MIRA INFORM REPORT

 

 

Report Date :

30.06.2011

 

IDENTIFICATION DETAILS

 

Name :

WELSPUN INDIA LIMITED

 

 

Registered Office :

Welspun City, Village Versamedi, Taluka Anjar – 370 110, Gujarat

 

 

Country :

India

 

 

Financials (as on) :

31.03.2010

 

 

Date of Incorporation :

17.01.1985

 

 

Com. Reg. No.:

04-33271

 

 

Capital Investment / Paid-up Capital :

Rs.780.900 millions

 

 

CIN No.:

[Company Identification No.]

L17110GJ1985PLC033271

 

 

TAN No.:

[Tax Deduction & Collection Account No.]

RKTW00055G

 

 

PAN No.:

[Permanent Account No.]

AAACW1259N

 

 

Legal Form :

Public Limited Liability Company. Company’s Shares are Listed on the Stock Exchange.

 

 

Line of Business :

Manufacturer of Home Textile. 

 

 

No. of Employees :

2000 Approximately

 

 

RATING & COMMENTS

 

MIRA’s Rating :

Ba (51)

 

RATING

STATUS

 

PROPOSED CREDIT LINE

41-55

Ba

Overall operation is considered normal. Capable to meet normal commitments.

Satisfactory

 

Maximum Credit Limit :

USD 25000000

 

 

Status :

Good

 

 

Payment Behaviour :

Regular

 

 

Litigation :

Clear

 

 

Comments :

Subject is a well established and a reputed company having satisfactory track. Trade relations are reported as fair. Business is active. Payments are reported to be regular and as per commitments.

 

The company can be considered normal for business dealings at usual trade terms and conditions.

 

NOTES :

Any query related to this report can be made on e-mail : infodept@mirainform.com while quoting report number, name and date.

 

INFORMATION PARTED BY

 

Name :

Mr. Ashish Shah

Designation :

Credit Department

Date :

28.06.2011

 

 

Name :

Mr. Ulhas Vaidhya

Designation :

Finance Department

Date :

28.06.2011

 

 

Name :

Mr. Dayanand Wagale

Designation :

Finance Head

Date :

28.06.2011

 

 

LOCATIONS

 

Registered Office/Plant I  :

Welspun City, Village Versamedi, Taluka Anjar – 370 110, Gujarat, India

Tel. No.:

91-2836-573428/9 / 279000 / 09/ 661111 / 279051

Fax No.:

91-2836-247070/ 279010 / 279050

E-Mail :

companysecretary_wil@welspun.com

ashish_shah@welspun.com

Websites :

www.welspuntowels.com

Location :

Owned

 

 

Corporate Office :

Welspun House, 6th Floor, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai – 400013, Maharashtra, India

Tel. No.:

91-22-66136000/ 24908000

Fax No.:

91-22-24908020/ 24908021

E-Mail :

subrata_pal@welspun.com

 

 

Plant II :

Survey No. 76 Village and P.O. Morai, Vapi District, Valsad, Gujarat – 396194

Tel. No.:

91-260-2437437

Fax No.:

91-260-2437088

Email :

wttvapi@welspun.com

 

 

Branch Office :

Located at

·         Delhi

·         Ahmedabad

 

 

Overseas Office 1 :

Suite no. 1118-1120, 295 Textile Building, 5th Avenue, New York 10016, U.S.A.

Tel. No.:

+1-212-620-2000

Fax No.:

+1-212-696-2831

 

 

Overseas Office 2 :

Suite - 580, Fairview Center One, 6302, Fairview Road, Charlotte, NC - 28210, U.S.A.  

Tel. No.:

+1-704-362-3942

 

 

Overseas Office 3 :

Rosarito, Baja California, Mexico, Novelty Home Textiles SA DE CV, Ave De La Hospitalidad S/N, Col. Parque Industrial Rosarito C.P. 22710 Rosarito Baja California

Tel. No.:

+52-1-661-613-4411

Fax No.:

+52-1-661-613-4409

 

 

Overseas Office 4 :

Post Box No. 19, Newton Street, Hyde Cheshire, SK 14 5NR, United Kingdom

Tel. No.:

+ 44-2613-514-150

Fax No.:

+ 44-1613-514-327

 

 

Sorema - Tapates e Cortinas de Banho SA :

(Bath Rugs and Shower Curtains)

Apartado 195-4501-860, Espinho Codex, Portugal

Tel. No.:

+ 351-227-330-780

Fax No.:

+ 351-227-330-789

 

 

Overseas Office Warehouse :

3901 Gantz Road, Grove City, OH-43123

Tel. No.:

+1-614-945-5100

Fax No.:

+1-614-945-5099

 

 

KOJO Office : 

SAN DIEGO, CALIFORNIA, Welspun KOJO, 9654 Siempre viva road suite 1, San Diego, California 92154, USA

Tel. No.:

+1-619-205-5656

Fax No.:

+1-619-710-0952

Website :

www.welspunkojo.com

 

 

DIRECTORS

 

As on 31.03.2010

 

Name :

Mr. B. K. Goenka

Designation :

Chairman and Managing Director

Date of Birth/Age :

15.08.1965

Qualification :

B. Com.

Date of Appointment :

17.01.1985

 

 

Name :

Mr. Dadi B Engineer

Designation :

Director

 

 

Name :

Mr. A. K. Dasgupta

Designation :

Director

 

 

Name :

Mrs. Revathy Ashok

Designation :

Director

 

 

Name :

Mr. Arun Todarwal

Designation :

(Nominee DunearnInvestments (Mauritius Pte. Limited)

 

 

Name :

Mr. Ram Gopal Sharma

Designation :

Director

 

 

Name :

Mr. R. R. Mandawewala

Designation :

Director

 

 

Name :

Mr. M. L. Mittal

Designation :

Executive Director (Finance)

 

 

Name :

Mrs. Dipali Goenka

Designation :

Executive Director

 

 

Name :

Mr. Bharat B Sharma

Designation :

Director, Operations, WIL Anjar

 

 

Name :

Mr. Swapan S Nath

Designation :

Director, Operations, WIL Vapi

 

KEY EXECUTIVES

 

As on 31.03.2010

 

Name :

Mr. Shashikant Thorat

Designation :

Company Secretary

 

 

Audit Committee :

·         Mr. Ram Gopal Sharma

·         Mr. Dadi B Engineer

·         Mr. A. K. Dasgupta

·         Mr. Arun Todarwal

 

 

Remuneration Committee:

·         Mr. A. K. Dasgupta

·         Mr. Dadi B Engineer

·         Mr. Arun Todarwal

·         Mr. Ram Gopal Sharma

 

 

Share Transfer and Investor Grievance Committee :

·         Mr. A. K. Dasgupta

·         Mr. B. K. Goenka

·         Mr. R. R. Mandawewala

·         Mr. M. L. Mittal

 

 

Name :

Mr. Akhil Jindal

Designation :

Corporate Affairs 

 

 

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

 

As on 31.03.2011

 

Category of Shareholders

No. of Shares

% of Holdings

(A) Shareholding of Promoter and Promoter Group

 

