Final Report by Garima

7/30/2019 Final Report by Garima

http://slidepdf.com/reader/full/final-report-by-garima 1/106

The project is all about the restructuring of the thread unit i.e. restructuring

of thread business of Vardhmān Textile Limited (VTXL), Vardhmān threads

limited (VTL) into Vardhmān Yarns & threads limited. The VTEX Thread

undertaking be transferred to & vested in the transferee company (VYTL) as

a going concern on slump sale basis & The VTL Threads undertaking be

demerged & vested in the transferee company (VYTL). The demerger &

restructuring would enable a focused business approach for the

maximisation of benefits to all stake holders. Our objective is to study the

scheme and the loans which shall be bifurcated and thereafter to work out

the eligibility of all the loans from the tufs angle.

1



2



TEXTILE INDUSTRYTextile industry is primarily concerned with the design and/or manufacture of clothing as

well as the distribution & use of textiles.

During the late medieval period cotton become known as an imported fibre in Northern

Europe.

By the end of 16TH century, cotton was cultivated throughout America. In roman times

wool linen & leather clothes, was a curiosity that only naturalise had herd of & silk

imported along the silk road from china was an extravagant luxury. The use of flax fibre

& the manufacturing of clothes in northern Europe dates back to Neolithic times.

The process of making clothes depends slightly on the fibre being used, but there are

three main steps for the preparation of fibre- Spinning, Weaving & knitting.

The preparation of fibres differ the most depending on the fibre used. Flax requires

retting & dressing while wood requires carding & washing. The spinning & weavingprocesses are very similar between fibres though.

Spinning wheels & spindles or part was invested in India between 500 & 1000 AD.

DURING THE INDUSTRIAL REVOLUTION:-

The textile industry grew out of the industry revolution in the 18 TH century as mass

production of clothing became a main stream industry.

POST INDUSTRIAL REVOLUTION:-

Power looms were shuttle operated but in early part of the 20 TH century, the faster & the

more efficient shuttle less looms came into an existence. Today advances in technology

have produced a variety of looms designed to maximized production for specific types of

material. The most common of these are –Air jet looms & water jet looms. Industrial

looms can weave at speeds of six rows per second & faster.

3



Our economy is largely dependent on textile manufacturing and trade in addition to other

major industries. About 27% of the foreign exchange earnings are on account of export of

textiles & clothing alone.

The textile & clothing sector contribute about 14% of the industrial production & about

3% to the gross domestic product of the country. Around 8% of the total excise revenue

collection is the contributed by the textile industry.

The textile industry in India has a strong multi-fibre raw material production base. A

technology SAVVY industry to meet the challenges ahead.

“India is presently exporting 6 billion U.S. dollars worth of garments, where as with the

WTO regime in place, we can increase the production and export of garment from 18 to

20 billion U.S. dollars within next 5 years.”

First time a separate policy statement was made in 1985 in regard to development of

textile sector.

With new investment flow, India’s cotton production increased by 57% over the last 5

years & 3 million additional spindles & 30000 shuttles less looms was installed.

4



INDIAN TEXTILE INDUSTRY & ITS GLOBAL POSITION

The Indian Textile Industry is the second largest in the world.

It has the largest cotton acreage (9 million hectares).

It is the third largest cotton producer.

It ranks 4TH in terms of staple fibre production & 6TH in filament yarn

production.

India accounts for (circa) 25% of the Global trade in cotton yarn.

It is the largest producer of Jute, the second largest producer of silk and the 5 th

largest producer of synthetic fibre / yarn.

THE INDIAN TEXTILE INDUSTRY WITHIN THE INDIANECONOMY

The Indian Textile and Apparel industry :

contributes to circa 3.6% of India’s gross domestic product Accounts for 25% of India’s exports.(Ref 7).

The Textile Industry accounts for about 20% of industrial production.

The Textile Industry employs over 15 million people.

Textiles and Garment exports account for 39% of India’s total exports.

Globalisation has brought opportunities for Indian Textiles.

But Globalisation also brings threats which have to be addressed (particularly

from cheap imported fabrics).

If the WTO means better distribution of world trade, it will not be free for all and

only the fittest will survive.

WTO benefits for Indian Textiles will also apply to other developing countries.

The Indian Textile Industry has great potential, but great challenges ahead.

It must maximise its strengths and minimise its weaknesses.

5



INDIA’S COMPETITORS

India’s exports fall into the low risk category because of its well developed domestictextile industry.

Despite this, India’s exports do face serious competition from the following countries

China

Bangladesh

Pakistan

Sri Lanka

Main markets of Indian textiles are:-

Australia

Mauritius

Bangladesh

New Zealand

Belgium

Russia

Canada

Saudi Arabia

China

Singapore

Columbia

Spain

Egypt

Sri Lanka

Germany

Switzerland

Greece

Syria

Hong Kong

Thailand Indonesia

Ukraine

Israel

U.K

Italy

USA

Japan

Uruguay

Korea

Venezuela Lebanon

6



Vietnam

Malaysia.

After the textile quota regime of quantitative import restrictions under the Multi- fibre

Arrangement (MFA) came to an end on 1 st Jan 2005 under WTO agreement on textiles &

clothing.

MULTI-FIBRE ARRANGEMENT (1974)

MFA was designed to be a short term measure primarily to give industrialise countries

time to adjust to competition from imports from developing countries. Aim of MFA was

to allocate export quotas to low cost developing countries & limiting the amount of

imports to countries whose domestic industry’s faced serious challenges from rapidly

increasing imports. The expiration of MFA didn’t however mean the end of quotas on

textile & clothing exports from developing countries. The MFA is regime served to

protect newly industrialised countries like Korea, Taiwan & Hong Kong that have now

become non-competitive due to substantial increase in domestic wages. It checks the

decline of textile sector in the industrialised countries but failed to help it revive.

CHALLENGES FACED BY TEXTILE INDUSTRY

Rising rupee brought the inherent structural weaknesses that have plagued the

industry for decades.

The textile industry suffers from low competitive position too with regard to

the availability of good quality cotton, low level of technology, poor

automation, lack of integrated supply chain, low brand image in overseasmarkets etc.

Infrastructural bottlenecks like the transaction time at ports, inland

transportation time, lack of initiatives by textile manufacturers to going for

technological up gradation, fragmentation of Indian textile industry etc.

Indian industry will have to become competitive by raising its level of

efficiency to meet the challenges both in international & domestic markets.

7



The speedy development of the technology in the world textile industry.

The substantial issues related to fibre resources i.e. energy, water,

environment etc.

And the increasing cost of HR and other.

COMPETITOR STRENGTHS AND WEAKNESSES

Country Strengths Weaknesses

China

World’s largest TextileEconomy.

The largest exporter of textiles &clothing (worth US $ 62 billionin 2002).

This accounts for 17% of worldtrade (Textiles = 13%; Clothing

= 20%).

World’s largest producer ofCotton.

World’s largest producer ofSynthetic fibres.

Textile sector generates 10% ofits GDP; and 20% of itsmerchandise output.

Relatively low labour costs.

Large obsolete productioncapacities in the cottonsector.

Low value addition.

One of the world’s largestexporters of readymadegarments (exports of US $ 5billion pa).

Significant presence in USmarkets, due to a large quota.Also enjoys quota free, & dutyfree access to Australia;

Canada & Norway.

Raw material base; noindigenous cottonproduction; & reliesheavily on imported yarnsand fibres.

Inadequate infrastructure.

Leads to congestion &delays at ports.

8



Bangladesh Its status as a least developedcountry (LDC) will give itfavourable market access inthe post quota era(01/01/2005);with preferred facility for EU

markets.

Has mastered the garmenttrade & has low cost / highproductivity in that sector.

Inadequatecommunications network.

Uncompetitive and

unreliable power supplyleads to production delays& elevated costs.

9



Sri Lanka

Textile & Apparel Industry has

crucial part of country’seconomy.

It is the country’s biggestemployer in manufacturing; &number 1 export earner.

In 2001 it accounted for 69%of the country’s industrialexports and 53% of its totalexports.

Relatively secure markets inwith USA; EU & Canadathrough bilateral agreements

Small domestic fabric base.

Relies heavily on yarn &fabric imports.

Industry is seeing declinein competitiveness due toits heavy reliance on quotacategories, concentrationon a few markets, inabilityto develop new markets ormajor purchasers becauseof direct marketing

contacts.

Relatively small domesticmarket, little cashgeneration to supportinvestment in developingexport markets.

Pakistan

Fourth largest Cotton producer inthe world.

Highly developed garmentconfection industry, & alsodyeing & finishing industry.

Abundant labour force, whichrelatively cheaper than China &India.

Limited manufacturing basein clothing & processing.

Limited research &development restrictingdiversity in product &innovation.

10



11



SUMMARY OF THE INDIAN INWARD LOOKING VIEW

Indian Textiles could (potentially) grow from US $ 36 billion to US $ 85 billion

over the next 6 years.

Future prospects for Indian Textiles look good but competition will be fierce.

Only the Fittest will survive, let alone prosper.

India Textiles Must improves PRODUCTIVITY across the whole Value-Chain.

Abolition of quota-free tariff charges in January 2005 will favour Indian Textile

imports. But China, and others, will also benefit.

Given the low productivity of the workforce, India’s strength of (relatively) low

labour cost has not been fully exploited.

Value Addition needs to be a Key Driver for the Indian Textile Industry to

achieve its full potential.

Indian Textiles need to command premium prices; need to target niche products &

markets; need to redesign products in higher value-added segments of

international business.

The Dyeing & Finishing sector is critical in these growth drivers, since it holds

the key to fabric (& sequent garment) quality.

The Processing Sector (Dyeing & Finishing) is currently one of the weakest links

of the Value-Chain and must look particularly towards Productivity

improvements.

Over 36% of the total investment which will take place in the Indian Textile

Industry over the next 6 years will be in the Dyeing and Finishing sector.

The need is to create new capacity, and to refresh existing capacity.

12



13



INDIAN TEXTILE SWOT

STRENGTHS: Indian Textile Industry is an Independent &

Self-Reliant industry.

Abundant Raw Material availability thathelps industry to control costs and reducesthe lead-time across the operation.

Availability of Low Cost and SkilledManpower provides competitive advantageto industry.

Availability of large varieties of cotton fibre& has a fast growing synthetic fibreindustry.

