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TEXTILE SECTOR

VIEWS: 74 PAGES: 45

  • pg 1
									           TABLE OF CONTENT

Sr.No Particulars                   Page No
 1.    GLOBAL ECONOMY                  3

 2.    INDIAN ECONOMY                  6

 3.    TEXTILE SECTOR-AN OVERVIEW      9

 4.    RAW MATERIALS                  11

 5.    MANUFACTURING PROCESS          14

 6.    PORTERS FIVE FORCE MODEL       17

 7.    GOVERNMENT POLICIES            20

 8.    KEY PLAYERS                    23

 9.    COMPANY ANALYSIS-              25
       GOKALDAS EXPORTS Ltd.
 10.   COMPANY ANALYSIS-WELSPUN       34

 11.   INITATIVES TO BE TAKEN         44

 12.   THE ROAD AHEAD                 45




                                           Page 1
                          GLOBAL ECONOMY

The stresses in the financial markets of the United States that first emerged in
the summer of 2007 transformed themselves into a full-blown global financial
crisis in the fall of 2008 credit markets froze; stock markets crashed; and a
sequence of insolvencies threatened the entire international financial system.



                                  GDP Real Growth Rate
 6%
                                                                                          5.30%
                                                                   4.90%
                                                                                                     5.20%
 5%
                          4.80%                                                   4.70%

 4%
                                                           3.80%

 3%           3%
                                                2.70%
                                     2.20%
 2%


 1%


 0%
       2000        2001       2002       2003       2004       2005        2006       2007        2008


FIGURE 1: WORLD GDP REAL GROWTH RATE GRAPH (SOURCE: WEBSITE-INDEX
MUNDI)




                                                                                                         Page 2
                                    GDP SHARE COUNTRY WISE
                                                                                                       U.S.A
                                               28%
                                                                                                       JAPAN
                                                                                                       GERMANY
                                                                     26%                               CHINA
                           2%
                      2%                                                                               U.K.
                           2%                                                                          FRANCE
                             2%                                                                        ITALY
                       3%                                                                              CANADA
                                                                    9%                                 SPAIN
                                   4%
                                                                                                       BRAZIL
                                        5%              5% 6%
                                                                                                       RUSSIA
                                                5%
                                                                                                       INDIA
                                                                                                       OTHERS


FIGURE 2: WORLD GDP SHARE COUNTRY WISE (SOURCE)

W e can see here that U.S. contributes around 27.4% to the W ORLD
GDP and with subprime financial crisis hitting America; its GDP growth
has taken a hit, which has impacted overall economy of the world. The
broad retrenchment of foreign investors and banks from emerging
economies and the resulting buildup in funding pressures are
particularly worrisome. New securities issues have come to a virtual
stop, bank-related flows have been curtailed, bond spreads have
soared, equity prices have dropped, and exchange markets have come
under heavy pressure . In developing countries, growth is projected to slow to
4.5 percent in 2009, down from 7.9 and 6.3 percent in 2007 and 2008.



 9.0
 8.0
 7.0                                                                     6.1
 6.0                                                                                   Developing
                                                                         4.7
 5.0
 4.0                                                                                   Developing countries excluding
                                                                                       China and India
 3.0                                                                     2.0
                                                                                       High income
 2.0
 1.0
 0.0
        2004


               2005


                            2006


                                        2007


                                                     2008


                                                             2009


                                                                         2010




 -1.0


FIGURE 3: COMPARITIVE                           GDP         GROWTH              RATE    (SOURCE:        WEBSITE
INDEXMUNDI)


                                                                                                             Page 3
In the baseline forecast, much tighter credit conditions, weaker capital inflows to
middle-income countries, and a sharp reduction in global import demand are
expected to be the main factors driving the slowdown in developing countries

Headline inflation increased by 5 percentage points or more in most developing
countries and more than half of developing countries had inflation rate in excess
of 10 percent by the middle of 2008.

The global economy is showing some signs of recovery because of
initiatives to staunch the bleedin g by public capital injections and an
array of liquidity facilities, monetary easing, and fiscal stimulus
packages.




In parallel with the rapid cooling of global activity, inflation pressures
have subsided quickly. Commodity prices fell sharply from midyear
highs, causing an especially large loss of income.

Responses have made some progress in stabilizing financial markets
but have not yet restored confidence nor arrested negative feedback
between weakening activity and intense financial strains.

W hile the rate of contraction should moderate from the second quarter
onward, world output is projected to decline by 1.3 percent in 2009 as a
whole and to recover only gradually in 2010, growing by 1.9 percent



                                                                            Page 4
                  INDIAN ECONOMY

Indian economy has b een witnessing a phenomenal growth since the
last decade. The country is still holding its ground in the midst of the
current global financial crisis

Despite the global slowdown, the Indian economy is estimated to have
grown at close to 6.7 per cent in 200 8-09.

The Confederation of Indian Industry (CII) pegs the GDP growth at 6.1
per cent in 2009 -10.




                                18%

                                                             AGRICULTURE
                                                             INDUSTRY
                    53%
                                                             SERVICES
                                      29%




FIGURE 4: SECTORWISE CONTRIBUTION TO INDIA'S GDP (SOURCE: CII)




                                                                    Page 5
 8
         6.7
 7
                                                                                                                                   5.9
 6                      5.4     5.4            5.4                                                                  5.3
 5                                                                            4.2                 4.2
                                                               3.8
 4
                                                                                                                                                    INFLATION
 3

 2

 1

 0
                                               2003
         2000


                        2001


                                 2002




                                                               2004


                                                                                2005


                                                                                                  2006


                                                                                                                    2007


                                                                                                                                     2008
FIGURE 5: INFLATION RATE (SOURCE: WEBSITE INDEXMUNDI)

The per capita income in real terms (at 1999 -2000 prices) during 2008 -
09 is likely to attain a level of US$ 528 as compared to the Quick
Estimate for the year 2007 -08 of US$ 500. The growth rate in per
capita income is estimated at 5.6 per c ent during 2008 -09, as against
the previous year's estimate of 7.6 per cent.

 14000                                                                                                                                      20000
 12000                                                                                                                                      18000
 10000                                                                                                                                      16000
  8000                                                                                                                                      14000
  6000                                                                                                                                      12000
  4000                                                                                                                                      10000
                                                                                                                                                       2007-08
  2000                                                                                                                                      8000
     0                                                                                                                                      6000       2008-09
 -2000                                                                                                                                      4000       SENSEX
 -4000                                                                                                                                      2000
 -6000                                                                                                                                      0
                APRIL

                          MAY




                                        JULY

                                                      AUGUST




                                                                                                                     JANUARY
                                JUNE




                                                                                       NOVEMBER




                                                                                                                               FEBRUARY
                                                                                                         DECEMBER
                                                                SEPTEMBER

                                                                            OCTOBER




FIGURE 6: FOREIGN INFLOWS AND SENSEX MOVEMENT (SOURCE :)




                                                                                                                                                        Page 6
                                                        SENSEX

          21000

                      BEAR STERNS RESCUE
          18000                                   CRUDE SOFTENING
                                                      UPA WINS
               RELIANCE POWER                      INFLATION DOWN
          15000   IPO SUCKS        RISING CRUDE
                   LIQUIDITY      HIGH INFLATION
                 BEAR STERN      MONETARY POLICY
                                                                  HUGE FII SELL
          12000 COLLAPSE        POLITICAL INSTABILITY
 SENSEX




                                                                GLOBAL TURMOIL       MONETARY&
                                                               LEHMANN COLLAPSE
                                                                                  FISCAL STIMULUS
                                                                    STRONG
           9000                                                  DELEVEARAGING


           6000


           3000


              0
               JAN   FEB MAR APR MAY JUN                    JUL AUG SEP OCT NOV DEC JAN             FEB

                                                        YEAR 2008-O9


FIGURE 7: SENSEX MOVEMENT (SOURCE: MEHTA EQUITIES LTD.)

