presentation on aarti international ltd

Summer Training ProjectSummer Training Projectonon

Organic Cotton: An Opportunity for Organic Cotton: An Opportunity for Ludhiana textile industry to trade in Global Ludhiana textile industry to trade in Global

textile markettextile market

Undertaken atUndertaken at

AARTI INTERNATIONAL LIMITEDAARTI INTERNATIONAL LIMITED

Presented by:Presented by:Nitin GoelNitin GoelMBA-IB (2B)MBA-IB (2B)Roll No. Roll No. 9497223829194972238291

Indian Textile Industry

Second largest in the world

Second largest employment generator- 38 million

Segments:• Readymade garments• Cotton textiles • Man made textiles• Silk textiles• Woolen textiles• Handicrafts• Jute

Main markets: USA, UAE, UK, Germany, France, Russia ,

Canada

Major players

Arvind Mills

Raymonds

Vardhaman Spinning

Welspun India

Alok Industries Ltd

Madura Garments

Future Outlook

Will grow at an annualized rate of 16% between 2007 and 2012

Expected to reach a level of $115 billion by 2012

Share in world textile trade to increase from current 3% to 7%

Exports projected to increase from $19.24 billion in 2006-2007 to

$55 billion in 2012

17.37 million new jobs will be created in next five years - 12.02

direct and 5.35 indirect

Introduction to Aarti GroupIntroduction to Aarti Group

Group Profile

Registered office/Corporate office : G.T. Road, Millar Ganj, Ludhiana

Year of Incorporation : 1977

The Aarti Group comprises of:

Aarti Steels Limited Aarti International Limited Aarti Theatre Deepak hospital

Brief History Incorporated in 1977 in the name of Aarti Steels Limited at Ludhiana

Steel Plant with a capacity of 1.25lacs tones per annum

Steel Plant in Orissa (India) with the capacity of 0.5 million tons per annum

Diversified into yarn manufacturing in 1996 with the installe d capacity of 27000 spindles

Deepak Memorial Hospital located in Ludhiana is a multi specialty Hospital with 24*7 medical emergency facilities

Cinema which has been a constant source of joy to the residents

Mission & Vision

Mission

“Providing efficient & reliable services to the customer by adding genuine value to the product”

Vision

“To be globally recognized as a supplier of choice in this highly competitive global economy”

Business Portfolio

SHARE OF EACH BUSINESS IN GROUP TURNOVER

Product Range Yarn

Single yarn in count range of Ne 16s/1 to Ne 80s/1 100% Cotton- Combed Compact Yarn Hosiery Yarn

Double yarn in count range of Ne 16s/2 to Ne 80s/2 100% Cotton- Combed Compact Yarn Hosiery Yarn

Steel

Carbon

Spring Steel

Low Alloy Steels Wire Rods

Wires drawn and galvanized

Coal Washer

Sponge Iron

Introduction to Aarti International Ltd.Introduction to Aarti International Ltd.

Aarti Yarn Range Single yarn in count range of Ne 16s/1 to Ne 80s/1 100% Cotton- Combed Yarn 100% Cotton-Compact Yarn 100% Cotton-Hosiery Yarn

Double yarn in count range of Ne 16s/2 to Ne 80s/2

100% Cotton- Combed Yarn 100% Cotton-Compact Yarn 100% Cotton-Hosiery Yarn

Philosophies

Focus on Value Added Yarn

Improvement in Capacity Utilization

Focus on high value customers

Focus on improving yields

Quality policyCommitted to meet the customer expectations by

continuous efforts to improve process & technology

Quality objectivesTo provide better human resourcesTo achieve maximum utilization of resources

Departments Production Department

Research & Development Department

Maintenance & Engineering Department

Human Resource Department

Stores & Purchase Department

Excise & Dispatch Department

Marketing Department

Finance Department

Markets Major export destinations are as follows:

Hong Kong

China

South Korea

Taiwan

Bangladesh

European Union

Major domestic market destinations are as follows:

Gujarat

Mumbai

Uttar Pradesh

Delhi

Haryana

Punjab

Accolades & awards

USTERIZED quality certificate from USTER, Switzerland.

Supima Licence

Cotton USA Licence from Cotton Council International.

Spirituality at Workplace Award

Strengths

Good brand equity

Good technological base

High Production Capacity

Weaknesses

Comparatively high prices

Lesser degree of promotional activity

High labor turnover

Opportunities

Favorable demand conditions-large, growing domestic & international market

India - Ban on Cotton exports

The government allows 100 per cent FDI in the textiles sector under the automatic route

Threats

Cotton prices soar

Growing competition from yarn producing units in the unorganized sector

Competition from other established groups like Nahar, Vardhman, Anshupati Textiles, Malwa etc.

