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

restructuring of thread business of Vardhmn Textile Limited (VTXL), Vardhmn threads limited (VTL) into Vardhmn 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.

TEXTILE INDUSTRY
Textile 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 & weaving processes 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.

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, Indias cotton production increased by 57% over the last 5 years & 3 million additional spindles & 30000 shuttles less looms was installed.

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 & 6 TH 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 INDIAN ECONOMY

The Indian Textile and Apparel industry : contributes to circa 3.6% of Indias gross domestic product Accounts for 25% of Indias 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 Indias 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.

INDIAS COMPETITORS
Indias exports fall into the low risk category because of its well developed domestic textile industry. Despite this, Indias exports do face serious competition from the following countries China Bangladesh Pakistan Sri Lanka 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

Main markets of Indian textiles are:-

 Vietnam Malaysia.

After the textile quota regime of quantitative import restrictions under the Multi- fibre Arrangement (MFA) came to an end on 1st 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 industrys faced serious challenges from rapidly increasing imports. The expiration of MFA didnt 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 overseas markets 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.

 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 Worlds largest Textile Economy. Weaknesses Large obsolete production capacities in the cotton sector.

The largest exporter of textiles & clothing (worth US $ 62 billion Low value addition. in 2002). This accounts for 17% of world trade (Textiles = 13%; Clothing = 20%). China Worlds largest producer of Cotton. Worlds largest producer of Synthetic fibres. Textile sector generates 10% of its GDP; and 20% of its merchandise output. Relatively low labour costs. One of the worlds largest exporters of readymade garments (exports of US $ 5 billion pa). Significant presence in US markets, due to a large quota. Also enjoys quota free, & duty free access to Australia; Canada & Norway. Raw material base; no indigenous cotton production; & relies heavily on imported yarns and fibres. Inadequate infrastructure. Leads to congestion & delays at ports.

Bangladesh

Its status as a least developed country (LDC) will give it favourable market access in the post quota era(01/01/2005); with preferred facility for EU markets. Has mastered the garment trade & has low cost / high productivity in that sector.

Inadequate communications network. Uncompetitive and unreliable power supply leads to production delays & elevated costs.

Textile & Apparel Industry has crucial part of countrys economy. It is the countrys biggest employer in manufacturing; & number 1 export earner.

Small domestic fabric base. Relies heavily on yarn & fabric imports.

Sri Lanka

Pakistan

Industry is seeing decline in competitiveness due to its heavy reliance on quota categories, concentration In 2001 it accounted for 69% on a few markets, inability of the countrys industrial to develop new markets or exports and 53% of its total major purchasers because exports. of direct marketing contacts. Fourth largest Cotton producer in Limited manufacturing base Relatively secure markets in the world. in clothing & processing. with USA; EU & Canada Relatively small domestic through bilateral agreements market, little cash Highly developed garment Limited research & generation to support confection industry, & also development restricting investment in developing dyeing & finishing industry. diversity in product & export markets. innovation. Abundant labour force, which relatively cheaper than China & India.

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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, Indias 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 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. towards Productivity

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13

INDIAN TEXTILE SWOT

STRENGTHS:
Indian Textile Industry is an Independent & Self-Reliant industry. Abundant Raw Material availability that helps industry to control costs and reduces the lead-time across the operation. Availability of Low Cost and Skilled Manpower provides competitive advantage to industry. Availability of large varieties of cotton fibre & has a fast growing synthetic fibre industry. India is one of the largest exporters of Yarn in international market & contributes around 25% share of the global trade in Cotton Yarn. The Apparel Industry is one of largest foreign revenue contributor & holds 12% of the countrys total export. Industry has Manufacturing Flexibility that helps to increase the productivity

WEAKNESSES:
Indian Textile Industry Fragmented Industry. is highly Industry is highly dependent on Cotton. Lower Productivity in various segments. There is Declining in Mill Segment. Lack of Technological Development that affect the productivity & other activities in whole value chain. Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and transportation Time. Unfavourable labour Laws. Lack of Trade Membership, which restrict to tap other potential market. Lacking to generate Economies of Scale. Higher Indirect Taxes, Power and Interest Rates.

