Bata India

Ladies and Gentlemen:
 
 It gives me great pleasure to welcome you all at the 70th Annual
 General Meeting of Bata India Limited. The Annual Accounts and the
 Director's report have been with you for some time and, with your
 permission, i will take them as read.
 
 INTRODUCTION
 
 Before i review the highlights of your company's performance in the
 year ended 31st December, 2002 let me put in perspective the overall
 business environment in the country.
 
 Economic historians may in the future describe 2002 as the yar of
 disinvestments. The process was triggered by the smooth disinvestments
 of VSNL and IBP with a number of other PSUs on the way. These bold
 steps shuld have far reaching positive economic consequences.
 
 The Natonal Highway Project, envisaged as the Golden Qualdrilateral
 and covering 13 sates should strengthen the country's infrastructure
 facilities and attract foreign investmetn. This project is expected to
 cofer a length of 5851 Km and is planned to be completed by 2007 with
 the four metros conected by the end of 2004.
 
 The economic generally is characterized by high foreign exchange
 reserves a low level of inflation, adequate supplies of essential
 commodities and major infrastucture plans valued at Rs.104,000 crore.
 
 THE ECONOMIC BACKGROUND
 
 Industrial output gew 6.4 percent in January 2003., up from 3.8 per
 cent in January 2002. The pick-up in growth of the Indian economy in
 2001-02 was stronger than initially anticipated. Data on quarterly GDP,
 which is available only for the first half of 2002-03, indiacated that
 in the first and second quarteres of th current financial year, GDP
 grew by 6 per cent and 5.8 per cent, respectively, registered for the
 corresponding periods of the previous financial year. Overall GDP
 growth in the current financial year as a whole is likely to be only
 4.4 per cent.
 
 Most estimates indicate that the uncertainly created by the Iraq
 conflict will persist for some more time before consumer confidence
 retruns. The IMF has already scalled down its projections for gloabla
 economic growth from 3.7 per cent to 3.2 per cent, which in terms of US
 Dollor works out ot a very substantial decline of US $ 1400 billion.
 
 New risks, such as terrorism and SARS will also have a negative impact
 onthe world's economy and probably retard stronger growth.
 
 An increase in India's foreign exchange reserves has facilitated a
 furthree relaxation of foreign exchange restrictions and a gradual move
 towards greater capital account convertibility.
 
 After twenty three years the current account of Indai's balance of
 payments recorded a surplus - equivalent to 0.3 per cent of GDP - in
 2001-02.  Stagnant exports and falling imports brought down the trade
 deficit by 0.5 per centage points in 2001-02.
 
 The stengthenining of hte balance of payments has impacted on the
 monatary sector. With the net foreign exchange asets (NFA) of the RBI
 emerging as an important source of reserve Money.
 
 Capital markets continued to be subdued; The equity market has absorbed
 the design changes of rolling settlements and equity derivatives
 trading.
 
 A significant reform in the current financial year was the dismanting
 of the administered price mechanism for petroleum products from Arpril
 1, 2002. Approval of the disinvestmetns of Hindustean Petroleum
 Corporation Limited and Bharat Petroleum Corporation Limited in
 December 2002 cleared teh uncertaqinly over privatization.
 
 OPERATIONS
 
 During the 2002 calendar year, your company's trunover was Rs. 6941.9
 million copared with Rs. 7599.8 million in 2001, a decline of 8.66 per
 cen. This was mainly due to depressed market conditions and low
 purchasing power in rural areas, which have effected our wholesale
 business. There has been market resisteance tot price increases,
 particularly ofor volume articles, which face competitin from the
 unorganized sector. Besides these factors, discounts were needed to
 clear slow moveing articles and under-utilization of productin unites
 has resulted in the under-recovery of fixed costs in our factories.
 
 The business sector is switnessing fierce competition. The company is
 constantly introducing new lines of footwear to cater to t he needs of
 hte fashion-conscious consumer. The images fashion award for the most
 admited footwear company was conferred on us and has made the Company
 all the more conscious ofr its resposibilities to the ever-growing
 demands and expectations of Indian consumeres.
 
 The Company at present is in a stage of consolidation and in the prcess
 of re0investing itself. wHile at the sametime retaining the principle
 of Value of money The company is mintaining its ongoing goal of
 constantly trying to provide consumers with full satisfaction for every
 rupee spent. The technical collaboration with Bata Limited, Canada,
 contibutes to this end by providing access to the latest developments
 in the footwear industry.
 
 The Company in its present form will lose further market share until
 and unless it undertakes substantial restructuring and rationalizes its
 large workforce and reduces its fixed costs drastically. The scheme of
 arrangement is a step in this direction and will not only be beneficial
 to the Company, cbut also to the units which will function
 independently in their area of core competency to attain
 aconomicviability with more focused managment.
 
 DIVIDEND
 
 The Board has not recommended any divided for the calendar year ended
 December 31, 2002.
 
 INDUSTRIAL RELATIONS AND PERSONNEL
 
 Industrial raltions remained harmonious during the year. Production has
 commenced at the Peenya factory in Karnataka although some employees
 are still absent, Procurement levels are being maintaind by outsourcing
 untl opeations are normelized. The Loang term Agreement (LTA) for th e
 feridabad unit was concluded on May 17, 2002.
 