Ratio Analysis of Aarti International Ltd.Ratio Analysis of Aarti International Ltd.

Liquidity RatiosLiquidity Ratios

Current ratio

Year 2006-07 2007-08 2008-09

Current assets 167 193 186

Current liabilities

85 93 87

Current ratio 1.96:1 2.07:1 2.14:1

(Fig. In Crores)

Quick Ratio

Year 2006-07 2007-08 2008-09

Quick assets 71 62 76

Current liabilities

85 93 87

Quick ratio 0.84:1 0.67:1 0.87:1

(Fig. In Crores)

Activity Ratios Activity Ratios

Inventory turnover ratio

Year 2006-07 2007-08 2008-09

Cost of goods sold

284 218 278

Average inventory

98.5 115 121

Inventory turnover ratio ( in times)

2.88 1.89 2.3

Inventory holding period ( in days)

126.7 192.3 158.7

(Fig. In Crores)

Debtor turnover ratio

Year 2006-07 2007-08 2008-09

Net credit sales 275 276 345

Average debtors 64 61 64

Debtors turnover ratio

4.24 4.49 5.43

Debtor conversion period

86.1 81.3 67.2

(Fig. In Crores)

Creditor turnover ratio

Year 2006-07 2007-08 2008-09

Net credit purchases

248.5 190.7 187.9

Average creditors 10.57 11.43 11

Creditor turnover ratio( in times )

23.51 16.68 17.08

Average payment period ( in days )

15.52 21.88 21.37

(Fig. In Crores)

Capital structure ratiosCapital structure ratios

Debt –equity ratio

Year 2006-07 2007-08 2008-09

Debt 256 368 362

Equity 163 170 162

Debt equity ratio

1.57:1 2.16:1 2.23:1

(Fig. In Crores)

Proprietary ratio

Year 2006-07 2007-08 2008-09

Shareholder fund

162 170 162

Equity 444 238 536

Proprietary ratio

37% 71% 30%

(Fig. In Crores)

Solvency ratio

Year 2006-07 2007-08 2008-09

Proprietary 37% 71% 30%

Solvency ratio 63% 29% 70%

Profitability ratiosProfitability ratios

Gross profit ratio

Year 2006-07 2007-08 2008-09

Gross profit 73 58 68

Net sales 275 276 345

Gross profit ratio

26.6% 20.9% 19.6%

(Fig. In Crores)

Net profit ratio

Year 2006-07 2007-08 2008-09

Net profit 14.35 12.4 10.97

Net sales 275 276 345

Net profit ratio 5.2% 4.49% 3.96%

(Fig. In Crores)

Operating profit ratio

Year 2006-07 2007-08 2008-09

Operating profit

56 41 35

Net sales 275 276 345

Operating ratio

20.34% 15% 9.08%

(Fig. In Crores)

Return on shareholders’ equity

Year 2006-07 2007-08 2008-09

Net profit after taxes

14.35 12.4 10.97

Shareholders’ fund

275 170 170

Return on shareholders’ equity

5.22% 7.3% 6.45%

(Fig. In Crores)

Trend analysisTrend analysis

Trend of Turnover Years Sales (Rs. In Crores) Trend ( In %)

2004-05 143.68 100

2005-06 154.28 107.38

2006-07 274.92 191.34

2007-08 276.09 192.16

2008-09 345.43 240.42

Trend of Net Profit / Loss

Years Net Profit (Rs. In Crores) Trend ( In %)

2004-05 17.49 100

2005-06 18.61 106.4

2006-07 14.35 82.05

2007-08 12.41 70.95

2008-09 10.97 62.72

Trend of EPSTrend of EPS Years EPS (Rs.) Trend (In %)

2004-05 25.98 100

2005-06 25.29 97.34

2006-07 16.61 63.93

2007-08 14.03 54

2008-09 11.47 (31.25)

Introduction to the ProjectIntroduction to the Project

Organic cotton

Originates from organic agricultureCertified ‘organic’ by certification bodiesAims for an optimum and sustainable use of local

natural resourcesNo application of external inputs like pesticides,

chemical fertilizers, herbicides and chemically treated or genetically modified (GM) seed

External ‘organic’ inputs may be usedMore labour intensiveYields are lower

Standards

Global Organic Textile Standard (GOTS)To be labelled “organic” requires fiber to be at least 95%

organic. (The remaining 5% can be conventional fiber, but not of the same fiber as the organic portion)

OE 100 and OE BlendedOE 100 only allows a minimum of 95% organic fiber

(exclusive of threads or non-textile accessories). The remaining 5% cannot be cotton.