OPPORTUNITIES:
Growth rate of Domestic Textile Industry is 6-8% per annum. Product development and Diversification to cater global needs. Elimination of Quota Restriction leads to greater Market Development. Market is gradually shifting towards Branded Readymade Garment. Increased Disposable Income & Purchasing Power of Indian Customer opens New Market Development. Emerging Retail Industry and Malls provide huge opportunities for the Apparel, Handicraft & other segments of the industry. Greater Investment & FDI opportunities are available. 14

THREATS:
Competition from other developing countries, especially China. Continuous Quality Improvement is need of the hour as there are different demand patterns all over the world. Elimination of Quota system will lead to fluctuations in Export Demand. Threat for Traditional Market for Power loom & Handloom Products & forcing them for product diversification. Geographical Disadvantages. International labour & Environmental Laws. To balance the demand & supply. To make balance between price & quality.

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.

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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 thumbsdown 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.

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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. The scheme 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.

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3Rs 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 RBIs 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).

3Rs FOR RECOVERY IN TEXTILE INDUSTRY

RECOVERY
USAs 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.

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22

COMPANYS 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.

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LOGO OF VARDHMN 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 vardhmn The V stands for the Vardhmn 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

COMPANYS 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.

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GROUP COMPANIES

Vardhman Holdings Limited (VHL) Year of Commencement Main Business Gross Turnover 07-08 Collaborations 1965 Investment & Financing

Vardhman Textiles Limited (VTEX) 1973 Yarn, Fabric, Sewing Thread, Steel Rs. 23.46 bn

Vardhman Acrylics Limited (VAL) 1999 Acrylic Staple Fibre Rs. 2.28 bn Exlan & Marubeni

NA NA

NA
Vardhman Threads Limited (VYTL)* 1994 Synthetic Threads Rs. 0.29 bn

Year of Commencement Main Business Gross Turnover 07-08 Collaborations

VMT Spinning Co. Limited (VMT) 1996 Cotton Yarn Rs. 0.89 bn Marubeni & Toho Rayon

NA

* 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

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 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- Vardhmn Acrylics Limited Current Capacity 18,000 mtpa Turnover for the FY ended 31st March 08 : Rs. 2.28 billion 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 Turnover for the FY ended 31st March 08 : Rs. 3.76 billion

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

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

31

 GROUP CAPACITIES
As On As On As On As On Unit of Mar Mar Mar Mar Measurement 1998 2000 2002 2006 As On As On Mar Mar 2008 2007

Particulars

32

Spinning Dyeing Mercerization Weaving Sewing Thread Acrylic Fibre Processed Fabric Steel

Spindles (Lakhs) Tpd Tpd Looms Tpd Tpa Mma Mtpa

3.86

4.00

4.96

5.12 55.00 6.75 432 25.00

5.88 55.00 8.00 460 30.00 18,000 42 80,400

7.47 55.00 8.50 810 33.00 18,000 82 80,400

25.50 34.50 52.00 1.70 144 5.00 160 6.75 208

15.50 18.50 18.50

16,500 16,500 16,500 16,500 NA 15 20 30

65,000 40,000 40,000 80,400

Vardhman Global Alliances

Fibre and Yarn Dyeing Gassed Mercerized Yarns Cotton Yarns Acrylic Fibre Fabric Dyeing & Finishing Sewing Threads Cotton Yarns Cotton Fabric NIHON SANMO, JAPAN KYUNG BANG, SOUTH KOREA 1992 1994

TOHO RAYON, JAPAN 1995 EXLAN AND MARUBENI CORP, 1996 JAPAN TOKAI SENKO, JAPAN 1998

AMERICAN & EFIRD (A&E) INC 2001 USA NISSHINBO, JAPAN 2002 NISSHINBO, JAPAN 2007

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

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34

 Group Financials for the FY ending 31st March 08

(Rs Billions)
Company VTEX VAL VM T VYTL* Vardhman Group Turnover 23.46 2.28 0.89 0.29 26.92 Operating Profit 3.87 0.32 0.17 0.08 4.44 Profit after Tax 1.22 0.05 0.09 0.06 1.42 Operating M argin 17% 14% 19% 27% 16% Net Worth 11.72 1.40 0.56 0.20 13.88 Return on Net Worth 10% 4% 15% 30% 20%

