted by accessories and

material prices and unhealthy competi-

garments.

tion). On the other hand, there was 25 per

tion system and achieving growth in

cent volume growth in furniture. The

company launched 15 new models and
reached an advanced stage of commissioning the manufacturing facilities in
Maharashtra, Punjab and West Bengal.

business with proper support services. The

Similarly, industrial components and crates

A capital expenditure of Rs 22 crore was

incurred during 2000 towards new stores

and store modernisation, balancing equipment, improving management informa-

company also entered into a technical collaboration agreement with Bata, Toronto,
Canada for the supply of technical knowhow and services for a period of 10 years

cent dividend.

Over the 1990s the company has grown

remarkably in terms of asset build-up and
in terms of top-line and bottom-line the

ware division, SIL launched new products

and exported 15 per cent of total produc-

decreased production at its Peenya factory

tion. The mould and machinery division

in Karnataka due to the imposition of a

lockout. Attempts were made to compensate for the loss of production through

moulds for industrial components, PVC

outsourcing. During the year, BIL's

exports were to the tune of Rs 21 crore as

compared to Rs 23 crore in the previous

year. Net forex earnings were Rs 1.52 crore

as against Rs10.32 crore in 1999. 'il

SUPREME INDUSTRIES (SIL)

Optimistic
Trends
The financial performance of the 59year old Supreme Industries, a major
player in moulded plastics, was affected
by a bunch of factors. As the chairman
B L Taparia puts it in the annual report -

growth has been moderate. Between 1991

and 2000, gross fixed assets have increased
at compound annual growth rate of 22.3
per cent. During the same period, CAGR

"The poor overall growth, which was much

in total turnover (as reported in the annual

ing several months of the year; (ii) contrac-

report) and PAT has been 7.3 pet cent and

tion in PVC pipe business; (iii) restructuring of plastic mat business".

SIL's operations can be broadly classified into eight business categories namely
-furniture, industrial components and
crates, PVC pipes and fittings, protective
packaging, flexible packaging, mats, food
service ware products and moulds and

6.7 per cent respectively. The company

has an installed capacity of 425 lakh rubber

and canvas footwear, 203 lakh leather

footwear and 16 lakh pieces of finished
leather from hides. In 2000, actual pro-

duction was, 193 lakh pairs (45.4 per

cent capacity utilisation) of rubber and
canvas footwear, 116 lakh (57.1 per cent)
leather footwear and 8 lakh (50 per cent)
finished leather. In total sales turnover,
the share of leather footwear was 58.2 per
cent followed by rubber and canvas foot-

wear with 27.1 per cent share, plastic

footwear 11.5 per cent and the balance

of bottle crates. In the area of food service-

from January 2001. The company had a

came under pressure. However, this did

not deter the company from paying 15 per

division grew by 10 per cent. The company continues to be the largest supplier

below the expectation, was principally

due to the following reasons:

(i) Unaffordable raw material prices dur-

machinery. During the year under review,

there were problems in the PVC pipes and

fittings business (on account of imposition of 8 per cent sales tax on pipes and
15.3 per cent on fittings by the government of Maharashtra) and in the mats

business (on account of higher raw

was successful in developing quality

fittings, food service ware and furniture.

In 1999-2000, the company had an installed capacity of 37,000 tons of injection-moulded products and 42,050 tons of
extruded products. Actual production was,
36,345 tons and 29,470 tons respectively.

During the year, the company also produced 33 machinery and moulds. In the
total sales turnover, plastic products accounted for nearly 96 per cent share while

the rest was accounted by machinery and

moulds and raw material trading.
There was a fall in both net sales (-0.03

per cent) and PAT (-11.2 per cent) over

the previous year.

Although interest burden declined

mainly on account of reduced borrowings,

increase in other expenditure knocked

down the bottom line. Consequently, all
the major profitability ratios took a beating. Earnings per share declined from
Rs16.58 to Rs15.08. Yet, the company
rewarded the shareholders with 70 per
cent dividend. BE

CASTROL INDIA

Greasy Terrain
astrol India (CIL) is another victim
of the overall economic slow down

in general and recession in transport sector

in particular. As the health of 45 million

vehicles in India depends on the availability of quality lubricant and grease, in turn

the state of lubricant industry is mainly

dependent on the transport sector.

S M Datta the chairman observed in the

2728 Economic and Political Weekly July 21, 2001

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