India is one of the largest exporters of Yarnin international market & contributesaround 25% share of the global trade inCotton Yarn.

The Apparel Industry is one of largestforeign revenue contributor & holds 12% of

the country’s total export. Industry has Manufacturing Flexibility that

helps to increase the productivity

WEAKNESSES: Indian Textile Industry is highly

Fragmented Industry.

Industry is highly dependent on Cotton.

Lower Productivity in various segments.

There is Declining in Mill Segment.

Lack of Technological Development thataffect the productivity & other activities in

whole value chain.

Infrastructural Bottlenecks and Efficiencysuch as, Transaction Time at Ports andtransportation Time.

Unfavourable labour Laws.

Lack of Trade Membership, which restrictto tap other potential market.

Lacking to generate Economies of Scale.

Higher Indirect Taxes, Power and InterestRates.

OPPORTUNITIES: Growth rate of Domestic Textile Industry is

6-8% per annum.

Product development and Diversification tocater global needs.

Elimination of Quota Restriction leads togreater Market Development.

Market is gradually shifting towardsBranded Readymade Garment.

Increased Disposable Income & PurchasingPower of Indian Customer opens NewMarket Development.

Emerging Retail Industry and Malls providehuge opportunities for the Apparel,Handicraft & other segments of theindustry.

Greater Investment & FDI opportunities areavailable.

THREATS: Competition from other developing

countries, especially China.

Continuous Quality Improvement is needof the hour as there are different demandpatterns all over the world.

Elimination of Quota system will lead tofluctuations in Export Demand.

Threat for Traditional Market for Powerloom & Handloom Products & forcingthem for product diversification.

Geographical Disadvantages.

International labour & EnvironmentalLaws.

To balance the demand & supply.

To make balance between price & quality.

14



15



VALUE CHAIN IN TEXTILE

16



ANALYSIS PART

One of the worst hit sectors during the skyrocketing interest rate scenario in the late 90s

& early 2000s, the debt-laden Indian textile industry has spun many turn-around stories

since then. Aided by lower interest rates, restructuring packages from financial

institutions & the recent dismantle of quotas; the sector is today well poised to capture

growth opportunities. In 2005, the sector contributed 20% to industrial production, 9% to

excise collections, 18% of employment in industrial sector, nearly 20% to the country's

total export earnings and 4% to the GDP. The textile sector employs nearly 35 m people

& is the second highest employer in the country. In fact, it is estimated that one out of

every six households in the country directly or indirectly depend on this sector. Here we

analyse the sector's dynamics through Porter's five-factor model.

BARGAINING POWER OF CUSTOMERS (DEMAND SCENARIO)

Global textile & clothing industry is currently pegged at around US$ 440 bn. US &

European markets dominate the global textile trade accounting for 64% of clothing and

17



39% of textile market. With the dismantling of quotas, global textile trade is expected to

grow (as per Mc Kinsey estimates) to US$ 650 bn by 2010 (5 year CAGR of 10%).

Although China is likely to become the 'supplier of choice', other low cost producers like

India would also benefit as the overseas importers would try to mitigate their risk of

sourcing from only one country. The two-fold increase in global textile trade is also

likely to drive India's exports growth. India's textile export (at US$ 15 bn in 2005) is

expected to grow to US$ 40 bn, capturing a market share of close to 8% by 2010. India,

in particular, is likely to benefit from the rising demand in the home textiles & apparels

segment, wherein it has competitive edge against its neighbour. Nonetheless, a rapid

slowdown in the denim cycle poses risks to fabric players.

BARGAINING POWER OF SUPPLIERS (SUPPLY SCENARIO)

India is the third largest producer of cotton

in the world after China and US and has the

largest area under cultivation. Cotton, a key

raw material in the textile & garment

industry, accounts for about 30% of the

fabric cost and 13% of the garment cost.

India has an abundant supply of locally

grown long staple cotton, which lends it a

cost advantage in the home textile &

apparels segments. Other countries, like China & Pakistan, have relatively lower supply

of locally grown long staple cotton. Moreover, low cotton prices due to a bumper cotton

crop would enable India to lower its production cost & sustain pricing pressure. Further,

efforts on improving the yield per hectare would ensure higher productivity &

production, thereby providing the much-needed security of raw-material supply to textile

producers.

18



India also enjoys a significant lead in terms of labour cost per hour (US$ 0.6 in 2004),

over developed countries like US (US$ 15.1) & newly industrialised economies like

Hong Kong (US$ 5.1), Taiwan (US$ 7.1), South Korea (US$ 5.7) & China (US$ 0.9).

Also, India is rich in traditional workers adept at value-adding tasks, which could give

Indian companies significant margin advantage.

THREAT OF NEW ENTRANTS

In the quota free regime, capacity expansion is the name of the game in the textile sector.

Resultantly, smaller players who cannot venture into the global markets are flooding the

domestic markets with excess supply, thus weakening the pricing scenario. Be it denim

(Arvind Mills), home textiles (Welspun and Alok Industries) or branded apparels

(Raymond), new capex & consolidation with international players is also not likely to

safeguard margins for the larger players, unless they can tap a significant pie of the

overseas markets.

THREAT OF SUBSTITUTES

Low cost producing countries like Pakistan and Bangladesh (labour cost 50% cheaper)

are also posing a threat to India's exports demand. In fact, players like Arvind Mills have

already started feeling the pinch as overseas buyers have started shifting to 'alternative

sources', thus impacting their incremental volume off-takes.

COMPETITIVE RIVALRY

India's logistic disadvantage due to its geographical location can give it a major thumbs-

down in global trade. The country is distant from major markets as compared to its global

competitors like Mexico, Turkey & China, which are located in relatively close vicinity

to major global markets of US, Europe & Japan. As a result, high cost of shipments &

longer lead-time coupled with lack of infrastructure facility may prove to be major

hindrances.

19



The fragmented structure of the industry has also stood in the way of achieving true

integration between the various links in the supply chain. The sector has one of the

longest & most complex supply chains in the world, which the larger players are trying to

correct by integrating their operations & improving efficiency levels.

Textiles being a fairly regulated sector till the recent past (quota regime), another

indispensable leg of the above analysis are government regulations. Technology Up

gradation Fund Scheme (TUFS) was launched in FY99 for a period of five years (later

extended up to FY07) to promote the up gradation of the textile & jute industry. Thescheme aimed at providing loans to the sector at internationally comparable rates of

interest (5% lower than the domestic interest rates), which enabled the players to upgrade

their technology at lower cost of capital. Establishment of 'Apparel Export Parks' & fiscal

incentives in the recent budgets also indicate the government's resolve to aid the sector's

growth & international competitiveness.

As one can comprehend from the above analysis, the potential for the sector's growth are

ample, but the trick lies in competing effectively against rivals. Consolidation of the

industry & delivery of better quality at effective rates & minimum lead time would

certainly help the players surmount all competitive pressures.

20



3R’s FOR RECESSION IN TEXTILE INDUSTRY

RECESSION

Uncle Sam got beaten in the second half of 2007-08 due to subprime crisis, which

pushed US in a recession mode.

RUPEE

Indian Rupee appreciated from Rs.47.00 levels to Rs. 39.20 levels in less than 18

months, primarily because of RBI’s efforts to control inflation & increased FII

flows in Indian stock market, leading to a sharp fall in realizations in both the

export & the domestic market.

RISE IN COST (INFLATION RATE)

Global inflation rate soared due to rise in commodity prices. Oil breached $100

mark ($135 high), gold touched a high of $1000, cotton prices went up to 79c/lb

and the prices of other commodities also skyrocketed. Due to which inflation in

India also went up to 7.82% (current rate).

3R’s FOR RECOVERY IN TEXTILE INDUSTRY

RECOVERY

USA’s ability to recover from the current slowdown in its economy will boost up

the global demand. Sharp rate cuts by FED has improved the current economic

situation in US, thus raising hopes for an early recovery.

RUPEE

In the face of continuing inflation & political uncertainty, INR is expected to stay

range bound between 42-44 levels. This would help the industry to recover from

its current position.

RENMINBI (CHINESE YUAN)

Chinese Authorities decision to let Yuan appreciate beyond its current trading

band will make the Indian textile exports competitive. Yuan already reached 7

level against $, it might touch 6.3 level.

21



22



COMPANY’S MISSION

Vardhman aims to be a world class textile organization producing

diverse range of products for the global textile market. Vardhman

seeks to achieve customer delight through excellence in

manufacturing and customer service based on a creative combination

of sale-of-the-art technology and human resources. Vardhman is

committed to be a responsible corporate citizen.

23



LOGO OF VARDHMĀN GROUP

The “Flame” signifies growth i.e. growth of the company along with the growth

of each & every individual associated with it whether he/she is a worker , a white

collar employee, a shareholder or a customer

The “Stick” symbolizes cotton that is the basic raw material of the core product of

vardhmān

The “V” stands for the Vardhmān Group.

TEXTILE SOLUTIONS FOR THE WORLD OF

TOMORROW

24



INTRODUCTION

Vardhman is a major integrated textile producer in India. The Group was setup in

1965 at Ludhiana, Northern India. Since then, the Group has expanded manifold

and is today, perhaps, the largest textile conglomerate in India. The Group

recorded a turnover of Rs.24.54 billion for FY ended March 31, 2007. The Group

portfolio includes manufacturing and marketing of Yarns, Fabrics, Sewing

Threads, Fibre and Alloy Steel.

Brief Snapshot of Vardhman Group

Largest installed capacity in spinning in India.

Largest Yarn producer in India

Largest manufacturer and exporter of cotton Yarn from India.

Market Leader in Hand Knitting Yarn

Second Largest producer of Sewing Threads

One of the leading integrated fabric producer

One of the leading special alloys steel producer

Highest quality acrylic manufacturer of the country

ERP (Enterprise Resource Planning) enabled solutions for online order

tracking

25



COMPANY’S PHILOSOPHY

Faith in bright future of Indian textiles and hence continued expansion in

areas “which we know the best”

Total customer focus in all operational areas.

Product to be of best available quality for premium market segments

through TQM and zero defect implementation

Global orientation targeting – at least 20% production for exports.

Integrated diversification / product range expansion.

World class manufacturing facilities with most modern R&D and process

technology.

Faith in individual potential and respect for human values.