* 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

(Rs Billions)
Segments Yarn Sewing Thread Fabric Fibre Steel Unallocated Vardhman Group Turnover 12.99 3.39 4.51 2.28 3.75 N.A. 26.92 EBIDTA 2.80 0.51 0.52 0.32 0.40 (0.11) 4.44 Depn. 1.14 0.07 0.34 0.11 0.04 N.A. 1.70 EBIT 1.66 0.44 0.18 0.21 0.36 N.A. 2.85 Capital EBIDTA as % Employed * of Turnover 20.92 1.86 7.54 1.76 1.78 2.86 36.72 22% 15% 11% 14% 11% N.A. 16% EBIDTA as % of Cap. Employed 13% 27% 7% 18% 22% N.A. 12%

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

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PRIME CONSIDERATION OF BANKS

Some ratios of the Vardhmn 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 VARDHMN TEXTILE LIMITED
YEAR 2007-08 2006-07 2005-06 2004-05 2003-04 DEBT EQUITY RATIO 1.58 1.14 1.15 0.95 1.03

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 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 VARDHMN TEXTILE LTD.

YEAR 2007-08 2006-07 2005-06 2004-05 2003-04

INTEREST COVERAGE RATIO 8.20 10.10 9.20 5.50 4.14

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38

FINANCIAL INDICATORS OF VARDHMN GROUP (CRORES)

PARTICULARS Gross Sales Fob Value of Exp. Profit before Tax Cash Acc (PBT + Dep) Gross Block Net Block Capital Employed

GROUP 2006-07 2150.09 434.02 225.77 345.22 2108.66 1718.63 2911.39

GROUP GROUP GROUP GROUP 2005-06 1957.24 367.41 250.59 351.93 1856.33 1037.56 2156.04 2004-06 1931.37 413.07 159.67 256.67 1536.81 808.71 1645.80 2003-02
1155.57 276.90 82.35 139.12 791.77 435.73 1071.61

2002-03
906.06 235.91 58.30 109.47 774.94 466.29 971.91

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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 goal therefore 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.

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 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

Dealers 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.

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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 yarns and 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 Council 2003-04 Textile Export Promotion Council 2003-04 Textile Export Promotion Council 2002-03 Textile Export Promotion Council 1998-99 Textile Export Promotion Council 1997-98 Textile Export Promotion Council 1996-97 Textile Export Promotion Council 1996-97 Govt. of India Award 1994-5, 199596 Textile Export Promotion Council 1993-94 Textile Export Promotion Council 1993-94 Textile Export Promotion Council 1990-00

Gold trophy in EOU/EPZ for export of cotton yarn Bronze trophy in mill fabric exporter category Gold Trophy in EOU/EPZ for export of cotton yarn Silver Trophy Bronze Trophy Silver Trophy Silver Trophy 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 womens hostel ,numerous recreational activities sports programmes 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

Vardhmans 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.

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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 various fabric 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) Post Expansion 42 85-90

Spinning Business
Spindle Capacity Exiting Post Expansion 5,36,440 7,76,440

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

Technology partners
Fabric Dyeing and Finishing Fibre and Yarn Dyeing Gassed Merceized Yarns Cotton yarn Sewing thread Enterprise resource planning system Tokai Senko , Japan Nihon Sanmo, Japan Kyung Bang, South Korea Toho Rayon and Marubeni Corp, Japan American Efird. USA IBM

46

SWOT ANALYSIS

47

48

EXPANSION
Vardhmn 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 - Vardhmn Textiles Ltd (formerly known as Mahavir Spinning Mills Ltd) in order to take up an expansion of this size Existing Spinning (Lakhs Spindles) Weaving (Looms) Fabric Processing (MMPA) 7.47 810 82 Expansion ~1.03 ~90 0 Post Expansion ~8.50 ~900 ~82

49

50

MARKET PERFORMANCE
500 400 300 200 100 0
5 6 7 8 9 0 1 2 3 4 5 6 7 19 9 19 9 19 9 19 9 19 9 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 8

Vardhman Textiles Last price Market Cap (Rsmn) 52 Week High 52 Week Low P/E Ratio (Times)

Rs/share 106 6,120 201 90 5

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 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 was competitors analysis. This small tasks was to make us familiar with the company and ,its competitors.

