Bata India Ltd.

We have audited the accompanying financial statements of Bata India Limited (the Company), which comprise the Balance Sheet as at December 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Management''s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards notified under the Companies Act, 1956 read with General Circular 15/2013 dated 13th September 2013, issued by the Ministry of Corporate Affairs, in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor''s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Companies Act, 1956 (the Act) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Balance Sheet, of the state of affairs of the Company as at December 31, 2013; (b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Report on Other Legal and Regulatory Requirements 1. As required by the Companies (Auditor''s Report) Order, 2003 (the Order) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order. 2. As required by section 227(3) of the Act, we report that: (a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; (b) In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; (c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account; (d) In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956 read with General Circular 15/2013 dated 13th September 2013, issued by the Ministry of Corporate Affairs, in respect of Section 133 of the Companies Act, 2013; (e) On the basis of written representations received from the directors as on December 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on December 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. Annexure referred to in paragraph 3 of our report of even date Re: Bata India Limited (''the Company'') (i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. (b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verification. (c) There was no substantial disposal of fixed assets during the year. (ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year. (b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification. (iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4(iii) (a) to (d) of the Companies (Auditor''s Report) Order, 2003 (as amended) (the order) are not applicable to the Company and hence not commented upon. (b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4(iii) (e) to (g) of the Companies (Auditor''s Report) Order, 2003 (as amended) (the order) are not applicable to the Company and hence not commented upon. (iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system of the Company in respect of these areas. (v) (a) In our opinion, there are no contracts or arrangements that need to be entered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, the provisions of clause 4(v)(b) of the Order is not applicable to the Company and hence not commented upon. (vi) In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under, to the extent applicable, have been complied with. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal. (vii) In our opinion, the Company has an internal audit system commensurate with the size of the company and nature of its business. (viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, related to the manufacture of shoes and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. (ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales- tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it. (b) According to the information and explanations given to us, no undisputed dues payable in respect of provident fund, investor education and protection fund, employees'' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable. (c) According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows: Name of the Nature of dues Amount Period to Forum where statute (Rs. million) which the dispute is amount relates pending Various State Purchase Tax Dispute at 6.2 1984-85 Supreme Court Sales Tax Acts Faridabad Various State Revenue recovery against 4.3 1994-95 STAT, Kerala Sales Tax Acts non-payment of demand 1998-99 in assessment 1999-00 2000-01 Various State Tax in dispute u/s 92 of 2.8 1991-92 High Court, UP Sales Tax Acts Central Sales Tax Act regarding non- submission of forms Various State Misclassifi cation of Article 9.68 2005-06 to VAT Tax Tribunal, Sales Tax Acts for VAT Payment 2006-07 Kerala Central Excise Excise Duty demand on 1.50 1987-88 CESTAT-Kolkata Act, 1944 closing balance of exempted footwear. Central Excise Duty demanded for sale 7.03 1997-1999 Commissioner of Act, 1944 of footwear at domestic Central Excise, tariff area of which final Chennai hearing before commissioner concluded and order is pending Karnataka Disallowance of adjustment of 2.8 2005-06 to Joint Commissioner Sales Tax Act unclaimed tax credit 2008-09 Appeals Central Excise Disallowance for trade 2.75 1995-97 CESTAT-Chennai Act, 1944 discount for sale of footwear to retail outlet Central Excise Excise duty demanded for 15.56 2004-05 CESTAT-Kolkata Act, 1944 movement of raw material 2005-06 to job worker without payment of duty Central Excise Disallowing of abatement 9.00 2007 CESTAT, Kolkata Act,1944 @ 40% on MRP for 2008 Institutional Sales. Sale of 2009 Industrial Boots & Mines 2010 Safety Boots. Central Excise Non compliance of the 21.48 July 2004 to CESTAT, Kolkata Act, 1944 condition of the notification Jan 2008 for marking MRP on factory seconds cleared on payment of appropriate C.E duty. Central Excise Exclusion of sales tax 3.00 August 2004 to CESTAT, Kolkata Act, 1944 @ 8% for payment of an Jan 2008 amount equal to 8% /10% on exempted footwear as per CCR 6(3) (b). Finance Act, Disallowance of Service tax 4.34 2006-2010 Commissioner of 1994 Credit on input service Central Excise, availed for outward Kolkata transportation Customs Act, Duty demand on account of 10.34 2001 CESTAT-Kolkata 1942 short levy of customs duty (anti dumping duty) for which hearing before commissioner concluded and the order received. Finance Act, Availment of wrong input 86.2 April 2008 to CESTAT, Chennai 1994 service tax credit May 2012 Customs Act, Wrong availment of 81.20 1998-2003 CESTAT-Kolkata 1942 concessional rate of customs duty etc. against which the hearing has not finalized as yet Income Tax Short term capital gains 230.55 2007-08 High Court, Kolkata Act, 1961 Income Tax Disallowance of certain 13.67 2008-09 Commissioner of Act, 1961 expenditure (A.Y. 2009 -10) Income tax (Appeal) (x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year. (xi) The Company has neither taken any loan from financial institution or banks nor issued any debentures, therefore the provisions of clause 4(xi) of the Order not applicable, hence not commented upon. (xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company. (xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company. (xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions. (xvi) The Company did not have any term loans outstanding during the year. (xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment. (xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956. (xix) The Company did not have any outstanding debentures during the year. (xx) The company has not raised any money by way of public issue during the year. (xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the management. For S.R. Batliboi & Co. LLP ICAI Firm Registration No.: 301003E Chartered Accountants per Rajiv Goyal Place of Signature : Gurgaon Partner Date: February 12, 2014 Membership No.: 94549