OE Blended requires at least 5% organic cotton content for the blended standard allowing the remaining fiber to be any fiber, including conventional cotton.

Global Organic Cotton Market

Retailers• C&A (Belgium)• Nike, Inc. (Oregon, USA)• Walmart (Arkansas, USA)• Williams-Sonoma, Inc.

(California, USA and recorded last year as Pottery Barn)

• H&M (Sweden)• Knitwear (New York,

USA)

• Coop Switzerland• Green source Organic

Clothing Co. (Washington, USA)

• Levi Strauss & Co. (California, USA)

• Target (Minnesota, USA)• Adidas (Germany)• Nordstrom

Manufacturers Organic cotton yarns, fabrics, and finished goods

producing regions includes:• China• Southeast Asia• Indonesia• India• Pakistan• Bangladesh• Turkey• Mexico• United States

Global retail sales of organic cotton products

Source: Organic Exchange 2009 Market Report

Future outlook

According to OE forecasts:

Global organic cotton market will grow 20 to 40 percent in both 2010 and 2011

Reaching about $5.1 billion market in 2010 and $6.0 billion market in 2011

Title of the ResearchTitle of the Research

Organic cotton: An opportunity for Organic cotton: An opportunity for Ludhiana textile industry to trade in Ludhiana textile industry to trade in

global textile marketglobal textile market

Objectives of the research

To know the trend of export of organic cotton textile products from Ludhiana & the reasons for such trend.

To know the companies’ integration with valid operational certificate for manufacturing & trading organic cotton textile product.

To know the factors considered while procuring raw material for organic cotton textile product.

To know the factors influencing people to enter into organic cotton textile industry.

Research Methodology

Research Design

The research design of the project is descriptive as it describes data and view points of the organic cotton textile products manufacturers & exporters in Ludhiana.

UniverseAll the manufacturers & exporters of organic cotton textile products

PopulationAll the manufacturers & exporters of organic cotton textile products

in Ludhiana

Sampling UnitAny single individual or firm who manufactures & exports organic

cotton textile products

Sampling TechniqueConvenience sampling technique and Snowball technique

Sample size40

Limitations of the study

Elements of biasness might have crept in

Only 40 respondents have been contacted due to time constraint

Generally the respondents were busy in their work and were not interested in responding

Respondents were reluctant to disclose complete and correct information about themselves and their organizations

Data Analysis and InterpretationData Analysis and Interpretation

Products Yarn Fabric Garment

Knitted Woven Knitted Woven Knitted Woven

No of responses 12 6 16 4 19 4

No of

respondents

40 40 40 40 40 40

Percentage 30% 15% 40% 10% 47.5% 10%

Table 5.1-No of organic cotton textile products manufacturers & exporters in Ludhiana

(N=40)

Fig. 5.2- Annual turnover of the manufacturers & exporters in the year 2009-10

(N=40)

Fig 5.3- Proportion of export of organic cotton products out of total sales

(N=40)

Fig 5.4-Export trend of organic cotton textile products since manufacturers have started making

(N=40)

Fig 5.5-Factors resulting in an increasing demand of organic cotton textile products

(N=40)

Fig 5.6-Factors resulting in decreasing & constant demand of organic cotton textile products

(N=40)

Fig 5.7-No. holders of valid operational certificate applicable for the production/ trade of organic cotton textile products

(N=40)

Fig 5.8-Holders of different types of operational certificate

(N=40)

Consideration of various parameters while procuring raw material for organic cotton textile products

Rating No. of respondents Product

Most considered (+2) 23 46

More considered (+1) 8 8

Neutral (0) 8 0

Less considered (-1) 1 -1

Least considered (-2) 0 0

Total 40 53

Mean 1.325

Table 5.9(a)-Rating of payment terms factor

(N=40)




Neutral (0) 1 0

Less considered (-1) 0 0


Total

Mean

40 65

1.625

Table 5.9(b)-Rating of price factor (N=40)




Neutral (0) 9 0



Total 40 45

Mean 1.125

Table 5.9(c)-Rating of quality factor (N=40)




Neutral (0) 14 0


Least considered (-2) 2 -4

Total 40 12

Mean 0.30

Table 5.9(d)-Rating of lead time factor (N=40)




Neutral (0) 8 0



Total 40 23

Mean 0.575

Table 5.9(e)-Rating of long term relationship factor

(N=40)




Neutral (0) 11 0



Total 40 13

Mean 0.325

Table 5.9(f)-Rating of reputation of supplier factor (N=40)