 

(1) Indian

 

 

Individuals / Hindu Undivided Family

254453

0.29

         Bodies Corporate

36804936           

41.36

Sub Total

37059389

41.65

(2) Foreign

--

--

Total shareholding of Promoter and Promoter Group (A)

37059389

41.65

(B) Public Shareholding

 

 

(1) Institutions

 

 

         Mutual Funds / Axis  

3110956

3.50

         Financial Institutions / Banks

19861459

22.32

         Insurance Companies

1573171

1.77

         Foreign Institutional Investors

3183674

3.58

         Sub Total

27729260

31.16

(2) Non-Institutions

 

 

Bodies Corporate

3737058

4.20

Individuals

 

 

Individual shareholders holding nominal share capital up to Rs. 0.100 million

8350666

9.39

Individual shareholders holding nominal share capital in excess of Rs.0.100 million

3020433

3.39

Any Others (Specify)

9079463

10.20

Overseas Corporate Bodies

9079463

10.20

 Sub Total

24187620

27.18

Total Public shareholding (B)

51916880

58.35

Total (A)+(B)

88976269

100.00

(C) Shares held by Custodians and against which Depository Receipts have been issued

 

 

(1) Promoter and Promoter Group

--

--

(2) Public

--

--

Sub Total

--

--

Total (A)+(B)+(C)

88976269

100.00

 

 

BUSINESS DETAILS

 

Line of Business :

Manufacturer of Home Textile. 

 

 

Products :

Item Code Number

Product Description

 

63049250

Cotton Terry Towel

63041910

Cotton bed Sheet

52051100

Cotton Yarn

 

 

Exports :

 

Products :

Towels, Bedsheets, Bath Ropes

Countries :

·         USA

·         Australia

·         UK

 

 

Imports :

 

Products :

Machinery Cotton

Countries :

·         USA

·         Switzerland

·         Singapore

 

PRODUCTION STATUS AS ON 31.03.2010

 

Particulars

Unit

Licensed Capacity

Installed Capacity

Actual Production

Cotton Terry Towels

M.T.

NA

41500

38966.67

Cotton Yarn

M.T.

NA

33130

31387.300

Bed Sheets

000’ Mtrs

NA

45000

39304.560

Rugs

M.T.

NA

10151

2921.960

 

 

GENERAL INFORMATION

 

Customers :

·         Wholesalers

·         Retailers

 

 

No. of Employees :

2000 Approximately

 

 

Bankers :

·         State Bank of Bikaner and Jaipur

·         State Bank of India

·         Punjab National Bank

·         Andhra Bank

·         Canara Bank

·         Exim Bank Limited

·         Bank of India

·         State Bank of Patiala

·         Bank of Baroda

·         Oriental Bank of Commerce

·         IDBI Bank

 

 

Facilities :

Secured Loans

As on 31.03.2010

Rs. in millions 

As on 31.03.2009

Rs. in millions 

Term Loans

 

 

From Banks

 

 

In Rupee

12280.080

13049.920

In Foreign Currency

157.390

0.000

Working Capital Loans from Banks

3726.120

3039.170

Total

16163.590

16089.090

 

 

Unsecured Loans

As on 31.03.2010

Rs. in millions 

As on 31.03.2009

Rs. in millions 

Interest Free Sales Tax Loan (Repayable in six annual installments for each disbursement till October 7, 2010)

(Repayable within one year Rs.0.010 million ; March 31, 2009 : Rs.0.020 million)

0.010

0.030

Short Term Loans from Banks

328.570

500.000

Inter-Corporate Loan from Welspun Investments and Commercials Limited (Formerly Welspun Investments Limited) (Repayable within one year : Rs. Nil ; March 31, 2009 : Rs. Nil)

88.800

0.000

Total

417.380

500.030

 

 

Banking Relations :

Satisfactory

 

 

Auditors :

 

Name :

Price Waterhouse and Company

Chartered Accountant

 

 

Associates :

·         Welspun USA Inc., USA (WUSA)*

·         Welspun Holdings Private Limited, Cyprus (WHPL)*

 

 

Subsidiaries :

·         Welspun AG (WAG)

·         Besa Developers and Infrastructure Private Limited (BESA)

·         Welspun Mexico S.A. de C.V (WMEX) (Held through WAG)

 

 

Joint Venture :

·         Welspun Zucchi Textiles Limited (WZTL)

·         MEP Cotton Limited (MCL) (upto January 31, 2010)

 

 

Enterprises over which Key Management Personnel or relatives of such personnel exercise significant influence or control and with whom transactions have taken place during the year

·         Welspun Global Brands Limited (WGBL) *

·         Welspun Investments and Commercials Limited (WICL) (Formerly Welspun

·         Investments Limited) *

·         Welspun Sorema Europe, S.A. (SOREMA) (Formerly SOREMA – Tapetes E

·         Cortinas De Banho, S.A., Portugal)

·         Welspun UK Limited (WUKL) ( Formerly Christy UK Limited)*

·         Welspun Home Textiles Limited (WHTL)

·         Welspun Retail Limited (WRL) **

·         Welspun Gujarat Stahl Rohren Limited (WGSRL)

·         Welspun Power and Steel Limited (WPSL)

·         Welspun Syntex Limited (WSL)

·         Welspun Trading Limited (WTL)

·         Welspun Wintex Limited (WWL)

·         Welspun Mercantile Limited (WML)

·         Krishiraj Trading Limited (KTL)

·         Welspun Logistics Limited (WLL)

·         Welspun Realty Private Limited (WRPL)

·         Vipuna Trading Limited (VTL)

·         Mertz Securities Limited (MSL)

·         Welspun Polybuttons Limited (WPBL)

·         Refined Salts Private Limited (RSPL)

·         Welspun Foundation for Health and Knowledge (WFHK)

 

* Ceased to be a subsidiary effective April 1, 2009

** Ceased to be an associate effective April 1, 2009

 

 

CAPITAL STRUCTURE

 

As on 31.03.2010

 

Authorised Capital :

No. of Shares

Type

Value

Amount

125000000

Equity Shares

Rs.10/- each

Rs.1250.000 millions

500000

0% Redeemable Cumulative Preference Shares

Rs.100/- each

Rs.50.000 millions

 

 

 

 

 

Total

 

Rs.1300.000 millions

 

Issued, Subscribed & Paid-up Capital :

No. of Shares

Type

Value

Amount

73089519

Equity Shares

Rs.10/- each

Rs.730.900 millions

500000

0% Redeemable Cumulative Preference Shares

Rs.100/- each

Rs.50.000 millions

 

 

 

 

 

Total

 

Rs.780.900 millions

 

 

FINANCIAL DATA

[all figures are in Rupees Millions]

 

ABRIDGED BALANCE SHEET

 

SOURCES OF FUNDS

 

31.03.2010

31.03.2009

31.03.2008

SHAREHOLDERS FUNDS

 

 

 

1] Share Capital

780.900

780.900

780.900

2] Share Application Money

0.000

0.000

0.000

3] Reserves & Surplus

5397.960

4821.370

4807.290

4] (Accumulated Losses)