Encouraging innovation for constant improvements to achieve excellence in

all functional areas.

Accepting change as a way of life.

Appreciating our role as a responsible corporate citizen.

26



GROUP COMPANIES

1965

Investment & Financing

NA

NA

1973

Yarn, Fabric, SewingThread, Steel

Rs. 23.46 bn

NA

1999

Acrylic Staple Fibre

Rs. 2.28 bn

Exlan & Marubeni

1994

Synthetic Threads

Rs. 0.29 bn

NA

1996

Cotton Yarn

Rs. 0.89 bn

Marubeni & TohoRayon

Vardhman AcrylicsLimited (VAL)

Vardhman TextilesLimited (VTEX)

Vardhman HoldingsLimited (VHL)

Vardhman ThreadsLimited (VYTL)*

VMT Spinning Co.Limited (VMT)

Year ofCommencement

Main Business

Gross Turnover07-08

Collaborations

Year ofCommencement

Main Business

Gross Turnover07-08

Collaborations

* VTL sewing thread business has been demerged into VYTL w.e.f 1st April 07.

27



BUSINESS OF THE COMPANY

The group portfolio includes Yarn, Fabrics, Sewing Thread, Fibre and Alloy Steel.

SEWING THREAD BUSINESS

Started in 1982 as forward integration to Yarn Business.

Current capacity of approximately 33 tpd in its plants at Punjab, Tamil

Nadu & H.P.

Sewing thread contributes 12% of the group turnover.

Turnover for the FY ended 31st March 08 : Rs. 3.38 billion

Joint Venture Agreement with American & Efird, Inc. USA for

manufacturing & distribution of the famous A&E branded sewing threads

The second largest brand of specialized threads in the country

The product range includes:

Apparel Sewing Threads

Specialty Threads

Textile Crafts

Kite Flying

28



FABRICS BUSINESS

The group entered Fabric business in 1992.

Entered the processed fabric market in 1999

Commissioned the second plant for processed fabric

Current capacity 810 Looms & 82 million meters of processed fabric.

Turnover for the FY ended 31st March 08: Rs 4.47 billion

One of the few fully integrated fabric suppliers in the country

Dedicated to product innovation, world class quality, state-of-art

technology and excellence in service

Produces fabrics for both tops & bottoms for the apparel segment

Serving top of the line customers like GAP, Banana Republic, Ann Taylor,

Esprit, Abercombie & Fitch

ACRYLIC FIBRE BUSINESS

Ventured into manufacture of Acrylic Staple Fibre in 1999- Vardhmān

Acrylics Limited

Current Capacity 18,000 mtpa


World class wet spun technology with highly automated, microprocessor

controlled systems

Products are marketed under the brand name VARLAN©

It is used in manufacturing of hand knitted yarns, blankets, jerseys,

sweater, saris, upholstery, carpets etc.

STEEL BUSINESS

Started Steel business in the year 1972

29



Manufactures Special and Alloy Steel

Current Capacity 80,400 mtpa


Application of products in automotive components, forging, ball bearings,

engineering applications, railways, defense, medicosurgical …

Preferred OE supplier to leading OEMs like Telco, Ashok Leyland,

Maruti, Hindustan Motors, Toyota, M&M and Escorts among others

YARN

Yarn manufacturing is the major activity of the group accounting for 65

percent of the group turnover.

It produces the widest range of cotton, synthetic and blended, grey and

dyed yarns and hand knitting yarns.

Market leader in India.

Has 9 production plants with total capacity of over 5.5lacs spindles.

largest exporter of yarn form India, exporting yarns worth more than USD

90 million.

Value Added/Customized Products of Yarn Business

Domestic

Total

30



Vardhman Group consists of 5 SBUs spread across 9 (*2upcoming) manufacturing locations

31



GROUP CAPACITIES

ParticularsUnit of

Measurement

As OnMar

1998

As OnMar

2000

As OnMar

2002

As OnMar

2006

As OnMar

2007

As On Mar2008

32



SpinningSpindles(Lakhs)

3.86 4.00 4.96 5.12 5.88 7.47

Dyeing Tpd 25.50 34.50 52.00 55.00 55.00 55.00

Mercerization Tpd 1.70 5.00 6.75 6.75 8.00 8.50

Weaving Looms 144 160 208 432 460 810

Sewing Thread Tpd 15.50 18.50 18.50 25.00 30.00 33.00

Acrylic Fibre Tpa 16,500 16,500 16,500 16,500 18,000 18,000

ProcessedFabric

Mma NA 15 20 30 42 82

Steel Mtpa 65,000 40,000 40,000 80,400 80,400 80,400

Vardhman Global Alliances

Fibre and Yarn Dyeing NIHON SANMO, JAPAN 1992

Gassed MercerizedYarns

KYUNG BANG, SOUTH KOREA 1994

Cotton Yarns TOHO RAYON, JAPAN 1995

Acrylic FibreEXLAN AND MARUBENI CORP,

JAPAN1996

Fabric Dyeing &Finishing

TOKAI SENKO, JAPAN 1998

Sewing Threads AMERICAN & EFIRD (A&E) INCUSA

2001

Cotton Yarns NISSHINBO, JAPAN 2002

Cotton Fabric NISSHINBO, JAPAN 2007

Major Export Destinations

USA, EU, Australia, Canada, China, Egypt, Mauritius, Hong Kong,Indonesia, Israel, Italy, Japan, Korea, Malaysia, Singapore, U.K.

33



34



Group Financials for the FY ending 31st March 08

* VTL sewing thread business has been demerged into VYTL w.e.f 1 st April 07.

Segment-wise Financials for the FY ending 31st March 08

* Capital Work-In-Progress of the group of Rs 3.03 billions has been excludedwhile arriving at Capital Employed.

35

(Rs Billions)

Comp any TurnoverOperating

Profit

Profit after

Tax

Operating

MarginNet Worth

Return on Net

Worth

VTEX 23.46 3.87 1.22 17% 11.72 10%

VAL 2.28 0.32 0.05 14% 1.40 4%

VMT 0.89 0.17 0.09 19% 0.56 15%

VYTL* 0.29 0.08 0.06 27% 0.20 30%

Vardhman

Group

26.92 4.44 1.42 16% 13.88 20%

Segments Turnover EBIDTA Depn. EBITCapital

Employed *

EBIDTA as %

of Turnover

EBIDTA as %of Cap.

Employed

Yarn 12.99 2.80 1.14 1.66 20.92 22% 13%

Sewing

Thread3.39 0.51 0.07 0.44 1.86 15% 27%

Fabric 4.51 0.52 0.34 0.18 7.54 11% 7%

Fibre 2.28 0.32 0.11 0.21 1.76 14% 18%

Steel 3.75 0.40 0.04 0.36 1.78 11% 22%

Unallocated N.A. (0.11) N.A. N.A. 2.86 N.A. N.A.

VardhmanGroup

26.92 4.44 1.70 2.85 36.72 16% 12%

(Rs Billions)



PRIME CONSIDERATION OF BANKSSome ratios of the Vardhmān textiles limited are as follows:

DEBT EQUITY RATIO

This shows the relative contribution of creditors and owners.

The Norm set by the bank is 2:1.

D/E = DEBT/EQUITY

Debt consists of all debts, short term as well as long term.

Equity = Net worth + Preference Capital + Deferred tax Liability

DEBT EQUITY RATIO OF LAST 5 YRS OF VARDHMĀN

TEXTILE LIMITED

YEAR DEBT EQUITY RATIO

2007-08 1.58

2006-07 1.14

2005-06 1.15

2004-05 0.95

2003-04 1.03

36



INTEREST COVERAGE RATIO

This shows the ability of the firm to pay interest.

ICR = PBIT + Dep. / Debt Interest

The Norm set by the bank is 4:1.

INTEREST COVERAGE RATIO OF LAST 5 YRS OF

VARDHMĀN TEXTILE LTD.

YEAR INTEREST COVERAGE RATIO

2007-08 8.20

2006-07 10.10

2005-06 9.20

2004-05 5.50

2003-04 4.14

37



38



FINANCIAL INDICATORS OF VARDHMĀN GROUP(CRORES)

PARTICULARSGROUP

2006-07

GROUP

2005-06

GROUP

2004-06

GROUP

2003-02

GROUP

2002-03

Gross Sales 2150.09 1957.24 1931.37 1155.57 906.06

Fob Value of

Exp.434.02 367.41 413.07 276.90 235.91

Profit before Tax 225.77 250.59 159.67 82.35 58.30

Cash Acc (PBT +

Dep)345.22 351.93 256.67 139.12 109.47

Gross Block 2108.66 1856.33 1536.81 791.77 774.94

Net Block 1718.63 1037.56 808.71 435.73 466.29

Capital

Employed2911.39 2156.04 1645.80 1071.61 971.91

39



40



CUSTOMERS OF THE COMPANY

The Vardhman range of yarns was a humble beginning. Three decades of hard work,

commitment and constant innovation have resulted in well earned trust and goodwill of

their customers across the globe.

At Vardhman, with the notion that Customer service is a way of life. They strive to

provide their customers a delight with 3P services - Prompt, Polite and Personalized.

They today have a capacity of over half a million spindles along with two dyeing plants

bearing a capacity of more than 27 tons Yarn and 22 ton Fiber per day. Their goaltherefore calls for serving their customers with a multiple range of products meeting the

most diverse of requirements. This, in fact has positioned Vardhman as a “Supermarket

of High Quality Yarns”.

Their dedication to high quality has enabled them to become the first Indian textile mill

to be awarded the ISO 9002 certification

Vardhman target customers are dealers they do not contact

directly with the customers

Most of the dealers exclusively deal in hand knitting yarn & some of them

also deal in readymade garments, general store material etc.

The preferable brand of most of the dealers is vardhman because of its high

quality and profitability Dealers are satisfied with the price, availability,quality and terms& conditions

of the company

According to dealers customers prefer both Hand Knitted as well as

readymade sweaters.

41



Suggestions and recommendations by customers and

dealers

Customers’ suggestions

New design booklet should be given along with jar and box packing to

make it more popular

Attractive hand bag should be used

Packing should be according to range of colors

Regular customers should be given discounts or gift vouchers

Dealer’s suggestions

Packaging cost should not be included in the cost of product

Attractive schemes should be introduced to make product popular

Gifts should be given along with high price packed product.

