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A PROJECT REPORT ON
VARDHMAN
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BY-
ANUSHKA AGARWAL
MANISHA BATAR
NOOR BHATIA
SOURABH DAS
FMG2
PEARL ACADEMY OF FASHION
ACKNOWLEDGEMENT
Completion of any project depends upon the cooperation, co-ordination and combined
efforts of several resources of knowledge, energy and time.
We hereby take an opportunity to express our sincere thanks to all those who guided us
and who have directly or indirectly helped us complete this project We would like to
express our deep sense of gratitude to Mr Rahul Jain for his valuable guidance in research
and analysis throughout the completion of our project.
2
TABLE OF CONTENT
S.NO
1.
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
2.
2.1
2.1.i
2.1.ii
2.1.iii
2.1.iv
2.1.v
TOPIC
ORGANISATIONAL PROFILE
HISTORY
MISSION
GROUP OF COMPANIES
HOLDINGS
PORTFOLIO
MARKET SHARE OF VARDHAMAN LTD
ACHIEVEMENTS
QUATILY ACCREDATION
PRODUCT PROFILE
YARNS
Overview
Yarn product profile
Yarn machinery
Integrated yarn dyeing unit
Yarn operation
PAGE NO
6
6
7
8
8
9
9
12
13
14
14
14
14
15
15
15
2.2
2.2.i
2.2.ii
2.2.iii
2.2.iv
2.2.v
2.3
2.3.i
2.3ii
2.3.iii
2.3.iv
FABRIC
Overview
Machinery
Fabric processing
Quality assurance
Fabric testing capabilities
THREADS
Overview
Machine
Hand needle
Sciffli/lace
16
16
17
17
18
18
19
19
19
20
21
2.4
2.4.i
2.4.ii
2.4.iii
2.4.iv
2.4.v
FIBRES
Overview
Product features
Product range
Process
Process features
22
22
22
22
23
23
3.
INTERNAL AND EXTERNAL ENVIRONMENT
25
3.1
3.1.i
INTERNAL
Human resources
26
26
3
3.1.ii
3.1.iii
3.1iv
3.1v
3.1vi
3.2
3.2.i
4.
5.
5.1
5.2
6.
6.1
6.2
6.3
6.4
7.
8.
9.
Finance department
Centralized accounting system
Technological upgradation
Performance
Corporate social responsibility
EXTERNAL
PEST analysis
RATIOS
BREAKEVEN ANALYSIS
VARDHAMAN
CENTURY
SWOT ANALYSIS
strength
weaknesses
opportunities
threats
FUTURE PLANS OF THE COMPANY
CAPITAL EXPENDITURE
RECOMMENDATIONS
27
28
29
30
32
33
33
37
58
58
59
61
61
61
62
63
65
67
68
4
EXECUTIVE SUMMARY
Vardhman, a household name in Northern India, has carved out a niche for itself in textile
industry. The Vardhman group was setup in 1962 by late Lala Rattan Chand Oswal,
father of present Chairman cum Managing Director, Sh. S.P. Oswal. Vardhman aims to
be world class textile organization producing diverse range of products for the global
textile market. Vardhman seeks to achieve customer delight through excellence in
manufacturing and customer service based on creative combination of state-of-the-art
technology and human resources.
Vardhman deals with Fabrics, Sewing Thread, Fibre and Alloy Steel. It became India's
first textile company to be awarded ICO9002/ ISO 14002 Certification and has received
many other awards since the beginning. It lays a lot of emphasis on building and
sustaining an excellent organizational climate based on human performance and works
for the betterment of its human resource. It has adopted international accounting
standards for the presentation of the financial statements and has a centralized accounting
system. The company works on its technological upgradation and always works on
expanding its base.
The company believes in its corporate social responsibility and takes full pride in
fulfilling them through various means. It is affected tremendously by the political,
economic, social and technological environment. The company has high gross profit
margin ratio and can make profits while controlling its costs. Also it has greater assets
than liabilities and is performing well. Even during the times of recession the company
kept on providing superior quality goods and has been able to survive
5
1. ORGANISATIONAL PROFILE
Vardhman Group is a leading textile conglomerate in India having a turnover of $700
mn. Spanning over 24 manufacturing facilities in five states across India, the Group
business portfolio includes Yarn, Greige and Processed Fabric, Sewing Thread, Acrylic
Fibre and Alloy Steel.
Vardhman Group manufacturing facilities include over 8,00,000 spindles, 65 tons per day
yarn and fibre dyeing, 900 shuttleless looms, 90 mn meters per annum processed fabric,
33 tons per day sewing thread, 18000 metric tons per annum acrylic fibre and 100,000
tons per annum special and alloy steel.
Vardhman has evolved through history from a small beginning in 1965 into a modern
textile major under the dynamic leadership of its chairman, S.P.Oswal. His vision and
insight has given Vardhman an enviable position in the textile industry. Under his
leadership, Vardhman is efficiently using resources to innovate, diversify, integrate and
build its diverse operations into a dynamic modern enterprise.
http://www.vardhman.com/about_vardhman.asp
1.1 HISTORY
The industrial city of Ludhiana, located in the fertile Malwa region of Central Punjab is
otherwise known as the "Manchester of India". Within the precincts of this city is located
the Corporate headquarters of the Vardhman Group, a household name in Northern India.
The Vardhman Group, born in 1965, under the entrepreneurship of Late Lala Rattan
Chand Oswal has today blossomed into one of the largest Textile Business houses in
India.
At its inception, Vardhman had an installed capacity of 14,000 spindles, today; its
capacity has increased multifold to over 8 lacs spindles. In 1982 the Group entered the
sewing thread market in the country which was a forward integration of the business.
Today Vardhman Threads is the second largest producer of sewing thread in India. In
6
1990, it undertook yet another diversification - this time into the weaving business. The
grey fabric weaving unit at Baddi (HP), commissioned in 1990 with a capacity of 20,000
meters per day, has already made its mark as a quality producer of Grey poplin, sheeting,
shirting in the domestic as well as foreign market. This was followed by entry into fabric
processing by setting up Auro Textiles at Baddi and Vardhman Fabric at Budhni,Madhya
Pradesh. Today the group has 900 shuttleless looms and has processing capacity of 90mn
meters fabrics/annum.