                                           VIEWPOINT

     
           signals but there remain good reasons to believe the second half
           will see GDP growth start to surprise on the upside .



     
           not throu gh capital spending cuts .



      Interest rates likely to go down by 2% as part of stimulus
       packages.



      New government faces huge task of structural, financial sector
       reforms.




                                                                                               Page 7
                       TEXTILE SECTOR
OVERVIEW

The Indian textile industry is one of the oldest and most significant industries in the
country. This is evident from the fact that the textile industry accounts for around 4
per cent of the gross domestic product (GDP), 14 per cent of industrial
production and 16 per cent of the country's total export earnings. In fact, it is
the largest foreign exchange earning sector in the country. Moreover, it provides
employment to over 38 million people. With direct linkages to the rural economy
and the agriculture sector, it is estimated that one out of every six households in the
country depends on this sector, either directly or indirectly, for its livelihood.

The Indian textile industry is estimated to be around US$ 55 billion in April 2009
and is likely to reach US$ 115 billion by 2012. The domestic market is likely to
increase from US$ 34.6 billion to US$ 60 billion by 2012. It is expected that India's
share of exports to the world would also increase from the current 4 per cent to
around 7 per cent during this period.

India's textile exports have shot up from US$ 18.71 billion in 2006-07 to US$ 20.25
billion in 2007-08, registering a growth of over 8 per cent.


                                                                                Page 8
India has overtaken the US to become the world's second largest cotton producing
country, after China, according to a study by International Service for the Acquisition
of Agra-biotech Application. BT cotton was a major factor contributing to higher rate
of production, from 15.8 million bales in 2001-02 to 31 million bales in 2007-08.

        India is the largest exporter of yarn in the international market and has a
         share of 25 per cent in world cotton-yarn exports.
        India accounts for 12 per cent of the world's production of textile fibres
         and yarn.
        In terms of spindleage, the Indian textile industry is ranked second, after
         China, and accounts for 23 per cent of the world's spindle capacity
        The country has the highest loom capacity, including handlooms, with a
         share of 61 per cent in world loomage.
        India is the largest producer of jute in the world.
        It is the second largest producer of silk and the only country to produce
         all four varieties of silk – mulberry, tsar, era and mega.
        India is the fifth largest producer of synthetic fibres/yarn.




Segments of Indian Textile Industry

Indian Textile Industry can essentially be categorized into two segments:-

1. Organized Textile Industry

2. Unorganized Textile Industry

Unorganized sector is the dominant part in this industry which mainly utilizes the
traditional practices (woven or spun) in cloth production and hence is labor intensive
in nature. This industry is characterized by the production of clothes either through
weaving or spinning with the help of hands. The decentralized nature is considered
as another important feature of the unorganized textile industry in India.
The other half of the Indian Textile industry is a highly organized one with immense
importance on capital intensive production process. This sector is characterized by
sophisticated mills where technologically advanced machineries are utilized for mass
production of textile products.

Sub-Sectoral Categorization of Indian Textile Industry

      Textile Industry based on fiber produced through man made means or natural
       cotton
      Yarn industry utilizing fiber or filament of the man made type


                                                                                Page 9
      Textile industry involved in the production of wool, its derivatives and final
       woolen products
      Production, processing of Jute and the textile industry based on it
      Textile industry involved in the m0061ss production of natural silk along with
       derivative and final products from silk
      Handloom Industry
      Handicrafts industry which is basically unorganized in nature.

Sub-Categorized sectors of the Indian textile Industry

      Textile Industry based on fiber produced through man made means or natural
       cotton in the whole Indian textile industry, this sector has come as the largest
       producer of textile products. This industry has also proved its potential in
       employing the maximum number of people in the entire industry which has
       been calculated to be around a whooping one million workers. As per the
       latest records (31.01.2007) of Ministry of Textiles, the total number of mills in
       this particular sector is 1818 in number. The installed capacity of all these
       mills accumulates to
      35.37 million Spindles and
      0.45 Million rotors

During the year 2000-2001, the total amount of spun yarn produced was 3160 million
kgs. This amount saw an increase of around 400 million kgs within the period of
2000-2001 to 2005-2006.




 RAW MATERIAL IN TEXTILE SECTOR

COTTON

Cotton is a soft white fibrous substance covering seeds of certain plants.

When cotton arrives at a textile mill, several blenders feed cotton into cleaning
machines, which mix the cotton, break it into smaller pieces and remove trash. The
cotton is sucked through a pipe into picking machines. Beaters in these machines
strike t h e c o t t o n r e p e a t e d l y t o k n o c k o u t d i r t a n d separate lumps of cotton
into smaller pieces.
Cotton then goes to the carding machine, where the fibers are separated. Trash
and short fibers are removed. Some cotton goes through a comber that removes
more short fibers and makes a stronger, more lustrous yarn.
This is followed by spinning processes which do three jobs: draft the cotton, or
reduce it to smaller structures, straighten and parallels the fibers and lastly, put
twist into the yarn. The yarns are then made into cloth by weaving, knitting or other
processes.

                                                                                             Page 10
After inspectors check the cloth, it is passed through a gas flame that singes
the fuzz off its surface. Boiling the cloth in an alkaline solution removes natural
waxes, colored substances or discolorations. Then the cloth is bleached in
hypochlorite or peroxide. The cloth may then pass through a machine that prints
designs on it. Cloth intended to be solid-colored goes through a dye bath.

WOOL
Woolen fabric is made from the fleece of sheep.
The processing of wool involves four major steps. First comes shearing, followed
by sorting and grading, making yarn and lastly, making fabric.
In most parts of the world, sheep are sheared once a year, in early spring or early
summer. The best wool comes from the shoulders and sides of the sheep.

Simple Steps to Shearing your Show Sheep:

•   Place the sheep on the trimming table and brush the fleece to remove the dirt.
•   Dampen the fleece with water. A mild solution of an acceptable sheep dip will
    help to clean and straighten the fibers.




                                                                             Page 11
•  Comb the entire fleece with the circular comb to remove the dirt on the outer
   ends of the fibers.
 • Card the fleece with the wool card to straighten out the fibers and break up
   the fleece.
• Trim off the rough carded wool until a smooth surface is obtained. The fleece
   will trim more easily if it is damp.
 • Now do the major trimming.

       Trim the top of the width of the sheep's back making sure the top is level.
       Trim the sides until the proper shape is obtained.
       Square the dock and trim the twist closely as well as the rear legs.
       Trim the brisket and shoulders.
       Trim the head and neck according to breed type.

•   Pack the fleece with the back of a dampened wool card after trimming is
    Completed.

This is followed by grading and sorting, where workers remove any stained,
damaged or inferior wool from each fleece and sort the rest of the wool
according to the quality of the fibers. Wool fibers are judged not only on the
basis of their strength but also by their fineness (diameter), length, crimp
(waviness) and colour.

Wool manufacturers knit or weave yarn into a variety of fabrics. Wool may also be
dyed at various stages of the manufacturing process and undergo finishing
processes to give them the desired look and feel.

The finishing of fabrics made of woolen yarn begins with fulling. This process
involves wetting the fabric thoroughly with water and then passing it through the
rollers. Fulling makes the fibers interlock and mat together. It shrinks the material
and gives it additional strength and thickness. Worsteds go through a process
called crabbing in which the fabric passes through boiling water and then cold
water. This procedure strengthens the fabric.