42



ACHIEVEMENTS

It's an overwhelming feeling when the efforts and hard work put in are recognized and

felicitated. A feeling that galvanizes the Group into believing in more, in itself and

reaffirming its commitment to offer products that invoke trust and reliability.

Back home, the Vardhman Group became India's first textile company to be awarded

ICO9002/ ISO 14002 Certification. It is the largest producer and exporter of yarns and

Grey woven fabrics from India. Vardhman is also the largest producer of tyercord yarnsand the second largest producer of sewing threads in India. The Vardhman Group vision

of excellence is matched by a dedication and sincerity to be the best and excel in every

industry it has a presence.

Textile Export Promotion Council2003-04

Gold trophy in EOU/EPZ for export ofcotton yarn


Bronze trophy in mill fabric exportercategory


Gold Trophy in EOU/EPZ for export ofcotton yarn


Silver Trophy


Bronze Trophy


Silver Trophy

Textile Export Promotion Council1996-97 Silver Trophy

Govt. of India Award 1994-5, 1995-96

Award of Merit


(Merchant Export Category for Fabrics)Bronze Trophy


Merchant Export Category for Fabrics)Gold Trophy


Gold Trophy

43



ENVIRONMENT

Vardhman believes that success can be gauged by the happiness within and around

them. It is in the wellbeing of its people with which corporate can achieve

unprecedented heights in the business world .as a responsible corporate citizen,

vardhman has a commitment to building a happier environment.

As a gesture of its social commitment to the society and the workforce, Vardhman

has provided a school for the children, functional residential complexes for the

employees , working women’s hostel ,numerous recreational activities sportsprogrammes and cultural events during festivities . Besides these the company also

runs medical camps to meet the critical health requirements of the people.

Acclaiming and rewarding the outstanding achievers within the organization, has

become second nature to Vardhman.

GLOBAL ORIENTATION

Vardhman had also globalized their environment. As part of its strategy to

internationalize its operations, Vardhman embarked upon an ambitious plan to reap

the benefits of large scale production and diversification of its markets in 1986,

realizing that the global presence will be the key to survival in the age of open

markets, Vardhman looked outwards.

EXPORT LEAD GROWTH

Vardhman’s consistent efforts to enhance its presence in the international markets

have begun to show impressive results. The FOB value of exports of the Company

increased from Rs.33,35,37,482 in the previous year to Rs.40,08,86,957 during FY

20060-07 registering an increase of 20.19 percent. Vardhman, today, exports 40% of

its yarn production to more than 25 countries and has a strong presence in markets

like the EEC, USA, Canada, China, Japan, Korea, Mexico, Brazil and Mauritius,

Middle East. Vardhman has a share of more than 6% in total Yarn exports from India.

44



TECHNOLOGY

Vardhman is a technology driven organization. It believes that technology should

manifest itself in maximizing efficiency and increasing the inherent value of the product.

In its quest to excel, Vardhman has collaborated with global technology experts to

provide a wide range of products that match international standards.

Different type of technology is used in different types of fabrics as it is not one unit

however whole organization is interlinked with each other. It is totally automated

organization.

In case of fabrics technology which is used is:

ISO – 9002 certified plant

CAT System from Datatex for Fabric Inspection

CAD System from Techno graph InfoTech Services for Fabric Inspection

Fabric testing capabilities

Laboratory having state-of-the-art Testing equipments from USA & UK to test variousfabric parameters

It is equipped with latest technology machines from Switzerland, USA, UK & Japan. It

has Data color System, USA for Color Matching. The various other machines that are

available at the pilot plant are:-

Padding Mangles

Labs Dryer

HT Streamer

Lab Dispenser & Solution Maker

Vat and Reactive dyes for cotton fabrics

All dyes are purchased from reputed international Dye manufacturers

Vardhman has one of the largest spinning capacities in India with a spindlage of more

than 700,000. Vardhman Threads has emerged as second largest sewing thread brand in

the country. In fabrics, the Group has already made its mark as a quality.

45



Producer of grey poplin /shirting /suiting in the home market and has also entered the

highly competitive export market within this short span, now exporting fairly large

volume of its production. Vardhman established a modern fabric process house in

1999 with a capacity of 30 million meters per annum. This capacity has been

expanded to 42 million meters per annum in FY 2005-06. Set up in technical

collaboration with Marubeni and Japan Exlan of Japan, the acrylic fiber plant has

an annual capacity of 16500 metric tons annum. The steel mill has been modernized

and expanded to a capacity of 100000 metric tons per annum.

After implementing this new technology the capacity of the organization was increased

this has shown the quantifiable and as well as qualitable results which are as follows:

Fabric Business

Fabric Production in Lac ( 100 thousand) Meters/Month

Auro Textiles (Exiting) 42

Post Expansion 85-90

Spinning Business

Spindle Capacity

Exiting 5,36,440

Post Expansion 7,76,440

Modern technologies are an important part in the research and development efforts of

Vardhman.

Technology partners

Fabric Dyeing and Finishing Tokai Senko , Japan

Fibre and Yarn Dyeing Nihon Sanmo, Japan

Gassed Merceized Yarns Kyung Bang, South Korea

Cotton yarn Toho Rayon and Marubeni Corp, Japan

Sewing thread American Efird. USA

Enterprise resource planning system IBM

46



SWOT ANALYSIS

47



48



EXPANSION

Vardhmān Group kicked off an expansion program of Rs.23-24 billion approx. in FY

2005-06

In addition to the expansion of existing facilities, the new facilities are being set up in

Madhya Pradesh. The implementation will be in phases and is expected to extend up

to March 2009.

The Group had consolidated majority of its operations under one company in FY

2004-05 - Vardhmān Textiles Ltd (formerly known as Mahavir Spinning Mills Ltd)

in order to take up an expansion of this size

Existing Expansion

PostExpansion

Spinning (Lakhs

Spindles)7.47 ~1.03 ~8.50

Weaving

(Looms)810 ~90 ~900

FabricProcessing(MMPA)

82 0 ~82

49



50



MARKET PERFORMANCE

0

100

200

300

400

500

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

Note : Reference date for above figures is Mar 31,08. EPS taken for P/E

ratio is based on audited figures for the FY end Mar 08.

Largest Spinning capacity in India - over half a million spindles.

Largest producer of Cotton, Synthetics and Blended yarns in the country

Largest Dyeing Capacity of Fibre and Yarn

Largest Exporter of Cotton Yarn

Market Leader in Hand Knitting Yarns in India

Largest range of Textile products

Second largest producer of Sewing Thread in the country

VardhmanTextiles

Rs/share

Last price 106

Market Cap(Rsmn)

6,120

52 Week High 201

52 Week Low 90

P/E Ratio (Times) 5

51



Collaborations with specialist worldwide

ERP (Enterprise Resource Planning) enabled solutions for online order tracking

52



Before starting the project our company guide had given us small tasks which wascompetitor’s analysis. This small tasks was to make us familiar with the companyand ,its competitors.

COMPETITORS ANALYSIS AS ON 31-12-2007

53



Competitors PBDIT(A) Gross Sales (B)

PBDIT as a % of

sales (A/B)

(Rs. Crores) (Rs. Crores) (Rs. Crores) %age

Vardhman Textiles 293.21 1603.40 18.29%

Alok Industries 286.00 1245.03 22.97%

Arvind Mills 240.21 1280.67 18.76%

Welspun India 143.37 808.39 17.73%

Rajasthan Spinning 81.29 769.55 10.56%

Nahar Industrial Enterprises 144.35 706.41 20.43%

Nahar Spinning And Exports 142.80 717.45 19.90%

Abhishek Industries 141.54 618.46 22.89%

Rajapalayam 43.11 159.46 27.03%

Vardhman Polytex 43.67 283.56 15.40%Loyal Textiles 43.72 279.75 15.63%

Ginni Filaments 24.88 169.73 14.66%

Gangotri Textiles 21.82 126.48 17.25%

Winsome Yarns Limited 19.29 100.96 19.11%

Prime Textiles Limited 10.05 94.52 10.63%

Ambika Cotton 34.75 110.78 31.37%

Patspin India 13.58 99.96 13.59%

Raymond Limited 163.08 1019.79 15.99%

GTN Textiles 10.75 88.56 12.14%

Himatsingka Seide 62.51 160.69 38.90%Super Spinning Mills Limited 50.57 311.60 16.23%

JCT Limited 39.24 425.84 9.21%

Bombay Rayon Fashions Limited 65.36 344.52 18.97%

Winsome Textiles Limited 20.36 114.20 17.83%

Malwa Cotton 37.74 319.72 11.80%

Indusrty Average 87.09 478.38 18.21%

54



PBDIT AS A % OF SALES:

These are net profit margin is indicative of management’s ability to operate the business

with sufficient success not only to recover from revenues of the period , the cost of

merchandise or services ,the expenses of operating the business (including depreciation )

and the cost of borrowed funds , but also to leave a margin of reasonable compensation to

the owners for providing their capital at risk.