In the year 1999 the Group has added yet another feather to its cap with the setting up of
Vardhman Acrylics Ltd., Bharuch (Gujarat) which is a joint venture in Acrylic Fibre
production undertaken with Marubeni and Exlan of Japan. The company also has a strong
presence in the markets of Japan, Hong Kong, Korea, UK and EU in addition to the
domestic market. Adherence to systems and a true dedication to quality has resulted in
obtaining the coveted ISO 9002/ ISO 14002 quality award which is the first in Textile
industry in India and yet another laurel to its credit.
http://www.vardhman.com/about_history.asp
1.2 MISSION
Vardhman aims to be world class textile organization producing diverse range of
products for the global textile market. Vardhman seeks to achieve customer delight
through excellence in manufacturing and customer service based on creative combination
of state-of-the-art technology and human resources. Vardhman is committed to be
responsible corporate citizen.
S P Oswal, Chairman - Vardhman Group
http://www.vardhman.com/about_mission.asp
7
1.3 GROUP OF COMPANIES
1.4 HOLDINGS
Vardhman Holding Limited
Vardhman Textiles Ltd.
Vardhman Acrylic Ltd
VMT Spinning Company Ltd
Vardhman Yarns and Threads Ltd
http://www.vardhman.com/about_holdings.asp
8
1.5 PORTFOLIO
The group portfolio includes Yarn, Fabrics, Sewing Thread, Fibre and Alloy Steel.
Business Wise Turnover for the financial Year 2008-09
Actual 2008-09
Group Total( Rs
crore)
USD Million
% Share
Yarn
1513
329
47%
Fabric
689
150
22%
Sewing Thread
337
73
11%
Steel
327
71
10%
Power plant
66
14
2%
Fibre
254
55
8%
Total
3186
693
100%
1.6 MARKET SHARE OF VARDHMAN TEXTILES LTD
9
Spinning Business
Spindle Capacity ( financial year 2005 -06 )
Existing About 600,000
Post Expansion 800,000
http://www.fibre2fashion.com/textile-market-watch/company-brief/vardhman
Fabric Business
Fabric Production in Lac (100 thousand) Metres/Month
Auro Textiles (Existing) 42
Post Expansion 85-90
Sewing Thread Business
Production in Metric Tonnes/Day
Total 28.30
Dyeing (Yarn & Fibre) & Mercerising
Production in Metric Tonnes/Day
Total 54.5
Steel Business
Production in Metric Tonnes/Annum
SMS 100000
Rolling Mill 84000
Acrylic Fibre Business
Production in Metric Tonnes/Annum
Total 18500
10
YARNS
Yarn Manufacturing is the major activity of the group accounting for 47 percent of the
group turnover. Vardhman is virtually a supermarket of yarns, producing the widest range
of cotton, synthetics and blended, Grey and Dyed yarns and Hand Knitting Yarns, in
which Vardhman is the market leader in India. The group has twenty one production
plants with a total capacity of over 8 lacs spindles, spread all over the country. In many of
the yarn market segments, Vardhman holds the largest market share. Vardhman is also
the largest exporters of yarn from India, exporting yarns worth more than USD 150
million.
SEWINGTHREADS
Vardhman is the second largest producer of sewing thread in the country. The sewing
thread manufacturing capacity is being expanded from 17 tons per day to 33 tons per day
in its sewing thread plants located at Hoshiarpur, Baddi and Ludhiana. Sewing threads
contributes 11 percent of the group turnover.
FABRICS
The group has created state-of-the-art fabric weaving and processing facilities in its plant
at Baddi, Northern India. The group has installed 900 shuttle less looms and a fabric
processing capacity of 90 million meters per annum in collaboration of Tokai Senko of
Japan. Fabrics business contributes 22 percent to the group turnover.
FIBRE
The group has set up an Acrylic Staple Fibre plant at Bharuch in Gujarat in collaboration
with Marubeni and Japan Exlan of Japan. The plant has annual capacity of 18000 tons per
annum. Fibre contributes 8 percent to the total turnover of the group.
11
STEEL
The Group is also present in upper-end of the steel industry. The group has
manufacturing capacity of 100000 tons of special and alloy steel. The group supplies its
steel products to some of the most stringent quality steel buyers like Maruti and Telco. It
contributes 10 percent to the total turnover of the group.
http://www.vardhman.com/about_portfolio.asp
1.7 ACHIEVEMENT
It's an overwhelming feeling when the efforts and hard work put in are recognized and
felicitated. A feeling that galvanizes the Group into believing in more, in itself and
reaffirming its commitment to offer products that invoke trust and reliability.
Back home, the Vardhman Group became India's first textile company to be awarded
ICO9002/ ISO 14002 Certification. It is the largest producer and exporter of yarns and
Grey woven fabrics from India. Vardhman is also the largest producer of tyercord yarns
and the second largest producer of sewing threads in India. The Vardhman Group vision
of excellence is matched by a dedication and sincerity to be the best and excel in every
industry it has a presence.
 Textile Export Promotion Council 2007-08
Special Achievement Award in Yarn Category
 Textile Export Promotion Council 2007-08
Silver Top Exporter Award in Yarn Category
 Textile Export Promotion Council 2007-08
Bronze Trophy in Processed Yarn Category
 Textile Export Promotion Council 2005-06
World Trophy in highest export in Yarn Category
 http://www.vardhman.com/about_achievements.asp
 Textile Export Promotion Council 2005-06
Bronze Trophy for Highest Global Export Category (Overall)
 Textile Export Promotion Council 2004-05
World Trophy in highest export in Yarn Category
 Textile Export Promotion Council 2004-05
Silver Trophy for Highest Global Export Category (Overall)
12
 Textile Export Promotion Council 2003-04
Gold trophy in EOU/EPZ for export of cotton yarn
 Textile Export Promotion Council 2003-04
Bronze trophy in mill fabric exporter category
 Textile Export Promotion Council 2002-03
Gold Trophy in EOU/EPZ for export of cotton yarn
 Textile Export Promotion Council 1998-99
Silver Trophy
 Textile Export Promotion Council 1997-98
Bronze Trophy
 Textile Export Promotion Council 1996-97
Silver Trophy
 Govt. of India Award 1994-5, 1995-96
Award of Merit
 Textile Export Promotion Council 1993-94
(Merchant Export Category for Fabrics)
Bronze Trophy
 Textile Export Promotion Council 1990-00
Gold Trophy
 Textile Export Promotion Council 1993-94
(Merchant Export Category for Fabrics)
Gold Trophy
http://www.vardhman.com/about_achievements.asp
1.8 QUALITY ACCREDITATION
A Vardhman fabric is dedicated to meet customer demand for top quality finished fabric
through product innovation, world class quality, state-of-art technology and excellence in
service.
Quality policy
They believe in acceptance of customers. The specifications and standards of civil engineering
have to be transformed to fulfil the needs and requirements, of customer. At Vardhman they
strive to achieve engineering excellence and design their projects to deliver cost effective and
comfortable apartments for customers.