0.000

0.000

0.000

NETWORTH

6178.860

5602.270

5588.190

LOAN FUNDS

 

 

 

1] Secured Loans

16163.590

16089.090

15235.710

2] Unsecured Loans

417.380

500.030

182.720

TOTAL BORROWING

16580.970

16589.120

15418.430

DEFERRED TAX LIABILITIES

1562.090

1039.830

1104.000

 

 

 

 

TOTAL

24321.920

23231.220

22110.620

 

 

 

 

APPLICATION OF FUNDS

 

 

 

 

 

 

 

FIXED ASSETS [Net Block]

15068.530

14889.770

13706.300

Capital work-in-progress

239.820

884.040

1358.190

Incidental Expenditure Pending Capitalisation/ Allocation

0.000

54.050

62.780

 

 

 

 

INVESTMENT

929.440

1046.710

904.750

DEFERREX TAX ASSETS

0.000

0.000

0.000

 

 

 

 

CURRENT ASSETS, LOANS & ADVANCES

 

 

 

 

Inventories
3544.270

2105.630

2901.920

 

Sundry Debtors
1733.530

1523.910

753.410

 

Cash & Bank Balances
830.120

888.130

920.510

 

Loans & Advances and Other Current Assets
4035.040

3705.660

2970.850

Total Current Assets
10142.960

8223.330

7546.690

Less : CURRENT LIABILITIES & PROVISIONS
 

 

 

 

Sundry Creditors

1773.050

1081.290

1196.530

 

Other Current Liabilities
139.180

740.350

235.540

 

Provisions
146.600

45.040

36.020

Total Current Liabilities
2058.830

1866.680

1468.090

Net Current Assets
8084.130

6356.650

6078.600

 

 

 

 

MISCELLANEOUS EXPENSES

0.000

0.000

0.000

 

 

 

 

TOTAL

24321.920

23231.220

22110.620

 

PROFIT & LOSS ACCOUNT

 

 

PARTICULARS

31.03.2010

31.03.2009

31.03.2008

 

SALES

 

 

 

 

 

Income

18235.410

13444.400

12409.440

 

 

Other Income

577.300

171.600

246.660

 

 

TOTAL                                    

18812.710

13616.000

12656.100

 

 

 

 

 

Less

EXPENSES

 

 

 

 

 

Materials and Manufacturing Expenses

13378.730

9466.050

8338.770

 

 

Employees' Remuneration and Benefits

1163.630

1035.180

963.370

 

 

Selling, Administration and Other Expenses

632.490

975.980

1418.920

 

 

TOTAL                                    

15174.850

11477.210

10721.060

 

 

 

 

 

Less

PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION

3637.860

2138.790

1935.040

 

 

 

 

 

Less

FINANCIAL EXPENSES                        

870.050

921.110

676.850

 

 

 

 

 

 

PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION                                  

2767.810

1217.680

1258.190

 

 

 

 

 

Less/ Add

DEPRECIATION/ AMORTISATION                    

1063.250

952.980

847.190

 

 

 

 

 

 

PROFIT BEFORE TAX (E-F)                  

1704.560

264.700

411.000

 

 

 

 

 

 

Exceptional Item

0.000

0.000

3.520

 

 

 

 

 

 

Profit/ (Loss) Before Taxation From Ordinary Activities

1704.560

264.700

414.520

 

 

 

 

 

 

Profit/ (Loss) Before Taxation From Ordinary Activities And From Continuing Operations

1704.560

(50.470)

305.000

 

 

 

 

 

 

Provision For Taxation

 

 

 

 

Current Tax

288.930

27.100

44.500

Less

Minimum Alternative Tax Credit Availed

288.930

27.100

44.500

 

Excess Provision for Tax in Earlier Years

(16.760)

0.000

0.000

 

Reversal of Minimum Alternative Tax Credit Availed in Earlier Year

49.000

0.000

0.000

 

Deferred Tax

522.260

(60.400)

142.690

 

Fringe Benefit Tax

0.000

5.990

6.400

 

Profit After Taxation From Ordinary Activities And From Continuing Operations

1150.060

3.940

155.910

 

Extraordinary Item

0.000

7.330

0.000

 

Profit/ (Loss) After Taxation From Continuing Operations (A)

1150.060

(3.390)

155.910

 

 

 

 

 

 

Profit Before Taxation From Ordinary Activities And From Discontinuing Operations

0.000

315.170

109.520

 

Fringe Benefit Tax

0.000

2.750

2.770

 

Profit After Taxation From Ordinary Activities And From Discontinuing Operations (B)

0.000

312.420

106.750

 

 

 

 

 

 

PROFIT AFTER TAX (A+B)

1150.060

309.030

262.660

 

 

 

 

 

Add

PREVIOUS YEARS’ BALANCE BROUGHT FORWARD

2001.650

1692.620

1430.290

 

 

 

 

 

Less

APPROPRIATIONS

 

 

 

 

 

Equity Shareholders

73.090

0.000

0.000

 

 

Preference Shareholders

17.410

0.000

0.000

 

 

Tax on Proposed Final Dividend

15.030

0.000

0.000

 

 

Transfer to Capital Redemption Reserve

0.000

0.000

30.000

 

 

Transfer from Debenture Redemption Reserve

0.000

0.000

(29.670)

 

BALANCE CARRIED TO THE B/S

3046.180

2001.650

1692.620

 

 

 

 

 

 

EARNINGS IN FOREIGN CURRENCY

1044.380

8321.120

10131.140

 

 

 

 

 

 

IMPORTS

 

 

 

 

 

Raw Materials

1801.810

544.830

522.640

 

 

Stores & Spares and Dyes & Chemicals

143.790

203.870

121.970

 

 

Capital Goods

149.020

1003.110

1653.940

 

 

Packing Material

114.260

12.850

9.670

 

TOTAL IMPORTS

2208.880

1764.660

2308.220

 

 

 

 

 

 

Earnings Per Share (Rs.)