Vardhman’s net profit margin is 18.29% it comes at 11 th position among all 20

competitors and highest is of Himatsingka Seide 38.90% and lowest is of JCTLimited 9.21%

A high net profit margin would ensure adequate return to the owners as well as enable a

firm to withstand adverse economic conditions when a selling price is declining , cost of

production is rising and demand for the product is falling. A low net profit margin has the

opposite indication

55



DEBT EQUITY RATIO:

Competitors DEBT (D)

EQUITY

SHARE

CAPITA L

PREFERE

NCE SHRE

CAPITAL RESERVES

SHARE

APPLIC

ATION

MONEY

NET

WORT

H

DEBT/EQ

UITY

(Rs. Crores)

Vardhman Textiles 1724.27 57.77 0.00 1034.26 0.00 1092.03

Alok Industries 3336.76 170.37 0.00 854.07 0.00 1024.44 3.26

Arvind Mills 1934.31 209.38 46.2 1106.93 0.00 1362.51 1.42

Welspun India 1394.20 73.09 8 461.69 0.00 542.78 2.57Rajasthan Spinning 875.50 23.15 37.5 241.65 1.88 304.18 2.88

Nahar Industrial Enterprises 991.58 40.03 0 484.72 0.00 524.75 1.89

Nahar Spinning And Exports 602.66 18.05 0 501.33 0.00 519.38 1.16

Abhishek Industries 989.91 194.19 0 205.26 0.00 399.45 2.48

Rajapalayam 232.94 3.51 0 103.81 0.00 107.32 2.17

Vardhman Polytex 250.20 10.66 0 156.5 0.00 167.16 1.50

Loyal Textiles 302.20 4.7 0 89.73 0.00 94.43 3.20

Ginni Filaments 306.56 59.26 0 69.18 0.00 128.44 2.39

Gangotri Textiles 322.64 16.31 0 72.67 0.80 89.78 3.59

Winsome Yarns Limited 188.13 25.78 0 53.47 0.00 79.25 2.37Prime Textiles Limited 85.52 4.55 1.5 19.29 0.00 25.34 3.37

Ambika Cotton 202.37 5.88 0 92.38 0.00 98.26 2.06

Patspin India 86.38 30.92 0 23.75 0.00 54.67 1.58

Raymond Limited 787.61 61.38 0 1294.78 0.00 1356.16 0.58

GTN Textiles 77.95 11.64 0 33.29 0.00 44.93 1.73

Himatsingka Seide 224.20 48.72 0 552.39 0.00 601.11 0.37

Super Spinning Mills Limited 260.12 5.50 0.00 120.67 0.00 126.17 2.06

JCT Limited 424.62 85.92 36.28 48.42 0.00 170.62 2.49

Bombay Rayon Fashions Limited 333.45 63.00 0.00 420.01 12.63 495.64 0.67

Winsome Textiles Limited 111.39 5.87 0.00 31.72 0.00 37.59 2.96Malwa Cotton 183.03 6.17 27.25 59.64 0.00 93.06 1.97

Indusrty Average 649.14 49.43 6.53 325.26 0.64 381.86 1.70

56



The D/E ratio is an important tool of financial analysis to appraise the financial structure

of the firm. It ha s imp implication from the view point of the creditors, owners and the

firm itself .The ratio reflects the relative contribution of creditors and owners of business

in its financing.

Vardhman’s D/E ratio is 1.58 , highest is of Prime Textiles Limited 3.37 and lowest

is of Himantseingka Seide 0.37 .

A high debt/equity ratio generally means that a company has been aggressive in financing

its growth with debt .this can result in volatile earnings as a result of the additional

interest expenses. The Vardhman company is well with the norm.

57



CURRENT RATIO: -

Competitors

CURRENT

ASSETS LOANS

AND

ADVANCES

CURRENT

LIABILITIES AND

PROVISIONS CURRENT RATIO

(Rs. Crores)

Vardhman Textiles 1664.29 635.36 2.62Alok Industries 1999.25 441.34 4.53

Arvind Mills 1625.1 466.15 3.49

Welspun India 714.83 225.58 3.17

Rajasthan Spinning 393.02 102.52 3.83

Nahar Industrial Enterprises 828.96 85.23 9.73

Nahar Spinning And Exports 620.63 146.46 4.24

Abhishek Industries 426.14 156.24 2.73

Rajapalayam 118.74 59.02 2.01

Vardhman Polytex 231.48 66.16 3.50

Loyal Textiles 186.8 80.91 2.31Ginni Filaments 146.52 69.55 2.11

Gangotri Textiles 84.81 41.24 2.06

Winsome Yarns Limited 139.83 64.06 2.18

Prime Textiles Limited 77.09 39.03 1.98

Ambika Cotton 160.86 72.08 2.23

Patspin India 65.58 31.69 2.07

Raymond Limited 843.81 446.27 1.89

GTN Textiles 55.98 24.58 2.28

Himatsingka Seide 388.89 51.11 7.61

Super Spinning Mills Limited 249.22 113.43 2.20 JCT Limited 225.27 168.21 1.34

Bombay Rayon Fashions Limited 427.84 88.54 4.83

Winsome Textiles Limited 61.24 51.36 1.19

Malwa Cotton 277.41 93.75 2.96

Indusrty Average 480.5436 152.7948 3.15

58



CURRENT RATIO is the measure of the companies’ short term solvency. It represents

marginal safety for creditors.

Vardhman’s current ratio is 2.62:1 which shows that the company has been investing

more in the current assets than the current liabilities. The company, however, can be seen

not adhering to the thumb rule of 2:1 in any of the years. By over viewing B/S of the

company shows that major portion of current assets consists of inventories and sundry

debtors. That’s why company can face some financial crisis for paying its current

liabilities. Therefore there is a need to reduce the inventory level by implementing J.I.T

in an organization.

Among all 20 competitors highest is of Nahar Industrial Enterprises 9.73:1 and lowest is

of JCT Limited 1.34:1.

59



FIXED ASSET COVERAGE RATIO

Competitors DEBT (D) NET BLOCK

CAPITAL

WORK IN

PROGRESS

FIXED

ASSETS FACR

(Rs. Crores)

Vardhman Textiles 1724.27 1177.91 540.72 1718.63 1.00

Alok Industries 3336.76 1,975.32 608.48 2,583.80 0.77Arvind Mills 1934.31 2,044.89 71.45 2,116.34 1.09

Welspun India 1394.20 1,146.89 134.29 1,281.18 0.92

Rajasthan Spinning 875.50 515.83 324.79 840.62 0.96

Nahar Industrial Enterprises 991.58 493.51 172.11 665.62 0.67

Nahar Spinning And Exports 602.66 564.1 83.78 647.88 1.08

Abhishek Industries 989.91 772.58 301.12 1,073.70 1.08

Rajapalayam 232.94 232.52 1.98 234.50 1.01

Vardhman Polytex 250.20 202.24 14.03 216.27 0.86

Loyal Textiles 302.20 253.99 35.24 289.23 0.96

Ginni Filaments 306.56 212.83 134.37 347.20 1.13

Gangotri Textiles 322.64 106.28 234.67 340.95 1.06

Winsome Yarns Limited 188.13 92.26 99.34 191.60 1.02

Prime Textiles Limited 85.52 66.08 0 66.08 0.77

Ambika Cotton 202.37 185.13 26.71 211.84 1.05

Patspin India 86.38 96.36 10.8 107.16 1.24

Raymond Limited 787.61 676.05 85.69 761.74 0.97

GTN Textiles 77.95 66.07 4.82 70.89 0.91

Himatsingka Seide 224.20 105.26 250.76 356.02 1.59

Super Spinning Mills Limited 260.12 195.5 28.96 224.46 0.86

JCT Limited 424.62 276.1 183.85 459.95 1.08

Bombay Rayon Fashions Limited 333.45 305.95 48.06 354.01 1.06

Winsome Textiles Limited 111.39 76.13 62.97 139.10 1.25

Malwa Cotton 183.03 82.06 0.36 82.42 0.45

Indusrty Average 649.14 476.8736 138.374 615.25 0.95

FACR is a test that determines a company’s ability to cover debt obligations with its

assets after all liabilities has been satisfied.

60



As a rule of thumb, utilities should have an asset coverage ratio of at least 1.5, and

industrial companies should have a ratio of at least 1.33.

Vardhman’s FACR is 1 and from all compititors highest is of Himantsingka seide

1.59 and lowest is of Malwa Cotton 0.45

So vardhman’s FACR is satisfactory.

61



WORKING CAPITAL TURNOVER RATIO:-

Competitors Gross Sales (B)

CURRENT

ASSETS

LOANS

AND

ADVANCES

CURRENT

LIABILITIES AND

PROVISIONS

NET

WORKING

CAPITAL

RATIO

(Rs. Crores) (Rs. Crores)

Vardhman Textiles 1603.40 1664.29 635.36 1.56

Alok Industries 1245.03 1999.25 441.34 0.80

Arvind Mills 1280.67 1625.1 466.15 1.11

Welspun India 808.39 714.83 225.58 1.65

Rajasthan Spinning 769.55 393.02 102.52 2.65

Nahar Industrial Enterprises 706.41 828.96 85.23 0.95

Nahar Spinning And Exports 717.45 620.63 146.46 1.51

Abhishek Industries 618.46 426.14 156.24 2.29

Rajapalayam 159.46 118.74 59.02 2.67

Vardhman Polytex 283.56 231.48 66.16 1.72

Loyal Textiles 279.75 186.8 80.91 2.64

Ginni Filaments 169.73 146.52 69.55 2.21

Gangotri Textiles 126.48 84.81 41.24 2.90

Winsome Yarns Limited 100.96 139.83 64.06 1.33

Prime Textiles Limited 94.52 77.09 39.03 2.48

Ambika Cotton 110.78 160.86 72.08 1.25

Patspin India 99.96 65.58 31.69 2.95

Raymond Limited 1019.79 843.81 446.27 2.57

GTN Textiles 88.56 55.98 24.58 2.82

Himatsingka Seide 160.69 388.89 51.11 0.48

Super Spinning Mills Limited 311.60 249.22 113.43 2.29

JCT Limited 425.84 225.27 168.21 7.46

Bombay Rayon Fashions Limited 344.52 427.84 88.54 1.02

Winsome Textiles Limited 114.20 61.24 51.36 11.56

Malwa Cotton 319.72 277.41 93.75 1.74

Indusrty Average 478.38 480.5436 152.7948 1.46

62



It is the difference between C.A & C.L exuding short term borrowings.

Net Working Capital Ratio = Cost of sales/SalesNet Working Capital

Analysis indicates that the sales as compared to the working capital are nearly three to

four times indicating that the company is trying to utilize the available working capital to

the maximum and is not blocking much of capital in the working capital. However, in the

following years, the case has been the opposite where the sales are less than the working

capital and hence, indicating that the company is more towards investing its finances in

the working/ short term capital than in the long term or in sales.

63



64



INTRODUCTION

Objective:-

To workout the eligibility of the terms loans (which have been split) under the

Technology Upgradation Fund Scheme (TUFS) post restructuring of the thread

business of Vardhman group companies.

Steps to be followed to achieve the objective

To study the “Scheme of arrangement, reorganization and de-merger

amongst VARDHMAN TEXTILE LIMITED and VARDHMAN

THREADS LIMITED and VARDHMAN YARNS AND THREADS

LIMITED”.

To study the details of the TUFS scheme as laid down by the ministry of

textiles, Government of India for Textile & Jute Industries.

To study the details of the loans and relevant projects costs which are being

bifurcated after the abovementioned restructuring of the Vardhman Group

Companies.

