NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016

1. CORPORATE INFORMATION

Bata India Limited is a public Company domiciled in India. Its shares are listed on three stock exchanges in India. Bata India Limited is primarily engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network.

2. BASIS OF brPARATION

The financial statements of the Company have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has brpared these financial statements to comply in all material respects with the Accounting Standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been brpared on an accrual basis and under the historical cost convention, except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year, except for the change in accounting policy explained below.

2.1 Summary of significant accounting policies

a. Change in accounting policy

i) Component Accounting

The Company has adopted component accounting as required under Schedule II to the Companies Act, 2013 from 1 April 2015. The Company was brviously not identifying components of fixed assets separately for debrciation purposes; rather, a single useful life/ debrciation rate was used to debrciate each item of fixed assets.

Due to application of Schedule II to the Companies Act, 2013, the Company has changed the manner of debrciation for its fixed assets. Now, the Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset. These components are debrciated separately over their useful lives; the remaining components are debrciated over the life of the principal asset. The Company has used transitional provisions of Schedule II to adjust the impact of component accounting arising on its first application. If a component has zero remaining useful life on the date of component accounting becoming effective, i.e., 1 April 2015, its carrying amount, after retaining any residual value, is charged to opening balance of retained earnings. The carrying amount of other components, i.e., components whose remaining useful life is not nil on 1 April 2015, is debrciated over their remaining useful lives.

Had the Company continued to use the earlier policy of debrciating fixed assets, debrciation for the current year would have been lower by Rs. 25.29 million and Profit for the current period would have been higher by Rs 16.54 million (net of tax impact of Rs. 8.75 million). Fixed assets would correspondingly have been higher by Rs. 25.29 million.

On the date of component accounting becoming applicable, i.e., 1 April 2015, there was no component having zero remaining useful life. Hence, no amount has been directly adjusted against retained earnings.

b. Use of estimates

The brparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates.

c. Investments

Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.

On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident.

Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.

On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.

d. Tangible Fixed Assets

Tangible Fixed Assets, capital work in progress are stated at cost of acquisition (or revalued amounts, as the case may be), net of accumulated debrciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment. When significant parts of plant and equipment are required to be replaced at intervals, the Company debrciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria is satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. In case of revaluation of fixed assets, the revalued amount as determined by the valuer, is considered in the books of account and the differential amount is transferred to Revaluation Reserve.

Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.

The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.

e. Debrciation on Tangible fixed assets & Intangibles

i. Pursuant to the applicability of Schedule II of The Companies Act,2013 w.e.f. 1st April, 2015, the company has reassessed the estimated useful life of fixed assets. Accordingly, debrciation of Rs. 23.24 million (net of tax of Rs. 12.29 million) on account of assets whose useful life is already exhausted as on 1st April, 2015 has been adjusted to opening balance of retained earnings in terms of transitional provision of the said Schedule II. Had the company continued with the brviously assessed useful lives, charge for the debrciation for the current year would have been higher and profit for the current year would have been lower by Rs 15.50 million.

ii. Lease hold improvements (LHI) included under building and furniture & fixtures are amortised on straight line basis over the period of lease or useful life (not exceeding 5 years), whichever is lower.

iii. Debrciation on other fixed Assets is provided on written down value method at the rates based on the estimated useful life of the assets, which is in accordance with the useful lives specified in Schedule II of the Companies Act, 2013.

iv. Debrciation on fixed assets added/disposed off during the year is provided on pro-rata basis with respect to date of acquisition/ disposal.

f. Impairment

i. The carrying amounts of Tangibles Assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br tax discount rate that reflects current market assessments of the time value of money and risk specific to the asset.

ii. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life.

g. Inventories

Raw materials, components, stores and spares are valued at lower of cost and net realizable value. However, raw materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on a weighted average basis.