Basic and Diluted before Extraordinary Item

Basic and Diluted after Extraordinary Item

 

15.73

15.73

 

4.33

4.23

 

3.59

3.59

 

 

Particulars

 

 

31.03.2011

31.03.2010

Sales Turnover (Approximately)

 

20630.000

--

Sales Turnover (Including Subsidiary Companies) (Approximately)

 

21130.000

19800.000

 

The above information has been parted by Mr. Ashish Shah

 

 

QUARTERLY RESULTS

 

PARTICULARS

 

30.06.2010

30.09.2010

31.12.2010

31.03.2011

Type

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Net Sales

4613.420

5877.730

5110.240

4785.900

Total Expenditure

4112.440

5020.600

4600.670

4104.800

PBIDT (Excl OI)

500.980

857.130

509.570

681.100

Other Income

16.880

174.840

58.530

42.270

Operating Profit

517.860

1031.970

568.100

723.370

Interest

170.840

196.430

197.890

220.440

Exceptional Items

108.090

0.000

0.000

0.000

PBDT

455.110

835.530

370.210

502.930

Depreciation

275.820

280.790

285.890

292.630

Profit Before Tax

179.290

554.750

84.320

210.300

Tax

23.750

191.580

37.460

96.670

Provisions and contingencies

0.000

0.000

0.000

0.000

Profit After Tax

155.540

363.160

46.860

113.620

Extraordinary Items

0.000

0.000

0.000

(1677.020)

Prior Period Expenses

0.000

0.000

0.000

0.000

Other Adjustments

0.000

0.000

0.000

0.000

Net Profit

155.540

363.160

46.860

(1563.400)

 

KEY RATIOS

 

PARTICULARS

 

 

31.03.2010

31.03.2009

31.03.2008

PAT / Total Income

(%)
6.11

2.27

2.08

 

 
 

 

 

Net Profit Margin

(PBT/Sales)

(%)
9.35

1.97

3.31

 

 
 

 

 

Return on Total Assets

(PBT/Total Assets}

(%)
6.76

1.15

1.93

 

 
 

 

 

Return on Investment (ROI)

(PBT/Networth)

 
0.28

0.05

0.07

 

 
 

 

 

Debt Equity Ratio

(Total Liability/Networth)

 
3.02

3.29

3.02

 

 
 

 

 

Current Ratio

(Current Asset/Current Liability)

 
4.93

4.41

5.14

 

 

LOCAL AGENCY FURTHER INFORMATION

 

DETAILS OF SUNDRY CREDITORS

 

Particulars

As on 31.03.2010

Rs. in millions

As on 31.03.2009

Rs. in millions

As on 31.03.2008

Rs. in millions

Total Outstanding Dues of Micro Enterprises and Small Enterprises

1.070

0.790

0.750

Total Outstanding Dues of Creditors other than Micro Enterprises and Small Enterprises

1771.980

1080.500

1195.780

Total

1773.050

1081.290

1196.530

 

FINANCIAL HIGHLIGHTS

 

During the year, the Company registered a growth of 35.64% in Turnover, 70.09% in PBIDT, 562.30% in PBT, and 272.15% in PAT over those in the previous year indicating growth in all elements. The financial year 2009-10 has proved ground breaking for the Company. The Company achieved various milestones in this year. Recovery of global markets from recession in 2008-09 and heavy replenishments during the financial year 2009-10 has accelerated the growth of the Company tremendously.

 

The Board of Directors of the Company has approved capital expenditure of Rs.3621.000 millions. This expenditure will remove bottlenecks in the operations resulting in added capacity of production of towels, bedsheets, spinning, rugs and improvement in overall efficiency and sustainability of the operations.

 

EMPLOYEE STOCK OPTION SCHEME:

 

The particulars required to be disclosed pursuant to Clause 12 of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are as under:

 

On June 30, 2009, holders of outstanding 1,290,000 options surrendered their options. The Company then granted 2,265,000 Employee Stock Options under the Employee Stock Option Scheme to employees of the Company and its subsidiaries with a right to subscribe to equity shares at a price of Rs. 35.60 per equity share(closing market price as on June 30, 2009) . The stock options can be exercised during a period of 3 years from the date of vesting. Till March 31, 2010, none of the outstanding options were vested. The dates of vesting of options are June 30, 2010 (20%), June 30, 2011 (20%), June 30, 2012 (30%) and June 30, 2013 (30%).

 

The Company has adopted intrinsic value method for the valuation and accounting of the aforesaid stock options as per SEBI guidelines. Since the grants were made at an exercise price equal to the closing market price at the time of grant, no amount was required to be accounted as employee compensation cost. The fair value of the options as per the “Black Scholes” model comes to Rs. 17.49 per option. Had the company valued and accounted the aforesaid options as per the “Black Scholes” model, the Profit After Tax for the year would have been lower by Rs. 8.80 mn and the Basic and Diluted earning per share (with face value of Rs. 10/- each) would have been lower by Re.0.12 and Re. 0.17, respectively.

 

BUSINESS ORGANIZATION

 

Subject is a manufacturer of a wide range of home textile products. Subject, through Welspun Global Brands Limited (WGBL), is a strategic vendor to some of the top global retailers. Its manufacturing, sales and distribution network is spread over 32 countries. Worldwide, it is ranked among the top 4 manufacturers of terry towels and rugs with capacities of 41,500 MT and 10,151 MT respectively. It is also one of the top manufacturers' of bed sheets with a capacity of 45 million meters p.a.

 

Subject's major customers are WGBL and Welspun Retail Limited (WRL) who purchases the terry towels, sheets and rugs manufactured by WIL for marketing and distribution in international and domestic markets respectively. Pursuant to a scheme of arrangement, inter alia, Marketing Division of the Company was transferred to WGBL with Appointed Date being April 1, 2009. As mentioned in the scheme, WGBL acquired shares of WRL from the Company and other promoters which resulted in WGBL’s holding to 85% equity shares in WRL. Resultantly, WGBL started operating as the international sales and marketing intermediary of subject. Subject's (through WGBL) major customers in the international market are retail chains, specialty stores, fashion stores, merchants and importers. WRL caters to the domestic market through a chain of company owned and franchisee retail outlets.

 

GLOBAL OVERVIEW

 

Economic Environment

 

After negative GDP growth in the first 2 quarters ending on June 30, 2009, the US and European Union (EU) witnessed marginal positive growth in the 4th quarter of 2009 at 1.4% and 0.1% over the previous quarters respectively. The economies in 2010 also began on a positive note with the first quarter of the year registering a growth of 2.5% and 0.3% YoY in the US and EU respectively. This is a marked improvement over the environment that WIL faced during the same period last calendar year.

 

World Textile Market

 

Currently, the global textile and apparel trade is estimated to be over US$ 450 billion . The global market for textile trade includes yarns, fabrics, apparel and non-apparel finished products. Subject estimates that the global home textiles market is around US$ 22 - 27 billion, accounting for 5-6% of the total global textile market. The home textiles market includes:

 

1. Household textiles: Rugs, bed linen, table linen, bathroom and kitchen linen, etc.

2. Furnishing textiles: Curtains, bedspreads and other furnishing articles for home interiors, etc.

 

Post the expiry of the Agreement on Textiles and Clothing in 2005, India's share of textile imports into the EU and the US has significantly increased. India is among the top 3 leading suppliers of bed and bath linen in the EU . India along with China and Pakistan is amongst the top 3 suppliers of textile globally.

 

Demand – Supply Scenario

 

The global economic crisis which began in FY 09 continued to impact the global textile and apparel trade in FY10 as well, leading to lower growth rates. FY08-09 a worldwide drop in consumption due to consumers cutting back on discretionary spends impacting demand for 5 textiles . The last quarter of FY10, they have witnessed an increase in demand at the retail level, both domestically and internationally. This leads them to believe that the textile industry is on a path to recovery. They expect the industry demand to stabilize and grow in the near future.