Fig 5.10-Combined result of various parameters while procuring raw material


Most influencing (+2) 17 34

More influencing (+1) 11 11

Neutral (0) 5 0

Less influencing (-1) 4 -4

Least influencing (-2) 3 -6

Total 40 35

Mean 0.875

Factors influencing people to enter in to organic cotton textile products business

Table 5.11(a)-Rating of increasing basket size factor

(N=40)




Neutral (0) 14 0



Total 40 22

Mean 0.55

Table 5.11(b)-Rating of Highly profitable factor (N=40)




Neutral (0) 14 0


Least influencing (-2) 0 0

Total 40 15

Mean 0.375

Table 5.11(c)-Rating of Necessary for survival factor (N=40)




Neutral (0) 6 0



Total 40 34

Mean 0.85

Table 5.11(d)-Rating of to remain competitive factor (N=40)




Neutral (0) 9 0



Total 40 -9

Mean 0.225

Table 5.11(e)-Rating of helps in branding or differentiation factor

(N=40)




Neutral (0) 7 0



Total 40 43

Mean 1.075

Table 5.11(f)-Rating of global demand factor (N=40)

Combined result of factors influencing people to enter into organic cotton textile products business

Fig 5.12-Factors influencing people to enter into organic cotton textile products business

Steps Regulate

pricesFavourable

global policies

Create awareness

of eco-friendly products

Encourage farming of

organic cotton

Incentives to farmers

to grow organic cotton

Others

No of responses 24 7 17 9 6 1

No of respondents 40 40 40 40 40 40

Percentage 60% 17.5% 42.5% 22.5% 15% 2.5%

Table 5.13-Steps that government should take to boost the sales of organic cotton textile products in the global textile market

(N=40)

FindingsThere are 30% knitted & 15% woven organic cotton

yarn manufacturers & exporters, 40% knitted & 10% woven fabric manufacturers & exporters & 47.5% knitted & 10% woven garments manufacturers & exporters in Ludhiana out of 40 respondents.

Maximum no. of respondents exporting organic cotton textile products are having annual turnover above 40crores.

The maximum no of respondents export less percentage of organic cotton textile products of their total sales where as only few respondents are exporting 30% to 40% & above 40% organic cotton textile products of their total sales.

An increasing demand of organic cotton textile product in the overseas market has resulted in an increase in the exports of organic cotton textile products.

High prices & availability of substitutes are the most important factors which have resulted in constant & decreasing exports of their organic cotton textile products.

All the respondents have valid operational certificate for the production & trading of organic cotton textile products.

Maximum no of respondents dealing in organic cotton textile products hold both GOTS & OE certificates & there are 35% of total respondents who holds only GOTS certificate & 2.5% of total respondents hold only OE certificate.

Price is the most important factor which is most considered at the time of purchase of raw material for organic cotton textile products.

Global demand, competition & increasing basket size has more influenced the respondents to enter into organic cotton textile products business.

Government should more regulate prices of organic cotton textile products, create awareness of eco-friendly products, encourage farming of organic cotton & make favourable policies so as to boost the sales of organic cotton textile products in the global textile market.

Conclusion and SuggestionsConclusion and Suggestions

Conclusion

Demand for organic cotton textile products is increasing in the global textile market because it is of better quality & skin friendly.

Very less percentage of organic cotton textile products are exported from Ludhiana.

High prices & availability of substitutes can lead to decrease in the demand of organic cotton textile products.

All the manufacturers & exporters hold valid operational certificate for manufacturing & trading organic cotton textile products.

Price, payment terms & quality factors are more considered at the time of procurement of raw material for organic cotton textile products.

Increasing global demand, high profit margin & increasing competition are attracting more people to enter into organic cotton textile products business.

There is less government support in promoting export of organic cotton textile products from Ludhiana.

Suggestions and Recommendations

Awareness should be created among the consumer towards environment friendly & skin friendly products.

The manufacturers & exporters of organic cotton textile products should be more cautious while purchasing raw material & should consider lead time.

The manufacturers & exporters of organic cotton textile products should try to maintain strong relationship with the supplier so that their own supply should not get affected.

Government should regulate the prices of organic cotton textile products because products of organic cotton are more costly than its substitutes.

Government should provide incentives to the farmers to encourage organic farming.

There is more scope of export of organic cotton textile products in U.S. & European markets.

THANK YOUTHANK YOU

presentation on aarti international ltd

Documents

cotton council international

cottoncompact yarn100

cotton combed yarn100

cottonhosiery yarndouble

aarti yarn rangesingle

crores year

ne 80s1100

ne 80s2100