NYLON
Nylon is a strong, light synthetic fiber. It is a man-made.

Nylon is made by forcing molten nylon through very small holes in a device called a
spinneret. The streams of nylon harden into filament once they come in contact
with air. They are then wound onto bobbins. These fibers are drawn (stretched)
after they cool.
Drawing involves unwinding the yarn or filaments and then winding it around
another spool. Drawing makes the molecules in each filament fall into parallel lines.
This gives the nylon fiber strength and elasticity.
After the whole drawing process, the yarn may be twisted a few turns per yard or
meters as it is wound onto spools. Further treatment to it can give it a different
texture or bulk.




                                                                              Page 12
SILK
Silk is the fine strong soft lustrous fiber produced by silkworms.

Silkworms are cultivated and fed with mulberry leaves. Some of these eggs are
hatched by artificial means such as an incubator, and in the olden times, the
people carried it close to their bodies so that it would remain warm.

Silkworms that feed on smaller, domestic tree leaves
produce the finer silk, while the coarser silk is produced by
silkworms that have fed on oak leaves. From the time they
hatch to the time they start to spin cocoons, they are very
carefully tended to. Noise is believed to affect the process,
thus the cultivators try not to startle the silkworms.

Their cocoons are spun from the tops of loose straw. It will
be completed in two to three days' time. The cultivators then
gather the cocoons and the chrysalis are killed by heating
and drying the cocoons.

In the olden days, they were packed with leaves and salt in a jar, and then buried
in the ground, or else other insects might bite holes in it. Modern machines and
modern methods can be used to produce silk but the old-fashioned hand-reels and
looms can also produce equally beautiful silk.

POLYESTER
Polyester is the general name for any group of widely used synthetic products.
Polyesters are strong, tough materials that are manufactured in a variety of colors,
shapes and sizes.
Polyesters are made from chemical substances found mainly in petroleum.
Polyesters are manufactured in three basic forms - fibers, films and plastics.

Polyester fibers are used to make fabrics. Poly ethylene terephthalate (or simply
PET) is the most common polyester used for fiber purposes. This is the polymer
used for making soft drink bottles. Recycling PET by re-melting it and extruding it
as fiber saves much raw materials as well as energy.

PET is made by ethylene glycol with either terephthalic acid or its methyl ester in
the presence of an antimony catalyst. In order to achieve high molecular weights
needed to form useful fibers, the reaction has to be carried out at high temperature
and in a vacuum.




                                                                             Page 13
               TEXTILE MANUFACTURING
                       PROCESS



     Manufacturing units present at all levels of value chain


  Cotton,
  Wool,                                                                                         Garments
                 Fibres and yarn
  Silk, Jute
                                      Grey fabric             Processed fabric
                                       Knitting               Dyeing
                                       Weaving                Finishing
  Petro-         Man-made fibre/
  Chemic          filament yarn*                                                             Home textiles
  als




                                                                Hand processing
                                    Weaving/ knitting units     units, independent       Garments &
                                    - handlooms,                power processing         home textile
                   Spinning mills   powerlooms, hosiery         units, units attached to producers
                                    units                       mills

                                               Composite Mills




PRODUCTION PROCESS
The textile industry produces a wide range of products. The production process
includes four main activities: spinning, weaving and knitting, wet processing and
stitching (sewing). The production from fibers to spun yarn takes place through the
spinning process and constitutes the first stage. Then the yarn is weaved to make
fabrics in looms. Most woven fabrics retain the natural color of the fibers from which
they are made and are called “grey fabrics” at this stage. These fabrics then
undergo several different processes including bleaching, printing, dyeing and
finishing; these are grouped under the category of wet processing. Finally, the stage
from fabrics to garments is done by stitching. The industry uses cotton, jute, and
wool, silk, man-made and synthetic fibers as raw material.

                                                                                             Page 14
SPINNING:
Spinning involves opening/blending, carding, combing, drawing, drafting and
spinning. It uses four types of technologies: ring spinning, rotor spinning, air jet
spinning and friction spinning. Ring spinning is the most used in India with its main
advantage being its wide adaptability for spinning different types of yarn. Rotor
spinning technology is also widely used.




WEAVING AND KNITTING:

It uses two main technologies: Shuttle and shuttle less. Shuttle less has higher
productivity and produces better quality of output.




                                                                            Page 15
WET PROCESSING:
It is the third stage. It covers all processes in a textile unit that involve some form
of wet or chemical treatment. The wet processing process can be divided into three
phases: preparation, coloration, and finishing. It uses different types of technologies
depending on the type of yarn or fabric that are dyed. Jigger, winch, padding,
mangle and jet-dyeing are some of the important dyeing machines. Similarly, there
are different types of printing: direct printing, warp printing, discharge printing, resist
printing, jet printing, etc.




                                                                                 Page 16
 THE INDIAN TEXTILE INDUSTRY-
   PORTERS DIAMOND ANALYSIS




India’s strong performance and growth in the textiles sector is aided by several key
advantages that the country enjoys, in terms of easy availability of labour and material,
buoyant and large market demand, presence of supporting industries and supporting policy
initiatives from the government.

These advantages can be exhibited within the framework given in the figure below, and are
further discussed in the subsequent section.




                                                                          Page 17
FAVORABLE FACTOR CONDITIONS:
Favorable factor conditions give India a strong comparative advantage over other
competing countries in the textile industry. Specifically, India has the following
strengths:


      Ample low priced supply of domestically produced cotton - this is a
       significant advantage that is currently not matched by other key countries
       with competitive labour costs, including China and Brazil. India not only
       has the largest acreage under cotton cultivation, but also produces nearly
       twenty-three varieties of cotton. This diversity makes India capable of
       catering to various segments in the world trade. Further, this inherent
       strength in raw material availability prevents any supply side shocks.

      Predominance of small-scale units           with   skilled   workmen-provides
       increased flexibility in production.

         Availability of low cost skilled labour - provides a significant advantage
         for the textile industry in India in terms of increased productivity at lower
         costs.

 These strengths offer significant advantages for the industry which are discussed
 below:

 LOW COSTS:

 India has significantly lower raw material cost, wastage costs, labour costs when
 compared to other countries.

 MANUFACTURING FLEXIBILITY:

 The fragmented industry structure and small average scale of operation in India’s
 textile industry has created the capability for enhanced flexibility in production. Indian
 firms are used to handling small-runs, and have skilled manpower with the ability
 and willingness to work on complex designs. Therefore India has the ability to
 produce not only large orders but also smaller and complex orders.

 FAVORABLE DEMAND CONDITIONS – LARGE, GROWING
 DOMESTIC MARKET:

 Demographic trends in India are changing, with increase in disposable income
 levels, consumer awareness and propensity to spend.

                                                                                Page 18
STRONG PRESENCE OF RELATED AND SUPPORTING
INDUSTRY:

India’s textile industry is supported by well established supporting industries and
institutions that provide inputs and expertise to the industry in terms of design,
engineering and machinery.

PRODUCT DEVELOPMENT/ DESIGN:
India has built adequate infrastructure throughout the various stages in textile
development, that is, design, sourcing, merchandising and production. Apart from
institutes such as NIFT (National Institute of Fashion Technology) and Apparel
Training Institutes, there are several colleges, including the Indian Institutes of
Technology and National Institutes of Technology that offer courses in Textile
Engineering. Thus, India has the infrastructure in place to produce qualified and
skilled manpower in areas of textile design and engineering.