The largest consumers of home textile products are Europe, US and Japan. In the last few years, consumer wallet share of textiles has been declining leading to great demand in the value segment. In the last quarter of FY10, they observed a cautious optimism in the consumer demand. They expect the demand to grow at a gradual pace across geographies. The Industry is 6 expected to grow at a CAGR of 14% over the next 4 years to reach approximately US $850 billion by 2014 . In 2009, there was a severe price competition due to depressed demand. With cotton and crude oil prices moving up, they expect an increase in prices of finished goods. They do not expect any negative impact on demand for home textiles. They are increasingly facing competition from lower cost territories like Cambodia, Vietnam and Bangladesh whose shares in imports have been steadily increasing.

The United States of America, India, China and Pakistan together account for 81% of the total home textiles imports. India is the largest supplier of terry towels and second largest in sheets in the United States at 28% and 27% of total imports respectively.

 

OVERVIEW OF THE INDIAN ECONOMY

 

India's GDP growth trend

 

Despite a challenging global economic environment, India's GDP grew at 7.2% in FY10, while the manufacturing sector grew at 8 8.9%. It is expected to grow further at 8.5% in FY11 as per the Economic Survey of India.

 

GDP Growth Trend in India

 

The overall macro-economic trends have resulted in rising per capita income, increased consumerism and higher consumer spending. A large proportion of this higher consumer spending is towards textiles, apparel and lifestyle products. The chief reason for this has been India's changing demographic profile. The disposable income in India is also expected to increase significantly over the next decade. Subject believes that the above factors strongly suggest an ongoing structural shift in the demand pattern for textiles within the domestic markets. This indicates that the textile industry is on the threshold of higher consumer demand and consequently higher growth.

 

India's economy is on the fulcrum of an ever-increasing growth curve. With positive indicators such as stable 8-9 percent overall annual growth, rising foreign exchange reserves and rapidly expanding FDI inflows, India has emerged as the second fastest growing major economy in the world after China.

 

Industry structure

 

The industrial restructuring process has led to significant changes in the location of production activities in the home textiles sector. In the last two decades, many Western European home textiles companies have moved manufacturing activities to countries in Eastern Europe or to non-European countries, where costs of production are lower (e.g. India, China and Pakistan). Home textile manufacturers in developed economies have responded to pressures for changes by pursuing the following business strategies:

 

·         Relocation of production and activities to Low Cost Countries; and

·         Development of value-added activities in the higher end of the value chain.

 

 

The supply chain is increasingly organized as an integrated production network, within which production is divided into specialized activities. Activities are location based where they can contribute the most to the value of the end product. The globalization of the supply chain also entails certain risks for European companies, as they are required to monitor working conditions and manufacturing practices in all parts of the value chain, including those at subcontracting companies. If a company or its subcontractors are not complying with regulations or ethical standards, the image of the company can be tarnished. Some trends that influence the production for household and furnishing textiles in the developed markets includes:

 

Increasing price competition: Price competition among suppliers has intensified, resulting in slow growth in prices. This is causing concern among producers in developed markets who are finding it increasingly difficult to match low import prices.

 

Increasing internationalization: Textile manufacturing and retail companies are expanding their activities on a global scale at a rapid pace and their products are available in many developed markets resulting in increased competitive pressures.

 

High degree value chain integration: Several producers have opened their own chain(s) and many suppliers have started a close and long-term co-operation with distribution channels, thereby increasing the entry barriers for new suppliers.

 

Consolidation: The number of suppliers has decreased and many suppliers have merged or have taken over other suppliers. This is resulting in greater economies of scale and value chain efficiencies, forcing their less competitive counterparts out.

 

Specialization: Several manufacturers of home textiles have specialized in specific functions (such as design) or in specific markets (such as the contract market), while other manufacturers have shifted from manufacturing for private labels to introducing their own brands.

 

MARKET STRUCTURE

 

Consumers

 

A majority of purchases in the home textiles segment are made for replacement purposes and are discretionary in nature. The purchase of home textiles, therefore, gets deferred during periods of economic slowdown and a subsequent economic upturn tends to be steeper than the normal rate of consumption growth. Consumption patterns of households  vary substantially across geographies due to differences in culture, traditions and tastes. In the household textiles sector, Subject believes that brand awareness among consumers is limited, as can be derived from the high market shares for interior department stores, specialty chains and variety chains operating with their own private label and textile discounters, while super and hyper markets sell unknown or fancy brand names.

 

Importers purchase products from manufacturers abroad and they estimate that they generally add a 30-40% mark-up to cover commissions, credit risk, after-sales service and the cost of carrying a local inventory to meet small orders. In contrast to the agent, this importer holds his own stocks at his own risk.

 

Wholesalers cater to specialist shops as well as to department stores and home shopping companies. The wholesaler also holds stocks at own risk. This non-importing distributor purchases from domestic manufacturers and importers. The mark-up of wholesalers, Subject estimates approximately 20-30%. Large retail companies are increasingly purchasing from abroad, thereby bypassing this intermediary.

 

Purchasing agents are widely used by retailers and wholesalers due to their wide network of contacts and knowledge of foreign markets. They do not carry their own stock but purchase solely on the request from their customers.

 

Domestic manufacturers either import the raw material required for the finishing operations or are primarily manufacturing products which are freight unfriendly or difficult to manage with long supply chains. These manufacturers have the advantage of proximity to the source of raw material as well as the customer.

Sales agents are independent intermediaries between the (foreign) manufacturer and the retailer or retail organization, receiving a commission from the former. The sales agents do not take title to the merchandise, they have a responsibility limited to present samples to potential clients, obtaining orders, and forwarding these to the exporters.

 

Retailers constitute the final stage before products reach the consumer. A criterion for dividing the market is the composition of the total assortment: wholly or partly specialized in selling home textiles.

 

INDIAN TEXTILES INDUSTRY

 

The textile industry plays a crucial role in the Indian economy. The size of the Indian textile industry is estimated at approximately USD 60 billion. It contributes about 14 per cent to the industrial production of the country and 4% to the GDP. As regards employment, it is the second largest after agriculture employing nearly 35 million people and accounting 20 per 9 cent of the total workforce of the nation. Its contribution to forex earnings is around 17 per cent . Textiles sector has been identified as one of the priority sectors having high growth potential and higher multiplier effects for employment generation.

 

India occupies a prominent position in the global textile industry. It is the second largest producer of textiles in the world, with China being the largest. India's competitive advantages are supplemented by the fact that it contributes 23.7% to global 10 cotton production, being the second largest producer in the world . India is also the second largest producer of man-made fiber, polyester and filament yarns in the world. India produces a large variety of textile products based on natural fibers (cotton, wool and silk) as well as man-made fibers (polyester, viscose and acrylic). Of the above, cotton accounts for a majority share of India's overall textile output.

 

India – A Manufacturing Destination

India has several inherent advantages, which lends it the potential and ability to emerge as a key global outsourcing hub for textile products.

 

Self sufficiency of raw materials

India has a vast pool of raw materials for textiles, both natural and man-made . Cotton textiles and clothing account for approximately one-third of global textile trade. China, India and US accounts for approximately two thirds of global cotton production. Further, India is a country which has a surplus cotton production as a result of its increased productivity in the last few years. Other Asian countries such as China, Bangladesh, Pakistan, Thailand and Indonesia are net importers of cotton. India's self sufficiency in cotton provides it a strong competitive advantage in global textile and clothing trade .

