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INSPIRED BY CHALLENGE

INSPIRED BY CHALLENGE ABHISHEK INDUSTRIES LIMITED 19th Annual Report 2008-9

ABHISHEK INDUSTRIES LIMITED

19th Annual Report 2008-9

CONTENTS

2

About Abhishek

3

Managing Director’s Message

4

Financial Highlights

6

Inspired by Challenge

14

Business Overview

18

Directors’ Profile

20

Directors’ Report

30

Management’s Discussion and Analysis

38

Corporate Sustainability Report

42

Corporate Governance Report

60

Standalone Financial Statements

89

Consolidated Financial Statements

“THE TRIDENT CREDO” In life as in business, change is the only constant. Keeping in mind the events of the last year, Trident Group has undertaken a corporate rebranding program with a simple philosophy – Inspired by challenge.

Three simple words, yet it has profound impact on our business and our lives.

Throughout history we have witnessed how the world has progressed when people challenged the status quo, questioned the conventional wisdom and overcame the challenges to create what never existed. This is the genesis of human progress.

What does this philosophy mean to the Trident Group? Everything.

For us it means constantly raising the bar and creating new benchmarks. For us it means newer ways to do business and overcome any challenge that comes in the way.

But then mere words won’t help. It is all about imbibing this credo in our day-to-day work. It’s about internalizing the belief in our lives.

As we experienced the global downturn of 2008-9, our motto is the need of the hour. To overcome all the challenges business throws at us.

Mahatma Gandhi said, “One needs to be slow to form convictions, but once formed they must be defended against the heaviest odds.”

AT ABHISHEK, INSPIRED BY CHALLENGE IS A CONVICTION.

but once formed they must be defended against the heaviest odds.” AT ABHISHEK, INSPIRED BY CHALLENGE

2

Abhishek Industries Limited

Abhishek Industries Limited

2 Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

ABOUT ABHISHEK

Directors’ Pro fi le Message ABOUT ABHISHEK OUR BUSINESS We deal in yarn, terry towels, paper

OUR BUSINESS

We deal in yarn, terry towels, paper and chemicals along with our energy segment which serves all the other divisions. Therefore we exist in the segments replete with opportunities and consistent in growth.Pro fi le Message ABOUT ABHISHEK OUR BUSINESS OUR CALLING CARD Flagship Company of the Trident

OUR CALLING CARD

Flagship Company of the Trident Groupopportunities and consistent in growth. OUR CALLING CARD Headquartered in Ludhiana Manufacturing facilities in

Headquartered in LudhianaOUR CALLING CARD Flagship Company of the Trident Group Manufacturing facilities in Barnala, Punjab and Budni,

Manufacturing facilities in Barnala, Punjab and Budni, Madhya PradeshCompany of the Trident Group Headquartered in Ludhiana Listed on the Bombay Stock Exchange (BSE) and

Listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE)facilities in Barnala, Punjab and Budni, Madhya Pradesh Company Identification Number (CIN) : L99999PB1990PLC010307

Company Identification Number (CIN) : L99999PB1990PLC010307Stock Exchange (BSE) and the National Stock Exchange (NSE) OUR RANKING World’s largest wheat straw based

OUR RANKING

World’s largest wheat straw based paper manufacturerNumber (CIN) : L99999PB1990PLC010307 OUR RANKING One of the world’s largest terry towel manufacturers One

One of the world’s largest terry towel manufacturersWorld’s largest wheat straw based paper manufacturer One of India’s largest yarn spinners. Recognised by the

One of India’s largest yarn spinners.One of the world’s largest terry towel manufacturers Recognised by the ICSI as the best Indian

Recognised by the ICSI as the best Indian Company for adopting corporate governance practicestowel manufacturers One of India’s largest yarn spinners. OUR VISION Inspired by challenge, we will add

OUR VISION Inspired by challenge, we will add value to life, and together prosper globally.

OUR VALUES To provide customer satisfaction, through teamwork, based on honesty and integrity, for continuous growth and development.

OUR CORPORATE PHILOSOPHY To continue growth by leading national and international standards and ethical means, in harmony with the environment, ensuring customer delight, stakeholders’ trust and social responsibility.

Birth of Abhishek

1990

No of employees Over 9200

Exports across

65 countries

Net Sales growth

33 percent over

the last year

Exports growth

32 percent over

the last year

Balance Sheet Size Rs 20,362.1 million as on March 31, 2009

Public shareholding 36.52 percent as on March 31, 2009

Foreign shareholding 6.32 percent as on March 31, 2009

3

3

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

MANAGING DIRECTOR’S MESSAGE

Financial Statements MANAGING DIRECTOR’S MESSAGE Dear Shareholders It’s always a pleasure to talk to you

Dear Shareholders

It’s always a pleasure to talk to you – our valued shareholder. At Abhishek Industries, we have grown through the years, by questioning existing paradigms and by challenging assumptions. In essence, through our unconventional wisdom, we have prospered at every stage and gained confidence to take on fresh challenges every day.

As you are aware, 2008-9 was a tumultuous period. While on one hand, we have witnessed global downturns, economic uncertainities and stagnation; on the other we have seen geopolitical shifts and newer challenges.

With our motto being Inspired by Challenge, we are transforming our experiences into wisdom and are honing our skills through learning. The challenges of the recent past have made us that much wiser

With our motto being Inspired by Challenge, we are transforming our experiences into wisdom and are honing our skills through learning

and as a consequence we are reworking and re- strategizing on our business premise - people, products, processes and geo locations.

We are indeed grateful for the faith and trust you have reposed on us and assure you that the coming year will mark a new era in creating global benchmarks and great economic value additions.

Wishing you a great year ahead!

Warm regards,

global benchmarks and great economic value additions. Wishing you a great year ahead! Warm regards, Rajinder

Rajinder Gupta

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Abhishek Industries Limited

4 Abhishek Industries Limited
4 Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

FINANCIAL HIGHLIGHTS

FINANCIAL PERFORMANCE

 

(Rs million)

Period ended

Mar 2005

Mar 2006

Mar 2007

Mar 2008

Mar 2009

No. of months

15

12

12

12

12

Gross Turnover

8296

8885

9860

12062

15456

Net Sales

7056

7436

8166

10487

13981

Exports

3300

4190

4352

5193

6862

Gross Profit (PBIDT)

1464

1588

1794

1818

2605

Net Profit after tax

426

568

409

400

(530)

Net Worth

3150

3585

3995

4452

4463

Fixed Assets (gross block)

8218

10074

12101

13273

21032

Current Assets (Net)

2422

2863

3372

2785

2365

Gross Turnover (Rs million)

15456 12062 9860 8885 8296 2004-5 2005-6 2006-7 2007-8 2008-9
15456
12062
9860
8885
8296
2004-5
2005-6
2006-7
2007-8
2008-9
9860 8885 8296 2004-5 2005-6 2006-7 2007-8 2008-9 2605 1794 1818 1588 1464 2004-5 2005-6 2006-7
2605 1794 1818 1588 1464 2004-5 2005-6 2006-7 2007-8 2008-9
2605
1794
1818
1588
1464
2004-5
2005-6
2006-7
2007-8
2008-9

Exports (Rs million)

6862 5193 4352 4190 3300 2004-5 2005-6 2006-7 2007-8 2008-9 Net Worth (Rs million) 4452
6862
5193
4352
4190
3300
2004-5
2005-6
2006-7
2007-8
2008-9
Net Worth (Rs million)
4452
4463
3995
3585
3150
2004-5
2005-6
2006-7
2007-8
2008-9
5

5

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

KEY FINANCIAL INDICATORS

Period ended

Mar 2005

Mar 2006

Mar 2007

Mar 2008

Mar 2009

No. of months

15

12

12

12

12

Gross Profit Margin (%)

21

21

22

17

19

Return on Net worth (%)

14

16

10

9

--

Export Sales/Net Sales (%)

47

56

53

50

49

Debt/equity

1.47

1.92

2.48

2.88

3.49

CEPS (Rs)

6.16

6.35

6.46

6.32

2.80

EPS (Rs)

2.19

2.93

2.11

2.06

(2.64)

Book Value/Share (Rs)

16.22

18.12

20.57

22.92

20.09

Turnover per share (Rs)

42.72

45.75

50.77

62.11

69.56

Fixed Assets (gross block) (Rs million)

21032 13273 12101 10074 8218 2004-5 2005-6 2006-7 2007-8 2008-9 Book Value/Share (Rs) 22.92 20.57
21032
13273
12101
10074
8218
2004-5
2005-6
2006-7
2007-8
2008-9
Book Value/Share (Rs)
22.92
20.57
20.09
18.12
16.22
2004-5
2005-6
2006-7
2007-8
2008-9

CEPS (Rs)

6.35 6.46 6.32 6.16 2004-5 2005-6 2006-7 2007-8 2008-9 Turnover per share (Rs) 69.56 62.11
6.35
6.46
6.32
6.16
2004-5
2005-6
2006-7
2007-8
2008-9
Turnover per share (Rs)
69.56
62.11
50.77
45.75
42.72
2004-5
2005-6
2006-7
2007-8
2008-9

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Abhishek Industries Limited

6 Abhishek Industries Limited
6 Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

Business Overview Directors’ Pro fi le Message Our paper business witnessed a significant expansion, with

Our paper business witnessed a significant expansion, with the commissioning of new machine of 1,25,000 tpa. We also added 82 looms in our terry towel business

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7

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

EXPANSION AMID ADVERSITY

Corporate robustness and resilience are defined not only the ability to maintain a continuum in operations during phases of economic slowdown, but actually to increase the level of engagement with the market.

We, at Abhishek have focused on enhancing internal strengths and transforming them into opportunities. Amid a climate of economic adversity, we continued investing in enhancing our capacities, and stabilizing capacities that went on stream at the beginning of the year. We analysed competencies, allocated resources and re-visited our strategies to ensure that these new capacities were not rendered idle.

The vivid reflection of our efforts has been the Budni plant in Madhya Pradesh. The first phase of the integrated plant was commissioned with 50,400 spindles becoming operational. The capacity at Budni is planned on special yarns like compact, Elli-Twist, core spun yarn and special cottons like Supima, Organic and Giza, which would help us differentiate our product in the market.