Quality with timely completion of project is key of their success.
http://www.vardhmangroup.org/QualityPolicy.aspx
13
http://www.vardhman.com/quality_accreditation.asp
2. PRODUCT PROFILE
2.1 YARNS
2.1.i Overview
Yarn is the largest strategic business unit of the Vardhman Group with 8,00,000 spindles
and 65 MT tons per day yarn and fiber dying capacity. The Group offers one-stop
solution for variety of yarn requirements of the leading customers in India and the
international markets. Vardhman offers the widest range of specialized greige and dyed
yarns (NE 10 to NE 200) in cotton, polyester, acrylic and varieties of blends. The group
offers value added products like Organic Cotton, Melange, Lycra, Ultra yarns
(contamination controlled), gassed mercerized, super fine yarns and fancy yarns for hand
knitting. Vardhman is India's largest exporter of cotton yarn to the most quality conscious
markets like EU, USA and Far Eastern countries.
Products
Cotton Yarn
Organic Cotton Yarn
Fair Trade cotton Yarn
Organic Fair Trade Cotton Yarn
Ellitwist
Vortex Yarn
Slub Yarn
Acrylic Yarn
Poly -Cotton Yarn
Special Blended Yarn
Core Spun Yarn
Melanges
Gassed Mercerised
Modal Yarn
Tencel Yarn
Viscose Yarn
Hand Knitting Yarn
Speciality Yarn
http://www.vardhman.com/products_yarns_overview.asp
2.1.ii Yarn product profile
14
 Grey cotton yarn
 Grey acrylic yarn
 Grey polyester cotton yarn
 Special blended yarn
 Crayons
 Rainbow
 Rangoli
 Gassed mercerised cotton yarn
 Paragon
 Harmony
 Padam
 Daffodil
 Hank dyed acrylic yarn
 Vardhman knitting yarn
 Speciality yarns
http://www.vardhman.com/products_yarns_productprofile.asp
2.1.iii Yarn machinery





Preparatory – reiter, trutzschler
Pre-spinning – reiter, cherry hara, toyoda
Spinning – lakshmi reiter, kriloskar toyoda
Post spinning - schlaforst, murata
Doubling – volkman, leewha, vijaylakshmi
http://www.vardhman.com/products_yarns_machinery.asp
2.1.iv Integrated yarn dyeing unit
1994 has witnessed a milestone toward our mission, to supply value added product i.e.
cone and fibre dyed yarn and tops. A fully integrated dye house plant with technology
from Nihon Synmo, Japan, the leader in dyeing technology in the world, emerged on the
landscape of Vardhman. With setting up of this new dye house , the installed capacity to
process has increased to 20 tons of Yarn and 15 ton of Fibre per day.
 Technological collaboration with Nihonsanmo, Japan.
 Dyeing capacity :- fiber dyeing 15 tons per day and yarn dyeing 20 tons per
day.
 Facility of dyeing a vast range – 100% cotton , P/C blends, cotton/ wool,
cotton/ viscose, acrylics/ cotton, 100% acrylics.
15
 Lot size flexibility.
2.1.v Yarn operation
The unique combination of man and machine, competing and supplementing each other
with continuous increase in productivity has enable Vardhman to dexoterously ripe the
fruit of economies of scale and process variety of raw material required for variety of end
products to textile.
Evennes Results fall in 5% to 15% of Uster standards, achieved through
Proper selection of Raw Material
World class Pre-spinning and Spinning Facilities
Technical Know How
Human Skills
100% Quality Assurance System
http://www.vardhman.com/products_yarns_operations.asp
2.2 FABRIC
2.2.i Overview
Vardhman is among the few fully integrated fabric suppliers in the country. An exquisite
range of fabrics for shirting and trousers enables Vardhman to offer fashion solutions to
the leading clothing manufactures in the world. The state-of-the-art manufacturing
facilities having 900 shuttleless looms and producing 90 mn meters per annum processed
fabric are located in North and Central India, which cater to the highly customized fabric
needs of the buyers. An integrated fabric supply chain extending from raw materials to
yarns and from weaving to processing provides the winning edge to the customers.
http://www.vardhman.com/products_fabrics.asp
Shirting
16
Count range
Weave
Fabric weight
Finished width
Ring spun Ne 20's to 80's Ring spun Blends 2/40's
to 2/210's 100% cotton, Polyester cotton, Cotton
stretch DowXLA, Cotton Tencel, Cotton Modal,
Cotton Bamboo, Cotton silk, Cotton Nylon, Cotton
Nylon stretch, Cotton Linen.
Yarn Dyed: Chambray, fil-a-fil, checks, stripes,
Oxford, HBT Others (yarn dyed & piece dyed)
Plain, twill, satin, oxford, dobby, herringbone,
Pique Cord.
2-5.6 oz/yd'2
58"
Bottom weights
Count range
Weave
Fabric weight
Finished width
Ring spun Ne 20's to Ne 2/80's Open end Ne 6's to
Ne 16's 100% cotton, Polyester cotton, Cotton
stretch DowXLA, Cotton Tencel, Cotton Modal,
Cotton Bamboo, Cotton silk, Cotton Nylon, Cotton
Nylon stretch, Cotton Linen Coolmax.
Chambray, fil-a-fil, checks, stripes, Oxford, HBT
Others (yarn dyed & piece dyed) Plain, twill, Drill,
satin, oxford, dobby, herringbone, Pique Cord,
Honey comb
6.00 to 12.00 Oz.yd'2
58" to 60
Finishes
Eco-Friendly Blends
Also certified by
Soft, Peach, Mechanical stretch, Microsand, Easy
to iron, Water resistant, Stain Release, Stiff finish,
Airo finish, Carbon finish, Diamond finish, Airo
enzyme, Soft Easy Care, Soil resistant, Thirsty
finish, Feather touch, Banana Peel and to add
Ammonia finish.
Bamboo, Organic Cotton, Linen
FLO, OEKOTEX, SKAL.
http://www.vardhman.com/products_fabrics_productprofile.asp
2.2.ii Machinery
Grey
17
State of the art looms: Airjet and Rapier looms of Picanol Delta/Omni Plus, Tsudakoma,
Zax, Rapier GTX/Gammax and Toyota
Benninger and Sucker Muller Warping & Sizing Machines
2.2.iii Fabric Processing
Continuous Bleaching Range
Singeing with 4 burners
Chemical doising electronically controlled
Suitable for wide range of fabrics
Chain Mercerizer
Electronically controlled caustic concentration
and temperature
Ecofriendly
Pad steam ranges
Unique steamer. Efficient washing range.
Continuous Dyeing Ranges
Kuster mangle ensures uniform dyeing.