 

Labour Cost Advantage

On account of its vast population, India enjoys manufacturing cost competitiveness due to easy availability of low cost skilled labor across different industries. The textile industry is no exception whereby India's cost of production ranks amongst the lowest in the world today.

 

Design Skills and Value Addition Capabilities

Subject believes that India has high value addition skills, which enables it to service niche markets worldwide. This has been acknowledged by the world's leading global retailers.

 

Economies of Scale owing to a Huge Domestic Market

India is among the largest textile manufacturer and consumer in the world. The size of the domestic textile industry has been estimated at USD 40 billion. This gives India a natural advantage of economies of scale, which enables it to lower manufacturing overheads and improve operational efficiencies.

 

THE HOME TEXTILE INDUSTRY

 

The global home textiles industry is estimated at US$ 70 billion (at the retail level) with US and EU together accounting for 13 nearly 70% of the overall market . Home textiles are in large part, a replenishment business. This creates the need for a retailer to keep the same product in stock consistently and requires a steady and consistent supply of products. Earlier, quota restrictions inhibited foreign manufacturers from developing economies of scale and the logistics and supply chain capabilities required to effectively service overseas replenishment demand. The removal of quotas in January 2005 has resulted in the elimination of the advantages enjoyed by manufacturers in the United States and improved the competitive position of the overseas manufacturers.

 

The imports from China, India, Pakistan and other emerging manufacturing locations like Bangladesh and Vietnam have been increasing since 2005 after the end of quotas. Manufacturing plants in USA and Europe have been shutting down and adapting their business model to either relocating to low cost manufacturing locations, sourcing from Asia or getting acquired by companies from these manufacturing centres.

 

In the current scenario, USA imports of home textiles account for nearly 75% of the overall market. This figure is expected to go up with the finishing facilities for towels and basic bedding manufacturing plants also moving out of the USA .

 

Economies of scale with modern manufacturing facilities

 

Subject operates modern manufacturing facilities spread across geographies, which enables it to cater to volume demands as well as customer-specific requirements. Subject is among the top four terry towel manufacturers and one of India's top 15 manufacturers of bed sheets. The modern manufacturing facilities also enables them to consistently produce high-quality products that exceed the demands of the customers and end consumers. The manufacturing facilities at Vapi and Anjar operate in accordance with ISO 9001:2008 certifications and the manufacturing facility at Vapi also operates in accordance with ISO 14001:2004. Both the certifications are by Intertek Systems Certification.

 

Integration across the production chain

 

Subject has integrated manufacturing facilities which allows it to undertake all the production processes (Spinning, weaving, processing, cut and sew, packing and logistics) involved in the manufacture of its products. This helps us to exercise control over and make profit from major part of the value chain, starting from the procurement of cotton to the distribution of the products.

 

Wide ranging product portfolio

 

Subject's wide ranging product portfolio enables it to cater to the entire home furnishing requirements of the end

consumers. While the key products in terms of production and sales volume have been terry towels and bed linen, basic and decorative beddings and bath rugs were added to the portfolio in 2008. Subject believes that the addition of other home textile products to its product portfolio, such as basic and decorative beddings and bath rugs, has strengthened its position as a fully integrated home textile manufacturer. Subject believes that consumer-centric product innovation is a key driver to its growth and that continued emphasis on consumer research will help it create a niche in all the product categories, improve product mix and satisfy consumer product requirements for home textile products. Innovative products accounted for approximately one-fifth of its turnover for the financial year ended March 31, 2009.

 

Focus on cost reduction

 

Subject intends to retain its focus on improving manpower productivity and synergies of its global operations with the overall aim of reducing the cost of operations. Subject also continues to strive to remove bottlenecks from its operations to ensure smooth production and distribution of products. The continued focus on cost reduction will help us achieve the aim of becoming the lowest cost producer of home textiles globally.

 

Focus on quality

Subject believes that as its products are sold in some of the most competitive markets globally and ensuring quality of products is important to maintain the competitive advantage. Subject strives to continue to consistently produce high quality products to meet the standards of its consumers. Subject believes that its reputation for high quality products willenable it to attain a leadership position in each of its product segments.

 

Welspun Products

 

Subject has a wide ranging portfolio of home textile products comprising terry towels, bed sheets, bath robes, bath rugs,basic bedding and decorative bedding.

 

Terry Towels

 

Subject manufactures terry towels in different shapes and sizes. Some of the towels are intended for use in a particular setting, such as beach towels, or for a particular purpose, such as kitchen towels and baby hood towels, or in sizes convenient for a special use, such as hand towels, face towels and bath sheets. Being woven out of 100% cotton yarn, these fabrics acquire significant hygroscopic property, which is a prime reason for using terry fabrics in home textiles in general and towels and bath robes in particular.

 

Bed Sheets

 

Subject manufactures bed sheets in different shapes and sizes based on different bed sizes and mattress depth. The bed sheets are made from cotton or various blends, such as polyester cotton, cotton bamboo and cotton eucalyptus. The main reason for using blends is the cost and ease of maintenance of the product by the consumer.

 

Bath Robes

 

Subject manufactures bath robes in different designs, shades and weights as per customer requirements. It has the ability to make piece dyed, yarn dyed, jacquard and velour bath robes. The bath robes are manufactured in different styles such as "kimono", "hood", "zipper", and "shawl". Subject specializes in the manufacture of a specific category of bath robes called "wraps". It also provides embellishments, embroidery and prints as per customer requirements. The fabric for the bath robes is similar to the fabric of the towels, which enables them to leverage the product development and innovation undertaken in the production of terry towels.

 

Bath Rugs

 

Subject is able to make rugs of various designs using its multi-level cut loop machine to create multiple fiber lengths within a rug. The bath rugs are generally made of cotton, nylon or micro fiber and can be latex-backed, depending on consumer preferences. Based on customer requirements, they make rugs of different sizes and weights including reversible rugs.

 

Basic Bedding and Decorative Bedding

 

The basic bedding products includes mattress pads, blown and garneted pillows and basic comforters while the decorative bedding products includes comforters, bed skirts, shams, decorative pillows and bolsters. Most of these products are made of polyester fiber fill wadding. The fill tehy use for each product varies according to customer requirements. Since the decorative products provide the look and feel to the bedroom, the products are design-oriented.

 

"Value Added" Products

In addition to these products, Subject also manufactures "value added" products such as "quick dry towels" and "the perfect sheet". Subject believes that these product offerings are examples of how consumer research-driven innovation can enhance functionality in its product offerings.