In the terry towel division , we added 82 looms as part of our terry towel expansion program and added newer and higher value added products like super fine zero twist, anti microbial towel, super absorbent towel, quick dry towel, organic slub towel to name a few. In addition, we also produced exclusive ranges for many premium private labels. On an expanded capacity, these value added

products will result in higher contributions, reflecting a forward-looking proactivity in production planning and product innovation.

Our paper business witnessed a significant expansion, with the commissioning of new machine of 1,25,000 tpa . This machine, together with a pulping capacity of 90,000 tpa has significantly enhanced our capacity to service paper demand in our market territories and has enabled us to move up in value chain. It is also the first agro-based paper manufacturer of India to use Elemental Chlorine Free (ECF) technology, considered to be the most environment friendly paper manufacturing process.

This expansion will allow Abhishek to emerge as an important player in the writing and printing segment. We launched our own brand Copier paper called ‘SPECTRA TM COPIER’ and ‘MY CHOICE’, which will help create a B-to-C brand.

Thus, we as Abhishek have endeavoured to give a pragmatic approach to the present downturn. By harnessing strengths and expanding, we have made ourselves an organization that is ready to face future challenges with aplomb.

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Abhishek Industries Limited

8 Abhishek Industries Limited
8 Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

Business Overview Directors’ Pro fi le Message The employees have been empowered to take decisions,

The employees have been empowered to take decisions, experiment thereby promoting entrepreneurial mindset

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9

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

FOSTERING INTERNAL STRENGTH

Economic adversity is often an imperative phenomenon, which brings with it related opportunity to sharpen efficiencies and build capabilities that operate at these enhanced levels. The future is subject to resources and how we use them. During periods traumatized by economic perils, it is the ability to weather abnormalities that determines sustainability.

To be resourceful enough to face a fairer and more promising business climate, we took care to become stronger in our people relations and thereby worked towards an overall tightening of our organizational people networks.

We promoted the flat organizational structure which facilitates decision-making. The employees have been empowered to take decisions, experiment thereby promoting entrepreneurial mindset. There is a fair flexibility in deciding the career paths with growing elements of cross functionality.

We remain committed to our philosophy of continued operational excellence. To that effect, the business excellence initiatives continued with satisfying operational results.

We continued our focus on ensuring a right-fit in each of our various functions, and recalibrated the internal structure to match competencies with business objectives at all levels.

And most importantly, we ensured that the team morale remained strong and that the motivation levels were even higher to ensure a prompt response to market conditions.

Being stronger therefore, is the product of active and healthy synergies. Be it the work environment, the remuneration structures or the zeal to recruit and retain the best talent, we have proactively etched a path that has bravely penetrated through the barren economic scene. Facing challenges through internal strengths is our simple mantra.

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Abhishek Industries Limited

10 Abhishek Industries Limited
10 Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

Business Overview Directors’ Pro fi le Message Operationally, the year witnessed nearly 70 per cent

Operationally, the year witnessed nearly 70 per cent improvement in PBDITA - 2,605.3 million from Rs 1,540.0 million in the previous year

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11

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

PRUDENCE TO PROFITABILITY

There is never a better time to revisit norms of prudence and control filters in an organisation than when the overall business climate is unfavourable. This allows the learnings to be applied to a higher base as and when the turnaround happens, ensuring higher value creation.

We, at Abhishek believe in a continuous process of optimizing potential. As we await fairer weather, we endeavour to alleviate the gloom by taking measures which accrue to protecting and safeguarding our hard earned successes.

During 2008-9, our functioning was impacted by a significant foreign exchange fluctuation. Operationally, the year witnessed nearly 70 percent improvement in PBDITA - 2,605.3 million from Rs 1,540.0 million in the previous year, on a 33 per cent turnover increase. However, the severe foreign exchange impact saw this positive operational surplus turn into a net loss of Rs 530.4 million.

In order that such unpredictability and unrelated skews don’t impact performance, we have invested in creating a completely new forex strategy with a

inbuilt derisking mechanism. This will protect our bottomline from unnatural currency fluctuations.

We believe we have insulated ourselves from any troughs in external factor that may potentially damage our bottomline. Internally, we also emphasized on leveraging our efficiencies for lower operating costs, and strengthened our collection mechanism to ensure that our balance sheet is always well capitalised and protected from unpredictable fluctuations in currency rates, and that our cash flow is positive.

Thus, being spirited enough to face a challenge as huge as a global slowdown, requires a good degree of prudent planning that accrues from experience and wisdom. The business of emerging as a competent player requires us to be financially viable and internally strong.

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Abhishek Industries Limited

12 Abhishek Industries Limited
12 Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

Business Overview Directors’ Pro fi le Message Our project of the second phase of expansion at
Business Overview Directors’ Pro fi le Message Our project of the second phase of expansion at

Our project of the second phase of expansion at Budni, to take the total number of spindles to 1,00, 800 involving a total capital outlay of Rs 3737 million is on track

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13

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

INVESTING FOR A BETTER FUTURE

Adversity often impacts not only current productive ability but also has a destabilizing effect on plans for the future. However, a philosophy based on the principle of continuous investment often serves as a security against future downturns. It is also the clearest sign of organisational resilience.

For Abhishek, a year of economic instability and economic downturn is seen as an aberration, and not as a continuing reality. This inspires us maintain the momentum of capacity and productivity enhancement, based on a well considered business plan.

Our strategy is based on a long-term view of the market opportunities, and our plans are aligned towards extracting maximum leverage from them. Therefore, our expansion plans across each of our business lines continued uninterrupted, even in a difficult year, reflecting our ability to rise above challenges and the sanctity of our own forward planning.

Our project of the second phase of expansion at Budni, to take the total number of spindles to 1,00,800 involving a total capital outlay of Rs 3737 million is on track.

Similarly, in our terry towel division, we have undertaken to upgrade the existing 18 looms

and set up 24 new looms. This investment of almost Rs 360 million will be operationalised by the second quarter of 2009-10, allowing us to approach emerging demand with a larger portfolio and greater ability to service it.

In our paper division too, we have undertaken a debottlenecking and process streamlining project with a capital outlay of Rs 400 million, which will ensure that we derive maximum value from the recent addition of a new production line.

Thus, this culture of following our viable vision and adopted strategy is the harbinger of good tidings. In order to keep the wheel of progress rolling, we have constantly invested on new projects and product innovations to broaden our product base and enter newer markets and acquire newer customers.

Thus, market challenges have inspired us to continue undeterred on the path of investing in creating an organisation relevant in the future.

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Abhishek Industries Limited

14 Abhishek Industries Limited
14 Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

BUSINESS OVERVIEW

Directors’ Pro fi le Message BUSINESS OVERVIEW YARN PRODUCT BASKET 100 percent cotton yarn with count

YARN

PRODUCT BASKET

100 percent cotton yarn with count range of Ne 13 to Ne 32 in carded yarns and Ne 12 to Ne 40 in Ne 13 to Ne 32 in carded yarns and Ne 12 to Ne 40 in combed yarns

Single and TFO doubledto Ne 32 in carded yarns and Ne 12 to Ne 40 in combed yarns Hosiery

Hosiery and weaving (combed and carded)and Ne 12 to Ne 40 in combed yarns Single and TFO doubled Open end yarn

Open end yarn for weaving & hosieryand TFO doubled Hosiery and weaving (combed and carded) Slub yarn/multi counts/compact yarn Core spun yarns

Slub yarn/multi counts/compact yarn(combed and carded) Open end yarn for weaving & hosiery Core spun yarns Elli twist yarns

Core spun yarnsweaving & hosiery Slub yarn/multi counts/compact yarn Elli twist yarns Yarn from imported premium cotton varieties

Elli twist yarnshosiery Slub yarn/multi counts/compact yarn Core spun yarns Yarn from imported premium cotton varieties like supima

Yarn from imported premium cotton varieties like supima & egyptiancounts/compact yarn Core spun yarns Elli twist yarns Zero twist yarns Poly cotton blended yarn Cotton

Zero twist yarnsimported premium cotton varieties like supima & egyptian Poly cotton blended yarn Cotton bamboo, cotton modal,

Poly cotton blended yarncotton varieties like supima & egyptian Zero twist yarns Cotton bamboo, cotton modal, cotton soya and

Cotton bamboo, cotton modal, cotton soya and other blends& egyptian Zero twist yarns Poly cotton blended yarn Certified organic cotton Certified fair trade cotton

Certified organic cottonCotton bamboo, cotton modal, cotton soya and other blends Certified fair trade cotton KEY FEATURES Consumed

Certified fair trade cottonmodal, cotton soya and other blends Certified organic cotton KEY FEATURES Consumed captively and also marketed

KEY FEATURES

Consumed captively and also marketed within India and exportedorganic cotton Certified fair trade cotton KEY FEATURES Five units housing 1,76,352 spindles and 1920 rotors

Five units housing 1,76,352 spindles and 1920 rotorscaptively and also marketed within India and exported Manufacturing value-added products like yarn from organic

Manufacturing value-added products like yarn from organic yarns, fair trade cotton yarns, egyptian/supima cotton yarns, zero twist yarns, slub yarns, cotton bamboo yarns, cotton modal & core spun yarn etcFive units housing 1,76,352 spindles and 1920 rotors combed and carded as Varied counts- mentioned above

combed and carded as

cotton modal & core spun yarn etc combed and carded as Varied counts- mentioned above Focused

Varied

counts-

mentioned above

Focused efforts on value added productsyarn etc combed and carded as Varied counts- mentioned above Exports to 17 nations across the

Exports to 17 nations across the globementioned above Focused efforts on value added products Geographical diversification with expansion of spinning

Geographical diversification with expansion of spinning capacity at Budni, Madhya Pradesh by installing 50,400 spindles in first phase and another 50,400 spindles are being installed in second phasevalue added products Exports to 17 nations across the globe The expanded capacity in Budni would

The expanded capacity in Budni would focus on special yarns like compact, elli-twist, corepsun yarn and special cottons like supima, organic and giza etcanother 50,400 spindles are being installed in second phase REVENUE MIX 10% 22% 68% Captive consumption

REVENUE MIX 10% 22% 68%
REVENUE MIX
10%
22%
68%

Captive consumption : 22%like supima, organic and giza etc REVENUE MIX 10% 22% 68% Domestic sales : 68% Exports

Domestic sales : 68%etc REVENUE MIX 10% 22% 68% Captive consumption : 22% Exports : 10% KEY NUMBERS  

Exports : 10%10% 22% 68% Captive consumption : 22% Domestic sales : 68% KEY NUMBERS   2007-8 2008-9

KEY NUMBERS

 

2007-8

2008-9

Capacity

   

Cotton spindles

125952

125952

Rotors

1920

1920

Production (tonnes)

42244

40072

Revenue (Rs Million)*

4382.3

4608.4

PBIT (Rs Million)

334.6

58.4

*includes inter-segment sales

CAPITAL EXPENDITURE The Company is setting up 1,00,800 spindles at Budni, Madhya Pradesh which involves a total capital outlay of Rs 3,737 million. This project is being implemented in phased manner. The first phase of expansion consisting of 50,400 spindles has been completed in April 2009 and the second phase is scheduled to be fully operational during the third quarter of financial year 2009-10.

