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India continues to be one of the world’s fastest growing economies in a largely volatile global economic scenario. The Government is implementing key reforms to drive sustainable economic growth, despite challenges. There is focus on developing infrastructure, increasing rural spending and giving Indian youth opportunities to attain relevant skills for employment or entrepreneurship.
During FY 2016-17, the Government took steps to shape a bigger and cleaner GDP through the demonetisation initiative and by facilitating the passage of the Goods and Services Tax (GST) Bill in the Parliament.
These steps may bring more of the economy in the organised sector and also enhance the revenue collection, which may enable the Government to give relief to certain sectors where tax rates are high.
In the global textile sector, developed countries like the US and European Union are major buyers, whereas emerging markets like China,
India, Bangladesh, Vietnam focus on manufacturing, owing to lower cost in these regions. Among the emerging nations, currently China is a dominant player in the global textile trade. However, this is likely to change owing to increasing labour and production cost in the region, offering a wide opportunity to India and other developing countries like Bangladesh and Vietnam.
The countries that are able to offer a climate which makes apparel industry more competitive, may presumably take a bigger share of the world trade in textiles.
It may be pertinent to state that apparel is going to drive growth of the textile industry in Asian economies as it is always followed by spinning and fabric making to integrate the entire chain. In our view, any country which intends to develop a section of the industry independent of the growth of apparel may succeed for a time, yet may find difficulty in competing. A vertically integrated industry provides a better chance for each country to remain competitive as also attractive to world retail buyers. Obviously, the preference goes to such countries as lead time due to fashion changes is fast coming down. A shorter supply chain management may become key for the success of any country in grabbing a larger world share in this industry.
The Government of India is finalising the New Textile Policy, which we hope may address many of the concerns, which at present are limiting the growth of this industry. We hope the Government will utilise the potential of this industry in creating millions of jobs by having a more holistic approach and plan of action by going through those factors, which affect our competitiveness in relation to countries like Bangladesh and Vietnam, which have significantly exceeded their export of garments over India in the last few years. This is evident from the fact that Bangladesh and Vietnam have a 6% and 5.3% share in apparel exports as against India’s share, which was 4.1% in 2015.
2016-17 in retrospect
During 2016-17, we increased our revenues by 2.04% and post-tax profit by 48.08%, driven by our cost-efficient operations, better planning, enhanced technology and coverage of cotton at the right time.
We sold 40% stake (of 51%) in our subsidiary Vardhman Yarns & Threads Limited (VYTL) for Rs.413 crore. This initiative is in line with our strategy to focus more on our core business (yarn and fabric).
Looking at all relevant factors, including the present debt to equity of the Company, investments planned in the next two-three years as well as the increase in accumulated free reserves (including a one-time cash inflow from the stake sale), we considered it appropriate to reward our shareholders through a buyback of 62,60,869 equity shares for Rs.1,150/ share aggregating to Rs.720 crore.
In today’s competitive world, employees are a company’s most important resource and asset.
The Company fully recognises this fact and wants its employees to participate and share the fruits of growth and prosperity along with the Company. We have a vision of being the preferred partner of choice for all our stakeholders i.e. employees, clients, government and society.
Towards this vision, this year, we decided to reward our employees’ long association with the Company as well as motivate the employees by creating a sense of participation and ownership among them, by grant of Employee Stock Options.
The ultimate objective is to achieve sustained growth of the Company and the creation of shareholder value by aligning the interests of employees with the long-term interests of the Company.
Investing for future
We focus on optimum capacity utilisation, customer service, differentiation in portfolio and uniform quality standards to keep us ahead of the curve.
At VTL, we have incurred a capital expenditure of around Rs.2,000 crore in the last five years. Currently, we operate at near 100% utilisation levels in the yarn business, catering to diverse customer requirements. We are also consolidating our fabric business and are focusing on expanding capacity in this space.
Going forward, we have a planned capital expenditure of Rs.2,500 crore over three-four years towards the ongoing schemes at Baddi, Himachal Pradesh, as well as proposed expansion in Satlapur and Budhni in Madhya Pradesh and modernisation in other units.
The proposed capex would be partially towards the ongoing expansion schemes for enhancing yarn dyed and printed fabric capacity as well as increasing looms capacity.
Further, it has been proposed to increase fabric processing capacity, at Budhni, Madhya Pradesh, along with installation of additional spindles at Satlapur.
We have emerged as one of the leading players in this sector through our team’s persistent efforts. We are consistently investing in enhancing the capabilities of our people through focused training and coaching. We identify high-potential individuals and groom them for future leadership roles.
Partnering the community
During the year, as a part of our corporate responsibility initiative, we focused on education, healthcare and community development. We assisted government schools near our locations by providing adequate infrastructure.
We provided medical facilities to rural population in the vicinity of our plants, who have hardly any access to basic healthcare needs. We are also focusing on empowerment of women near our plants by providing them with relevant employment opportunities.
Our objective is to act as a change agent and help bring the fruits of economic development to the marginalised sections of India’s population.
On behalf of the Board and the entire leadership team, I thank all our stakeholders, business partners as well as customers for their continued guidance and support.
In all these years, we have crossed a number of milestones, but I believe that the journey continues...
Shri Paul Oswal
A fellow shareholder