 

In 2010-11, Subject plans to:

·         Sustain its market share of towels in USA and UK

·         Improve its market share of bed linen in all Markets

·         Utilize the sales network set up in Europe to increase sales across all product categories

·         Stabilize the sales of licensed brand products in UK

·         Acquire/ License Brands

·         Increase revenues in fashion bedding, basic bedding and bath rugs

·         Develop new markets like Mexico, Japan, Russia and China

·         Create a sourcing and quality infrastructure

·         Create sustainable products

·         Continuous focus on cost reduction at plants and subsidiaries

·         Product Development and Innovation

 

Developing a Competitive Advantage

·         Offering a business proposition

–         Be a strategic partner to customers

·         Sharing of common objective with customers

–         Maximize inventory turns

–         Optimize ROI for customer and Welspun

·         Integration

–         Supply chain integration with client data base

·         Quick response through USA based distribution

·         Efficient supply chain for filled products through Mexico

 

OUTLOOK

 

Subject is already a strategic vendor (through WGBL) to major retailers in the USA. It has been able to sustain its growth even in the current economic scenario where the retail sales in its key market of US dropped since Sept'08. As a result of reduced consumer spending, the retailers also corrected the inventory in the entire supply chain leading to low orders.

 

In 2008-09, Subject signed a License for a leading brand in North America for Fashion Bedding, Fashion Bath, Blankets/ Throws and Area Rugs in addition to the earlier license of Bath, Solid Sheets and Rugs. The new license has helped subject in emerging a key player in the Fashion Bedding segment through the manufacturing facility at Mexico.

 

Subject today differentiates itself from the other manufacturers by focusing on Consumer Research driven innovations, use of new technologies, a global manufacturing & sales footprint and ability to offer a comprehensive end to end solution to the customers. A recent example of a consumer research driven innovation has been the Quick Dry Towel and the Perfect Sheet.

 

DISCUSSION OF FINANCIAL PERFORMANCE

 

The Company has shown strong performance during the year. The significant developments which have major impact on financial numbers were:

 

·         Sales growth of 14%, backed by

o        Higher Sales volume in Towels (17%) and Bed Sheets (25%)

o        Revenue generated through new product line of Bath Rugs.

 

·         Additional contribution from higher volumes of all product categories, operational efficiencies and better margins on account of innovation improved profitability.

 

FIXED ASSETS

 

·         Freehold Land

·         Buildings

·         Leasehold Improvements

·         Plant and Machinery

·         Vehicle

·         Furniture and Fixtures

·         Office Equipment

·         Computer Hardware

·         Computer Software

·         Goodwill

 

AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31ST MARCH, 2011 (Rs. in Millions)

 

Particulars

Nine Months Ended

As on 31.12.2010

(Unaudited)

Quarter Ended

AS on 31.03.2011

(Unaudited)

Year Ended

AS on 31.03.2011

(Audited)

1. a. Net Sales / Income from operations

15234.626

4672.990

19907.616

b. Other Operating Income

474.857

112.913

587.770

Total Income

15709.483

4785.903

20495.386

 

 

 

 

2. Total expenditure

 

 

 

a. Decrease / ( Increase ) in stock in trade and work in progress

(848.232)

(3.538)

(851.770)

b. Consumption of Raw materials

8652.114

2303.116

10955.230

c. Purchase of Traded Goods

26.948

(0.938)

26.010

d. Power and Fuel

1450.254

411.166

1861.420

e. Employee costs

1097.381

381.213

1478.594

f. Depreciation

842.496

292.634

1135.130

g. Other Expenditure

3262.390

1013.779

4276.169

Total

14483.351

4397.432

18880.783

 

 

 

 

3. Profit from Operations Before Unrealised Exchange (Gain)/ Loss, Other Income, Interest and Exceptional Items (1-2)

1226.132

388.471

1614.603

 

 

 

 

4. Unrealised Exchange (Gain)/ Loss – Net

(56.408)

(4.812)

(61.220)

 

 

 

 

5. Profit from Operations Before Other Income, Interest and Exceptional Items (3-4)

1282.540

393.283

1675.823

 

 

 

 

6. Other Income

100.974

37.456

138.430

 

 

 

 

7. Profit before Interest and Exceptional Items (5+6)

1383.514

430.739

1814.253

 

 

 

 

8. Interest (Net)

565.157

220.443

785.600

 

 

 

 

9. Profit after Interest but before Exceptional Items (7-8)

818.357

210.296

1028.653

 

 

 

 

10. Exceptional Items (Gain)/Loss

0.000

0.0000

0.000

 

 

 

 

11. Profit from Ordinary Activities before Tax (9+10)

818.357

210.296

1028.653

 

 

 

 

12. Tax Expenses

 

 

 

Provision for Taxation - Current Tax (Net)

160.977

41.041

202.018

Less : Minimum Alternative Tax Credit Availed

(160.977)

(40.234)

(201.211)

Short Provision for Tax in Earlier Years

4.028

0.573

4.601

Reversal of Minimum Alternative Tax Credit Availed in Earlier Year

0.000

27.396

27.396

Provision for Taxation - Deferred Tax

248.771

67.896

316.667

Provision for Fringe Benefit Tax

0.000

0.000

0.000

Total

252.799

96.672

349.471

 

 

 

 

13. Net Profit from Ordinary Activities after Tax (11-12)

865.558

113.624

679.182

 

 

 

 

14. Extraordinary Items (net of tax expense)

0.000

1677.024

1677.024

 

 

 

 

15. Net Profit for the Period (13-14)

565.558

(1563.400)

(997.842)

 

 

 

 

16. Share of Associate's Net loss

0.000

0.000

0.000

 

 

 

 

17. Net Profit/ (Loss) for the period before share of profit/ (loss) of minority interest (15-16)

565.558

(1563.400)

(997.842)

 

 

 

 

18. Minority's Share of Profit/ (Loss) in Certain Subsidiary Companies

0.000

0.000

0.000

 

 

 

 

19. Net Profit/ (Loss) (17-18)

565.558

(1563.400)

(997.842)

 

 

 

 

20. Paid-up Equity Share Capital (Shares of Rs. 10 each)

889.763

889.763

889.763

 

 

 

 

21. Reserves excluding Revaluation Reserves as per Balance Sheet of Previous Accounting Year

0.000

0.000

5397.962

 

 

 

 

22. Earnings Per Share (EPS) in Rs.

 

 

 

a) Basic EPS/(Loss) before Extraordinary Items

6.42

1.29

7.71

b) Diluted EPS/(Loss) before Extraordinary Items

6.37

1.29

7.66

c) Basic and Diluted EPS/(Loss ) after Extraordinary Items

6.37

(17.70)

(11.33)

 

 

 

 

23. Public Shareholding

 

 

 

a) Number of Shares

51916880

51916880

51916880

b) Percentage of Shareholding

58%

58%

58%

 

 

 

 

Promoters and Promoter Group Shareholding

 

 

 

a. Pledged/Encumbered

 

 

 

- Number of Shares

Nil

Nil

Nil

- Percentage of Shares (as a % of the total shareholding of Promoters and Promoter Group)

Nil

Nil

Nil

- Percentage of Shares (as a % of the total Share capital of the Company)

Nil

Nil

Nil

 

 

 

 

b. Non-Encumbered

 

 

 

- Number of Shares

37059389

37059389

37059389

- Percentage of Shares (as a % of the total shareholding of Promoters and Promoter Group)

100%

100%

100%

- Percentage of Shares (as a % of the total Share capital of the Company)

42%

42%

42%

 

Notes

 

1.       The above financial results were reviewed by the Audit Committee and were thereafter approved by the Board of Directors at its meeting held on May 30, 2011.