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15

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

BUSINESS OVERVIEW

Statements Financial Statements BUSINESS OVERVIEW TERRY TOWEL PRODUCT BASKET Terry towel and toweling products

TERRY TOWEL

PRODUCT BASKET

Terry towel and toweling productsStatements BUSINESS OVERVIEW TERRY TOWEL PRODUCT BASKET Piece-dyed dobbies, yarn-dyed ,single and double jacquards,

Piece-dyed dobbies, yarn-dyed ,single and double jacquards, unidyed jacquards, yarn- dyed stripes, terry and velour finish, beach towels, bath sheets, bath towels, hand towels, guest towels, face fringes, bath mats, kitchen towels and made ups like bath robes and beach bags

KEY FEATURES

Integrated unit housing 350 loomsand made ups like bath robes and beach bags KEY FEATURES Combination of state of the

Combination of state of the art technology, know how from the worlds leading suppliers and vertically integrated manufacturing infrastructurebeach bags KEY FEATURES Integrated unit housing 350 looms Exports to 37 nations across the globe.

Exports to 37 nations across the globe. Products mainly exported to highly quality conscious & cost competitive marketsand vertically integrated manufacturing infrastructure Supplying to most of World’s reputed retail chain stores

Supplying to most of World’s reputed retail chain stores across the globeto highly quality conscious & cost competitive markets Increasing footprint in domestic market - single largest

Increasing footprint in domestic market - single largest supplier of towels to the five- star hotels and resorts. Aggressively focusing to enhance the reach to mass market through distributors and agents. Catering to major retail chains in Indiaof World’s reputed retail chain stores across the globe Implementing viable vision concept in the business

Implementing viable vision concept in the business based on TOC methodologyand agents. Catering to major retail chains in India Quality control laboratory complying with the AATCC

Quality control laboratory complying with the AATCC and ISO standardsvision concept in the business based on TOC methodology Production facility complying with CT-PAT requirement for

Production facility complying with CT-PAT requirement for overseas customerslaboratory complying with the AATCC and ISO standards Conferred the “2006 Supplier of the Year” award

Conferred the “2006 Supplier of the Year” award by JC Penney Corporation. Recipient of “Wal*Mart International Supplier of the Year” award for 4 timescomplying with CT-PAT requirement for overseas customers More focus on innovative and value added products; and

More focus on innovative and value added products; and enhancing market baseInternational Supplier of the Year” award for 4 times Addition of new products like super fine

Addition of new products like super fine zero twist, anti microbial towel, super absorbant towel, quick dry towel , organic slub towel, etc during the yearand value added products; and enhancing market base REVENUE MIX 8% 92% Export : 92% Domestic

REVENUE MIX 8% 92%
REVENUE MIX
8%
92%

Export : 92%organic slub towel, etc during the year REVENUE MIX 8% 92% Domestic : 8% KEY NUMBERS

Domestic : 8%towel, etc during the year REVENUE MIX 8% 92% Export : 92% KEY NUMBERS   2007-8

KEY NUMBERS

 

2007-8

2008-9

Capacity

   

Looms

282

350

Processed yarn (tonnes)

6825

6825

Production

   

Towel (tonnes)

24616

28311

Processed yarn (tonnes)

5024

5236

Revenue (Rs Million)*

6091.0

7587.5

PBIT (Rs Million)

579.0

(95.3)

*includes inter-segment sales

CAPITAL EXPENDITURE The Company has undertaken another expansion project of its terry towel division under which Company is upgrading its existing 18 looms and 24 new looms are being set up. This project is being implemented in textile park developed by Lotus Integrated Texpark Limited, a special purpose vehicle, with a capital outlay of Rs 359.8 million and shall be completed by second quarter of financial year 2009-10.

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Abhishek Industries Limited

16 Abhishek Industries Limited
16 Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

BUSINESS OVERVIEW

Directors’ Pro fi le Message BUSINESS OVERVIEW PAPER & CHEMICALS PRODUCT BASKET Main Products Writing

PAPER & CHEMICALS

PRODUCT BASKET Main Products

Writing and printing paper gradesOVERVIEW PAPER & CHEMICALS PRODUCT BASKET Main Products Branded copier paper ‘SPECTRA T M copier’ (75

Branded copier paper ‘SPECTRA T M copier’ (75 GSM, 88% ISO brightness) TM copier’ (75 GSM, 88% ISO brightness)

Branded copier paper ‘My Choice’ copier (70 GSM, 87% ISO brightness)‘SPECTRA T M copier’ (75 GSM, 88% ISO brightness) Surface size maplitho paper gold line (90%

Surface size maplitho paper gold line (90% ISO brightness), silverline (88% ISO brightness), crystalline (86% ISO brightness)paper ‘My Choice’ copier (70 GSM, 87% ISO brightness) Super white maplitho Ivory white Eco print

Super white maplitho(88% ISO brightness), crystalline (86% ISO brightness) Ivory white Eco print Bible printing Offset printing Cream

Ivory whitecrystalline (86% ISO brightness) Super white maplitho Eco print Bible printing Offset printing Cream wove Deluxe

Eco print(86% ISO brightness) Super white maplitho Ivory white Bible printing Offset printing Cream wove Deluxe super

Bible printingISO brightness) Super white maplitho Ivory white Eco print Offset printing Cream wove Deluxe super print

Offset printingSuper white maplitho Ivory white Eco print Bible printing Cream wove Deluxe super print Trident base

Cream woveIvory white Eco print Bible printing Offset printing Deluxe super print Trident base paper Watermark paper

Deluxe super printwhite Eco print Bible printing Offset printing Cream wove Trident base paper Watermark paper Sulphuric acid

Bible printing Offset printing Cream wove Deluxe super print Trident base paper Watermark paper Sulphuric acid

Trident base paper

Watermark paperprinting Cream wove Deluxe super print Trident base paper Sulphuric acid Environment friendly manufacturer of a

Sulphuric acid

Environment friendly manufacturer of a variety of papers. Among India’s lowest-cost paper producers, using agro residue as raw materialprint Trident base paper Watermark paper Sulphuric acid Launched ‘SPECTRA T M copier’ brand and My

Launched ‘SPECTRA T M copier’ brand and My Choice copier in copier segment. Presence in the A- TM copier’ brand and My Choice copier in copier segment. Presence in the A- grade segment of India’s paper market, with vast customer base across India & abroad

Plans to move up the value-chain by producingmarket, with vast customer base across India & abroad computerline, natureline and baseline maplitho

computerline,

natureline

and

baseline

maplitho

First agro based paper manufacturer in India to adopt Elemental Chlorine Free (ECF) technologycomputerline, natureline and baseline maplitho Exports to 22 nations across the globe Sulphuric acid Having

Exports to 22 nations across the globein India to adopt Elemental Chlorine Free (ECF) technology Sulphuric acid Having sulphuric acid manufacturing capacity

Sulphuric acid

Having sulphuric acid manufacturing capacity of 1,00,000 tpaExports to 22 nations across the globe Sulphuric acid Commercial grade One of the north India’s

Commercial grade One of the north India’s largest manufacturer

Commercial grade

One of the north India’s largest manufacturerCommercial grade

Battery grade of sulphuric acid

Battery grade

of sulphuric acid

By Products

Caustic sodaBattery grade of sulphuric acid By Products KEY FEATURES Paper Integrated paper & pulp plants

KEY FEATURES Paper

Integrated paper & pulp plants having total capacity of paper manufacturing of 1,75,000 tpa and pulping facility of 1,25,000 tpasulphuric acid By Products Caustic soda KEY FEATURES Paper the detergent manufacturers, steel units, textile factories

the detergent

manufacturers, steel units, textile factories among others

Plan to add more products of sulphuric acid viz. LR grade & AR grade into product basketmanufacturers, steel units, textile factories among others Consumers include Close to 75 per cent is sold

Consumers includeacid viz. LR grade & AR grade into product basket Close to 75 per cent is

Close to 75 per cent is sold within Punjab, the balance is marketed to the adjoining statesgrade & AR grade into product basket Consumers include REVENUE MIX 6% 94% Export : 6%

REVENUE MIX 6% 94%
REVENUE MIX
6%
94%

Export : 6%is marketed to the adjoining states REVENUE MIX 6% 94% Domestic : 94% KEY NUMBERS  

Domestic : 94%to the adjoining states REVENUE MIX 6% 94% Export : 6% KEY NUMBERS   2007-8 2008-9

KEY NUMBERS

 

2007-8

2008-9

Capacity

   

Paper (tpa)

40500

175000

Sulphuric acid (tpa)

100000

100000

Production

   

Paper (tonnes)

40832

67302

Sulphuric acid (tonnes)

68437

60968

Revenue (Rs Million)*

1758.9

3046.9

PBIT (Rs Million)

222.0

326.3

*includes inter-segment sales

CAPITAL EXPENDITURE

The Company has undertaken a debottlenecking and process-streamlining project with a capital outlay of

Rs 400 million. Major areas of development would be finishing house, lime kiln and pulping section.