Curing Machines
Enables us to give Resin Finish to Fabric
Sueding Ranges
Precise levels of Peaching
Stenters and Shrinking Ranges
Stenters with 7 heat chambers
2.2.iv Quality Assurance
4 Point inspection system.
SO - 9002 certified plant
CAT System from Datatex for Fabric Inspection
CAD System from Technograph Infotech Services for Fabric Inspection
2.2.v Fabric Testing Capabilities
18
Laboratory having state-of-the-art Testing equipments from USA & UK to test
various fabric
parameters
 Stretch, Recovery & Growth Test (Stretch fabrics)
 Abrasion Test
 ICI Pilling
 Tearing Strength
 Tensile and Seam Strength
 Formaldehyde Content
 Skew / Bow test
 D P Rating
 CRA test
 GSM test
 Sample Drying
 Shrinkage test
 Perspiration, Water Fastness
 Perspiration, Water Fastness
 Rubbing Fastness
 Sublimation
 Pilling Test
 Washing Fastness
 Light Fastness
http://www.vardhman.com/products_fabrics_machinery.asp
2.3 THREADS
2.3.i Overview
Vardhman is a leading player in the Indian sewing thread market. The joint venture with
A&E Threads of USA offers complete thread solutions from tailoring to industrial
applications. With 33 tons per day capacity spread over three plants located in North and
South India, Vardhman is uniquely positioned to serve the garment manufacturers across
the world. Vardhman's customer value proposition includes threads made from cotton,
polyester, core spun, nylon and filaments, which are AZO free and meet OEKO Tex
Standards.
http://www.vardhman.com/products_threads.asp
Embroidery
They manufactured products through following ways: Machine
19
 Hand / Needle
 Schiffli / Lace
2.3.ii MACHINE
Vardhman textiles ltd. Manufacture the following machine stitched embroidered
products: Polymerized: - Pride is a 100 % Trilobal polyester continuous filament thread
ideally suited for embroidery on high speed machines. It offers sparkling lustre and
enhanced productivity due to low breakages. The dye fastness rating is also very
good.

Metallic: - Eureka metall is a metallic embroidery thread with a nylon core and
a metallised foil cover. A special lubrication ensures proper running of the thread
on high speed machines. Available in 36 colours including Gold and Silver.

Specials -- Puff is a 100 % Acrylic thread which is ideal for raised effect
embroidery. It can be used on Multi head machines as well as manual machines
Application
Embroidery on all types of fabric for raised effect with Matt finish.
Sizes Available
Tex 70
Puff wool is composed of 50 % Wool and 50 % Acrylic. Embroidery done with
Puff Wool gives a raised and wool effect
.
Application
Embroidery on all types of fabric for raised effect.
Sizes Available
Tex 60Puff wool
MULTI COLOUR
Multi Colour or better known as space dyed is a combination of two or more
colours in the same thread. PRIDE offers multi colour threads in a combination of
two or four colours. It is available in Tex 27.

Cotton embroidery threads – Superseam is a 100% extra long staple mercerized
cotton thread. Its available in Tex 35.
http://www.vardhman.com/products_threads_embroidery.asp
20
2.3.iii HAND/NEEDLE
People have always found deep personal pleasure and sense of satisfaction in creating
articles of daily use and artistic works from basic equipment and materials. One of the
crafts practiced since times immemorial is needlecraft and embroidery - the urge to create
with colourful threads. Embroidery was used in Ancient Egypt to decorate the hems of
royal robes, in tapestries in the Middle Ages, and in ladies' samplers during the Colonial
and Victorian eras. It continues as an art form today.
Hand embroidery is used to decorate wall hangings, pillowcases, quilts and table runners.
Hand embroidery differs from counted cross stitch in that it uses many different types of
stitches to achieve texture and interest, whereas counted cross stitch uses a single stitch
and relies on color and shading for texture. Five stitches form the basis for hand
embroidery. The stitches are outline, satin, lazy daisy, cross and French knot.
Hand embroidery is a beautiful art that almost anyone can learn. It is an art that should be
preserved and well worth learning. The hand embroidery market in India is segmented
into three segments.
 Premium Embroidery Threads
 Popular Embroidery Threads
 Crochet Threads
Usage of Hand Embroidery Thread







Cross stitch
Counted thread work
Embroidery
Smocking
Tapestry
Applique work
Quilting
2.3.iv SCHIFFLI/LACE
Embroidery, the art of forming attractive designs with hand or machine needlework, has
been around virtually as long as clothing itself.
Schiffi embroidery is a single needle and single/multi head machine embroidery. Both
mercerized cotton as well as staple polyester fibers is used to manufacture this thread. It
gives excellent resistance to heat and organic solvent and good resistance to alkalis but
sensitive to acdis.
Application:
All Kinds of Embroidery with Lock stitch.
Top Thread (Cotton)
Tex Sizes Available: 14, 18, 27, 35, 60, 80, 105, 120
21
Bobbin Thread (Polyester)
Tex Size Available: 16, 18
http://www.vardhman.com/products_threads_embroidery.asp
INDUSTRIAL PRODUCTS
Apparel :- they manufacture the following categories of threads for industrial
application –
 Knits
 Wovens
 Denim
 Over dyed
 Special application
Shoes , leather & non –apparel :










Footwear
Leather garments
Leather accessories
Automotive seating and upholstery
Luggage
Mattress and quilting
Saddler industrial
Filter
Compressor
Winding curtains and tents
Book bindin
http://www.vardhman.com/products_threads_ip.asp
2.4 FIBRES
2.4.i Overview
The acrylic fiber of Vardhman is acclaimed for a wide variety of textile applications. The
modern manufacturing plant based on renowned Japan Exlan Wet Spun technology
produces 18000 MT per annum acrylic fiber at Gujarat (Western India). The fiber
marketed under the brand name VARLAN has achieved high level of recognition in the
Indian market because of super soft touch and silky appearance.
2.4.ii Product Features
Superb soft touch & silky appearance; resilence; excellent dye -ability; brilliant shades,
high bulk yarn products incorporating shrinkable fibres; low pill formation; better crease
22
recovery; high resistance to chemicals, light, weathering and midew make VARLAN a
preferred fibre in knitted, woven and other applications.
2.4.iii Product Range
 Acrylic Bright & Semi-dull Non shrinkable fibre in 1.2,1.5,2,3,5,7,10,15 deniers in a
wide range of cut lenghts.
 Acrylic Bright & Semi-dull Shrinkable fibre with different shrinage levels in 2,3,5
deniers in a wide range of cut lengths
 Acrylic Tow endless Bright & Semi dull in 2,3 denier.