 LTA setllements are due for conclusion for shop managers and for the
 shop employees unions as well as for unionized employees in the
 Mokamehghat, Bataganj, Southoan and Batashatak units Negotiations are
 taking place with all the Unions and the Management expects to conclude
 agreements shortly.
 
 During the year 2002, numertous training and development programmes,
 covering areas such as retail and wholesale operations, human resources
 and marchandising strategies were dconducted to expose participoants to
 the latest management concepts and techniques.
 
 RESEARCH AND DEVELOPMENT ACTIVITIES AND ENERGY CONSERVATION
 
 In 2002, R & D activities were continued by the Company in the key
 areas of product, process and materials development, footwear moulds
 and leather and tennery technology with emphasis on solid waste
 treatment to crate a pollution-free work environment. Total expenditure
 devoted to R & D during the year was Rs.39.2 million. The energy
 consevation measures taken by the Company included installing and
 reerranging cpapcitor banks to attan a 0.96 power factor, changing over
 to energy efficient lumineries, mixing additive with furnace oil for
 sludege reduction and improved combustion, as well as enhanced
 insulation of steam and themic fluidlines. Energy saving against total
 energy costs in 2002 was 5.20%.
 
 
 THE FUTURE
 
 The company is repositioning its image as a marketing orinted company
 rather than primarily a manufactuirng ocmpany. The existing strong
 Bata brand image withdeep market pernetration will provide much
 needed support to this strategyt. Brand managers are working on this
 new corporate brand building, which will be a departure from the past
 and is directed towards combating competition.
 
 The Company's focus is on quality with an emphasis on consumer
 satisfaction. The Company would not hesitate to enter into appropriate
 a strategic tie-ups to outsouce its products.
 
 Some of the measures which have been adopted to improve performance
 are;
 
 * The Bata brand is being promoted to reaffirm awareness among
 consumers of its high quality
 
 * Quality contrl is being reinforced by the Company on a daily basis.
 
 * New ranges of footwear are being developed in -house to hive
 continuoius excitement to customers.
 
 * Purchasing functions have been centralized.
 
 * There is closer coordination between the merchandising, procuct
 development plannig, manfacturing and distibution functions.
 
 * Cash drain stores are being replaced by new large format stores.
 
 * Stict adherence to credit terms with a greater emphasis oncollection
 
 * The Company is rationalizing its overhead costs.
 
 * The Company is re0negotiating the provisions of its agreements with
 Unions in order to meet the challenges of the market place.
 
 * Shop Managers and Shop mployees will be motivated by attractive
 reward schemes linked to growth in business.
 
 * Non-viable stores will be closed.
 
 * The Company has appointed Brand Manger who will be directrly
 responsible for promoting their brand of footwear.
 
 * The Company has come out with some exciting new products in 2002.
 Including the CHIARA Collection of shoes with elastic tape upper.
 Which are one of the best selling BetaShoe Oeganization shoes in the
 Asia-Pacific region, the U.K. and France. These are snug fitting and
 smart lookin gmulti-apparel shoes, idial for people on the move.
 
 * The POWER brand range of world-lass footwear showcases superior
 features with uncompromising standards. Designed in Canada, this
 footwear is currently penertrating markets in many countries. In order
 to attract more customeres in this segment to the Bata stores, the
 company is also marketing REEBOK and NIKE brand products. Our own
 ROCKY brand sports sandal incorporating the latest international
 features and style is also being offered.
 
 * The famouns WEINBRENNER brand range of rugged leather shoes and
 sandsls for outdoor adventure loving customers has been introduced and
 priced most competitively.
 
 * The ALL SEASONS range of new products combines outstanding styling
 with all-weather wearability features
 
 * The traditional HAWAI brand products, created within the Bata Shoe
 Oeganization and copied by many footwear manufactureres in India, have
 been upgraded by crating a niche range of footwear. Which incorportes
 the therapeutic features of acupressure MESSAGE, IMPULSE AND
 REFLEX are the three styles in the new HAWAI range.
 
 * Our range of men's dress shoes branded TINO is a blod expression of
 international fashion. TINO branded footwear exemplifies the 'on the
 move executive who can simply apply WIPE 'N' Go to their shoes to give
 a freshly plished and shinning look for all occasions.
 
 * The introduction of state-of-the-art technology in shoes branded
 Comfort Wind. Flexible and Antishox hs also provided much neede
 edge to fight competition.
 
 The Board firmly believes that the introduction of a wide range of
 high-class quality footwear, a reduction in overhead costs and
 atractive rewrd schemes linked to growth n business for shop employees
 will enhance futre returns of the Company.
 
 CONCLUSION
 
 On behalf of your Board, may i take this opportunity to convey thier
 since, appreciation to all theCompany's employees and associates as
 well as to all shareholders for their continued cooperatin and support.
 I would specifically like to offer the Board's compliments to the
 management team and to employees who have worked so hard for the
 Company.
 
 I would also like to convey my personal gratitude to my colleagues on
 the board for thier guidance, support and cooperation.
 
                                                           A L MUDALIAR
                                                               Chairman
                                                     Bata India Limited
 
 June 27, 2003