17

17

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

BUSINESS OVERVIEW

Statements Financial Statements BUSINESS OVERVIEW ENERGY KEY FEATURES Having facilities for 50 MW power

ENERGY

KEY FEATURES

Having facilities for 50 MW power generationFinancial Statements BUSINESS OVERVIEW ENERGY KEY FEATURES and 338 tph of steam Operates a co-generation power

and 338 tph of steam

Operates a co-generation power plant thatfacilities for 50 MW power generation and 338 tph of steam caters to the power and

caters to the power and steam requirement

of yarn, terry towel and paper divisions

Ensures uninterrupted power supply to allsteam requirement of yarn, terry towel and paper divisions business units of the Company and helps

business units of the Company and helps in

cost reduction

Equipped with latest technology and multibusiness units of the Company and helps in cost reduction fuel boilers India’s first organization to

fuel boilers

India’s first organization to adopt fuzzy logicEquipped with latest technology and multi fuel boilers for burner management in lime klin REVENUE MIX

for burner management in lime klin

REVENUE MIX 100%
REVENUE MIX
100%

Captive

consumption : 100%

KEY NUMBERS

 

2007-8

2008-9

Power capacity (MW)

50

50

Power generation (Mwh)

152951

274521

Consumption per unit of production (Kwh/kg)

   

Cotton yarn

2.43

2.38

Towel

2.49

2.51

Yarn processing

2.23

2.54

Paper

1.34

0.89

Sulphuric acid

0.07

0.07

18

Abhishek Industries Limited

18 Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

DIRECTORS’ PROFILE

Directors’ Pro fi le Message DIRECTORS’ PROFILE MR RAJINDER GUPTA (DIN 00009037) Mr Rajinder Gupta, aged

MR RAJINDER GUPTA (DIN 00009037) Mr Rajinder Gupta, aged 50 years, is the founder of Abhishek Industries Limited and has been serving the Company as Managing Director since 1992. Mr Gupta is a first generation entrepreneur having rich & varied exposure of promoting industrial ventures over the last two decades. He is the person behind the stupendous growth of the Trident Group Companies. He holds directorship of various companies and is also actively associated with several philanthropic ventures.

Mr Rajinder Gupta has been awarded with the prestigious “Padmashree” award 2007 by Hon’ble President of India in recognition of his distinguished services in the field of trade and industry.

Mr Rajinder Gupta was also conferred with the Udyog Ratna award for the year 2005 by PHD Chamber of Commerce and Industry and PHD Chamber of Commerce Distinguished Entrepreneurship Award, 2005 by the President of India.

MR S K TUTEJA (DIN 00594076) Sh S K Tuteja, aged 64 years, is retired IAS Officer of 1968 batch. He holds a Masters degree in Commerce from Delhi University and is a Fellow member of the Institute of Company Secretaries of India. He served the government in several key positions at the state and national level and was secretary to the Government of India in the Department of Food & Public Distribution at the

time of retirement. He has been a consultant to the World Bank and UNIDO.

Mr Tuteja has rich & varied experience of 41 years.

He is also a member of the executive committee of the International Sugar Organisation and the International Grain Council, London. He has contributed to a number of national and international events in India & abroad concerning SMEs. He was a member of Indian delegation in

the ministerial conference of WTO at Doha.

MS PALLAVI SHROFF

(DIN 00013580) Ms Pallavi Shroff, aged 53 years, is MMS, Bachelor of law and is lawyer by profession. She has

a vast experience of 27 years as a leading

litigation practitioner in the area of corporate law and banking. She has been recognized by

international publications for her leading practice

in

arbitration and dispute resolution. As a member

of

several high powered committees, appointed

by

the Government of India, she has been closely

associated with the formulation of several important commercial statutes.

Ms Pallavi is presently a partner of M/s Amarchand

& Mangaldas & Suresh A Shroff & Co., leading

legal firm of India. She is regularly called upon by the Government departments and ministries to advice them on various issues. Ms Pallavi’s area of expertise inter alia include corporate and commercial laws, anti dumping, arbitration and dispute resolution, competition and anti-trust, intellectual property rights, etc.

19

19

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

MS RAMNI NIRULA (DIN 00015330) Ms Ramni Nirula, aged 57 years, is Senior General Manager and Head of Corporate Banking of ICICI Bank Limited. She holds a Masters in Business Administration from Delhi University.

Ms Nirula has more than three decades of experience in the financial sector. She is a part of the senior management team at ICICI Bank and has played an active role in its transformation from a term-lending institution to a technology- led, diversified financial services group. She has previously served as the MD and CEO of ICICI Securities Ltd. and has held leadership position in the areas of leasing, planning, resources and corporate banking.

MR RAJIV DEWAN (DIN 00007988) Mr Rajiv Dewan, aged 47 years, is a Fellow member of the Institute of Chartered Accountants of India and is a practising Chartered Accountant.

Mr Dewan possesses a rich and varied experience in tax planning, management consultancy, business restructuring, capital market operations, SEBI related matters and other corporate laws. Prior to starting his own practice, Mr Dewan worked in senior positions in some of the renowned textile companies of north India.

MR KARAN AVTAR SINGH (DIN 01685074) Mr Karan Avtar Singh, aged 48 years, is a B.A, L.L.B, Ph.D (Economics) by qualification and is an IAS officer and Managing director of PSIDC.

He joined Indian Administrative Services in the year 1984 and since then he has been diligently serving the Government at higher posts.

He has experience in handling various administrative profiles as well as providing corporate services at Board levels. He holds the positions of Chairman, Managing director and Director in various Companies. Apart from holding the above stated corporate positions he has also worked as Deputy Commissioner, Jalandhar, Finance Secretary, Union Territory, Chandigarh, Managing Director, Punjab Infrastructure Development Board and Secretary to Govt. of Punjab, Development of P.W.D (B&R).

MR RAMAN KUMAR (DIN 00028180) Mr Raman Kumar, aged 57 years, is Masters in Economics and Post Graduate in Business Management. He has also worked with government sector in various capacities and is presently on the Board of number of Companies. He has rich and varied experience in administration, liaisoning, legal and corporate affairs. Mr Raman Kumar has been associated with the Group since its inception and was in charge of trust which takes care of social security and other welfare measures of employees of the Group.

Mr Raman Kumar can be briefly characterized as a person with a vast working experience having an in depth legal knowledge and a good legal acumen, blended with sharp liaisoning skills and a result-oriented attitude.

20

Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

DIRECTORS’ REPORT

Dear Shareholders

Your Directors are pleased to present the 19th annual report and audited accounts of the Company for the year ended March 31, 2009.

FINANCIAL RESULTS The financial performance of your Company for the year ended March 31, 2009 is summarised below:

 

(Rs million)

Particulars

Current Year

Previous Year

a) Net sales

13980.6

10486.7

b) PBIDT

2605.3

1540.0

c)

Less : Interest

833.2

473.2

d) PBDT

1772.1

1066.8

e) Less : Depreciation

1159.3

863.8

f) Profit before tax

612.8

203.0

g) Less: Foreign exchange gain/(loss)

(1440.7)

278.1

h) Profit/(loss) before tax after extraordinary item

(827.9)

481.1

i) Less : Provision for tax

(297.5)

81.6

j) Net Profit /(loss)

(530.4)

399.5

k) Add : Profit brought forward

2146.7

1756.8

l) Amount carried to balance sheet

1616.3

2146.7

m) Earning per share (Rs)

(2.64)

2.06

CORPORATE OVERVIEW The Company operates in diversified business segments viz. yarn, terry towel, paper and chemical and has captive power plant to cater to needs of it’s business segments. As on March 31, 2009, the Company is having following manufacturing capacities installed & operational:

Textile

Yarn

1,76,352 spindles

Yarn processing

6,825 tpa

Open end yarn

1,920 rotors

Terry towels

350

looms

Paper & Chemicals

Writing & printing paper

1,75,000 tpa

Sulphuric acid

1,00,000 tpa

Caustic soda

110

tpd

Energy

Co-generation of power

50 MW

Steam

338

tph

RESULTS OF OPERATIONS Financial review The net sales of the Company for the year under review increased to Rs 13,980.6 million

as compared to Rs 10,486.7 million in the previous financial year, registering a growth of 33.32 percent. The Operating profit for the year has increased by Rs 1,065.3 million in absolute terms, a growth of approximately 70 percent as compared to last year and accordingly the gross profit margin has increased by approximately 4 percent. During the year under review, Company has incurred a net loss of Rs 530.4 million due to volatility in foreign exchange resulting into foreign exchange loss; and higher amount of depreciation and interest attributable to expansion projects of the Company.

The Company had negative earning per share of Rs (2.64) and cash earning per share was Rs 2.80 during the current year. Total paid up capital of your Company has increased from Rs 1,941.9 million to Rs 2,221.9 million.

During the year under review, your Company has allotted 2,80,00,000 equity shares pursuant to conversion of warrants issued on preferential basis. More details on issued equity shares are provided elsewhere in this annual report.

Analysis of other relevant figures of balance

21
21

21

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

Directors’ Report (Contd.)

sheet and profit and loss account is given in “management discussion and analysis report” forming part of annual report.

Performance Review

A detailed discussion on performance of

operations of the Company is given elsewhere in

this annual report under “management discussion

& analysis report”.

DIVIDEND Keeping in view the loss incurred during the year, ongoing expansion, modernization and other future investment possibilities in order to meet competition, your directors have decided not to recommend any dividend for the year under review.

CONTRIBUTION TO THE NATIONAL EXCHEQUER The Company contributed a sum of Rs 249.3 million to the exchequer by way of central excise duty in addition to other direct and indirect taxes during the year under review.

EXPORTS Export sales accounted for 49 percent of net sales. During the year under review, export sales increased by 32 percent from Rs 5,192.8 million in the previous year to Rs 6,861.5 million in the current year.

EXPANSIONS/MODERNISATION Directors of the Company takes pleasure in informing you that during the year under review, Company has stabilized the operations and started commercial production on newly installed state-of-the-art pulp and paper machines after completing, balancing and synchronization activities. This integrated pulp and paper expansion project of the Company involved a

capital outlay of Rs 8,250 million. The Company is further incurring a capital expenditure of Rs 400 million for de-bottlenecking of paper project as to enhance production level and quality of final products. After this expansion, your Company has emerged as World’s largest agro straw based paper Company with a production capacity of 1,75,000

tpa of both printing & writing paper using wheat

straw as the main raw material, which saves about 5,000 trees a day. This project has enabled your Company to penetrate into value added paper segment and your Company has launched two branded copier paper products – ‘Spectra’ and ‘My Choice’ during the year under review.