COMPETITORS ANALYSIS AS ON 31-12-2007

53

C om petitors (R s .C rores ) Va rdhm a nT extiles AlokIndus tries ArvindMills Wels punIndia R a ja s tha nS pinning Na ha r Indus tria lE nterpris es Na ha rS pinningAndE xports Abhis hekIndus tries R a ja pa la y a m Va rdhm a nP olytex L oya lT extiles Ginni F ila m ents Ga ng otri T extiles Wins om eY a rnsL im ited P rim eT extilesL im ited Am bik aC otton P a ts pinIndia R a ym ondL im ited GT NT extiles H im a ts ing k aS eide S uper S pinningMillsL im ited JC TL im ited B om ba yR a yon F a s hionsL im ited Wins om eT extilesL im ited Ma lw aC otton Indus rtyAvera g e

P B D IT (A) (R s .C rores ) 293.21 286.00 240.21 143.37 81.29 144.35 142.80 141.54 43.11 43.67 43.72 24.88 21.82 19.29 10.05 34.75 13.58 163.08 10.75 62.51 50.57 39.24 65.36 20.36 37.74 8 7 .0 9

Gros sS a les(B ) (R s .C rores ) 1603.40 1245.03 1280.67 808.39 769.55 706.41 717.45 618.46 159.46 283.56 279.75 169.73 126.48 100.96 94.52 110.78 99.96 1019.79 88.56 160.69 311.60 425.84 344.52 114.20 319.72 4 7 8 .3 8

P B D ITa sa%of s a les(A/B ) % a g e 1 8 .2 9 % 2 2 .9 7 % 1 8 .7 6 % 1 7 .7 3 % 1 0 .5 6 % 2 0 .4 3 % 1 9 .9 0 % 2 2 .8 9 % 2 7 .0 3 % 1 5 .4 0 % 1 5 .6 3 % 1 4 .6 6 % 1 7 .2 5 % 1 9 .1 1 % 1 0 .6 3 % 3 1 .3 7 % 1 3 .5 9 % 1 5 .9 9 % 1 2 .1 4 % 3 8 .9 0 % 1 6 .2 3 % 9 .2 1 % 1 8 .9 7 % 1 7 .8 3 % 1 1 .8 0 % 1 8 .2 1 %

54

PBDIT AS A % OF SALES:
These are net profit margin is indicative of managements 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. Vardhmans 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 JCT Limited 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:

S H AR E EQUITY PR EFER E APPL IC NET S HAR E NCES H R E ATION WOR T DEB T/EQ DEB T(D) CAPITAL CAPITAL R ES ER VES MONEY H UITY 1724.27 3336.76 1934.31 1394.20 875.50 991.58 602.66 989.91 232.94 250.20 302.20 306.56 322.64 188.13 85.52 202.37 86.38 787.61 77.95 224.20 260.12 424.62 333.45 111.39 183.03 649.14 57.77 170.37 209.38 73.09 23.15 40.03 18.05 194.19 3.51 10.66 4.7 59.26 16.31 25.78 4.55 5.88 30.92 61.38 11.64 48.72 5.50 85.92 63.00 5.87 6.17 49.43 0.00 0.00 46.2 8 37.5 0 0 0 0 0 0 0 0 0 1.5 0 0 0 0 0 0.00 36.28 0.00 0.00 27.25 6.53 1034.26 854.07 1106.93 461.69 241.65 484.72 501.33 205.26 103.81 156.5 89.73 69.18 72.67 53.47 19.29 92.38 23.75 1294.78 33.29 552.39 120.67 48.42 420.01 31.72 59.64 325.26 0.00 0.00 0.00 0.00 1.88 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.80 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 12.63 0.00 0.00 0.64 1092.03 1024.44 1362.51 542.78 304.18 524.75 519.38 399.45 107.32 167.16 94.43 128.44 89.78 79.25 25.34 98.26 54.67 1356.16 44.93 601.11 126.17 170.62 495.64 37.59 93.06 381.86