To workout the eligibility of the bifurcated loans under the TUF Scheme in

order to achieve full coverage of the loans under the said scheme.

65



INDUSTRY ANALYSIS –

“Understanding the past is a pre-requisite for anticipating the future”

Industrial Analysis is an initial pebble stone which is being kept to

build up the plans before making any kind of recommendations.

CONCEPTS STUDIED –

Studied the concepts related to

1. Mergers ,

2. Demerger (spin offs),

3. TUFS,

4. Term loans & bifurcation of loan.

5. Expansion schemes & loans taken against the same.

RATIO ANALYSIS –

Various ratios like current ratio, debt equity ratio, interest coverage

ratio, PBDIT as a % of sales, FA coverage ratio, WC turnover ratio

etc. these ratios are calculated in comparison to its competitors.

COMPARISON –

Comparison has been made between vardhman and its competitors.

The base of the comparison is various ratios calculated.

EXPLORATORY RESEARCH USING SECONDARY DATA –

To prepare the project, secondary data was collected and then worked

out.

66



67



STRUCTURE OF THE SEWING THREAD BUSINESS

VARDHMĀN TEXTILE LIMITED (1973):-

Vardhmān textile limited (“VTEX”) is a public limited company incorporated

under the companies’ act 1956, having its registered office at Chandigarh road,

Ludhiana, Punjab – 141010.

VTEX is presently engaged inter alia in the business of manufacture of yarn,

sewing thread, fabrics & steel.

The Equity shares of VTEX are listed on the BSE limited & the NSE of India

limited.

Turnover – US $ 500 million in the core business of textiles from fibre to finished

goods.

Earlier it was named as “Mahavir Spinning Mills Ltd”.

First Textile Company to be awarded ISO - 9002 / ISO – 14002 Certification in

1993.

Largest manufacturer & exporter of cotton yarns from India & Second largest

producer of sewing threads in India.

Built a large capacity of over half a million spindles over a period of time.

Technical tie-ups with the world leaders from Switzerland, Germany, Japan &

Korea.

Has a leveraged technology by implementing ERP to provide online order

tracking of products.

68



VARDHMAN THREADS LIMITED (1994) :-

Vardhmān threads limited (“VTL”) is a public limited co incorporated under

the companies’ act 1956, having its registered office at Chandigarh road,

Ludhiana, Punjab – 141010.

VTL is presently engaged inter alia in the following distinct & diverse

activities namely –

Business of manufacture of sewing threads, twines & braids;

Investment in securities & financing.

The entire issued & paid-up share capital of VTL is held by VTEX.

VARDHMĀN YARNS & THREADS LIMITED:-

Vardhmān Yarns & Threads Limited (the “Transferee Company”) is a

company incorporated under the companies act, 1956 and having its registered

office at Chandigarh road, Ludhiana, punjab-141010.

The transferee company is authorised to be engaged inter alia in the business

of manufacture of all types of sewing threads, twines & braids.

VTEX holds 98.04% of the issued and paid-up share capital of the transferee

company.

VTL, VTEX & the Transferee company propose by the scheme that:-

The VTEX Thread undertaking be transferred to & vested in the transferee

company as a going concern on slump sale basis;

The VTL Threads undertaking be demerged & vested in the transferee

company.

The demerger of the VTL threads undertaking & vesting thereof in the transferee

company with effect from the VTL appointed date the transfer & vesting of the

69



VTEX threads undertaking in the transferee company as a going concern on a

slump sale basis with effect from the VTEX appointed date, is in the interest of

70



the shareholders, creditors & employees as stakeholders of VTL, VTEX & the

transferee company, respectively. The demerger & restructuring would enable a

focused business approach for the maximisation of benefits to all stake holders.

The allocation of share capital of VTL –

The existing issued, subscribed & paid-up equity share capital of VTL of Rs. 8,

00, 00,000/- shall be reorganized by way of allocation of the same between the

VTL threads undertaking & VTL Residual undertaking in the ratio of 1:1.

71



72



WHAT IS CORPORATE RESTRUCTURING?

Corporate restructuring is a process by which a firm does an analysis of itself at a point of

time & alters what it owes & owns, refocuses itself to specific task of performance

improvement. Restructuring would sometimes radically alter a firm’s capital structure,

asset mix and organization so as to enhance the firm value. A FRESH spell of corporate

restructuring is likely to add depth to the business sector, make it more attractive to

foreign institutional investors & unlock value for shareholders. Robust restructuring

initiatives — mergers, demergers, asset sell-offs, takeovers and strategic partnerships —

can be expected in companies across such sectors as cement, media and financial

services.

Ensuring survival, improving competitiveness and prodding a sluggish economy as it

opened up to global competition were the principal drivers for India Inc's restructuring

between 1998 and 2003. In contrast, the restructuring activity ahead will be driven by

companies strengthening their core businesses.

Most restructuring candidates have fine-tuned their operations to be competitive. Starting

with healthy operating margins, the initiatives will likely result in higher earnings,

unlocking value for shareholders as the stocks of these new-look companies may enjoy a

higher price earnings multiple. Here is a list of the likely rejig candidates over one-to-three years.

73



REASONS FOR RESTRUCTURING :

There are basically six reasons why companies going for restructuring:

The globalization of business has compelled Indian companies to open

new export houses to meet global competition. Global market concept has

necessitated many companies to restructure because lowest cost producers

only can survive in the competitive global markets.

Changed fiscal & Government policies like deregulation/ decontrol has led

many companies to go for newer market and customer segments.

Revolution in information technology has made it necessary for

companies to adapt new changes in the communication/ information

technology for improving corporate performance.

Many companies have divisionalised into smaller businesses. Wrong

divisionalisation strategy has led to revamp them. Product divisions which

do not fit into the company’s main line of businesses are being divested.

Fierce competition is forcing Indian companies to re launch themselves.

Improved productivity and cost reduction has necessitated downsizing of

the work force- both at works & managerial levels.

Convertibility of rupee has attracted medium sized companies to operate

in global markets.

BROAD AREAS OF CORPORATE RESTRUCTURING:

Financial Restructuring: This involves decision relating to acquisitions,

mergers, joint ventures & strategic alliances. This also deals with restructuring

the capital base & raise finance for new projects.

Technological Restructuring: This involves investment in research &

development & also alliance with overseas companies to exploit technological

strengths.

Market Restructuring: This involves establishing internal structures where

the company plans to operate based on its core competencies.

74



Manpower Restructuring: This involves establishing internal structures &

processes for improving the capability of the people in the organization to

respond to changes.

A good restructuring exercise consists of a mixture of all these. These alterations have

a significant impact on the firm’s balance sheet by redeploying assets or by exploiting

unused financial capacity.

TECHNIQUES OF CORPORATE RESTRUCTURING:

Expansion Techniques : In expanding the business the following techniques

are used:

Mergers and amalgamations: - M&A are often used interchangeably to

denote the situation where two or more companies, keeping in view their long

term business interest, combine into one economic entity to share risks and

financial rewards. However, in strict sense, merger is used for the fusion of

two companies to achieve expansion & diversification.

Amalgamation is an arrangement for bringing the assets of two companies

under the control of one company, which may or may not be one of the

original two companies.

Amalgamation signifies the transfer of all or some part of the assets &

liabilities of one or more existing businesses entities .to another existing of

new companies.

Takeovers: - Takeover is a business strategy whereby a person acquires

control over the other company- either directly by acquiring assets or

indirectly by controlling management. Takeover is a part of business strategy

for acquiring control over another business to consolidate & acquire large

share of the market. The legal eyes of raiders are on the lookout for cash cows

& high growth rate companies with low equity stake of promoters.

75



Joint Ventures:- Joint ventures is a business enterprise for profit, in which

two or more parties share responsibilities in an agreed manner, by providing

risk capital, technology, patent /trademark/brand name & access to market .

Joint ventures with multinational companies contribute to the expansion of

production capacity, transfer of technology & capital & above all penetrating

into global market. Entering into a joint venture is a part of strategic business

policy to diversify & enter into new markets, acquire finance, technology,

patent & brand names.

Business Alliances: - The concept of ‘alliance’ is gaining importance in

infrastructural sectors, more particularly in the areas of power, oil & gas. The

basic idea is to facilitate innovative ideas & techniques while implementing

large projects, with the common objective of reduction in cost & time, &

sharing the resultant benefits in proportion to the contribution made by each

party in achieving the targets.

Foreign Franchise: - Franchising provides an immediate access to business

operations and technology in profitable fields of operations. It is an important

means of doing business in several countries & represents an effective

combination of the advantages of large business with the motivation &

adaptation capabilities of small & medium scale enterprises. It also enables

linkages of large & small businesses within a framework of vertical divisionof labour. The concept of franchising is quite comprehensive & covers an

extensive range of marketing & distribution arrangements for goods &

services. Franchises are becoming a key mechanism for technological,

marketing & service linkages between enterprises within a country as well as

globally.

76



Intellectual Property Rights: - The worth of a company lies more in its

intangible assets (patents, trademarks, brands, copyrights etc.) than tangible

assets (land, building, plant and machinery). The intellectual property rights

give real value to a company. Patents, trademarks & strong brands lead to

higher sales, economies of scale and profits. Some business gains, however,

instead of investing efforts, time & money in research & development for new

patents, trademarks & brands; prefer to buy these from companies or go to the

extent of acquiring the companies themselves.

Divestment Techniques:

The following disinvestment techniques are used in corporate.

Sell-off: - In a strategic planning process, a company can take decision to

concentrate on crore business activities by selling off the non-crore business

divisions.

A sell-off is a sale of part of the organization to a third party in the followingcircumstances;

To come out of the shortage of cash and severe liquidity problems.

To concentrate on core business activities.

To protect the firm from takeover activities by selling off the desirable

division to the Bidder

To improve the profitability of the firm by selling off loss-making

divisions.

To increase the efficiency of men, machines and money.

To facilitate the promising activities with enough funds by sell-off

Non-performing assets

To reduce the business risk by selling off the high risk activities.

77



DEMERGERS (Spin-off):- For strategic reasons, a business firm is

splitted into two or more independent separate bodies and assets are

transferred to such bodies. A demerger is the opposite of a merger. By spin-

off, a corporate body splits into two or more corporate bodies with separation

of management and accountability. The main reason may be for making each

division as a profit-centred organization to make each head of division to

account for profitability of their respective divisions. The common reasons for

demerger are as follows:

To bring the clear lines of management structure to implement

responsibility of accounting concept.