As reported in our last year report, the Company has established its first manufacturing venture outside the State of Punjab by completing first phase of yarn expansion project consisting of 50,400 spindles installed in Budni, Madhya Pradesh. The commercial production on these spindles was started during the month of April, 2009. This project entails setting up of 1,00,800 spindles at a total capital outlay of Rs 3,737 million in two phases. The Company has laid foundation stone and started civil works for the second phase consisting of another 50,400 spindles which shall be operational by third quarter of financial year

2009-10.

During the year under review, your Company also completed terry towel expansion plan by installing 82 looms. Out of this, 14 looms had already become operational during the financial year 2007-8. The Company has commenced commercial production on remaining looms during the third quarter of financial year 2008-9. This project, which involved setting of 82 looms and balancing cum modernisation of textile manufacturing facilities, was fully completed with a capital investment of Rs 2,130 million. Further, the Company has undertaken another expansion project of its terry towel division under which Company is upgrading its existing 18 looms and 24 new looms are being set up. This project is being implemented with a capital outlay of Rs 359.8 million and is being set up in textile park developed by Lotus Integrated Texpark Limited, a special purpose vehicle, and shall be completed by second quarter of financial year 2009-10.

SUBSIDIARIES As on the last day of financial year under review, Company had two foreign subsidiaries, i.e. Abhishek Industries Inc, a wholly owned subsidiary situated at USA and Abhishek Europe SA, a subsidiary in Neuchatel; apart from one Indian wholly owned subsidiary Abhishek Global Ventures Limited.

The completion of Integrated paper and pulp project has enabled your Company to penetrate into value added paper segment

The completion of Integrated paper and pulp project has enabled your Company to penetrate into value

22

Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

Directors’ Report (Contd.)

Your Company proactively works towards strengthening relationship with constituent of system through corporate fairness, transparency and accountability

through corporate fairness, transparency and accountability However, the Company has disinvested its entire holding in

However, the Company has disinvested its entire holding in Abhishek Europe SA, Neuchatel

by way of transferring 1,000 equity shares on May 18, 2009 and consequent to this transfer, the Abhishek Europe SA ceased to be a Subsidiary Company of Abhishek Industries Limited and the Company does not hold any voting right/control

in Abhishek Europe SA from the aforesaid date of

disinvestment.

The Ministry of Corporate Affairs, Government of India, vide its letter no. 47/251/2009-CL-3 dated May 8, 2009 has granted exemption to the Company from attaching balance sheet, profit

& loss accounts, etc of the aforesaid subsidiary

companies to the accounts of the Company for the financial year 2008-9. The Annual accounts of the subsidiary companies alongwith the reports of the Directors and Auditors thereon and all related detailed information are open for inspection by any investor including investor of subsidiary companies at the head office of the Company and of the subsidiary companies concerned. The Company will make available these documents to investors including investors of subsidiary companies upon receipt of request

from them. The investors, if they desire, may write

to

the Company to obtain a copy of the financials

of

the subsidiary companies.

A

statement giving information on the financials

of subsidiaries for the year ended March 31, 2009 and the consolidated financial statements prepared by the Company in accordance with Accounting Standard are given in the annual report for the reference of the members.

DIRECTORS During the year under review, Mr Anurag Verma ceased to be a director of the Company consequent to withdrawal of his nomination by PSIDC. Mr Karan Avtar Singh was appointed as an additional director by the Board and holds office upto the ensuing annual general meeting.

Further, in accordance with the provisions of Articles of Association of the Company, all the

directors, for the time being, except the Managing directors and Whole time director, shall retire annually and accordingly Mr S.K. Tuteja, Ms Pallavi Shroff, Ms Ramni Nirula and Mr Rajiv Dewan, directors are retiring at the ensuing annual general meeting. All retiring directors, offer themselves for re-appointment.

As per the approval of shareholders in last annual general meeting, Mr Rajinder Gupta has been re- appointed as Managing director of the Company for a period of three years w.e.f. April 1, 2009. The Board has appointed Mr Raman Kumar as Whole time director of the Company for a period of three years w.e.f. September 24, 2008 and recommends his appointment alongwith remuneration for the approval of shareholders.

FIXED DEPOSITS During the year under review, your Company has not accepted any fixed deposits and no amount of principal or interest was outstanding as of balance sheet date.

NO DEFAULT The Company has not defaulted in payment of interest and/or repayment of loans to any of the financial institutions and/or banks during the year under review.

CORPORATE GOVERNANCE Your Company is committed to adhere to the best practices & highest standards of corporate governance. It is always ensured that the practices being followed by the Company are in alignment with its philosophy towards corporate governance. The well-defined vision and values of the Company drives it towards meeting business objectives while ensuring ethical conduct with all stakeholders and in all systems and processes.

Your Company proactively works towards strengthening relationship with constituent of system through corporate fairness, transparency and accountability. In your Company, prime importance is given to reliable financial information, integrity, transparency, fairness,

23
23

23

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

Directors’ Report (Contd.)

empowerment and compliance with law in letter and spirit. Your Company proactively revisits its governance principles and practices as to meet the business and regulatory needs.

Detailed compliances with the provisions of Clause 49 of the Listing Agreement for the year 2008-9 has been given in corporate governance report, which is attached and forms part of this report. The Auditors’ certificate on compliance with corporate governance norms is also attached thereto.

HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS The human resources development function of the Company is guided by a strong set of values and policies. Your Company strives to provide the best work environment with ample opportunities to grow and explore. Your Company maintains a work environment that is free from physical, verbal and sexual harassment. The details of initiatives taken by the Company for development of human resources are given in management discussion & analysis report.

The Company maintained healthy, cordial and harmonious industrial relations at all levels.

RECOGNITIONS & AWARDS During the year under review, your Company has been conferred Silver Trophy for outstanding export performance for “Top Exporters – Madeups” in the Category of “Terry Towels” for the year 2007-8 by The Cotton Textiles Export Promotion Council (TEXPROCIL).

AUDITORS & AUDITORS’ REPORT M/s Deloitte, Haskins & Sells, Chartered Accountants, Statutory Auditors of the Company, hold office until the conclusion of ensuing annual general meeting and are eligible for re-appointment. The Company has received a certificate from M/s Deloitte, Haskins & Sells, Chartered Accountants, under Section 224(1) of the Companies Act, 1956 confirming their eligibility and willingness to accept the office of

the Statutory Auditors for the year 2009-10, if re-appointed.

The Statutory Auditors of the Company have submitted auditors’ report on the accounts of the Company for the accounting year ended March 31, 2009. In their report, they have made an observation that loss on valuation of open put derivative options could not be determined by the Company due to certain reasons as specified in Note 18 of the Notes to Accounts. The ultimate outcome of these transactions and their effect on these accounts cannot be ascertained at this stage.

As you are aware that a major part of revenue of your Company comes from export sales and as such Company has foreign currency fluctuation exposure. Your Company hedges its foreign currency fluctuation exposure by way of foreign currency derivative options. The Company has taken various foreign currency options from various banks and as at March 31, 2009, there were certain open put options outstanding having a maturity period up to January 2013. These derivative options are proprietary products of banks, which do not have a ready market and as such are marked to a model, which is usually bank specific instead of being marked to market. In the view of the significant uncertainty associated with the above derivative options whose ultimate outcome depends on future events, the loss if any, on such open derivative options cannot be determined at this stage.

The other points of auditors’ report are self- explanatory and needs no comments.

COST AUDIT Pursuant to the provisions of Section 233B of the Companies Act, 1956 and subject to the approval of the Central Government, the Board of Directors of your Company has re-appointed M/s Ramanath Iyer & Co., Cost Accountants, New Delhi as Cost Auditor for the accounting year 2009-10 to carry out an audit of cost accounts of the Company in respect of textile, paper and chemical divisions.

24

Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

Directors’ Report (Contd.)

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

A statement giving details of conservation of

energy, technology absorption, foreign exchange earnings and outgo, in accordance with Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is given as Annexure I hereto and forms part of this report.

DISCLOSURE ON ESOP The Abhishek Employee Stock Options Plan, 2007 has been constituted in accordance with the Securities and Exchange Board of India (Employee

Stock Options Scheme & Employee Stock Purchase Scheme) Guidelines, 1999. The relevant disclosure

on Company’s stock options scheme as per these

guidelines has been provided in Annexure II hereto

and forms part of this report.

PARTICULARS OF THE EMPLOYEES As per the provisions of Section 217(2A) of the

Companies Act, 1956, the statement of particulars

of the employees, etc forms part of this report.

However, as per the provisions of Section 219(1)

(b)(iv) of the Companies Act, 1956, the annual report excluding the abovesaid information is being sent to all the members and other entitled

persons. Any member interested in obtaining such particulars may write to the Company Secretary

at the registered office of the Company.

RESPONSIBILITY STATEMENT OF DIRECTORS

A Directors’ Responsibility Statement, setting out

the requirements pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956 is annexed as Annexure III hereto and forms part of this report.

ACKNOWLEDGEMENTS

It is our strong belief that caring for our business constituents has ensured our success in the past and will do so in future. Your Directors acknowledge with sincere gratitude the co-operation and assistance extended by the Central Government, Government of Punjab, Government of Madhya Pradesh, Financial Institution(s), Bank(s), Customers, Dealers, Vendors and society at large.

Your Directors also wish to convey their appreciation for collective contribution & hard work of employees across all level. The Board, also, takes this opportunity to express its deep gratitude for the continued co-operation and support received from its valued shareholders and their confidence in Company’s management and look forward to their continued support in future too.

For and on behalf of the Board

S K Tuteja

Rajinder Gupta

Chairman

Managing Director

Place : New Delhi Date : July 23, 2009

25
25

25

Directors’ Report

Management’s

Corporate

Corporate

Standalone

Consolidated

Discussion and Analysis

Sustainability Report

Governance Report

Financial Statements

Financial Statements

ANNEXURE I to the Directors’ Report

Information as per section 217(1) (e) read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the directors’ report for the year ended March 31,

2009.