Work in progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a weighted average basis. Cost of traded goods includes purchase and allied costs incurred to bring inventory to its brsent condition and location, determined on FIFO basis.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

h. Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised :

i. Sale of Goods:

Revenue from sale of goods is recognized when the significant risks and rewards of ownership of goods have passed to the buyer, which generally coincides with delivery. It includes excise duty but excludes value added tax/sales tax. Excise Duty deducted from turnover (gross) is the amount that is included in the amount of turnover (gross) and not the entire amount of liability that arose during the year.

ii. Interest:

Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Interest income is included under the head 'other income' in the statement of profit and loss.

iii. Export Benefits:

Export benefits in the form of Duty Drawback. Duty Entitlement Pass Book (DEPB) and other schemes are recognized in the Statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

i. Foreign Currency Transactions

i. Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

ii. Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.

iii. Exchange Differences

Exchange differences arising on the settlement of monetary items or on reporting Company's monetary items at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognised as income or expenses in the year in which they arise.

iv. Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/ liability

The brmium or discount arising at the inception of forward exchange contract is amortized and recognized as an expense/ income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward exchange contract is also recognized as income or expense for the period.

j. Government Grants and Subsidies

Grants and subsidies from the government are recognized when there is reasonable assurance that the grant/ subsidy will be received and all attaching conditions will be complied with.

When the grant or subsidy relates to an expense item, it is recognized as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate. Where the grant or subsidy relates to an asset, its value is deducted from the gross value of the assets concerned in arriving at the carrying amount of the related asset.

Government grants in the form of non-monetary assets given at a concessional rate are accounted for on the basis of their acquisition cost.

k. Borrowing Cost

Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets, which take substantial period of time to get ready for its intended use are capitalized until the time all substantial activities necessary to brpare such assets for their intended use are complete. Other Borrowing costs are recognized as an expense in the year in which they are incurred.

l. Segment Reporting Policies

(i) Identification of Segments: Primary Segment

Business Segment:

The Company's operating businesses are organized and managed separately according to the nature of products, with each segment rebrsenting a strategic business unit that offers different products and serves different markets. The identified segments are Footwear & Accessories and Investment in erstwhile Joint Venture for Surplus Property Development.

Secondary Segment

Geographical Segment:

The analysis of geographical segment is based on the geographical location of the customers. The geographical segments considered for disclosure are as follows:

• Sales within India include sales to customers located within India.

• Sales outside India include sales to customers located outside India.

(ii) Allocation of Common Costs:

Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.

(iii) Unallocated Items:

Includes general corporate income and expense items which are not allocated to any business segment.

(iv) Segment Policies:

The Company brpare its segment information in conformity with the Accounting Policies adopted for brparing and brsenting the Financial Statement of the Company as a whole.

m. Intangible Assets

i. Computer Software Acquired for Internal Use

Software is stated at cost of acquisition and includes all attributable cost of bringing the software to its working condition for its intended use, and amortized on a straight-line basis over its useful life of 5 years.

ii. Research and Development Costs

Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured. Any expenditure carried forward is amortised over the period of expected future sales from the related project, not exceeding ten years.

The carrying value of Intangible Assets is reviewed for impairment annually, when the asset is not yet in use, and otherwise, when events or changes in circumstances indicate that the carrying value may not be recoverable.

n. Retirement and Other Employee Benefits

i Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method, at each year end. The liability so provided is rebrsented substantially by creation of separate funds and is used to meet the liability as and when it accrues for payment in future.

ii. The Provident Fund (administered by a Trust) is a defined benefit scheme where by the Company deposits an amount determined as a fixed percentage of basic pay to the fund every month. The benefit vests upon commencement of employment. The interest credited to the accounts of the employees is adjusted on an annual basis to confirm to the interest rate declared by the government for the Employees Provident Fund. The Guidance Note on implementing AS-15, Employee Benefits (revised 2005) states that provident funds set up by employers, which requires interest shortfall to be met by the employer, needs to be treated as defined benefit plan. The Actuarial Society of India has issued the final guidance for measurement of provident fund liabilities. The Company has adopted actuarial valuation based on project unit credit method to arrive at provident fund liability as at March 31, 2016.

iii. Short term compensated absences are provided on estimated basis. Long term compensated absences are provided for based on actuarial valuation on projected unit credit method carried by an actuary, at each year end.

Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.