 Specialty acrylic fibres suitable for Open end spinning; Soft handle, Water absorbent
applications etc.
http://www.vardhman.com/products_fiber.asp
2.4.iv PROCESS
2.4.v Process Features
Continuous aqueous suspension polymerisation of reactive ingredients in a precisely
controlled reactor system.
23
Constant composition of polymer and close control of molecular weight.
Polymer in water slurry dissolved with highly concentrated solvent, deaerated, heated and
filtered to convert into dope suitable for spinning.
Dope extruded through spinnerette in spin bath filled with dilute coagulant to form gel
fibre which is washed, stretched and made void free to provide a dense and compact
structure of the fibre.
Tow is crimped and heat set to acquire stress and strain property. High quality finish
applied for antistatic and lubrication purpose.
Tow is dried, cut and baled as staple or packed as tow as per requirement.
Weak solvent from spinning sent to solvent recovery for purification and evaporation to
increase concentration of solvent for reuse at dope.
Assortment
Single Fibre
Denier
Cut Length
(MM)
Luster
Non - Shrinkable
1.2
38
Bright
1.2
51
Bright & Semi
Dull
1.5
38,51
2
51,64
3
61,64,76,V64
5
64,76,V74
7
76, V64
10
102, V84
15
152, V84
High - Shrinkable
2
3
51, 64
64, V64
Bright & Semi
Dull
Medium - Shrinkable
2
38,51
Semi Dull
Very Much Shrinkable
2.5
51,64
Bright
Bright
24
Assortment
Single Fibre Denier
Tow Dennier
Luster
Tow
3
9,7,000x2
Bright
5
9,80,000x
Bright & Semi Dull
SPECIAL FIBRE
Assortment
Single Fibre
Denier
Tow Dennier
Luster
Staple for Open
End
1.5
38
Bright & Semi
Dull
Soft - Hand
2
51
Dull
3
V64
Semi-Dull
Water Absorbent
1.5
38,51
Semi-Dull
Tow
2
Total Dennier 5,30,000
X 2 Tows
Semi-Dull
http://www.vardhman.com/products_fiber_productprofile.asp
For more details see Annexure no. 4
3. INTERNAL AND EXTERNAL ENVIRONMENT
3.1 INTERNAL ENVIRONMENT
3.1.i Human Resources/Industrial Relations:
Vardhman textiles continues to lay emphasis on building and sustaining an excellent
organizational climate based on human performance. Performance management is the
key word for the company. During the year the Company employed over 23,350
employees. Pursuit of proactive policies for industrial relations has resulted in a peaceful
and harmonious situation on the shopfloors of the various plants.
It works for its workers by training them through HRD centers and it has In house
training and development center for staff and management. It organizes various
competitions for workers like Olympiads which is a contest based on workers skills and
productivity.
(http://www.vardhman.com/InvPpt.pdf)
25
Organisational hierarchy chart
CHAIRMAN –CUM-MANGING DIRECTOR
CORPORATE GENERAL MANAGERS
VICE PRESIDENT
MANAGERS (M1-M4)
EXECUTIVES (E1-E2)
OFFICERS (O1-O2)
STAFF (S1-S4)
SUBSTAFF
Internal Control System:
The Company has well defined internal control system. The Company takes abundant
care to design, review and monitor the working of internal control system. Internal Audit
in the organization is an independent appraisal activity and it measures the efficiency,
26
adequacy and effectiveness of other controls in the organisation. All significant issues are
brought to the attention of the Audit Committee of the Board.
(http://www.moneycontrol.com/stocks/company_info/directors_report.)
3.1.ii FINANCE DEPARTMENT
There have been efforts at the international level to bring about uniformity in the
presentation of the financial statements by formulating and adopting international
accounting standards.
Thus the role of accounting is to provide an effective measurement and reporting system.
This is possible only when accounting is based on certain coherent set of logical
principals that forms the general frame of reference for evaluation and development of
sound accounting practices
Vardhman Spinning & General Mills, finance department is headed by Mr. Bhushan
Punj (Chief Manager, Commercial fianance); Mr. Munish Jain (manager) .all the working
of the finance department is done through ERP (Enterprise Resource Planning) system,
which was installed in August 2003
NEED OF FINANCE DEPARTMENT
Economic activities are those which includes buying and selling of goods and services for
purpose of profit. These activities are related to business. The main objective of the
business is to earn profits. This exchange is termed as TRANSACTION. A transaction
means a transfer from one person to another in money or money’s worth. Hence,
exchange of money, goods or services between persons or parties is known to have
resulted in a transaction. In each organization transactions are effected. The goods are
purchased from one market at a certain rate and then these goods are sold in another
market at higher price. However , in some cases organizations incur some losses instead
27
of profits, which may occur due to any reasons. So to achieve the purpose of recording a
will devised system plays a dominant role in an organization.
In VARDHMAN SPINNING AND GENERAL MILLS there is a finance department
headed by Mr.Bhushan Punj. ERP system is installed to deal with the finance problems
and to derive the maximum benefits of ERP system a concept of ‘ CENTRALISED
ACCOUNTING CELL’. Under this concept of centralization, all types accounting of
Debtors and Creditors of all units at one single platform i.e. at accounts department
VARDHMAN Ludhiana. The basic reason behind its implementation was to improve the
accounting relating to the customers and suppliers
3.1.iii CENTRALIZED ACCOUNTING SYSTEM
Centralized Accounting System means the accounting system, which is maintained
centrally for the units or branches located at different locations. With this system, the
company can maintain the accounts for the different units at the head office or the desired
place where ever they want to keep those.
In VARDHMAN TEXTILES LIMITED, LUDHIANA, they have the centralized
accounting cell at there corporate office. This office is situated at Vardhman Spinning &
General Mills, Ludhiana. The corporate offices as well as the accounts department, which
controls the centralized accounts, are situated in this.
This computerized centralized accounting cell has four departments and they performed
there specialized type of functions only as specified by the management which can be
altered time to time as per the need of the organization or as the organization suits better,
which are shown as under:
Accounts Department
Accounts Payable
ACP
28
Accounts Receivable
ACR
Business Planning
Control System
BPCS
Exports Import Cell
EXIM Cell
3.1.iv TECHNOLOGICAL UPGRADATION
The Company has been proactively moving towards more liberalized
domestic and international trade regime. The company chalked out fresh
investments amounting to about Rs.2000 crore by way of capacity
expansion and modernization. The company commissioned a new yarn
unit-Vardhman Yarns at Satlapur (M.P.) in 2007 with initial capacity of
30,000 spindles. The capacity has since been expanded to present level
of 1,23,552 spindles. Vardhman Yarns is well on its way of achieving
the ultimate capacity of approx. 2,30,000 spindles. The unit is also
establishing its own captive power plant of 24 MW which is likely to be
operational during the current year.