To protect the whole organization from high risk areas of business.

It is a way of protecting the crown jewel from a predator.

To avoid Government agencies interference in business.

To tap more opportunities of business.

To keep away the unwanted activities thereby the increase in profitability

of parent company.

To increase the competence of core activities.

The potential disadvantages of demergers are loss of economies of scale,

increase in overheads, and loss of ability to raise extra finance, lower

turnover and profits, loss of benefits from synergy.

MERGERS

A general term used to refer to the consolidation of companies. A merger is a

combination of two companies to form a new company, while an acquisition

is the purchase of one company by another in which no new company is

formed.

78



A merger is a tool used by companies for the purpose of expanding their

operations often aiming at an increase of their long term profitability.

Classifications of mergers Horizontal mergers take place where the two merging companies

produce similar product in the same industry.

Vertical mergers occur when two firms, each working at different stages

in the production of the same good, combine.

Congeneric mergers occur where two merging firms are in the same

general industry, but they have no mutual buyer/customer or supplier

relationship, such as a merger between a bank and a leasing company.

Example: Prudential's acquisition of Bache & Company.

Conglomerate mergers take place when the two firms operate in different

industries.

79

http://en.wikipedia.org/wiki/Horizontal_integration

http://en.wikipedia.org/wiki/Vertical_integration

http://en.wikipedia.org/w/index.php?title=Congeneric_integration&action=edit&redlink=1

http://en.wikipedia.org/wiki/Conglomerate_(company)

http://en.wikipedia.org/wiki/Vertical_integration

http://en.wikipedia.org/w/index.php?title=Congeneric_integration&action=edit&redlink=1

http://en.wikipedia.org/wiki/Conglomerate_(company)

http://en.wikipedia.org/wiki/Horizontal_integration



80

SCHEME OF ARRANGEMENT,REORGANIZATION AND DE-

MERGER AMONGST

Vardhman Textiles Limited (VTXL)– Threads

First plant was set up at the SpinningMill in Hoshiarpur in 1981. Thecapacity in this facility enhanced tocurrent levels of 19 TPD

In 1999-2000, a sewing threads unit wasestablished in Ludhiana which currentlyhas a capacity of 6 TPD

In 2003-2004 the business was furtherexpanded with a unit at Perundurai inTamil Nadu with a current capacity of2.50 TPD

Threads Business had Sales of over Rs3288 Mn and EBITDA of Rs 626 Mn.(19.04% margin) in FY2006constituting 16.8 % and 16.0% of TotalSales and EBITDA of VTXL

Vardhman Threads Limited (VTL)

Established in 1994 as a JV betweenerstwhile Mahavir Spg Mills Ltd

(MSML) and Barbour Campbell Groupof Ireland as Barbour VardhmanThreads Private Limited

Plant for manufacture of industrialsynthetic threads set up at Baddi withinstalled capacity of 0.80 TPD whichwas increased to 1.90 TPD

Products have specialised applicationfor shoe and leather industries.

In 2000, Vardhman Textiles (erstwhileMSML) bought out the entire stake ofthe JV partner, and renamed thecompany Vardhman Threads Limited

Sales of over Rs 214 Mn and EBITDA



STRUCTURE OF THE SEWING THREADS BUSINESS

Unit Wise Distribution

81

Vardhman Textiles Limited

2.50 TPD

6.0 TPD

19.0 TPD

Capacity

4.7

22.4

66.8

% Sales

2.2

32.5

55.2

%EBITDA

Perundurai, TamilNadu

Ludhiana,Punjab

Hoshiarpur, Punjab

Location

Vardhman Threads Limited

1.9 TPD

Capacity

6.1%

% Sales

10.1

% EBITDA

Baddi, Punjab

Location



RESTRUCTURING PLANS EVALUATED

Alternative 1

Transfer of threads business of

Vardhman Threads into Vardhman

Textiles

Alternative 2Transfer of threads business of

Vardhman Textiles into Vardhman

Threads

Alternative 3

Transfer of both Vardhman Textiles

and Vardhman Threads into a new

entity (NewCo)

EXECUTION PATH -- ALTERNATIVE 3A) For Slump sale of thread business of VTXL to New Company

B) For De-merger of thread business of VTL to New Company

Companies Act

Section 293 (1)(a) Route

Section 391-394 route: Court Approval

Companies ActSection 391-394 route: Court Approval

82



83



TECHNOLOGY UPGRADATION FUND SCHEME:-

Introduced on Ist April 1999, provided a fresh lease of life to the textile industry. It has

infused huge investment climate in the textile sector & in its operational life span eight

years since 01.04.1999 till 31st March 2007, has propelled investment of more than

Rs.86, 000 crore. 71% of the beneficiaries under TUFS are from small scale industry

sector. The spinning and composite segments of the textiles sector have driven maximum

benefits whereas the segments like processing, garmenting, power looms etc. are still the

weak links in the textiles value chain and have not realized the potential for

modernization:

• Modified Guidelines has been made effective w.e.f.1st Nov. 2007 & will be

continue till 31st March 2012.

• The benefits of Modified TUFS are available for all sectors of textile industry as it

was earlier with certain modifications.

• In Modified TUFS, more attention has been given to the Weaving units,

Processing units, Garment Units & Technical Textile Units.

• In Modified TUFS, 10% Additional Capital Subsidy on the identified machinery

for Processing units, Garment Units & Technical Textile Units intend to avail 5%

interest re-imbursement or 5% Foreign Exchange rate Fluctuation.

The Indian Textile Industry has an overwhelming presence in the economic life

of the country. Apart from providing one of the basic necessities of life, the textile

industry also plays a pivotal role through its contribution to industrial output,

employment generation, and the export earnings of the country. Currently, it contributes

about 14 percent to industrial production, 4 percent to the GDP, and 17 percent to the

country’s export earnings. It provides direct employment to about 35 million people,

which includes a substantial number of SC/ST, and women. The Textile sector is the

second largest provider of employment after agriculture. Thus, the growth & all round

development of this industry has a direct bearing on the improvement of the economy of

the nation.

84



The Indian textile industry is extremely varied, with the hand-spun and hand woven

sector at one end of the spectrum, and the capital intensive, sophisticated mill sector at

the other. The decentralized power loom/ hosiery & knitting sectors form the largest

section of the Textile Sector. The close linkage of the Industry to agriculture and the

ancient culture & traditions of the country make the Indian textile sector unique in

comparison with the textile industry of other countries. This also provides the industry

with the capacity to produce a variety of products suitable to the different market

segments, both within & outside the country.

The major sectors forming part of the textile industry include the organized Cotton/Man-

Made Fibre Textile Mill Industry, Wool & Woollen Textile Industry, Sericulture & Silk

Textile Industry, Handloom Industry, Handicraft Industry, Jute & Jute Textile Industry,

& Textile Exports. The Ministry of Textiles is implementing various schemes for the

holistic growth & development of the sector.

The Indian Textile Industry has suffered from severe technology obsolescence & lack of

economies of scale, which in turn diluted its productivity, quality and cost effectiveness,

despite distinctive advantages in raw material, knowledge base, & skilled human

resources. While the relatively high cost of state-of-the-art technology and structural

anomalies in the industry have been major contributory factors, perhaps the single most

important factor inhibiting technology up gradation has been the high cost of capital,

especially for an industry that is squeezed for margins. Given the significance of this

industry to the overall health of the Indian economy, its employment potential and thehuge backlog of technology up gradation, it has been felt that in order to sustain and

improve its competitiveness and overall long term viability, it is essential that the textile

industry has access to timely & adequate capital, at internationally comparable rates of

interest in order to upgrade the level of its technology.

85



In the light of above, the Technology Up gradation Fund Scheme was launched on

01.04.1999 for a period of five years, which has been subsequently extended till

31.03.2007, the terminal year of the Xth plan.

TUF Scheme will be continued during the eleventh plan against a provision of Rs.535

Crore in 2006-2007. Rs.911 crore would be provided under TUF Scheme in 2007-2008.

As before handlooms will be covered under the TUF Scheme. The extension of TUF, a

central scheme offers 5% interest subsidy to textile companies on expansion spree, has

been high on the wish list of the industry. It wants more incentives for investment as it

aims to double its global market to 10% by 2010. For this, investments worth Rs. 100,000

crore are required. The Union Budget 2007-08 has been positive for the textile sector.

TUF Scheme will be continued during the eleventh plan against a provision of Rs. 535

Crore in 2006-07. Rs. 911 Crore would be provided under TUF scheme in 2007-08.

As before handlooms will be covered under the TUF scheme. Allocation under this

scheme for the next year has been increased which should expedite the release of the

subsidy.

EXTENDED

The industry has begged the extension of the 10% upfront capital subsidy for specified

textile processing machinery by another year. The subsidy is additional to the interest

subsidy of 5% under the TUF for specified textile processing machinery and the

implementation period for the scheme is one year, which will end on April 19, 2006.

Under the scheme, the government has yet sanctioned 4,047 applications worth Rs

12,758 crore for expansion projects worth Rs 28,628 crore.

The extension of the scheme would benefit a lot of such textile processing units that have

not avail the savour if it. Also, TUF would greatly help the textile industry to face global

competition.

The industry people has welcomed the extension and it is assumed that Indian apparel

exports are slated to grow at 15-18% annually and win 5% of the global apparel export

market till 2010.

86



BENEFITS UNDER THE SCHEME:

5% reimbursement of the normal interest charged by the lending agency on rupee

term loan (RTL); or

Coverage of 5% exchange fluctuation (interest & repayment) from the base rate

on foreign currency loan (FCL); or

15% credit linked capital subsidy for the SSI textile and jute sector; or

20% credit linked capital subsidy for the power loom sector; or

5% interest reimbursement, plus 10% capital subsidy, for specified processing

machinery.

25% capital subsidy on purchase of the new machinery and equipment for pre-

loom & post-loom operations, handlooms/up-gradation of handlooms & testing

&quality control equipments, for handloom production units.

ELIGIBILITY CRITERIA:

Technology levels are benchmarked in terms of specified machinery. There is no cap onfunding under the scheme.

