Can we talk about optimism in the current scenario? I think we can. I
believe, rather than putting the entire onus on the external economic
landscape, we must try to evolve our own strategies of growth and
resilience. Interestingly, many large global business enterprises were
founded, not during years of easy growth. But, during years of economic
hardships. The reason is simple: hardship teaches us to question
conventions, think laterally and take the road less travelled. 2012-13
evoked mixed response from economies across the world. While Europe
continues to weather uncertainties, the US economy is showing signs of
sustainable growth. Japan, on the other hand, after several years of
deflation and marginal growth, is on the road to recovery. China
continues to steal the show with above 7% growth, followed by India and
other emerging economies.
India''s long-term growth prospects continue to be bright, and the
government is initiating reforms to elevate the economy to a high
growth trajectory. At Indo Rama, we withstood challenges and were able
to deliver satisfactory overall performance.
In the current financial year, we achieved a turnover of Rs. 2,865.02
Crores (Rs. 2,943.27 Crores in 2011-12). Our EBIDTA stood at Rs.
282.45 Crores against Rs. 319.06 Crores in 2011-12 and a net profit of
Rs. 41.26 Crores against Rs. 31.96 Crores in 2011-12. Our earnings per
share stood at Rs. 2.72, as on 31 March 2013. In 2012-13, we
maintained persistent focus on customers and product quality to drive
creditable sales performance. Moreover, we completed several cost
optimisation projects that improved our cost competitiveness and
enhanced profitability, despite the decline in global trade,
fluctuation in dollar prices and crude oil, and adverse local market
During the year, we completed some key margin strengthening projects.
We successfully commissioned 11 MW of power to utilise the spare boiler
capacity for captive consumption. Also, expanded production capacity
for value-added product Draw Texturized Yarn (DTY) from the earlier
71,200 tonnes to 87,400 tonnes with the commissioning of 11 new
Over the last few years, the demand for polyester fibre is growing. The
year 2012 was no exception. During the year, demand grew at 6%.
Moreover, the year was characterised by soaring capacity additions in
the PFY segment. Polyester fibre outlook remains positive and demand is
estimated to increase by 5% between 2013 and 2016, on account of a
decline in cotton fibre production in 2013-14.
We entered into the renewable energy space through a wholly-owned
subsidiary, with a 30 MW wind energy project in Maharashtra. This will
come on stream by June 2013. The renewable energy sector is expected to
grow significantly in future. We aim to build a robust portfolio of
renewable energy assets, offering optimum shareholder returns. We plan
to add another 60-70 MW of renewable energy capacity by 2014. We have
already acquired land in Rajasthan and Gujarat, having wind energy
project development potential of around 300 MW.
BACKWARD INTEGRATION INTO PTA
In my last letter, I talked about our strategic backward integration
initiative into petrochemical - Purified Terephthalic Acid (PTA),
Polyethylene Terephthalate (PET) and Polyester Staple Fiber (PSF) -
where we have entered into a Joint Venture with Indorama Ventures
(Thailand) having equal equity partnership to set this project with an
investment of Rs. 5,000 Crores.
In 2012-13, we made significant developments on this project, conducted
feasibility studies for site location across various states. Finally,
we zeroed in on a location in Chennai (Tamil Nadu), from where we have
two ports (Ennore Port and L&T Port) having liquid terminal facility in
close vicinity. This will enable us to transport Paraxylene (key raw
material) to our plant at minimal logistical cost and find an MoU with
the Government of Tamil Nadu for fiscal and infrastructure support.
This plant would be a strategic backward integration project, ensuring
100% security of the key raw material (Purified Terephthalic Acid) for
polyester, enabling uninterrupted operations. The PTA produced would be
of consistent quality on account of best-in- class technology.
The plant will also manufacture downstream products like PET Resin and
PSF. PET resin is used for bottle grade applications meant for mineral
water and carbonated soft drinks packaging. PSF finds application in
apparel and non-apparel industries.
Despite challenges, India holds out an enormous market potential. The
per capita consumption of all fibre in India is around 6.86 kg per
person, compared to the global per capita consumption of 12 kg per
person. However, for polyester fibre and yarns, India''s per capita
consumption is 2.45 kg per person, as against the global per capita
consumption of 5.85 kg. Polyester accounts for 36% of per capita fibre
consumption in India. On the back of India''s burgeoning population,
rapid urbanisation, enhanced industrialisation, increasing cotton
prices and insignificant cotton production growth, I am hopeful that
polyester consumption will increase substantially in the coming years.
We are strengthening our cost competitiveness by virtue of backward
integration and cost rationalisation. Therefore, positioning ourselves
as a reliable supplier of high quality raw materials to downstream
industries helps us achieve one of the highest profitability levels in
The future belongs to polyester, and we are well positioned to leverage
the market potential. On the strength of talent and teamwork, we are
building an organisation known for its dynamism and constant
innovation. In short, an organisation constantly on the move to create
exceptional value for all stakeholders.
On behalf of the Board, I would like to thank our shareowners,
management team, employees, suppliers, associates and loyal customers
for their unflinching support and endeavour.
OM PRAKASH LOHiA
Chairman and Managing Director