The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company brsents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.

iv. Retirement benefits in the form of Pension cost is a defined contribution scheme and the contributions are charged to the Statement of profit and loss for the year when the employees render related services. There are no other obligations other than the contribution payable to the respective trusts.

v. Actuarial gains/losses are immediately taken to Statement of profit and loss and are not deferred.

vi. Expenses incurred towards voluntary retirement scheme are charged to the statement of profit and loss in the year such scheme is accepted by the employees/workers.

o. Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of profit and loss on a straight-line basis overthe lease term.

p. Taxes on Income

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961 enacted in India. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities are off set, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on Income levied by the same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will not be available against which deferred tax asset can be realised. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available

q. Provisions

A provision is recognised when there is a brsent obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Warranty provisions

Provisions for warranty-related costs are recognized when the product is sold or service provided. Provision is based on actuarial valuation. The estimate of such warranty-related costs is revised annually.

r. Contingent liability

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a brsent obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.

s. Earnings Per Share (Basic & Diluted)

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Partly paid equity shares are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares).

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

t. Cash and cash equivalents

Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

2. Note 19 includes R&D expenses of Rs.38.02 million (Previous year Rs. 53.71 million) and Note 20 includes R&D expenses of Rs. 21.72 million (Previous year Rs. 21.18 million).

3. The Company in the earlier years, entered into a joint venture agreement for the development of the township at Batanagar with Riverbank Developers Private Limited (RDPL). Thereafter, in April 2010, while retaining the legal title over the land at Batanagar Project and shares in the erstwhile Joint Venture Company (RDPL), the Company restructured its agreements with revised terms and conditions and received 315,000 sq. ft. of employee housing recorded as fixed assets at INR 433.75 million and also recorded a liability of INR 216.24 million for obligation to be fulfilled. In December 2013, the Company had signed an addendum to the development agreement to receive further constructed area of 332,030 sq. ft. against 325,000 sq. ft. agreed in April 2010.

During the brvious period, the Company had received approval from the West Bengal Government committee, inter alia, specifying that the Company had completed the obligations with respect to Batanagar factory, retail stores and employee housing and RDPL were to complete balance employee housing.

During the year, the Company has received possession of balance apartment measuring to 195,075 sq. ft. (brvious period 136,955 sq. ft.) and recognized an exceptional income of Rs. 306.31 million (Previous period Rs. 239.19 million), based on fair valuation undertaken by an independent valuer. As at the year end, there are no remaining apartments to be received.

The management believes it has already discharged its obligations and has reassessed the provision for contingencies. Accordingly the Company has reversed the provision for contingencies of Rs. 123.24 million (Previous year INR 93 million) as exceptional income.

4. CAPITAL COMMITMENTS:

Estimated amount of contracts remaining to be executed for capital expenditure and not provided for amounted to Rs.65.09 million (Previous year: Rs. 301.64 million).

5. CAPITAL COMMITMENTS:

Estimated amount of contracts remaining to be executed for capital expenditure and not provided for amounted to Rs.65.09 million (Previous year: Rs. 301.64 million).

6. Due to setbacks in implementation of ERP software and based upon internal assessment, the management believes that the ERP reimplementation would involve complete change in design and accordingly has decided to charge of the expenditure of Rs. 290.55 million incurred on implementation in current year and brvious years, except for Rs. 56.06 million incurred on perpetual licenses which is being carried under intangible assets under development. The management is brsently developing plans to initiate fresh implementation.

7. The brvious financial year was for a period of 15 months ended on 31st March 2015 ("brvious period") and accordingly, the figures for the brvious period are not comparable with figures for the current year ended 31st March 2016 brsented in the Statement of Profit and Loss, Cash Flow Statement and related notes. Previous period's figures have been regrouped/reclassified, wherever necessary, to conform to the classification of current year.

As per our report of even date

For S.R. Batliboi & Co. LLP

ICAI Firm Registration number: 301003E/E300005

Chartered Accountants

Per Sanjay Vij

Partner

Membership no.: 95169

For and on behalf of the Board of Directors

Ram Kumar Gupta Director Finance DIN: 01125065

Rajeev Gopalakrishnan Managing Director DIN: 03438046

Maloy Kumar Gupta Company Secretary Membership no.: A-24123

Uday Khanna Chairman DIN:00079129

Place: Gurgaon

Date : May 30, 2016