Calcutta, July 17: Bata India Ltd, just back in the black after a huge loss in 1995, has undertaken a revaluation exercise for its fixed assets. Leading consultancy firm SR Batliboi has received the mandate to carry out the valuation.

The decision by the country's largest shoe-maker to revalue its fixed assets is an attempt at enhancing its book value and put behind the 1995 disaster when it recorded a net loss of Rs 42.16 crore. Bata India, a 51 per cent subsidiary of Canada-based Bata Shoe Organisation, had last revalued its buildings in 1969. The latest exercise, which will cover all fixed assets, is expected to substantially prop up its reserves.

"The revaluation exercise forms a part of our overall strategy. Fixed assets have not been revalued for decades, and we felt it proper to take it up this time," a senior Bata official said.

Despite a Rs 4.15-crore net profit in the year to December 31, 1996, the company's 1995 performance has left a scar on the its financial statements with accumulated losses amounting to Rs 37 crore.

For the year ended December 1996, Bata's reserves and surplus stood at a modest Rs 37.65 crore against a share capital of Rs 25.71 crore. Revaluation reserve was Rs 3.17 crore (after re-appraisal of buildings in 1969) and the general reserve for the year amounted to Rs 35.20 crore. A revaluation of fixed assets after the 30-year gap will substantially enhance the company's reserves and surplus, through a far higher revaluation reserve.

Under the guidelines of the Securities & Exchange Board of India, listed companies are not allowed to issue bonus shares out of revaluation reserves, nor can dividend be paid out of this kitty. But a revaluation helps a company to draw bank loans with higher limits.

During 1996, Bata's gross block and net block stood at Rs 120.31 crore and Rs 52.35 crore respectively. The net value of land was Rs 2.73 crore, while buildings, plant & machinery and furniture & fixtures were valued at Rs 11.67 crore, Rs 25.24 crore and Rs 12.58 crore respectively.

With a strategic shift back towards the volumes segment, the Rs 600-crore Bata India has been able to put in a far better performance during the first six months of the current fiscal with close to 20 per cent growth in turnover over the previous corresponding period.

With the stockmarket bullish about a far better half-yearly performance, Bata's share prices are ruling at a 52-week high of Rs 140. The company will hold its board meeting on July 23 to review the half-yearly results.

Analysts expect Bata to report a net profit of around Rs 5 crore for the six months, against Rs 4 crore for the previous 12 months.

Bata's annual report notes that the turnaround strategy involves focus on mass consumption products, flexibility in marketing, tighter cost controls and better asset management. The company has, meanwhile, undertaken a massive cost reduction exercise and is striving to improve production and distribution efficiencies to take on the might of the international players setting up shop in the country. Raw materials expenditure during 1996 at Rs 184 crore was around Rs 27 crore lower than the previous year.

Bata has deployed the proceeds of its 1:1 rights issue amounting to Rs 75 crore in reducing the debt-burden and the debt-equity will come down to around 0.6 after completion of the capital restructuring.

Export performance has been stagnant with sales amounting to Rs 23.65 crore during 1996. The company has been busy in correcting some "teething" problems in the Hosur unit and expects to substantially improve exports next year.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.