1. CONSERVATION OF ENERGY

1.1 Energy conservation measures taken:

1. Reduction in power consumption by increasing flow of chilled water

2. Installation of eco ventilator in process house and sizing area

3. Optimum use of H-plant and reducing its power consumption by re-engineering

4. Maintaining the power factor 0.97 through out the year by proper utilization of capacitors so that system loss is minimum

5. Installation of HT capacitors, Energy Monitoring Systems (EMS) and Variable Frequency Drives (VFDs)

6. Installation of timers and stabilizers for all lighting in lighting distribution panel

1.2 Additional investments and proposals, if any, being implemented for reduction of consumption of energy

1. Installation of HPA system in humidification plant

2. Re-engineering of humidification plant and compressor line to optimize the pressure systems

3. Reduction of unburnt carbon residue to improve boiler efficiency

4. Energy Audit for process improvements and reduce power consumption

1.3 Impact of measures taken at 1.1 and 1.2 above for reduction of energy consumption and consequent impact on the cost of production of goods:

On account of the aforesaid measures adopted by the Company, considerable saving of energy & reduction in cost of production has been achieved. However, the power consumption per kilogram as compared to the previous year in paper & yarn has increased because of new technology absorption and increase in the production of value-added products, which require a substantial amount of extra energy.

1.4 Total energy consumption and consumption per unit of production as per form a of the annexure in respect of industries specified in the schedule thereto:

Particulars

Units

Year ended

Year ended

31.03.2009

31.03.2008

1.4.1

Power and fuel consumption

     

1.4.1.1

Electricity

     

a)

Purchased

     
 

Units

MWH

75985

86003

 

Total amount

Rs Million

328.08

372.69

 

Rate per unit

Rs/KWH

4.32

4.33

b)

Own generation

     

i)

Through diesel generator

     
 

Units

MWH

206

218

 

Units/litre of diesel

KWH

3.33

3.40

 

Cost per unit

Rs/KWH

9.81

8.06

ii)

Through Steam turbine/generator

     
 

Units

MWH

269010

158417

 

Units per tonne of steam

KWH

148

156

 

Cost per unit

Rs/KWH

3.57

4.12

1.4.1.2

Coal

     
 

Quantity

MT

222118

79669

 

Total amount

Rs Million

736

319.77

 

Average

Rs/MT

3312

4014

1.4.1.3

Furnace Oil

     

1.4.1.4

Other /Internal Generation

     

Energy conservation measures taken by the Company has resulted in saving of energy and reduction in cost of production

Energy conservation measures taken by the Company has resulted in saving of energy and reduction in

26

Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

ANNEXURE I to the Directors’ Report

Particulars

 

Units

Year ended

Year ended

31.03.2009

31.03.2008

1.4.2

Electricity consumption per unit of production

     
 

Product

     
 

Cotton yarn

KWH/kg

2.43

2.38

 

Towel

KWH/kg

2.49

2.51

 

Yarn processing

KWH/kg

2.23

2.54

 

Paper

KWH/kg

1.34

0.89

 

Sulphuric acid

KWH/kg

0.07

0.07

New product development in paper- Copier Paper under the name of Spectra- 75 GSM and MY Choice Copier-70 GSM with the use of GCC in alkaline sizing, surface sized maplitho paper under the name of Crystaline and Silver Line Paper

paper under the name of Crystaline and Silver Line Paper 2. TECHNOLOGY ABSORPTION Efforts made in

2. TECHNOLOGY ABSORPTION

Efforts made in technology absorption as per Form B RESEARCH & DEVELOPMENT (R & D)

2.1.1(a)

Specific areas in which R & D carried out by the Company:

1. New product development in textile - organic yarn, FLO yarn, cotton covered lycra yarn, karded slub yarn, cotton/soya, 100 % synthetic and synthetic blended yarn in both R/F and TFO, Quick dry towel, eco friendly zero twist without using PVA, herbal dyes

2. Developing fine zero twist yarn in cotton, cotton/modal and cotton/bamboo up to 20s Ne

3. New product development in paper- Copier Paper under the name of Spectra-75 GSM and MY Choice Copier-70 GSM with the use of GCC in alkaline sizing, surface sized maplitho paper under the name of Crystaline and Silver Line Paper

4. Impact of varying chlorine dioxide dosages on optical properties and shrinkage loss of straw and wood pulps

5. Pulp characteristics & its behaviour at various PFI refining levels

2.1.1(b)

Benefits derived as a result of the above R & D:

1. Increased process flexibility for running different types of yarns

2. Increase in Revenue and EBIDTA Margin

3. Improved brand image in market

4. Improvement in runnability of paper in Multi-color Offset Printing Machine

2.1.1 (c)

Future plan of action:

1. Planning for increased share of value added and innovative products

2. Accelerate safety, health, and environment programs across the organization

3. Environment friendly products

4. Optimization studies of bleaching chemicals

5. Use of drainage aid for improvement in formation of paper and dryness of paper after press section

2.1.1(d)

Expenditure incurred on R & D:

Expenses incurred on R & D are booked under respective general accounting heads and as such no amount can be quantified separately under the head of R & D expenses

2.1.2

Technology absorption, adaptation & innovation:

2.1.2 (a)

Efforts, in brief, made towards technology absorption, adaption and innovation :

1. Installation of amsler core soun yarn and caipo slub yarn technology

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ANNEXURE I to the Directors’ Report (Contd.)

2. Installation of latest technology in weaving, processing, cut stitch & pack in towel division. Improved productivity per person with the new automatic machines and expansion

3. Cost optimization with improvement in quality by new technology in process house

4. The ECF technology in new paper machine

5. The fibreline system is a modern environmentally sound process utilising an oxygen delignification and a D-Eop-D sequence for final bleaching of pulp

6. Commissioning of latest state of art technology new paper machine

7. Commissioning of pasaban sheeter for improving the sheeting quality of paper

8. Use of alkaline sizing in copier and maplitho paper for photocopying and printing

2.1.2 (b)

Benefits derived as a result of the above efforts, e.g., product improvement, cost reduction, product development, import substitution, etc :

The company was able to cater to a large number of customers with multiple products portfolioandabetterqualitybasedonenvironment-friendlytechnology.Themanufacturing costs were rationalized towards optimization.

2.1.2 (c)

In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), following information may be furnished :

(i)

Technology imported The latest state of the art technology in TFO, sectional warping , direct warping, sizing machine, looms, material movement trolley, knotting machines, package dyeing machines, fabric dyeing machines, length cutting , length hemming machine, automatic cross cutting & hemming machines, supersonic lobtex PP clearer for manufacturing contamination free yarn, continuous pulping digester & ECF technology from world renowned suppliers, for improving productivity and product quality, besides reducing consumption of energy and scare resources.

(ii)

Year of import 2004 to 2008

(iii)

Has technology been fully absorbed? Yes

(iv)

If not fully absorbed, areas where this has not taken place, reasons therefore and future plans of action. Not Applicable

3. FOREIGN EXCHANGE EARNINGS AND OUTGO

3.1 Activities relating to exports, initiatives taken to increase exports; development of new export markets for products and services; and export plans

The Company is presently exporting its products to around 65 countries across the globe. The Company is growing its market base. Consistent efforts are being made to capture new avenues for exports.

3.2 Total foreign exchange used and earned

 

(Rs million)

Particulars

Current year

Previous year

Earnings (FOB value of exports)

6861.5

5192.8

Outgo (CIF value of imports)

1356.4

2300.4

Travelling expenses

3.2

8.8

Other expenses

103.6

98.8

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Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

ANNEXURE II to the Directors’ Report

DISCLOSURE RELATED TO EMPLOYEE STOCK OPTION SCHEME OF THE COMPANY

In financial year 2007-8, the Company had introduced Abhishek Employee Stock Options Plan, 2007. The

plan was approved by the special resolution of shareholders passed on June 29, 2007 by way of postal

ballot. As per the plan, the Board of Directors can grant maximum upto 97,01,933 options. There has

been only one grant under this scheme till March 31, 2009. The grant was made during the financial

year 2007-8 by the Compensation Committee of the Board of Directors on July 9, 2007 under which

79,01,462 options to eligible employees of the Company were allotted. The options were granted at

the latest available closing market price prior to the date of meeting. The Company calculates employee

compensation cost using the intrinsic value of option.

The relevant information with respect to Company’s stock options plan as on March 31, 2009 is given

below:

Details of Options

Total option granted

79,01,462

Exercise price

Rs. 17.55

Options vested

5,85,039

Options exercised

Nil

Total no. of shares arising as result of exercise of options

Nil

Options lapsed * (*Lapsed options include options forfeited and options cancelled / lapse)

24,14,026

Variation in terms of options

None

Money realised by exerise of options

Nil

Total number of options in force

54,87,436

Employee wise details of options granted to:

 

- Senior managerial personnel* * Name of employees are not given keeping in view the sensitivity

13,36,376

- Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year

None

- Employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding warrants and conversions) of the company at the time of grant

None

DIFFERENCE BETWEEN INTRINSIC VALUE AND FAIR VALUE OF STOCK OPTIONS AND IMPACT

OF THIS DIFFERENCE ON NET PROFIT AND EPS

Pro forma adjusted net income/(loss) and earning per share

 

Net Profit/(loss) as reported (Rs million)

(530.4)

Add: Intrinsic value compensation cost (Rs million)

0

Less: Fair value compensation cost (Rs million)

17.7

Adjusted Pro forma net profit/(loss) (Rs million)

(548.1)

EARNING PER SHARE (RS)

 

Basic

Diluted

As reported

(2.64)

(2.64)

Adjusted Pro forma

(2.73)

(2.82)

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WEIGHTED AVERAGE EXERCISE PRICE AND WEIGHTED AVERAGE FAIR VALUE OF OPTIONS

GRANTED DURING THE YEAR

 

(Rs)

Particular

Exercise Price

Fair Value

Exercise price equals market price

17.55

8.81

Exercise price is greater than market price

Not applicable

Not applicable

Exercise price is less than market price

Not applicable

Not applicable

DESCRIPTION OF METHOD AND SIGNIFICANT ASSUMPTIONS USED TO ESTIMATE THE FAIR

VALUE OF OPTIONS The fair value of the options granted has been estimated using the Black-Scholes option pricing model. Each tranche of vesting have been considered as a separate grant for the purpose of valuation. For estimation of fair values of option, following weighted average values have been used for options granted:

Stock price

17.70

Volatility

63.33%

Risk free rate

7.68%

Exercise price

17.55

Time to maturity

5.50

Dividend yield

3.11%

ANNEXURE III to the Directors’ Report

Directors’ Responsibility Statement pursuant to the provisions of Section 217 (2AA) of the

Companies Act, 1956 and forming part of the Directors’ Report for the year ended March 31,

2009.