The integrated textile unit of the Company- Vardhman Fabrics at Budni
( M.P.) has also started commercial production in 2007-2008. Vardhman
Fabrics will have 60,000 spindles for yarn spinning, 2,830 rotors and
400 airjet looms, besides having yarn dyeing capacity of 10 TPD and
fabric processing capacity of 60 million meters per annum. Out of the
above, 40,800 spindles, 2,160 rotors, 310 looms and fabric processing
capacity of 40 million meters per annum have already become operational
29
during 2007-2008 and the remaining capacity is likely to be operational
during the current financial year. Further, the unit also has its own
captive power plant of 24 MW, which has become operational during
2007-2008. However, the optimum level of utilization of the increased
capacities could also not be achieved in 2007-08 because of initial
hiccups which are expected to normalise over a period of time.
With these projects, Vardhman Group will emerge as a strong integrated
textile house, catering to the diverse requirements of the customers.
The planned increase in capacity will
generate economies of scale and adoption of technology will boost the
productivity and quality to customers delight.
Vardhman is working on the expansion plans and technology advancement with the help
of grants given by the government under the ‘Technology Upgradation Fund’ (TUF)
scheme to “boost the textile industry”.(www.aepcindia.com/market-sch-TUFS.asp)
3.1.v.PERFORMANCE
In markets like the EEC, USA, Canada, China, Japan, Korea, Mexico, Brazil and
Mauritius, Middle East. Vardhman has a share of more than 6% in total Yarn
exports from India.
Its trusted, tested and reliable workforce, coupled with the latest technology, quality
consciousness, customer oriented services and strong logistics has given Vardhman an
30
edge over its competitors and in the world’s most quality conscious and price sensitive
markets. Thereby making Vardhman a truly international organisation in terms of
sourcing from and catering to the world market.
FINANCIAL STATUS
PARTICULARS
SALES REVENUE (RS CRORE)
Yarns
102873.31
Sewing thread
29634.83
Steel
34702.19
Fabric
33239.58
% SALES REVENUE
fabric, 13%
steel, 15%
sewing
thread, 15%
yarns , 57%
During the last 5 years, Vardhman Group has recorded 10 percent top line growth rate,
which is higher than the industry average growth rate. The Group turnover has grown
from Rs 723 crores in 1995 to Rs 3186.32 crores (about USD 700 million) in 2008-09.
31
The exports has grown from negligible level in early nineties to Rs 689 crores (USD 150
million) in 2008-09.
Financial Indicators Of Vardhman Group (Rs. In Crores)
Particulars
Group
Group
Group
Group
Group
2008-09 2007-08 2006-07 2005-06 2004-2005
Gross Sales
3186.32
2692.93
2454.00
2210.27
2219.34
Fob Value Of Exports
688.67
495.73
482.93
402.67
445.81
Profit Before Tax
137.41
204.80
264.73
259.53
190.62
Cash Accrual (PBT + Dep.)
380.79
376.74
398.32
377.33
305.26
Gross Block
3935.47
3460.86
2467.71
2079.37
1802.54
Net Block
2571.33
2219.22
1386.84
1124.31
954.55
4555.61 3917.86 3181.18
Capital Employed
http://www.vardhman.com/about_performance.asp
2438.86
1817.96
there has been an increase in gross sales from 2004-2005 which was 2219.34 crore to
3186.32 crore in the year 2008-2009.
There has been a decline in profit before tax from 2005-2006 which was 259.53 crore
to 137.41 crore in 2008-2009.
Globalization
Vardhman ventured in to the global market in 1986 with an export value of one core to
reach exports of $150 mn in FY 2008-09.
32
Little wonder then, that Vardhman, today, exports 40% of its yarn production to
more than 25 countries and has a strong presence
(www.vardhman.com)
3.1.vi. CORPORATE SOCIAL RESPONSIBILITY
Some of CSR activities  Sri Aurobindo Socio-Economic and Management Research Institute is
engaged in the promotion of education, research and publications highlighting
social and economic issues facing the society. The Institute runs a Human
Resource Development Centre for providing career counseling and guidance
to college students in Punjab. The teams of experts also visit the colleges in
the state to prepare college students for gainful employment in the industry.
 Sprung from a keen desire to set up an educational institution in Ludhiana and
inspired by the writings of Sri Aurobindo and the Mother, the Trust has set up
a college - Sri Aurobindo College of Commerce and Management (affiliated
to the Punjab University) with the mission to create an institution with
distinction dedicated to the ideals of creating disciplined career oriented
young people ready for going for administrative and management roles in
enterprises or to set up their own business as entrepreneurs.
 A Vardhman initiative to improve the yield of cotton in Punjab in 2001 when
the State had suffered a shock of crop devastation and area under cotton
cultivation was dwindling, led to the experiment to adopt villages and see
whether concerted efforts in bringing knowledge to farmers could improve the
yield of cotton. The experiment was successful as it improved the yield of
cotton to 873 kg/hectare in 2005 in adopted villages where the average yield
of cotton in the State of Punjab was 587 kg/hectare
 (world average - 700 kg/hectare).
33
 Vardhman is actively engaged in the activities of Nimbua Greenfield Punjab
Limited (www.ngpl.co.in) formed by a consortium of Industries of Punjab for
developing a common facility for storage, treatment and disposal of hazardous
wastes generated by the Industry with a Government of India grant.
www.ngpl.co.in)
3.2 EXTERNAL ENVIRONMENT
3.2.i.PEST ANALYSIS
Political
The principal government policies affecting consumer prices for textile products are
excise taxes charged on products as they leave the factory and import tariffs charged on
raw and intermediate products used in manufacturing. Historically, both excise taxes and
tariffs have been used to discourage domestic use of manmade fibres, which are based
heavily on imported raw materials, and to promote the use of cotton, most of which is
produced domestically. Both excise taxes and, to a lesser extent, tariffs on manmade
fibres have been reduced during the past decade as part of policy reforms aimed at
reducing protection and regulation throughout the industrial sector. Overall, excise tax
rates on manmade and blended products have been reduced nearly 40 percent since the
mid-1990s, while taxes on cotton goods have been reduced about 25 percent. Tariff
reductions on manmade raw materials and goods have been more recent and less
significant than the excise tax cuts. Despite the cuts, taxation of manmade goods remains
high relative to cotton goods.
Tariff and excise tax policies that have discriminated against manmade fibres have played
a key role in shaping relative consumer prices and consumption patterns for cotton and
manmade products. Recent tariff and excise tax adjustments have reduced discrimination
against manmade fibres, but with continued high differentials in taxes on cotton and
manmade goods, there is considerable scope for future tariff and tax reductions to further
reduce prices for manmade products.