 

2.       The statutory audit report of the auditors includes a qualification regarding accounts receivables balance of Rs. 696.023 millions receivable from Welspun Retail Limited (WRL), a group company. As at March 31, 2011, the Company has trade receivables aggregating Rs.696.023 millions including Rs.108.330 millions outstanding for more than one year due from WRL, in relation to which no valuation allowance has been estimated and adjusted in the financial statements for the year ended March 31, 2011 which in their view, does not meet the requirement to consider prudence in selection of accounting policies, as set out in Accounting Standard 1 - Disclosure of Accounting Policies, as WRL has been incurring significant losses and has also been unable to achieve its projected financial results in the previous and current financial reporting periods. The management is of the view that , in order to turnaround WRL's operations, WRL has made a robust plan for widening its reach in the market by using new marketing strategies with aggressive cost reduction programs. Accordingly, in the opinion of the Management, the aforesaid accounts receivable as at March 31, 2011 is considered good and recoverable.

 

 

3.       In the meeting of the Board of Directors of the Company held on May 11, 2011, it was resolved that the business of Welspun Mexico S.A. de C.V. (a wholly-owned downstream subsidiary of Welspun AG which, in turn, is a wholly owned subsidiary of the Company), involved in manufacturing decorative bedding products for Welspun AG, shall be re-organised in view of the adverse law and order conditions in the region in which the manufacturing premises of Welspun Mexico S.A. de C.V is situated, which has severely impacted its business prospects and its ability to contain the sustained losses and reverse the accumulated losses. Further there has been a breach of the lease agreement by the landlord necessitating the vacating of the premises. The aforesaid business reorganization involves exiting the current manufacturing premises of Welspun Mexico S.A. de C.V. and setting up trading activities only in new premises, disposing of the assets and discontinuing the employment of the majority of its employees. The Board of Directors further resolved in the aforesaid meeting that the consequential impairment in the value of the Company’s investments in Welspun AG, and loans given to Welspun AG, shall be determined and recognized. Other than the business of Welspun Mexico S.A. de C.V., Welspun AG does not have any substantial business activities. As at March 31, 2011, the Company had investments, aggregating Rs.739.115 millions, in Welspun AG, and outstanding loans at zero rate of interest, aggregating Rs.936.230 millions, and other advances, aggregating Rs.1.675 millions, due from Welspun AG. Accordingly, a provision of Rs.739.115 millions towards diminution in the value of investments in Welspun AG, and a provision of Rs.937.910 millions towards the aforesaid loans and advances to Welspun AG, have been recognized and disclosed as extraordinary items in the Profit and Loss Account for the year.

 

4.       The Company has allotted 15603000 equity shares of Rs. 10 each at Rs. 100 per share on April 19, 2010 to Qualified Institutional Buyers (QIBs) in accordance with Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. The equity share issue expenses related to Qualified Institutional Placement (QIP) aggregating Rs.87.639 millions has been adjusted against Securities Premium Account as per Section 78 of the Companies Act, 1956.

 

5.      The Company operates in only primary business segment. Hence, information relating to primary segments has not been furnished.

 

Information relating to Secondary Geographical Segments is as under :

 

Particulars

Nine Months Ended

As on 31.12.2010

Quarter Ended

AS on 31.03.2011

Year Ended

AS on 31.03.2011

 

India

 

 

 

External Revenue

15224.693

4672.105

19896.798

Carrying Amount of Segment Assets

28610.091

27810.794

27810.794

Capital Expenditure

1697.525

402.705

2100.230

 

 

 

 

Outside India

 

 

 

External Revenue

9.934

0.884

10.818

Carrying Amount of Segment Assets

1850.306

450.830

450.830

Capital Expenditure

0.000

0.000

0.000

 

 

 

 

Total

 

 

 

External Revenue

15234.627

4672.988

19907.616

Carrying Amount of Segment Assets

30460.397

28261.624

28261.624

Capital Expenditure

1697.525

402.705

2100.230

 

CMT REPORT (Corruption, Money Laundering & Terrorism]

 

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

 

1]         INFORMATION ON DESIGNATED PARTY

No records exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

 

2]         Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

 

3]         Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

 

4]         Record on Financial Crime :

            Charges or conviction registered against subject:                                                              None

 

5]         Records on Violation of Anti-Corruption Laws :

            Charges or investigation registered against subject:                                                          None

 

6]         Records on Int’l Anti-Money Laundering Laws/Standards :

            Charges or investigation registered against subject:                                                          None

 

7]         Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

 

8]         Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

 

9]         Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

 

10]        Press Report :

            No press reports / filings exists on the subject.

 

 

CORPORATE GOVERNANCE

 

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

 

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

 

 

CONTRAVENTION

 

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

 

 

FOREIGN EXCHANGE RATES

 

Currency
Unit

Indian Rupees

US Dollar

1

Rs.44.94

UK Pound

1

Rs.71.91

Euro

1

Rs.64.60

 

 

SCORE & RATING EXPLANATIONS

 

SCORE FACTORS

 

RANGE

POINTS

HISTORY

1~10

6

PAID-UP CAPITAL

1~10

5

OPERATING SCALE

1~10

5

FINANCIAL CONDITION

 

 

--BUSINESS SCALE

1~10

6

--PROFITABILIRY

1~10

6

--LIQUIDITY

1~10

6

--LEVERAGE

1~10

5

--RESERVES

1~10

6

--CREDIT LINES

1~10

6

--MARGINS

-5~5

--

DEMERIT POINTS

 

 

--BANK CHARGES

YES/NO

YES

--LITIGATION

YES/NO

NO

--OTHER ADVERSE INFORMATION

YES/NO

NO

MERIT POINTS

 

 

--SOLE DISTRIBUTORSHIP

YES/NO

NO

--EXPORT ACTIVITIES

YES/NO

YES

--AFFILIATION

YES/NO

YES

--LISTED

YES/NO

YES

--OTHER MERIT FACTORS

YES/NO

YES

TOTAL

 

51

 

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

 

Financial condition (40%)            Ownership background (20%)                 Payment record (10%)

Credit history (10%)                    Market trend (10%)                                Operational size (10%)

 

 

RATING EXPLANATIONS

 

 

RATING

STATUS

 

 

PROPOSED CREDIT LINE

>86

Aaa

Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums

 

Unlimited

71-85

Aa

Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums

 

Large

56-70

A

Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums

 

Fairly Large

41-55

Ba

Overall operation is considered normal. Capable to meet normal commitments.

 

Satisfactory

26-40

B

Capability to overcome financial difficulties seems comparatively below average.

 

Small

11-25

Ca

Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity

 

Limited with full security

<10

C

Absolute credit risk exists. Caution needed to be exercised

 

 

Credit not recommended

-

NB

                                       New Business

-

 

 

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.