TEXTILE MACHINERY:
The Indian textile engineering industry, which began as an offshoot of the textile
industry, is today reckoned as the largest segment in the country. Indian textile
machinery manufacturers are able to produce at competitive prices sophisticated
machines of higher speed and production capability. The textile industry also gets
significant support from the well developed IT capabilities of Indian firms.




                                                                            Page 19
                GOVERNMENT POLICIES

INTRODUCTION:
The Indian textile industry is one of the largest industries in the world. The Ministry of
Textiles in India has formulated numerous policies and schemes for the development of
the textile industry in India. Some of them are detailed in the following sections:


In an effort to increase India's share in the world textile market, the government has
introduced a number of progressive steps.

       100 per cent FDI allowed through the automatic route.
       De-reservation of readymade garments, hosiery and knitwear from the
        small-scale industries (SSI) sector in end-2000. Technology Mission on
        Cotton was launched in February 2000 to make quality raw material available
        at competitive prices.
       Technology Upgradation Fund Scheme (TUFS) which was launched to
        facilitate the modernization and upgradation of the textiles industry in 1999 has
        been given further extension till 2011-12. A total of 18773 applications involving
        a project cost of US$ 24.91 billion have been sanctioned (for a loan amount of
        US$ 10.84 billion) under the Technology Upgradation Funds Scheme upto
        March 31, 2008.
       40 textile parks are being set up under the Scheme for Integrated Textile
        Parks (SITP) which will attract an investment of US$ 4.38 billion, create
        employment both direct and indirect for 908,000 workers and produce goods
        worth US$ 7.77 billion annually.
       The Apparel International Mart, in Gurgaon, will provide world class facility
        to apparel exporters to showcase their products and to serve as a one-stop-
        shop for reputed international buyers.
       The Indian Textile Plaza is being built in Ahmadabad to encourage exports to
        overseas markets.



In current times of a global meltdown, the government has come out with an economic
stimulus package for the textile industry. This includes:

       Additional allocation of US$ 285.66 million to clear the entire backlog in the
        TUF Scheme, which would enhance cash flow of the exporters.
       Extension of interest rate subvention of 2 per cent on pre and post
        shipment credit
       Additional fund of US$ 224.42 million for refund of terminal excise duty




                                                                                Page 20
NATIONAL TEXTILE POLICY:
   The National Textile Policy was formulated keeping in mind the following
   objectives:

    Development of the textile sector in India in order to nurture and maintain its
     position in the global arena as the leading manufacturer and exporter of
     clothing.
    Maintenance of a leading position in the domestic market by doing away
     with import penetration.
    Injecting competitive spirit by the liberalization of stringent controls.
    Encouraging Foreign Direct Investment as well as research and
     development in this sector.
    Stressing on the diversification of production and its upgradation taking
     into consideration the environmental concerns.
    Development of a firm multi-fiber base along with the skill of the weavers
     and the craftsmen.

GOALS ARE SET TO MEET THE FOLLOWING TARGETS:
    The size of textile and apparel exports must reach a level of US $50 billion by
     the year 2010.
    The Technology Upgradation Fund Scheme should be implemented in a
     strict manner.
    The garments industry should be removed from the list of the small scale
     industry sector.
    The handloom industry should be boosted and encouraged to enter into
     foreign ventures so as to compete globally. The National Textile Policy has
     also formulated rules pertaining to certain specific sectors. Some of the most
     important items in the agenda happen to be the availability and productivity
     along with the quality of the raw materials. Special care is also taken to curb
     the fluctuating price of raw materials. Steps have also been taken to raise
     silk to the international standard.

THRUST AREAS:
Government of India is trying to promote textile industry by giving emphasis on several
areas of textile, which are as below:

  Innovative marketing strategies




                                                                             Page 21
            employment opportunities

           Resource Development

.

BUDGET 2009-2010

     Minimum Support Price to cotton farmers have been hiked so much that
      Indian Cotton prices have shot through the roof. Ramification – yarn prices
      have gone up between Rs. 10 and Rs. 40 per kg. The weavers and processors
      of low quality fabric are unable to pass on that increase to the market, thanks to
      the overcapacity generated by liberal TUF benefits already extended to the
      industry.
     Excise duty on man made fibre and yarn from 4% to 7% has increased the
      cost of producing polyester and blended fabric, the so called “poor man’s
      fabric”.
     Reintroduction of optional excise duty of 4% on 100% cotton will give
      some help to the opting-in mills who can avail the Cenvat credit. But this is
      small compared to the sky high indigenous raw cotton price.
     5% increase in the MAT is going to badly affect the units making thin margins
      already.
     TUF budget has been increased from Rs. 10.91 billion last year to Rs.
      31.40 billion during the current year. This will facilitate creation of further
      manufacturing capacities.

Apparently, all the above developments reflect a tough time ahead for the Indian
Textile Manufacturers simply because input costs have increased drastically but the
market is unable to pay for it.

Also, due to oversupply, there is a glut in the market and cash flow situation is tight.
But it is very difficult to raise funds to cover the extra working capital requirement.




                                                                              Page 22
KEY DOMESTIC & FOREIGN PLAYERS

India’s textile industry is an attractive sector that is poised for higher growth. The
industry enjoys significant advantages, aided by India’s key strengths in
availability of raw materials, labour, domestic market and supportive government
policies. While the domestic market has been growing consistently and offers
attractive growth potential, exports are poised for a quantum increase after the
removal of quotas under MFA.

The industry is also undergoing transformation, determined by a few key trends.
While the structure is predominantly of small scale, unorganized player; de-
reservation and the removal of quotas has led to the growth of vertically-
integrated, large-scale units as well. India thus has the potential to be a
significant player not only in complex, customized designs, but also in low cost
mass production. Mass customization may well be a key differentiator for the
industry in future.




                   Leading producer of silk yarns and fabric (mainly for
                    decorative and bridal use), with annual turnover of USD
                    32 million.
                   Other businesses include retailing of home furnishings in
                    India and manufacture of bed linen products for domestic
                    and export market.

                   Amongst the top 3 terry towel producers in the world, with
                    annual turnover of USD 132 million
                   Other products include cotton yarns, polyester filament
                    yarn, bathrobes, and buttons and saw pipes.


                   Belongs to one of the most diversified business groups in
                    India (Aditya Birla Group) and has turnover of USD 577
                    million).
                   Key products in textiles include viscose filament yarn and
                    branded apparel; other interests include insurance,
                    telecom, IT, carbon black.




                                                                            Page 23
                   Large industry conglomerate, with turnover of USD 279
                    million and presence in textiles, retail, engineering
                    goods, personal care and prophylactics.
                   Textile products - worsted fabrics, wool and blended
                    fabrics, specialty ring colour and stretch denim fabric,
                    cotton and linen shirting fabric, readymade garments,
                    woolen blankets and home furnishings.
                   One of the oldest textile companies in the country,
                    having turnover of USD 231 million.
                   Produces suitings, shirting’s, sarees, towels, bed linen
                    and men’s apparel; significant exporter of polycotton
                    blended fabrics and made ups.

                   One of the largest producers of denim in the world,
                    having turnover of USD 338 million and exports to
                    more than 70 countries.
                   Produces denim fabric, cotton and blended fabric,
                    knitted fabric, voiles, apparel.

                   One of the largest textile business houses in India,
                    having turnover of USD 400 million.
                   Significant presence in acrylic fibre, cotton, synthetic
                    and blended spun yarns, grey and processed fabrics,
                    cotton and synthetic sewing threads.

                   India’s largest exporter of readymade garments, having
                    turnover of USD 180 million.
                   Supplies to more than 100 retailers and fashion brands
                    across 39 countries.