Com petitors (R s. Crores) Vardhm anTextiles AlokIndustries ArvindMills WelspunIndia R ajasthanS pinning Nahar Industrial Enterprises Nahar S pinningAndExports AbhishekIndustries R ajapalayam Vardhm anPolytex L oyal Textiles Ginni Filam ents Gang otri Textiles Winsom e YarnsL im ited Prim e TextilesL im ited Am bikaCotton PatspinIndia R aym ondL im ited GTNTextiles H im atsing kaS eide S uper S pinningMillsL im ited JCTL im ited B om bayR ayonFashionsL im ited Winsom e TextilesL im ited MalwaCotton IndusrtyAverag e

3.26 1.42 2.57 2.88 1.89 1.16 2.48 2.17 1.50 3.20 2.39 3.59 2.37 3.37 2.06 1.58 0.58 1.73 0.37 2.06 2.49 0.67 2.96 1.97 1.70

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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. Vardhmans 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: -

Com petitors (R s . Crores) Va rdhm a nT extiles AlokIndustries ArvindMills WelspunIndia R a ja stha nS pinning Na ha r Indus tria lE nterprises Na ha rS pinningAndE xports AbhishekIndus tries R a ja pa la ya m Va rdhm a nPolytex L oya lT extiles Ginni F ila m ents Ga ng otri T extiles Winsom e Ya rnsL im ited Prim eT extilesL im ited Am bik aC otton Pa tspinIndia R a ym ondL im ited GT NT extiles H im a tsing k aS eide S uper S pinningMillsL im ited JCTL im ited B om ba yR a yonF a s hionsL im ited Winsom eT extilesL im ited Ma lwaCotton IndusrtyAvera g e

CUR R E NT AS S E T SL OANS C UR R E NT AND L IAB IL IT IE SAND AD VANCE S PR OVIS IONS CUR R E NTR AT IO 1664.29 1999.25 1625.1 714.83 393.02 828.96 620.63 426.14 118.74 231.48 186.8 146.52 84.81 139.83 77.09 160.86 65.58 843.81 55.98 388.89 249.22 225.27 427.84 61.24 277.41 4 8 0 .5 4 3 6 635.36 441.34 466.15 225.58 102.52 85.23 146.46 156.24 59.02 66.16 80.91 69.55 41.24 64.06 39.03 72.08 31.69 446.27 24.58 51.11 113.43 168.21 88.54 51.36 93.75 1 5 2 .7 9 4 8 2 .6 2 4 .5 3 3 .4 9 3 .1 7 3 .8 3 9 .7 3 4 .2 4 2 .7 3 2 .0 1 3 .5 0 2 .3 1 2 .1 1 2 .0 6 2 .1 8 1 .9 8 2 .2 3 2 .0 7 1 .8 9 2 .2 8 7 .6 1 2 .2 0 1 .3 4 4 .8 3 1 .1 9 2 .9 6 3 .1 5

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CURRENT RATIO is the measure of the companies short term solvency. It represents marginal safety for creditors. Vardhmans 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. Thats 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.