34
Economic
India has already emerged as a small but growing market for U.S. cotton in recent years,
driven by the price and quality consciousness of export-oriented mills and garment
makers. India has been a competitive producer of raw cotton and mostly self-sufficient. It
is not clear, however, if domestic producers will be able to meet the quantity and quality
demands of a rapidly expanding textile sector that, according to government targets, aims
to more than triple its exports by 2010. On January 1, 2005, developed countries removed
import quotas on textile products previously sanctioned by the 1974 Multifiber
Arrangement (MFA). This change provides a major opportunity for India to expand
production and exports of textiles and apparel to developed country markets.
The elimination of MFA quotas induced Indian policymakers to relax investment
restrictions and to adopt market liberalization measures in the textile sector, although
these reforms have been slower than developments in some other key countries ,most
notably China. However, the opportunity created by the elimination of MFA quotas,
together with India’s rapid economic growth and demonstrated comparative advantage in
production of both raw cotton and textiles, increases the likelihood that India will
continue to adopt policies aimed at expanding its capacity to produce and export cotton
and textiles.
Social
One of the most interesting social features of the textile industry is that, it migrates from
high cost nations to the low cost nations. The growth of the domestic demand for clothing
in India is linked with the success of the retailing sector. India presently has entered the
second phase of growth and is witnessing a massive rise in the domestic demand. This is
primarily due to the rise in the standard of living caused by the rise in the middle-income
groups. In our present economic world of demand and supply, price and quality are the
key factors, which determine the success of any business. The key element here though,
is the cost of labor. India and China have a comparative advantage in this industry
though,
their
vast
labor
forces
and
the
relatively
low
cost
of
labor.
35
Since, India and China have the advantage of making textiles and so fabric costs are
lower than in other countries, they have become the Apparel sourcing choice for many
international companies. Sourcing choices arise from profitability. This includes
considering costs, such as, buying factors of production, like land, buildings and
machines versus factors affecting revenues, including pricing, marketing, and
distribution. The issues of labor, material, shipping costs and tariffs structure also affect
the sourcing choices. Since, apparel production is a labor-intensive activity, wage rates
are also a major factor in sourcing decisions. This gives immediate competitive
advantage to producers in countries like India and China to export to more developed and
high cost countries like the United States and the European Union.
Technology
To facilitate needed structural transformation, the Government established TUFS to
provide subsidized, low-interest loans to purchase imported shuttleless looms. To
encourage additional participation, the Government recently reduced interest rates to 2.53.0 percent for investments made by larger cotton-processing units.
The heavily protected handloom sector is growing much more slowly (about 3 percent
annually) than the powerloom and hosiery sectors but still accounts for about 13 percent
of cloth output. Handlooms, which are highly labour intensive and viewed as a source of
employment and supplementary income for 6-7 million people in over 3 million weaver
households, will likely continue to receive preferential policy treatment. The Government
provides handloom operations with tax exemptions, low-interest loans, and rebates on
fabrics sold through cooperatives, and also “reserves” exclusive rights for handloom
operators to produce 11 items, such as non- terry towels and some varieties of bed sheets.
In 2001, the Government established the high-level Technology Mission on Cotton
(TMC) to direct, coordinate, and fund initiatives to raise the productivity and quality of
36
Indian cotton and strengthen returns to growers. TMC activities focus on four program
areas, including (1) research and technology generation, (2) transfer of technology to
farmers, (3) improvement of marketing infrastructure, and (4) modernization of gins.
Although it is too early to evaluate TMC impacts on research and extension, progress in
improving market facilities and, particularly, cotton gins is evident in cotton-producing
areas.
http://usda.mannlib.cornell.edu/usda/ers/CWS//2000s/2005/CWS-06-032005_Special_Report.pdf
4. RATIOS
Financial ratios are useful indicators of a firm's performance and financial situation. Most
ratios can be calculated from information provided by the financial statements. Financial
ratios can be used to analyze trends and to compare the firm's financials to those of other
firms. In some cases, ratio analysis can predict future bankruptcy
Ratio Analysis enables the business owner/manager to spot trends in a business and to
compare its performance and condition with the average performance of similar
businesses in the same industry. To do this compare your ratios with the average of
businesses similar to yours and compare your own ratios for several successive years,
watching especially for any unfavorable trends that may be starting. Ratio analysis may
provide the all-important early warning indications that allow you to solve your business
problems before your business is destroyed by them
The Company enjoys a rating of AA- and P1+ from Credit Rating. Information Services
of India Limited (CRISIL) for long term and short term borrowings respectively.
Management believes that the Companies liquidity and capital resources should be
sufficient to meet its expected working capital needs and other anticipated cash
requirements.
37
Profitability Ratio:- (all figures in Cr and Rs)
Gross Profit Margin Ratio= sale-cost of goods sold /sale
Cost of goods sold= Material consumption + Mfg expenses+ personal expenses
particulars
Sale
Cost of goods sold
GPM (in %)
2009
2456.71
1939.49
21.05%
2008
2294.79
1794.8
21.78%
INTERPRETATION:GPM has decrease in 2009 by .73%
Ratios that use various profit margin analyses to show return on sales and capital, as a
measure of how well a company is using its resources to generate profits. A high GPM
suggests that the firm has good cost management controls of its operations. A high GPM
indicates that a business can make a reasonable profit on sales, as long as it keeps
overhead costs in control. If business is slow and profits are weak, a high margin could
indicate overpricing. A low GPM, especially relative to industry norms, could indicate
under pricing. In general, the GPM should be stable, not fluctuating much from period to
period, unless the industry has been undergoing changes that affect the costs of goods
sold or pricing policies.
Like Vardhman has a higher GPM in 2008 comparison to 2009 which gives them a better
costs and expenses on its operation
INTER-FIRM
38
particulars
Cost of goods sold
Sale
GPM Ratio (in %)
Vardhman(2009)
1939.49
2456.71
21.05%
Century(2009)
3882.1
2552.28
34.26%
INTERPRETATION:Vardhaman has a GPM of 21.05 and Century has a GPM of 34.26, it shows that Century
done well to use his resources to generate his profit and Century has a good cost
management control of its operation and other direct cost.
Operating Profit Margin:- GP-OPEX-DEP/sale
particular
2009
2008
Gross profit
517.22
499.99
OPEX = Operating expenses 32.62
(General
44.65
and
Administrative)
DEP = Depreciation
Sale
OPM (in %)
207.32
2456.71
11.29%
154.56
2294.79
13.11%
39
INTERPRETATION
Operating Profit Margin (OPM)
The operating profit margin indicates how effective a company is at controlling the costs
and expenses of its operations. The remaining deductions are interest and taxes. Like
GPM, the higher the OPM, the more pricing flexibility a company has in its operations.