                   Having turnover of USD 303 million, company is a major
ALOK INDUSTRIES
     LTD.           producer of polyester yarns, fabrics, garments and
                    textiles

                   textile mill in India for producing cotton fabric
CENTURY
TEXTILES AND
                   Having a turnover of USD 95 million, its products include
INDUSTRIES LTD      viscose filament yarn, viscose tyre/ industrial yarn,
                    denim, cement and pulp and paper




                                                                          Page 24
              COMPANY ANALYSIS


GOKALDAS EXPORTS


Introduction

Gokaldas Exports Limited (GEL) is India’s leading apparel manufacturer-
exporter. The giant textile BPO earns 95% of its revenue through
exports. It operates 43 factories in the country. Its Hyderabad plant, at
a capacity of 2m garments, has yet to start its operations.               All
factories together have a capacity of 24m garments a year. The
processing sector is one of the weakest links of the Indian textile
industry. Yet, the company stands out due to its fully-integrated facilities
with in-house manufacture of apparel components such as, labels, tags,
elastics, cords, and woven tapes with value-added services of poly fill
quilting, embroidery, printing and laundry. It also has in-house design
capability.

In 2007, the US based private equity firm, Blackstone has acquired a 50% stake in
GEL from its promoters––the Hinduja. It was followed by the mandatory open offer
to shareholders, which increased Blackstone's stake to 68.27%. Consequently, the
Hinduja family's shareholding came down to 20%.


Product

GEL is manufacturer a n d exporters of readymade garments, women clothing, woven
readymade garments, kids apparel, men’s clothing, shirts for men, rainwear and
jackets, windcheaters, etc. The principal products that GEL produces are outer wear and
bottom wear. Outer wear includes both sports wear and winter wear and bottom wear
include casual pants, chinos, linen trouser, denim jeans, etc.




                                                                                Page 25
 Marketing Strategies

 Gokaldas markets its product through retail chain. In the present Indian fashion
 retailing, Gokaldas has etched a distinguished place for itself in the form of ‘The
 Warehouse’. Being one of the oldest fashion brands, the Warehouse has high profile
 outlets in Bangalore, Chennai, Hyderabad and Coimbatore. It has developed strategic
 alliances with some of the world’s premier fashion brands. Its clientele includes Nike,
 Mexx, Old Navy, Banana Republic, H&M, Tiffany, Spykar, Adidas, GAP, Tommy
 Hilfiger and Abercrombie & Fitch.



Company's Performance at a glance (Rs m)

                      Company's Performance at a glance (Rs m)
                                2005-06  2006-07     2007-08   2008-09
 Net Sales                        8844.   10344.      10712.    11730.
 Operating Profit/(Loss)          93
                                  1003.   28
                                           1249.      12
                                                       1138.    09728.2
 OPM (%)                          1011.3   2612.0      6310.6     46.21
 NPM (%)                            46.8     8
                                            6.79         3
                                                        4.44       0.29
 Depreciation                        8
                                   180.7    249.6       321.2     342.7
 Interest                          7
                                   142.9    6
                                            219.6       5
                                                        305.2     1
                                                                  351.0
 PAT                               3
                                   608.8    9
                                            702.8       1
                                                        476.0     333.6
                                   3
  Source: BSE India; Cygnus Research        3           9          5


Key Ratios at a glance

                            KEY RATIOS
                                  2005-06 2006-07 2007-08 2008-09
 Debt-Equity Ratio                      1.7     0.8     0.6    0.7
 Long Term Debt-Equity Ratio            6
                                        0.6     0
                                                0.2     9
                                                        0.1    5
                                                               0.1
 Current Ratio                          3
                                        1.3     9
                                                1.7     9
                                                        1.6    6
                                                               1.5
 OPM (%)                                6
                                        9.3     3
                                               11.3     0
                                                       12.0    1
                                                              10.6
 NPM (%)                                2
                                        5.5    46.8    86.7   34.4
 ROCE (%)                               0
                                       22.4     8
                                               17.8     9
                                                       15.6    4
                                                              11.9
 RONW (%)                              8
                                       44.1    5
                                               23.7    8
                                                       18.6   2
                                                              12.7
 Source: Company; Cygnus Research      8       9       6      3




                                                                           Page 26
Performance Analysis
                      Quarterly Performance     Financial Year
                JFM08      JFM09                Performance
                                     Var (%) 2007-08 2008-09    Var (%)
Sales            2782.      2707.        (2.7  10712.    11730.     9.5
Other            71 16.1    03 7.4       2)
                                        (53.8  12215.0 09 19.3      0
                                                                 (91.0
Income
PBIDT               5
                   172.8        6
                               92.2     1)
                                        (46.6    2
                                                1138.      3
                                                          728.2  1)
                                                                 (36.0
Interest           679.3       9
                               84.1     1)6.0   63
                                                 305.2    4
                                                          351.0  4)15.0
PBDT                8
                   172.8       8
                               92.2       5
                                        (46.6    1
                                                 833.4    3
                                                          377.2    1
                                                                 (54.7
Depreciation       690.1       9
                               91.2     1)1.2    2
                                                 321.2    1
                                                          342.7  4)6.6
PBT                 3
                    82.7       31.0       2
                                        (98.7    5
                                                 512.1    134.5     8
                                                                 (93.2
TAX                 33.5        6
                               46.1     2)
                                       1184.     636.0     00.8  6)
                                                                 (97.6
PAT                  9
                    86.3       2
                               47.1    68
                                        (45.3     8
                                                 476.0      5
                                                           33.6  4)
                                                                 (92.9
                    2          8
Source: BSE India; Cygnus Research      4)       9         5     3)


Crippled by a Forex loss of Rs710m, GEL posted a 45.34% dip in JFM09 net profit at
Rs47.18m. Net sales for the period dropped by 2.72% to Rs2707.03m.
For the year ended March 31, 2009, net sales were up by 9.50% to Rs11730.09m.
Net profit dipped 92.93% to Rs33.65m. For the first two quarters of FY09, GEL made
a profit of around Rs140m. In OND08, the company made a loss of Rs155.39m.
So the company’s net till December was an approximate Rs10m loss. As a re su l t
R s 4 7 . 1 8 m p r o f i t a c c r u e d i n JFM09, the company has effectively managed to
post a net profit of Rs.33.65m for FY09.




                                                                           Page 27
Cost Structure
Company’s cost structure has remained almost constant over the years. Raw material
forms the major chunk of the cost structure. Overall cost structure was 67.63%, 72.0
and70.53% of net sales in 2006-07, 2007-08 and 2008-09 respectively. During 2008-09,
cost structure declined by 156.60 bps as percent of net sales. Consumption of raw
material was at 51.93% of net sales, a 19.43bps declined as compared to 2007-08. Staff
expenses were more or less the same. Other expenses, depreciation and tax declined
by 19.75, 7.73 and 32.96 bps as percent of net sales respectively. However, an
increase of 14.34 bps as percent of net sales was seen in the financial charges of the
company.

               Cost Structure as a Percentage of Operating Exp.
               Income            2008-09 2008-07 2006- 2005-
                (Inc)/Dec in Stk    -2.43   -1.55 7 -    06-
                in trade
                Raw Material       51.93   52.12            2.87
                                                    1.76 49.2
                                                    51.5
                Staff Expenses       6.77    6.80   85.2   54.1
                Other                8.34    8.54    0
                                                     7.3    4
                                                            5.3
                Expenses
                Depreciation         2.92    3.00    2
                                                     2.4    4
                                                            2.0
                Interest             2.99    2.85    1
                                                     2.1    4
                                                            1.6
                 Tax                 0.01    0.34    2
                                                     0.7    2
                                                            0.8
                Source: Company; Cygnus Research     5      0


Cloth and accessories forms the major part of 65.88% and 25.02% in raw material
mix.