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FIXED ASSET COVERAGE RATIO

Com petitors (R s. C rores) Va rdhm a nT extiles AlokIndustries ArvindMills Wels punIndia R a ja s tha nS pinning Na ha r Indus tria lE nterpris es Na ha rS pinningAndE xports Abhis hekIndus tries R a ja pa la ya m Va rdhm a nP olytex L oya lT extiles Ginni F ila m ents Ga ng otri T extiles Wins om e Ya rnsL im ited Prim eT extilesL im ited Am bikaC otton Pa tspinIndia R a ym ondL im ited GT NT extiles H im a tsing k aS eide S uper S pinningMillsL im ited JC TL im ited B om ba yR a yonF a s hionsL im ited Wins om eT extilesL im ited Ma lw aC otton Indus rtyAvera g e

D E B T(D ) 1724.27 3336.76 1934.31 1394.20 875.50 991.58 602.66 989.91 232.94 250.20 302.20 306.56 322.64 188.13 85.52 202.37 86.38 787.61 77.95 224.20 260.12 424.62 333.45 111.39 183.03 649.14

CAPIT AL WOR K IN NE TB L OCK PR OGR E S S 1177.91 1,975.32 2,044.89 1,146.89 515.83 493.51 564.1 772.58 232.52 202.24 253.99 212.83 106.28 92.26 66.08 185.13 96.36 676.05 66.07 105.26 195.5 276.1 305.95 76.13 82.06 476.8736 540.72 608.48 71.45 134.29 324.79 172.11 83.78 301.12 1.98 14.03 35.24 134.37 234.67 99.34 0 26.71 10.8 85.69 4.82 250.76 28.96 183.85 48.06 62.97 0.36 138.374

F IX E D AS S E T S 1718.63 2,583.80 2,116.34 1,281.18 840.62 665.62 647.88 1,073.70 234.50 216.27 289.23 347.20 340.95 191.60 66.08 211.84 107.16 761.74 70.89 356.02 224.46 459.95 354.01 139.10 82.42 615.25

F ACR 1 .0 0 0 .7 7 1 .0 9 0 .9 2 0 .9 6 0 .6 7 1 .0 8 1 .0 8 1 .0 1 0 .8 6 0 .9 6 1 .1 3 1 .0 6 1 .0 2 0 .7 7 1 .0 5 1 .2 4 0 .9 7 0 .9 1 1 .5 9 0 .8 6 1 .0 8 1 .0 6 1 .2 5 0 .4 5 0 .9 5

FACR is a test that determines a companys ability to cover debt obligations with its assets after all liabilities has been satisfied.

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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. Vardhmans FACR is 1 and from all compititors highest is of Himantsingka seide 1.59 and lowest is of Malwa Cotton 0.45 So vardhmans FACR is satisfactory.

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WORKING CAPITAL TURNOVER RATIO:-

Com petitors (R s. Crores) Va rdhm a nT extiles AlokIndustries ArvindMills WelspunIndia R a ja stha nS pinning Na ha r Industria lE nterprises Na ha rS pinningAndE xports AbhishekIndus tries R a ja pa la ya m Va rdhm a nPolytex L oya lT extiles Ginni F ila m ents Ga ng otri T extiles Winsom e Ya rnsL im ited Prim eT extilesL im ited Am bik aCotton Pa tspinIndia R a ym ondL im ited GT NT extiles H im a ts ing k aS eide S uper S pinningMillsL im ited JCTL im ited B om ba yR a yonF a s hionsL im ited Winsom eT extilesL im ited Ma lwaCotton IndusrtyAvera g e

GrossS a les(B ) (R s. Crores ) 1603.40 1245.03 1280.67 808.39 769.55 706.41 717.45 618.46 159.46 283.56 279.75 169.73 126.48 100.96 94.52 110.78 99.96 1019.79 88.56 160.69 311.60 425.84 344.52 114.20 319.72 4 7 8 .3 8

C UR R E NT NE T AS S E T S WOR K ING L OANS CUR R E NT CAPIT AL AND L IAB IL IT IE SAND R AT IO AD VANCE S PR OVIS IONS 1664.29 1999.25 1625.1 714.83 393.02 828.96 620.63 426.14 118.74 231.48 186.8 146.52 84.81 139.83 77.09 160.86 65.58 843.81 55.98 388.89 249.22 225.27 427.84 61.24 277.41 4 8 0 .5 4 3 6 635.36 441.34 466.15 225.58 102.52 85.23 146.46 156.24 59.02 66.16 80.91 69.55 41.24 64.06 39.03 72.08 31.69 446.27 24.58 51.11 113.43 168.21 88.54 51.36 93.75 1 5 2 .7 9 4 8 1.56 0.80 1.11 1.65 2.65 0.95 1.51 2.29 2.67 1.72 2.64 2.21 2.90 1.33 2.48 1.25 2.95 2.57 2.82 0.48 2.29 7.46 1.02 11.56 1.74 1.46

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

Net Working Capital Ratio =

Cost of sales/Sales Net 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.