The statement of the Directors’ responsibility on the annual accounts of the company for the year ended

March 31, 2009 is provided below:

i)

That in the preparation of the annual accounts, the applicable accounting standards had been followed

along with proper explanation relating to material departures.

ii)

That the Directors had selected such accounting policies and applied them consistently and made

judgments and estimates that are reasonable and prudent so as to give a true and fair view of the

state of affairs of the Company as at March 31, 2009 and of the profit/loss of the Company for the

year ended March 31, 2009.

iii)

That the Directors had taken proper and sufficient care for the maintenance of adequate accounting

records in accordance with the provisions of the Companies Act, 1956 in safeguarding the assets of

the Company and for preventing and detecting fraud and other irregularities.

iii)

That the Directors had prepared the annual accounts on a going concern basis.

For and on behalf of the Board

Place: New Delhi

S K Tuteja

Rajinder Gupta

Date:

July 23, 2009

Chairman

Managing Director

Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 in safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities

Act, 1956 in safeguarding the assets of the Company and for preventing and detecting fraud and

30

Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

MANAGEMENT’S DISCUSSION AND ANALYSIS

fi le Message MANAGEMENT’S DISCUSSION AND ANALYSIS The management of the Company has devised an ongoing

The management of the Company has devised an ongoing system to assess the operations of the Company on real time basis. The Company is proactively engaged in a formulaic approach towards the handling of critical projects and is attentive to the pre requisites. The Company prioritizes opportunities, strategise decisions and embark on expansions.

Through this report, the management shall look at the future, explore the different frontiers, identify the trends and present arguments on how it should gear up for the threats and advantages. This comprehensive report analyses the impact of the business environment on the Company’s performance and should be read in conjunction with the audited financial statements and notes for the year ended March 31, 2009 and the audited financial statements and notes for the year ended March 31, 2008. All references to ‘AIL’, ‘Abhishek’, ‘we’, ‘our’ or the ‘Company’ in this report refer to Abhishek Industries Limited and should be construed accordingly.

BUSINESS OVERVIEW The Company primarily operates in textiles, papers and chemicals segment. The Company, over a period of time has added 50 MW capacities for power generation. The energy segment of the Company is presently catering to the power needs of all the three businesses of the Company.

The Company has manufacturing set up based in Barnala, Punjab and the Corporate office is located at Ludhiana, Punjab. As part of geographical derisking and diversification, the Company has set up a new yarn project at Budni, Madhya Pradesh. This is the first manufacturing venture of the Company outside the state of Punjab.

The Company is a recognized player in its respective segments and respected for its professional ethics, state of art technology, innovative concepts and quality management.

ECONOMY OVERVIEW India has displayed admirable fortitude in the face of the global economic crisis. As economic distress looms over US, UK, Europe and Japan, global real GDP is forecasted to decline by 0.5 percent to 1 percent as in 2009 as against a growth rate of 3.2 percent in 2008-a clear indication of challenges ahead.

After clocking an average annual growth rate of 8.9 percent during last five years i.e. 2004-5 to 2007-8, growth has stagnated in the financial year 2008-9, due to the the global financial crisis.

The global economic crisis has had quantifiable

repercussions across the primary, secondary and tertiary sectors in the economy. The industrial sector is estimated to grow by a mere 4.2 percent as compared to 7.4 per cent in 2007-8. The slowdown has been majorly attributed to the deceleration in the manufacturing sector, which is estimated to grow by a nominal 4.1 percent during 2008-9 as compared to 8.2 percent last year.

The last year had started with a strong economic performance for India, but the momentum was lost as the months passed, as India faced the ripple effects of the gloom in the global economy. The global economic crisis, took a turn for the worse in September 2008 with the collapse of several international financial institutions, including investment banks, mortgage lenders and insurance companies. India’s growth rate was less than hoped as its exports shrank at the end of 2008.

TEXTILE INDUSTRY OVERVIEW The Indian textile industry is one of the oldest and most significant industries in the country. It accounts for around 4 per cent of the gross domestic product (GDP), 14 per cent of industrial production and over 13 per cent of the country’s total export earnings. In fact, it is the largest foreign exchange earning sector in the country. Moreover, it provides employment to over 35 million people.

The Indian textile industry is estimated to be around US$ 52 billion and is likely to reach US$ 115 billion by 2012. The domestic market is likely to increase from US$ 34.6 billion to US$ 60 billion by 2012. It is expected that India’s share of exports to the world would also increase from the current 4 per cent to around 7 per cent during this period.

India’s textile exports have shot up from US$ 19.14 billion in 2006-7 to US$ 22.13 billion in 2007-8, registering a growth of over 15 per cent.

India is facing increased business opportunities in the domestic retail sector due to skewed population towards the young, an increase in disposable incomes and a rapid growth in organised retail.

Consequently, the domestic market is estimated

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to grow to over US$ 50 billion by 2014. Significantly, the textile sector is estimated to offer an incremental revenue potential of no less than US$ 50 billion by 2014 and over US$ 125 billion by 2020.

The textile industry has attracted FDI worth US$ 850 million during August 1991 and December

2008.

India is speeding towards attaining the status of a global player in textile and apparel-sourcing with its abundant multi-fibre raw material base, well established production bases, design capability and skilled labour force.

Government Initiatives In an effort to increase India’s share in the world textile market, the government has introduced a number of progressive steps:

FDI allowed through the

a number of progressive steps: FDI allowed through the 100 per cent automatic route De-reservation of

100

per

cent

automatic route

De-reservation of readymade garments, hosiery and knitwear from the small-scale industries sector in end-2000steps: FDI allowed through the 100 per cent automatic route Technology Mission on Cotton was launched

Technology Mission on Cotton was launched in February 2000 to make quality raw material available at competitive pricesknitwear from the small-scale industries sector in end-2000 Technology Upgradation Fund Scheme (TUFS) which was launched

Technology Upgradation Fund Scheme (TUFS) which was launched to facilitate the modernisation and upgradation of the textiles industry in 1999 has been given further extension till 2011-12. A total of 18773 applications involving a project cost of US$ 24.91 billion have been sanctioned under TUFS upto March 31, 2008to make quality raw material available at competitive prices 40 textile parks are being set up

40 textile parks are being set up under the Scheme for Integrated Textile Parks (SITP) which will attract an investment of US$ 4.38 billionbillion have been sanctioned under TUFS upto March 31, 2008 In the face of a global

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

Additional allocation of US$ 285.66 million to clear the entire backlog in TUFS, which would enhance cash flow of the exportersstimulus package for the textile industry. This includes: Extension of interest rate subvention of 2 per

Extension of interest rate subvention of 2 per cent on pre and post shipment creditin TUFS, which would enhance cash flow of the exporters Additional fund of US$ 224.42 million

Additional fund of US$ 224.42 million for refund of terminal excise dutysubvention of 2 per cent on pre and post shipment credit ABHISHEK’S YARN DIVISION INITIATIVES The

ABHISHEK’S YARN DIVISION INITIATIVES The Company is one of the largest yarn spinners

of India with spinning capacity of 1,25,952 spindles at single location. The Company has total spinning capacity of 1,76,352 spindles and also has 1920 rotors.

The year under review has witnessed special focus on value added products as recognized to be the major drivers of growth. To this effect, the division has undertaken modernization and expansion of capacity leading to increase in turnover.

Optimization of resources, lean manufacturing and energy saving techniques have been the cornerstones of the year improving productivities and other operational parameters.

The Company is perpetually engaged in the process of making efforts to be globally relevant in a competitive scenario and therefore is expanding the spinning capacity by 1,00,800 spindles at Budni in Madhya Pradesh. The first phase of this expansion consisting of 50,400 spindles has already been completed. The expanded capacity would concentrate on manufacturing special yarns like compact, elli-twist, corespun and special cottons like supima, organic and giza. This would foster expansion of product base with count range extending to Ne 60. The Company has adapted the latest technology, encourages better customer relationships and religiously organizes yarn dealers’ meets to the effect.

Strengths and Opportunities Technology: The division has adopted state of art technology and is abreast of all the current advancements in the field due to its attempts of accumulating technological updates. Projected growth of textile industry:

Considering the immense growth potential of Industry, companies like us who have implemented process and technology of global standards can live on substantial hopes of success. Access to raw materials: The major raw material, cotton is sourced locally following the Company’s principle of establishing integrated synergies in raw material sourcing, manufacturing facilities and markets, therefore helping in lean manufacturing. Geographical diversification: The Company is setting up textile facility at Madhya Pradesh for fine counts which would enhance the division’s product basket and hence increase customer base.

Challenges and Threats Increased competition: The increase in

Optimization of resources, lean manufacturing and energy saving techniques have been the cornerstones of the year improving productivities and other operational parameters

32

Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

Management’s Discussion and Analysis (Contd.)

capacity in the yarn spinning industry in recent time and globalization momentum have led to manifold increase in competition internationally as well as domestic.

Cotton sourcing: Government intervention in fixing Minimum Support Price (MSP) has badly impacted international competitiveness of industry and likely to have the impact in the future as well.

Capital Expenditure The Company is setting up 1,00,800 spindles at Budni, Madhya Pradesh which involves a total capital outlay of Rs 3,737 million. This project is being implemented in phased manner. The first phase of expansion consisting of 50,400 spindles has been completed in April 2009 and the second phase is scheduled to be fully operational during the third quarter of financial year 2009-10.

TERRY TOWEL INDUSTRY OVERVIEW Terry towels constitute 6-9 percent of the overall Home Textile assortment. In the US market, the major market share is with the retailers (discount stores, department stores, specialty stores etc). Owing to the financial challenges and tough market scenario the towel sales registered a major reduction during the year but Abhishek was able to maintain its growth trajectory. The market is becoming more matured in terms of product needs. From a generic product market, a shift is seen towards products with functional attributes like quick dry, anti microbial etc.