                                                                       Page 28
Stock Performance
During the 52 week period Sense has gained 1163.65 points and reached at
14625.25 from 13461.60. During May 2009, stock market saw sudden improvement in
indices values which was contributed by the increase in FII investments, stable political
environment after elections and improvement in US consumer confidence.

During the same period, company’s share price of the company declined by 45.28%
to reach at Rs100.1 in May 2009 from Rs182.95 in June 2008. The 52 week period
under consideration has seen a high of Rs188.3 in July 2008 and a low of Rs64 in
February 2009. The relative market capitalization in May 2009 stands at 54.71% which
increased by 48.19% when compared to April 2009.

The stock had underperformed the market over the past one month till April 2009,
falling 11.41R as compared to the Sensex’s 17.45% rise. Though the Forex cover
pulled the bottom line down, the company hope things will pick up in the third and
fourth quarter of 2009-10. Also, it has an order book of Rs4.8 billion till September.




                                                                           Page 29
Common size comparison
When compared GEL to its peer Zodiac clothing and Maxwell Industries, the former’s
operational performance is far better than the latters’. GEL bears the highest raw material
cost and manufacturing expense, followed by Maxwell Industries and Zodiac Clothing.
Staff, selling and administrative expenses are considerably less for GEL compared to
Zodiac clothing but more than Maxwell Industries. Interest charges paid by the company
are more than Zodiac but less than Maxwell. The company is lagging behind both the
peers in terms of bottom line.
                             Common Size Comparison (% of net
                             sales)
                                          Gokald Zodiac Maxw
                                          as              ell
                                                         Ind
                       Other Income           1.6  2.31    s 0.
                       Raw Material           1
                                             52.9 44.26      29
                                                           54.
                       Consumed
                       Manufacturing         2
                                             27.2  3.15    23
                                                           15.
                       Expenses
                       Staff Expenses        57.0 15.47    814.
                       Selling Expenses       3
                                              2.1 13.05      58
                                                             8.
                       Administrative         6
                                              2.5 12.58      12
                                                             3.
                       Expenses
                       Interest               0
                                              2.8  1.01      88
                                                             3.
                       Depreciation           9
                                              3.0  1.51      25
                                                             1.
                       PBT                    4
                                              3.8 11.26      99
                                                             8.
                       Tax                    1
                                              0.3  4.57      22
                                                             2.
                       PAT                    4
                                              3.4  6.69      81
                                                             5.
                                              7 research
                        Source: Companies; Cygnus            41
Recent Strategies


     Due to market conditions, GEL is going slow and it has no expansion plans.

     The company has stopped recruitment at its factories, although the employee
      count at its factories has come down by 3000 from 48000 due to attrition.


        Post-March, it has hedged only about 10-20% at the Rs45/46 levels which it
        considers to be good thing when the rupee is depreciating against the US dollars.

     GEL is trying to focus more on non-US markets such as, Europe, Japan and
      South Africa. The US alone currently constitutes more than half of the company’s
      70 odd clients.


                                                                           Page 30
OUTLOOK

 India’s Textile exports declined by about 2% in 2008-09 to US$21.75 billion
  due to slump in demand from global economies like the US and Europe which
  are reeling under the impact of financial meltdown. The garment exports,
  however, grew by a moderate 4.6% to US$10.13 billion during the previous
  fiscal.

 The future of the Garment export industry depends upon both the US and
  European markets and hopefully, the recessionary trends would take a turn in
  about six months from now after which a good portion of business can come to
  India.


 Exporters from the textile and garment sector are wringing their hands in glee at
  the prospects of bagging even more business in the coming months due to
  depreciation of the Indian rupee against the US dollar and at the same time
  appreciation of the Chinese Yuan.

 GEL expects to maintain its last fiscal’s order book worth Rs11 billion in the
  year ending March 2010. It is trying to focus more on non-US markets such as,
  Europe, Japan and South Africa. GEL expects to get orders from the US market
  by July-August 2009 and is in talks with a number of US companies for the
  new orders.     Added to it, it has announced plans to invest at home and
  expand its retail network. With good order book in and strategic plans, GEL
  revenues are expected to boost up in coming years and will be able to post
  higher margins.




                                                                     Page 31
STOCK SCAN




             Page 32
          16 May-24 May       25 May-31 May 01 Jun-07 Jun 08 Jun-15 JUN
       Weak global cues       Investors            Sensex ended        Sensex gained
       and profit-            Remained             in positive note    during this
       booking made           Bullish during       during this         period as buying
SENSEX
       Sensex register        this period and      period on           seen amid
       gain during this       buying seen in       increased           encouraging
       period.                the market.          capital inflow      global cues.
                              Sensex gained        by funds after
                              during this          a positive
                              period.              infrastructure
                                                   data.




          Positive           Share price        Negative          Share price
Arvind    sentiment     of   moved further      sentiments of the plumped by
          the investors      up by              investor led to 12.87%.
          lifted the         30.04%.            decline in share
          share price up                        price by 0.29%.
          by 25.54%.


          Share     price    Share price        Share p r i c e   De-merger
          locked        at   moved smartly                        news of the
                                                i n c r e a s e d by
          upper circuit to   up by              5.94%.            company
Welspun                      14.94%.
          gain by 9.05%.                                          created
                                                                  negative
                                                                  sentiments on
                                                                  investors.
                                                                        Share
        Positive         Share price            Share       price price declined
                                                                  Share price
Raymond sentiments of moved further                                     by
                                                continued to gain increased by
        the investors    by 12.62%.             and               10.59
                                                         jumped 4.29%.
                                                                  %.
        increased the                           further        by
        share     prices                        16.05%.
        by 33.15%.

          Share price        Share price        Share price       Negative
Century   increased by       increased by       gained further by sentiments of
          21.53%.            12.21%.            5.92%.            the     investors
                                                                  led to decline in
                                                                  share price by
                                                                  9.22%.


                                                                               Page 33
WELSPUN LTD

 Welspun India Ltd

 Introduction

 Welspun India Ltd (WIL) is Asia's largest and amongst
 the top four Terry Towel producers in t h e world,
 having its b u s i n e s s spread across continents
 and has a distribution network in 32 countries
 including USA,UK, Canada, Australia, Italy, Sweden
 and France. Company’s 94% of the total products
 are exported. In India, the company has plants at
 Vapi (Gujarat) and Anjar (Coastal Gujarat). Today
 WIL is a US$400m company and is expected to
 become a US$1 billion by the year 2010.

 Operations

 It has fully Integrated, state-of-the-art                          Value
 textiles plants. The plant operations are        1995-2000   Indirect Export
                                                                   Creation
 supported with SAP for online MIS. It is         2000-2003   Direct Export
 customer centric quality organization,
 driven by c o n t e m p o r a r y techniques     2003-2004 Choose & Pick amongst
 and embracing the six-sigma model                          retailer, High-end
 across all functions. The operations are                   Products
                                                  2004-2005 Branding
 driven by “Cost Management” and
 “Efficiency”. . The
                                                  2005-2006   Marketing and Outsourcing
  company emphasizes on market driven
 product development. It is the first                      Inorganic Growth by
 company from the sector to opt for ESOP.         2006-2007
                                                           Acquisition of
 The company has investments in training                   Christy, UK and Sorema,
 at Werner International, USA.                    Source: Company; Cygnus Research
                                                           Portugal

 Products

 WIL offers a variety of products like towels in different sizes and qualities, bed
 linen using state-of-the-art technology and the best quality of Egyptian cotton.
 Welspun has additionally launched organic products utilizing the benefits of
 soya, seaweed, milk and bamboo. It is the preferred supplier to 14 out of top
 20 retailers in the world.
                                                                                Page 34
Brand Strategies

Supported by a distribution network spread across all major markets, the
Welspun exports more than 90% of its total production over 34 countries,
caters to 14 outlets of the top 20 retailers in the world wide product ranges
within exclusive designer brands (including licensee-where the newest
acquisition is Umbra) in addition to Nautica. Nautica has additionally been
licensed not just towel but also bed linen range. The recent acquisitions of
Christy in UK and Sorema in Portugal have added to its brand value in UK,
Portugal and other European Countries. With licensing lifestyle brand in home
textiles, the Welspun desires to extend its business on high value products
and distribution channels as a part of its overall de- risking strategy.