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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.

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 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.

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67

STRUCTURE OF THE SEWING THREAD BUSINESS

VARDHMN TEXTILE LIMITED (1973): Vardhmn 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.

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VARDHMAN THREADS LIMITED (1994) : Vardhmn 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.

VARDHMN YARNS & THREADS LIMITED: Vardhmn 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

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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.

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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 firms 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-tothree 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 companys 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.

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 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 firms 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.

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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 division of 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.

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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 following circumstances; 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.

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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 spinoff, 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.

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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.

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SCHEME OF ARRANGEMENT, REORGANIZATION AND DEMERGER AMONGST

Vardhman Textiles Limited (VTXL) Threads First plant was set up at the Spinning Mill in Hoshiarpur in 1981. The capacity in this facility enhanced to current levels of 19 TPD In 1999-2000, a sewing threads unit was established in Ludhiana which currently has a capacity of 6 TPD In 2003-2004 the business was further expanded with a unit at Perundurai in Tamil Nadu with a current capacity of 2.50 TPD Threads Business had Sales of over Rs 3288 Mn and EBITDA of Rs 626 Mn. (19.04% margin) in FY2006 constituting 16.8 % and 16.0% of Total Sales and EBITDA of VTXL

Vardhman Threads Limited (VTL) Established in 1994 as a JV between erstwhile Mahavir Spg Mills Ltd (MSML) and Barbour Campbell Group of Ireland as Barbour Vardhman Threads Private Limited Plant for manufacture of industrial synthetic threads set up at Baddi with installed capacity of 0.80 TPD which was increased to 1.90 TPD Products have specialised application for shoe and leather industries. In 2000, Vardhman Textiles (erstwhile MSML) bought out the entire stake of the JV partner, and renamed the company Vardhman Threads Limited Sales of over Rs 214 Mn and EBITDA of Rs 70 Mn (32.8% margin) in FY2006

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STRUCTURE OF THE SEWING THREADS BUSINESS

Unit Wise Distribution
Vardhman Textiles Limited Location Hoshiarpur , Punjab Ludhiana, Punjab Perundurai , Tamil Nadu Capacity 19.0 TPD 6.0 TPD 2.50 TPD % Sales 66.8 22.4 4.7 % EBITDA 55.2 32.5 2.2

Vardhman Threads Limited Location Baddi, Punjab Capacity 1.9 TPD % Sales 6.1% % EBITDA 10.1

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RESTRUCTURING PLANS EVALUATED

Transfer of threads business of Alternative 1 Vardhman Threads into Vardhman Textiles Transfer of threads business of Alternative 2 Vardhman Textiles into Vardhman Threads Transfer of both Vardhman Textiles Alternative 3 and Vardhman Threads into a new entity (NewCo)

EXECUTION PATH -- ALTERNATIVE 3

A) For Slump sale of thread business of VTXL to New Company

Section 293 (1)(a) Route

Companies Act Section 391-394 route: Court Approval

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

Companies Act

Section 391-394 route: Court Approval

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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.1 st 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 countrys 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/ManMade 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 the huge 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.

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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.

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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 preloom & 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 on funding 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;

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 Processing of fibres, yarns, fabrics, Garments, and made-ups; c) Jute industry. The Industrial Development Bank of India (IDBI), the Small Industries Development Bank of India (SIDBI), and the Industrial Finance Corporation of India Ltd. (IFCI) are the nodal agencies for the Non-SSI textile sector, SSI textile sector and Jute sector, respectively. However, in 2005, 13 additional nodal banks have also been appointed under TUFS for determining eligibility & releasing subsidy for cases financed by them.