The following are covered under the scheme:

a) Cotton ginning & pressing.

b) Textile industry covering:-

Spinning;

Silk reeling & twisting;

Wool scouring & combing;

Synthetic filament yarn texturising,

Crimping and twisting;

Viscose filament yarn (VFY);

Weaving/knitting including non-woven,

Fabric embroidery and technical textiles;

Garments, made-up manufacturing;

87



Processing of fibres, yarns, fabrics,

Garments, and made-ups;

c) Jute industry.

The Industrial Development Bank of India (IDBI), the Small IndustriesDevelopment Bank of India (SIDBI), and the Industrial Finance Corporationof India Ltd. (IFCI) are the nodal agencies for the Non-SSI textile sector, SSItextile sector and Jute sector, respectively. However, in 2005, 13 additionalnodal banks have also been appointed under TUFS for determining eligibility& releasing subsidy for cases financed by them.

GOVERNMENT ASSISTANCE

EARLIER MODIFIED

5% interest Re-imbursement for allsectors & additional 10% CapitalSubsidy on specified ProcessingM/cs

Or

15% Credit Linked Capital Subsidyfor all SSI Units

Or

20% Credit Linked Capital Subsidyfor Power loom Preparatory & P/LUnits

25% Capital Subsidy forHandloom Units

5% interest Re-imbursement forall sectors except Spg Sector forwhich it will be available @ 4%plus 10% Capital Subsidy forSpecified M/cs of Processing,Garment & Tech. Textiles

Or

15% Margin Money Subsidy forall SSI Units

Or

20% Credit Linked CapitalSubsidy for Powerloom

Preparatory & P/L Units

25% Capital Subsidy for H/L

88



To illustrate the working of tufs eligibility following example is given as under:

ELIGIBILITY UNDER TUFS

PARTICULARS Amount in lacs

PLANT & MACHINERYIMPORTED 100

INDIGENOUS 50

TOTAL P&M(A)

150

25% OF TOTAL P&M(1)

37.5

Other Investments Eligible to the extent of 25% of (1) above :Land & Site 10

Factory Building 30

MFA 35

Pre-operatives Expenses 5

Margin Money 10

TOTAL OTHER INVESTMENTS

(2)

90

Lower of (1) & (2) above(B)

37.5

Concessional Funding in D. G. SetC

5

R&D Equipment D 2

WTP E 6

ETP F 2

ESD G 5

ERP H 5

Contingency 5%

Captive Power Plant not covered in (3) above

Total Eligibilty under TUFS(A+B+C+D+E+F+G+H)

212.5

89



90



Bifurcation of Loans from VTXL & VTL TO VYTL –

All these loans are taken for the purpose of expansion as well as modernization,

modification and capacity enhancement.

PRE – RESTRUCTURING POST –RESTRUCTURING

PROJECTCOST

IN CRORE

LOANAMOUNT

BANK NAME& SHARE

VARDHMANTEXTILE

LTD.(VTXL)

VARDHMANYARNS &THREAD

LTD.(VYTL)

198.00 125.00 ICICI BANK – 155

91.00 34.00

70.07 41.00

CORPORATIONBANK -15.00STATE BANKOF INDIA(SBI)-26.00

32.00 9.00

41.55 28.49CORPORATIONBANK -34.00

20.49 8.00

172.07 141.95

ALLAHABADBANK -70.95CORPORATIONBANK – 71.00

105.00 36.95

The above table provides the details of the various loans which are bifurcated after the

restructuring of the thread units of Vardhman group. It explains the both the scenario

before and after the scheme has been finalized.

Pre - Restructuring

Column first is about the total projected cost of the projects to be implemented.

Column second is the total loan amount taken by the company from the bank to ensure

the fulfilment of the projects.

91



Column third tells the name of the various bank with their respective share in the loan

amount taken by the company.

Post – Restructuring

These two columns tells the amount of the loans amounts bifurcated with their respective

firms.

Column fourth is about the amount of the loans left under the Vardhman Textile Limited.

Column fifth is about the amount of the loans under the Vardhman Yarns & Thread Ltd.

92



93



PROJECT 1 --198 CRORES

Appraised cost is 189.90 crore.

The loan amount is 155.05 crores out of which only 125 crores was

disbursed.

Raised from ICICI bank for the amount 125 crores.

Actual expenditure incurred was 145.91 crores.

Units :

o GMYU (HOSHIARPUR)

o ST (HOSHIARPUR)

o ARIHANT (MALERKOTLA)

ST (Hoshiarpur) was transferred to VYTL as being thread units

whereas rest 2 units i.e. GMYU and Arihant were in VTXL.

This loan was taken under expansion cum moderanisation scheme of

Vardhman group.

Out of the total loan of 125 crores, Rs. 34 crores was transferred to

VYTL.

91 crores was in VTXL.

After working the tufs eligibility it was computed that out of loan of

34 crores which was transferred to VYTL only 17.27 crores were

eligible.

On the other hand, out of loan of 91 crores which was in VTXL

120.92 crores were eligible subject to minimum of balance loan left in

VTXL and loan amount eligible under tufs as per calculation on the

basis of bifurcation of assets is eligible which is 91 crores.

94



LOAN - I

PROJECT 2 --70.07 CRORES

Appraised cost was 70.07 crore.

The loan amount was 43.49 crores out of which only 41 crores was

disbursed.

Raised collectively from corporation bank for the amount 15 crores

and from state bank of India for the amount 34 crores.


Units :

o ST 1 (HOSHIARPUR)

o DYEING UNIT (PERUNDRAI)

o ANANT (MANDIDEEP)


ST 1 as well as dyeing unit(Perundrai) were transferred to VYTL as

being thread units whereas rest 2 units i.e. Anant and Arihant were in

VTXL.


Vardhman group.

Out of the total loan of 41 crores, Rs. 9 crores was transferred to

VYTL .

32 crores was in VTXL.

After working the tufs eligibility it was computed that out of loan of 9

crores which was transferred to VYTL only 6.75 crores were eligible.

On the other hand, out of loan of 32 crores which was in VTXL 41.25 crores

were eligible subject to minimum of balance loan left in VTXL and loan

95



amount eligible under tufs as per calculation on the basis of bifurcation ofassets is eligible which is 32 crores.

LOAN - II

PROJECT 3 -- 41.55 CRORES


The loan amount is 34 crores out of which only 28.49 crores was

disbursed.

Raised from corporation bank for the amount 34 crores.


Units :

o MSML (HOSHIARPUR)

o ST 2 (LUDHIANA)

o ANANT (MANDIDEEP)

o ARIHANT (MALERKOTLA)o ARISHT (BADDI)

ST 2 as well as MSML(Hoshiarpur) were transferred to VYTL as

being thread units whereas rest 3 units i.e. Anant and Arihant and

Arisht were in VTXL.


Vardhman group.

Out of the total loan of 28.49 crores, Rs. 8 crores was transferred to

VYTL.

20.49 crores was in VTXL.

After working the tufs eligibility it was computed that out of loan of 8

crores which was transferred to VYTL only 4.49 crores were eligible.

96



On the other hand, out of loan of 20.49 crores which was in VTXL



basis of bifurcation of assets is eligible which is 20.49 crores.

LOAN - III

PROJECT 4 --172.07 CRORES


The loan amount is 141.95 crores out of which only 119.50 crores

was disbursed.

Raised collectively from corporation bank for the amount 71 crores

and Allahabad bank for Rs.70.95.

Actual expenditure incurred was 141.52 crores till 31-03-08 and

further the group is expecting an expenditure of 6.17 crores in the year

2008-09.

Units :

o MSML (HOSHIARPUR)

o ST 3 (PERUNDRAI)

o GMYU (HOSHIARPUR)


o ARISHT (BADDI)

ST 3 as well as MSML(Hoshiarpur) were transferred to VYTL as

being thread units whereas rest 3 units i.e. GMYU and Arihant and

Arisht were in VTXL.


Vardhman group.

97



Out of the total loan of 121.86 crores, Rs. 36.95 crores was transferred

to VYTL.

84.91 crores was in VTXL.

After working the tufs eligibility it was computed that out of loan of

36.95 crores which was transferred to VYTL only 33.52 crores were

eligible.

On the other hand, out of loan of 84.91 crores which was in VTXL



basis of bifurcation of assets is eligible which is 84.91 crores.

In this project I also worked on project completion. I completed the

accounts of the company regarding capex till 2009. Expenditure was put

in to find out the total expenditure till 31-03-08 and further I calculated

the cost to be incurred in the year 2008-09.

For the purpose of project completion, I allocated the amounts against the

respective plant and machinery and misc. fixed assets. I calculated the

capex for the year 2006-07, 2007-08 and 2008-09. After adding all these

amounts I have arrived at the total of plant and machinery and misc. fixed

assets.

In this project I have also calculated the benefit of rescheduling the

installments. To find it I calculated the NPV of interest subsidy @5% and

98



then the difference with rescheduled installments was found out. The

benefit that arrived from rescheduling the installments is 108 lacs.

LOAN – IV

In this project, I have worked on various loans taken up by VARDHMAN

GROUP. After working out the eligibility of loans bifurcated after the

restructuring I have found out that all thread units which are transferred to

VYTL are having difference between actual eligibility and total eligibility.

Amounts which would have been eligible are far more than which are

actually eligible.

PROJECT

COST

LOAN

AMOUNT

TRANSFERREDTO VYTL

TOTAL

ELIGIBILITY

ACTUAL

ELIGIBILITY

WORKEDOUT

1) 198.00

CRORE34 CRORE 34 CRORE 17.27 CRORE

2) 70.07

CRORE9 CRORE 9 CRORE 6.75 CRORE

3) 41.55

CRORE

8 CRORE 8 CRORE 4.48 CRORE

4) 172.07 36.95 CRORE 36.95 CRORE 33.52 CRORE

99



CRORE

Where as the loans of non-thread units are completely eligible under the tufs.

So there is no loss which has occurred in VTXL.

This project is done to make top management aware of the situation after the

restructuring among various companies of vardhman group. If in future

government of India and banks of the company wishes to know the clear

picture of loans eligibility under tufs, the company should be already

prepared for the same.

I have also worked out the benefit that

company have by rescheduling the installments to be made in case of project

4 whose project cast is 172.07 crores. The benefit amounts to be 108 lacs.

100



101



102



103



104



105



Documents

Final Report by Garima