Company’s Performance at a Glance


                    Company's Performance at a Glance (Rs m)
                            2008-09    2007-08     2006-07   2005-06
Net Sales                     12409.     9735.       6537.     4747.
Operating Profit/(Loss)       44
                               1938.     61
                                         1953.       34
                                                     1462.     00
                                                               1184.
OPM (%)                        5615.6    6020.0      0822.3    0024.9
NPM (%)                          2
                                2.12       7
                                          5.35         7
                                                      6.36       4
                                                                7.65
Depreciation                    847.1     650.6       486.0     263.0
Interest                        9
                                676.8     3
                                          478.1       9
                                                      343.1     0
                                                                272.0
PAT                             5
                                262.6     8
                                          521.0       8
                                                      415.4     0
                                                                363.0
Source :BSE India               6         3           9         0



Key Ratios at a Glance

                             2008-09      2007-08 2006-07         2005-06
Debt-Equity Ratio             2.67          2.05      1.57          1.36
Long Term Debt-Equity         2.15          1.63      1.26          1.04
Ratio Ratio
Current                       1.36          1.31      1.07          1.19
OPM (%)                      17.16         21.29     23.73         25.25
Adjusted NPM (%)              2.23          5.54      6.56          8.39
ROCE (%)                      5.82          8.13      8.66         12.64
RONW (%)                      4.83          9.88      9.81         14.19




                                                                        Page 35
Performance Analysis
                    Performance Analysis of Welspun India Ltd
                     Quarterly Performance     Financial Year Performance
                OND08       OND07 Var (%) 2008-09 2007-08          Var (%)
 Sales            3599.33     2991.     20.3  12409.    9735.61       27.46
 Other Income        3.26     71(5.5    1
                                        40.7  44246.6    379.07      (34.93)
 PBIDT             485.98       0)
                               449.7    38.0    6
                                               1938.    1953.60       (0.77)
 Interest          233.74      3
                               178.4     6
                                        30.9   56
                                                676.8    478.18       41.55
 PBDT              252.24      5
                               271.2    8
                                        (7.0    5
                                               1261.    1475.42      (14.48)
 Depreciation      242.63      8
                               220.4    2)
                                        10.0   71
                                                847.1    650.63       30.21
 PBT                 9.60      350.8    7
                                       (81.1    9
                                                414.5    824.79      (49.74)
 Tax                 2.19       53.4   2)
                                       (37.0    2 9.1      3.49      162.75
 Deferred Tax        3.35        8
                                16.4   7)
                                       (79.6      7
                                                142.6    300.11      (52.45)
 PAT                 4.07       8
                                30.8   7)
                                       (86.8    9
                                                262.6    521.03      (49.59)
                                9
 Source: Company; Cygnus Research      2)       6



    Welspun operates at a world scale level, contributing to more than
     25% of the total Indian towel export across the globe, with around
     34% in towels and around 21% in sheeting & bed products to the
     US in 2007. With capacity expansion in towels and sheeting, the
     company is achieving higher productivity at lower cost of production
     catering to the need of the global scale in which the quality is at the
     highest throughput. The state-of-the-art machinery from the renowned
     companies in Germany, Switzerland and Japan gives the Welspun
     technological as well as product quality edge in the competitive
     arena. The Welspun expects to leverage its position as a leading
     player in the home textile segment by being able to negotiate raw
     material costs as a result of bulk buying.

    Sales in terms of amount increased by 27.5% in 2008-09 on account
     of higher volumes and increased per tonnes realization in towels.
     Commissioning o f new capacities at Anjar supported the growth.
     Sales volume for towels grew by 19%, whereas the average price
     realization dropped by 4%. With respect to bed linen products the
     year being second year of business and product range being
     different, new price levels and new volumes were reached, that
     resulted in realization being lower by 9%. The export including benefits
     for the year was Rs11, 443.0m, which was 92% of the total sales.




                                                                        Page 36
 The company earned an EBIDTA of Rs1935m representing 16% of
  sales as against Rs1954m for FY07-08 at 20% of net sales. This has
  been due to overall lower sales realization mainly because of business
  recession in western countries and significant rise in input cost as well
  as conversion and other expenses, particularly in the last two quarters
  of FY08-09.

 The deferred tax was significantly lower due to lower deferred
  taxable profit in FY08-09 compared to that in FY07-08. Resultantly,
  the net income in theFY08-09 was Rs263m as against Rs521m in the
  FY07-08. This represents 2% and 5% of the total revenue in FY08-09
  and FY07-08 respectively.



 During OND09, WIL registered a growth of 20.31% when compared
  to OND08. The company was able to maintain its profitability but its
  net profit declined by 86.82% as compared to OND07.




                                                                      Page 37
 Common Size Comparison
                                            Common Size Comparison for 2007-08
 When compared to its
                                                      Welspu Vanasthali SR Inds
 peer group companies, Other Income                   n 0.84       9.70         9.09
 WELSPUN beats other Raw Material                       79.65     62.91        62.70
 in terms of manufacturing Consumed
                                Manufacturing           11.39     24.12        14.99
 expenses. Raw material Staff Expenses
                                Expenses                 7.73      6.25         6.74
 consumption          cost   is Selling                  7.67      0.00         0.00
                                Administrative
 highest for the company as Expenses                     3.52      9.13         7.98
 the        company        has  Interest
                                Expenses                 5.92      5.71         5.09
                                Depreciation             6.79      8.72        10.17
 undertaken        the mixed PBT                        14.12     -2.42         7.59
 favored sheet business Tax                              1.22      3.91         1.26
 during the 2007-08 and PAT                              2.11    -11.07         0.30
 also it follows           the Source: Companies; Cygnus research
 strategy of bulk
 Purchases. Due to higher volume of business as well as improved efficiency, the
 company leads i n t e r m s o f s t a f f cost. As compared  to other companies,
 WIL s e l l i n g    expenses are more because discounts, freights,    advertisement
 and sales promotion shot up. Interest of the company is more as compared to its
 peer group because of increase in interest rate as well as lower generation of
 sales from new capacities. The finance expenses increased due to higher
 utilization of working capital funds warranted by growth in business. The
 company is leader in terms of profit before tax and net profit when compared to
 its peer group.