GOVERNMENT ASSISTANCE
EARLIER 5% interest Re-imbursement for all sectors & additional 10% Capital Subsidy on specified Processing M/cs Or 15% Credit Linked Capital Subsidy for all SSI Units Or 20% Credit Linked Capital Subsidy for Power loom Preparatory & P/L Units 25% Capital Subsidy for Handloom Units MODIFIED 5% interest Re-imbursement for all sectors except Spg Sector for which it will be available @ 4% plus 10% Capital Subsidy for Specified M/cs of Processing, Garment & Tech. Textiles Or 15% Margin Money Subsidy for all SSI Units Or 20% Credit Linked Capital Subsidy for Powerloom Preparatory & P/L Units 25% Capital Subsidy for H/L

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

ELIGIBILITY UNDER TUFS

PARTICULARS PLANT & MACHINERY IMPORTED INDIGENOUS TOTAL P&M (A) 25% OF TOTAL P&M (1) Other Investments Eligible to the extent of 25% of (1) above : Land & Site Factory Building MFA Pre-operatives Expenses Margin Money TOTAL OTHER INVESTMENTS (2) Amount in lacs

100 50 150

37.5

10 30 35 5 10 90

Lower of (1) & (2) above (B) Concessional Funding in D. G. Set C R&D Equipment WTP ETP ESD ERP Contingency 5% Captive Power Plant not covered in (3) above Total Eligibilty under TUFS (A+B+C+D+E+F+G+H)

37.5

5 D E F G H 2 6 2 5 5

212.5

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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 PROJECT COST IN CRORE 198.00 LOAN AMOUNT 125.00 BANK NAME & SHARE ICICI BANK 155 CORPORATION BANK -15.00 STATE BANK OF INDIA(SBI)26.00 CORPORATION BANK -34.00 ALLAHABAD BANK -70.95 CORPORATION BANK 71.00 POST RESTRUCTURING VARDHMAN VARDHMAN YARNS & TEXTILE THREAD LTD.(VTXL) LTD.(VYTL) 91.00 34.00

70.07

41.00

32.00

9.00

41.55 172.07

28.49 141.95

20.49 105.00

8.00 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.

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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.

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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.

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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. Actual expenditure incurred was 51.39 crores. Units : o ST 1 (HOSHIARPUR) o DYEING UNIT (PERUNDRAI) o ANANT (MANDIDEEP) o ARIHANT (MALERKOTLA) 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. This loan was taken under expansion cum moderanisation scheme of 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

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amount eligible under tufs as per calculation on the basis of bifurcation of assets is eligible which is 32 crores.
LOAN - II

PROJECT 3 -- 41.55 CRORES

Appraised cost is 41.55 crore. The loan amount is 34 crores out of which only 28.49 crores was disbursed. Raised from corporation bank for the amount 34 crores. Actual expenditure incurred was 34.83 crores. Units : o o o o o MSML (HOSHIARPUR) ST 2 (LUDHIANA) ANANT (MANDIDEEP) ARIHANT (MALERKOTLA) 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. This loan was taken under expansion cum moderanisation scheme of 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.

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 On the other hand, out of loan of 20.49 crores which was in VTXL 24.98 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 20.49 crores.
LOAN - III

PROJECT 4 --172.07 CRORES

Appraised cost is 172.07 crore. 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 o o o o MSML (HOSHIARPUR) ST 3 (PERUNDRAI) GMYU (HOSHIARPUR) ARIHANT (MALERKOTLA) 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. This loan was taken under expansion cum moderanisation scheme of Vardhman group.

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 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 100.26 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 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

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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. LOAN PROJECT COST 1) 198.00 CRORE 2) 70.07 CRORE 3) 41.55 CRORE 4) 172.07 AMOUNT TO VYTL 34 CRORE 9 CRORE 8 CRORE 36.95 CRORE 34 CRORE 9 CRORE 8 CRORE 36.95 CRORE
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ACTUAL TOTAL ELIGIBILITY WORKED OUT 17.27 CRORE 6.75 CRORE 4.48 CRORE 33.52 CRORE

TRANSFERRED ELIGIBILITY

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.

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