India along with China, Pakistan and Brazil has major manufacturers for the terry towel industry. The industry faces major challenges due to the volatility of foreign exchange and input costs. This however is hardly unusual since any global industry would face such challenges in a bid to keep the price competitive.

ABHISHEK’S TERRY TOWEL DIVISION INITIATIVES The Company is one of the World’s largest terry towel manufacturers. As a value added segment having a continuous growth momentum, the terry towel business is the most important source of export earnings and international recognition for the Company.

The year 2008-9 was a challenging year for the Company. In the beginning of the year, a steep rise in the commodity prices was witnessed,

which resulted in the higher manufacturing costs hitting the bottom line. However the prices were normalized towards the end of the year. Further in the current retail environment there were lesser opportunities in the market. The Company has seen very competitive prices being quoted despite the scanty opportunities in the market. This has also given an opportunity to the Company to expand in markets other than US and focus on Brand alliances.

During the year under review, the Company has added new products like super fine zero twist, anti microbial towel , super absorbant towel , quick dry towel , organic slub towel and many more. The Company is constantly expanding/modernizing its manufacturing capacities with an objective to attain increased volumes with lower overheads, better quality and replacement of old technology with the latest world class technology.

The improvement initiatives along with viable vision initiatives based on theory of constraints were continued to enhance operational efficiencies, customer satisfaction and market share.

Entering the Domestic Market Indian market in itself offers tremendous opportunity for the Company. The growth in shopping space and need for Home textiles product has positive bearings for the Company. The Company is aggressively aiming to tap the domestic market. The Company’s prime focus is to build brand for its towels & toweling products in the national market and enlarge distribution channel for the products to reach masses. It is also working to customize products to suit all Indian needs.

Strengths and Opportunities Technology: State-of-the art technology, machinery know-how from the best international suppliers and vertically integrated plants, gives the Company a very strong footprint in the industry.

Reliability: A strong client base and a great track record in terms of client servicing backed by technology, supply chain partnerships and on time delivery are key strengths.

Markets: Latin America, Middle East, Eastern European and Domestic markets are an opportunity to spread business.

Challenges and Threats Increased competition: This segment faces

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competition within India and from neighboring countries. The globalization has intensified competition.

Logistics: The distance between plant and ports increases supply time and cost.

Product’s lifecycle: The long life cycle of towels could stagger fresh off take.

Agriculture based raw-material: The major raw-material is cotton yarn where prices are driven by uncertainties of weather, size of world crop and Govt. regulations on Import/Export trade.

Capital Expenditure The Company has undertaken another expansion project of its Terry towel division under which Company is upgrading its existing 18 looms and 24 new looms are being set up. This project is being implemented in textile park developed by Lotus Integrated Texpark Limited, a special purpose vehicle, with a capital outlay of Rs 359.8 million and shall be completed by second quarter of financial year 2009-10.

PAPER INDUSTRY OVERVIEW Global paper market is dominated by North America, Europe and Asia. Current global paper and paperboard consumption is around 395 million MT, which is expected to grow to 420 million MT by 2010. For the fast developing Asian markets, their share in global paper and paperboard consumption has risen to 35 per cent from the 32 per cent in the last couple of years; and expected to grow even further. The share of mature markets like North America and Europe is expected to fall to around 50 per cent by 2010.

Asia’s principal markets are China, Japan, India, Malaysia, Singapore and Thailand. India, with a per capita consumption as low as 8.2 kg, clearly has a long way to go, as compare to Japan (250 kg), China (45 kg) and the world average (56 kg). With social development in terms of increased education levels, there is considerable headroom for increasing paper consumption in India. Global demand is expected to increase at a rate of 2.4 percent and India by 6.7 percent.

In the first half of FY 2008-9, Indian paper industry was booming and demand leading the supplies and prices going up. But in second half, with the newer capacity addition, supplies started leading the demand, which started increasing pressure on prices. The scenario got worst with lot of factors

coming into play viz; industry down cycle, rate of capacity addition leading the rate of increase in demand, change in consumption pattern, cheaper imported material from China, Malaysia, Singapore, Thailand, which has lead to pressure on domestic pricing.

In these conditions, only way to survive is to control the cost of production and simultaneously build the brand through quality and increase the share in value added products like copier & business stationary.

Overall demand is expected to get steady in second quarter of FY 2009-10, and it can start catching its pace in third and fourth quarter of financial year.

ABHISHEK’S PAPER DIVISION INITIATIVES This has been a year of expansion, growth and looking ahead into a future which promises to yield results and would take the Company to a new dimension of success. The major concern this year has been to stabilize new plant and establish the Company in the market as “A” grade mill with quality product range. This paper plant expansion at Barnala is anticipated to produce fruitful results in the field of writing & printing paper.

With completion of this expansion, the Company has emerged as first agro-based paper manufacturer of India to use Elemental Chlorine Free (ECF) technology.

The Company has launched its own brand of Copier paper called ‘SPECTRA TM COPIER’ which has helped Company to move forward from commodity segment to customer oriented Organization. The Company is producing high quality paper which is getting utilized in the manufacturing of diaries, notebooks and text books. Its customer base has increased substantially with strong services & quality products.

Strengths and Opportunities Technology: The Company has installed modern and hi tech paper & pulp machine with world class art of technology.

Environmental friendly: The Company has already been complying with the CREP environmental norms and saves 5,000 trees per day as compared to 100 percent wood pulp based units. Also the Company has adopted ECF technology.

Proximity to raw material: Agro residues are sourced locally leading to saving in logistics cost

A strong client base and a great track record in terms of client servicing backed by technology, supply chain partnerships and on time delivery are key strengths

record in terms of client servicing backed by technology, supply chain partnerships and on time delivery

34

Abhishek Industries Limited

About Abhishek

Managing Director’s

Financial Highlights

Inspired by Challenge

Business Overview

Directors’ Prole

Message

Management’s Discussion and Analysis (Contd.)

The net sales of paper & chemicals division witnessed a significant increase of 75 percent in FY 2008-9 with increase in total production of paper

by 65 pecent

with increase in total production of paper by 65 pecent Capacity enhancement: The Company has expanded

Capacity enhancement: The Company has expanded its manufacturing capacity which would enable it to widen its product basket. Better realization: Excise duty on paper has been cut from 8 percent to 4 percent, giving manufacturing companies a better realization benefit during recession.

Challenges and Threats Competition: Capacity expansion by a number of players, a sign of tough competition ahead, has and will prove a deterrent. Decrease in consumption: Due to global recession, overall consumption of paper has gone down and export market is getting hit. Even imported quantities are coming in huge stocks and expected to create tough competition in market. Crop pattern: Movement for changes in crop pattern and environment factor may lead to raw material scarcity

Capital Expenditure The Company has recently completed its integrated state of the art paper & pulp expansion project with installing paper machine having capacity of 1,25,000 tpa; pulping facility having capacity of 90,000 tpa and a captive power plant of 20 MW with a capital investment of Rs 8,250 million. In the current year, the Company is undertaking a debottlenecking and process streamlining project with a capital outlay of Rs 400 million.

CHEMICAL INDUSTRY OVERVIEW The chemical industry in India is well established and has recorded a steady growth in the overall Indian industrialscenario.Thechemicalandalliedindustries have been amongst the faster growing segments of the Indian industry. The chemical industry is highly heterogeneous encompassing many sectors like organic and inorganic chemicals, dyestuffs, paints, pesticides and specialty chemicals. Some of the prominent individual chemical industries are caustic soda, soda ash, carbon black, phenol, acetic acid, methanol and azo dyes.

Currently, there is tremendous scope for growth in chemical sector. The per capita consumption of chemicals in India is well below the prevailing world level.

ABHISHEK’S CHEMICAL DIVISION INITIATIVES The Chemical Division has facility to produce 1,00,000 tonnes per annum of sulphuric acid and the Company also produces battery grade

sulphuric acid. The chemical division caters to the need of leading battery manufacturers, detergent industry, zinc sulphate industry, alum manufacturing, dyes & chemicals and fertilizer industry etc.

Marketing of sulphuric acid is strategically planned so as to utilize full potential of the installed capacity. In this direction, strategic purchase of sulphur is being done as sulphur is the main raw material and contributes to more than 50 percent cost of production.

Strengths and Opportunities Capacity: Maximum production capacity in entire Northern region Inventory: Low inventory carrying costs for customers Value added services: Increasing revenue & profitability from offering value added services to customers

Challenges & Threats Raw material: Forecasting of sulphur prices & availability of sulphur Client base: Customer retention & new customer development Substitution: Alternate products available in the market wherever possible.

POWER SECTOR OVERVIEW The power & energy infrastructure sector in India

is poised for a major take-off. The present installed capacity is inadequate for the nation’s needs, and there are plans for rapid growth. The APDRP (Accelerated Power Development & Reforms Programme 2002 - 2012) has seen an addition of around 22,000 MW during last five years. And during the next five years, a capacity addition of over 78,000 MW has to be setup by 2012.

The Market potential to sustain the GDP growth

rate of India @ 8 percent plus per annum needs the power sector to grow at 1.8 - 2 times the GDP rate of growth as espoused by economists, planners and industry experts. This would mean

a YOY capacity addition of 18,000 - 20,000 MW

to achieve this ambitious plan of moving India to a developed economy status, as an economic global powerhouse. The target mission : ‘POWER for All by 2012’ would mean achieving the target of 1000 KwHr (Units) of per capita consumption of electricity by this period. To achieve this goal, the engagement of the private sector gains

significance.

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Financial Statements

Management’s Discussion and Analysis (Contd.)

ABHISHEK’S ENERGY DIVISION INITIATIVES The Company has made investment in power generation in its effort to be self reliant for its energy needs. The in-house generation of power leads to an uninterrupted supply for the smooth production process, meeting delivery schedules and cost saving. FINANCIAL ANALYSIS WITH RESPECT TO OPERATIONAL PERFORMANCE Revenues The net turnover of the Company increased by 33 percent to Rs 13,980.6 million in FY 2008-9. Of the total turnover, Rs 6,861.5 million was on account of income from exports. A snapshot of segmental financial performance for the FY 2008-9 and its comparison with the preceding fiscal year is tabulated below:

(Rs Million)

Division

Current year

Previous year

Growth

Sales *

PBIT

Sales *

PBIT

Sales *

PBIT

Yarn

3397.0

58.4