Cost Structure
                                     2008-09      2007-08     2006-07       2005-06
 Raw Material Consumed                55.58        52.79         47.69       51.83
 Manufacturing Expenses               11.39        11.34         11.10        7.16
 Staff Expenses                        7.73         8.22          8.92        6.48
 Selling Expenses                      7.67         5.07          7.49        7.01
 Administrative Expenses               3.52         3.34          5.38        4.96
 Depreciation                          6.79         6.53          7.40        5.58
 Interest                              5.92         5.09          5.84        6.05
 Tax Charges                           1.22         3.12          3.31        4.63

 In 2007-08, raw material cost increased by 279.86 basis points as compared
 to last year. Manufacturing expenses increased by 5 basis points. Staff
 expenses of the company declined by 49.05 basis points. Selling expenses
 increased by 260.07 basis points and was 7.67% of net sales. When all costs
 are taken into consideration, raw material cost forms the major chunk of the
 cost structure followed by manufacturing expenses. In terms of raw material
 mix cotton yarn forms the major part of 49.22%, cotton 33.34%, bed
 linen products 14.41% and fabric 3.01%.
                                                                             Page 38
                           Raw Material Mix
                           3.01

                                  14.41

                                                  Bed Linen Products
                                                  Cotton
                                                  Cotton Yarn
                 49.22
                                          33.34
                                                  Fabric




SOURCE 1:WWW.WELSPUN.COM




     During the 52-week long period under consideration, the
      company’s share prices fell from Rs45.15 toRs14.3. The 52-week
      long period showed a high of Rs52.8 in April 2008 and a low of
      Rs14.3 in February2008.

     The relative market capitalization of the company stands at
      31.67% in February 2009. The share prices of W IL increased in
      November-December 2008, which can be contributed to the group
      company’s expansion plan.
                                                                       Page 39
Industry Updates

  The urban home textiles market in India is estimated to         be   Rs93
   billion and is expected to grow to Rs200 billion by 2011.

  Out of this only 6% of the market is organized. Bed and Bath constitute
   about two thirds of this market.


  The increasing acceptance of these products in US and EU are good signs for
   further growth of exports in this sector. Other regions that can be
   targeted are Middle East Asian and South East Asian companies. India,
   China and Pakistan are the d o m i n a n t          participants   in t h e
   h o m e t e x t i l e with their imports into USA.

  According the Office of Textiles and Apparels, they account for
   65% in terry towels, 81% in sheets 79% in comforters and 84% in
   pillows/pads/other.




                                                                        Page 40
OUTLOOK
   WIL envisions to become a fully integrated home textile company (Bed
    and Bath) from cotton farming to retailing by the year 2010 with the
    largest market capital in India and to be among the top three home
    textile companies in the world.

   Welspun is the leader in terms of embracing new technologies, product
    innovations, market intelligence and offering competitive end-to-end
    solutions to customers at globally competitive prices with effective
    supply chain management.


   Welspun targets cost optimization with an aim to become the lowest
    cost producer of home textiles globally and further aims to become
    the preferred partner in home textiles for global initiative with its
    business model. It targets US$1 billion turnover by 2010 with both
    organic and in organic initiatives.




                                                                    Page 41
STOCK SCAN




             Page 42
           16 Feb – 22     23 Feb – 01         02 Mar – 08 Mar    09 Mar – 13 Mar
           A
           Feb             The
                           Mar                 Due           to   Recovery        of
           disappointing   falling inflation   worsening          global       markets
           interim         assisted the        global economic    helped the
SENSEX     budget and      Sensex; It          outlook,    the    Sensex     to gain
           weak global     gained              Sensex             5.17% in the week.
           cues    made    around              performed          The market gained
           Sensex fall.    0.55                poorly and it      in two out of three
                           %.                  lost     around    trading days in the
                                               6.35%.             week. Low inflation
                                                                  also assisted      a
                                                                  smart bounce back.
           Due to bad      Share prices Share     prices          Share prices
           performance     remained flat tumbled further          gained by
Arvind     of        the   during     the by 13.53%.              5.75% a s it
           company         week.                                  mo ved i n tandem
           stock prices                                           with the Sensex.
           declined by
           7.97%



               Share prices     Share prices       Share prices     Share prices flared
               declined by      remained flat      gained           up by 10.50% as it
 Welspun       6.47%.           during     the     marginally by    moved in tandem
                                week.              2.98%.           with      the
                                                                    Sensex.
               Due to poor      Share prices       During    the    Share prices
               performance      declined           week,     the    gained by
 Raymond       of        the    marginally by      share prices     2.13% a s it
               company the      2.95%.             declined by      mo ved i n tandem
               share prices                                         with the Sensex.
               declined by                         7.23
               6.34                                %.
               Share prices
               %.               Strategic          Share prices     Share          prices
               declined by
               %%               steps taken by     remained flat    increased          by
 Century       7.95%.           the company        during   the     11.20%      as      it
                                resulted     in    week.            moved in tandem
                                increase of its                        with   the
                                share pricey                        Sensex.
                                16.50
                                %.

                                                                                Page 43
INITIATIVES TO IMPROVE THE TEXTILE INDUSTRY
 The weak links in the Indian conventional industry such as weaving and finishing
  have to be strengthened. A major thrust here is to have consolidated efforts by
  Indian Textile Machinery Manufacturers Association, end-users and the
  Government to undertake a moonshot and come-up with alternatives to European
  Machinery, which the weaving sector can afford. This should be doable within the
  next five years, if dedicated efforts are undertaken with the financial support for R
  & D by the Government through its various schemes.

 Inch forward in the non-commodity textile sector, i.e., technical textiles sector from
  a non crawling phase to at least a crawling industry in the next three years.
  General awareness on nonwoven and technical sectors has been created with the
  recent marathon training workshops and conferences such as, "Advances in
  Textiles, Nonwoven and Technical Textiles", organized for the past five years in
  Coimbatore by Texas Tech University, USA and those such as the Texcellance
  and IIT's Technical Textiles conferences. These have put India on the international
  map in technical textiles. These conferences are of less use if they do not translate
  into investments and new projects.

 Tie up with Global level international players. Joint ventures with investors from
  developed economies will automatically give an edge over competition in terms of
  capabilities.

 Invest in industrial textiles/performance textiles. India has a long way to go in this
  field. If needed, make JV with businesses from countries where technical textiles
  are produced but costs are higher.

 We may have a fresh look at your textile manufacturing business. You may be
  having a good physical infrastructure with the best machines available.

 Banks should offer credit for a longer period of time to the textile industry.

 As part of a short-term strategy for the textile industry, the government should try to
  rationalize fiscal structure, exempt it from service tax, reduce interest rates on
  credit and facilitate faster clearance of arrears.

 Finally our textile industrialists should think global. If you think you can
  manufacture low tech textiles (like twills, plains, chinos, dobbies, corduroy etc) very
  well but the Indian market is not supporting the price, you should open shop in
  places like Bangladesh, Vietnam or even in Africa, to get the benefit of cheap
  labour, proximity to massive garment export industry and lots of goodies from
  Governments there.




                                                                             Page 44
                        THE ROAD AHEAD

 As the saying goes in the financial sector, it is not advisable to put all eggs in one
  basket. This is what happened somewhat in the case of the Indian textile industry.

 With the opening of world markets and the abolition of textile quotas since 2005,
  there came a negative situation as well. But, The hindsight is always 20-20.

 Indian textile industry should have focused on all major sectors right from fibre to
  fashion and planned for an organized growth across the supply chain so as to
  compete with China and even countries such as Pakistan, Vietnam and Thailand.
  Instead, the industry had put majority of its stock in the spinning sector.

 This is clearly evident in the utilization of Technology Upgradation Fund Scheme
  effectively by the spinning sector. Although it is a positive outcome, the industry
  turned a blind eye on value-adding sectors such as weaving and finishing.

 Indian powerloom sector, which enables value-addition is a highly unorganized
  industry and needs major upgradation. Not only India does not have world quality
  indigenous shuttleless looms, but also investments are not adequate to cope with
  the quality and quantity to cater to the export market.

 Technical textiles sector is still in its infancy and a tangible growth will be highly
  visible by 2035 when the growth in this sector will be exponential.




                                                                           Page 45

								
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