This pricing flexibility provides greater safety during tough economic times. A higher
OPM could also be a sign of the degree of cost control management.
Vardhman has a higher OPM in 2008 which gives them flexibility during recession and a
higher degree of cost control management.
INTERFIRM:
Particulars
Gross profit
OPEX = Operating expenses
(General and
Administrative)
DEP = Depreciation
Sale
OPM Ratio (in %)
Vardhman (2009)
517.22
32.62
Century (2009)
1329.82
153.74
207.32
2456.71
11.29%
205.28
3882.1
25.01%
40
OPM RATIO
Vardhman has a OPM of 11.29% and Century has a OPM of 25.01%. It shows that
Century is more effective over controlling the costs and expenses of its operations. It has
a effective cost management than Vardhman.
Net Profit Margin Ratio
GP-OPEX-DEP-INTEREST-TAX
= ____________________________
SALE
Here Reported PAT is the Operating net profit
Intra firm:Particulars
2009
2008
Reported PAT
140.77
122.54
Sale
2456.71
2294.79
NPM Ratio (in %)
5.73%
5.31%
INTERPRETATION
41
Net profit margin is one of the key performance indicators. The higher the net profit
margin, the more effectively the company is converting revenue into profit. The NPM
measures the profits available to shareholders after deducting interest and taxes.
Comparing profit with sales volume is useful. You can determine whether you’re making
enough of a profit. The higher the profit margin, the more pricing flexibility a firm may
have in its operations or the greater cost control initiated by management. Vardhman
has a higher NPM in 2008 by 4.3%percentage, it means it converted more revenue
into profit.
Inter firm
Particulars
Reported PAT
Sale
NPM Ratio (in %)
Vardhman 2009
140.77
2456.71
5.73%
Century 2009
264.80
3882.1
6.82%
INTERPRETATION:It shows that the net profit margin is more in Century than Vardhman and Century
converting the revenue into profit very easily
Liquidity Ratio:Liquidity ratios (or solvency ratios) include the current ratio, the quick ratio.
Current Ratio= current assets/current liabilities
42
Particular
2009
2008
Current asset
1926.52
1828.77
Current liabilities
736.08
694.5
Current Ratio
2.61
2.63
INTERPRETATION:Current Ratio
This is the standard measure of any business’s financial health. The current ratio
measures the ability of the firm to pay its current bills. You derive this ratio from the
figures on your balance sheet. It tells whether a company has enough assets to cover its
liabilities.
current ratio =current assets/current liabilities
Current assets include cash, accounts receivable, marketable securities, inventory, and
any prepaid expenses like insurance or taxes. Current liabilities include accounts payable,
current interest due on long-term debt, like taxes payable and salaries payable. Generally,
the higher the current ratio, the greater the safety margin between current obligations and
the ability to pay them. The benchmark current ratio is 2:1.Vardhman has a Current Ratio
in 2008 is 2.63 which is crossed the bench mark of 2:1 it means it there is a good margin
between current obligation and pay them to the mark.
There is a Current Ratio in 2009 is 2.62 comparison with 2008 there is a decrease of .01
but its still cross the bench mark of 2:1.This is also showing the excess of liquidity.
43
INTER-FIRM
Particulars
Vardhman (2009)
Century (2009)
Current asset
1926.52
1669.13
Current liabilities
736.08
1373.95
Current Ratio
2.61
1.21
Current Ratio
The current ratio of Vardhman is 2.62 and century is 1.21 it shows that Vardhman has
more asset which they convert in to liabilities and Vardhman has a more financial
stability than Century because it still cross the bench mark of 2:1. It shows that Century
has a shortage of liquidity.
QUICK RATIO
QUICK RATIO = CURRENT ASSET-INVENTORY/CURRENT LIABILITIES
Particular
2009
2008
Current assets
1926.52
1828.77
Inventory
619.11
870.38
Current liabilities
736.08
694.5
Quick ratio
1.77
1.38
44
INTERPRETATION
The quick ratio is similar to the current ratio, but it’s a tougher measure of liquidity than
the current ratio, because it excludes inventories. Inventories typically take time to
convert to ready cash. Thus, most analysts find them illiquid, not a cash equivalent.
Majority opinion holds it stems from the practice of proving
quick ratio =(current assets – inventory)/current liabilities
Generally, the quick ratio should be lower than the current ratio, because the inventory
figure drops from the calculation. A higher ratio correlates to a higher level of liquidity.
This usually corresponds to better financial health. The quick ratio also indicates whether
a business could pay off its debts quickly, if necessary .The desired quick ratio is at least
1:1. A lower ratio flags questions about whether the firm can continue to meet its
outstanding obligations.
While compare both the data in 2008 the ratio was 1.38 & in 2009 the data was 1.77,
there is a improvement of .39% it shows that level of liquidity has increase and it pays his
debts very easily.
This is also showing excess of liquidity.
INTER-FIRM:Particular
Vardhman(2009)
Century (2009)
Current assets
1926.52
1669.13
Inventory
619.11
670.52
45
Current liabilities
736.08
1373.95
Quick ratio
1.77
0.67
Quick ratio:The Quick ratio of Vardhman in 2009 is 1.77 and for Century is 0.67 it shows that
Vardhman has a higher level of liquidity compare to Century and the strength of paying
debt is more than Century.
SOLVENCY RATIO:One of many ratios used to measure a company's ability to meet long-term obligations.
The solvency ratio measures the size of a company's after-tax income; excluding noncash depreciation expenses, as compared to the firm's total debt obligations. It provides a
measurement of how likely a company will be to continue meeting its debt obligations
Debt-to-Equity Ratio:- Total Debt/equity
Particulars
2009
2008
Total debt
2493.32
2391.24
Total equity
1272.75
1172.14
Debt-to-Equity Ratio
1.95
2.04
46
INTERPRETATION:
This ratio measures the percentage of debt tied up in the owner’s equity. Generally, this
calculation uses only long-term debt
Debt-to-equity ratio = long-term debt/total equity
As a rule of thumb, a high debt-to-equity ratio means a firm is more capital-intensive,
with all the risks that entails. If this number is high, the company may want to look for
ways to cut the debt load. Highly leveraged companies are usually more vulnerable to
business downturns than those with lower debt-to equity ratios. Debt to equity ratio of
Vardhman in 2008 is 2.04 & in 2009 is 1.96 it means in 2009 it has higher solvency
ratios and lower financial risk as compared to 2008.
INTER FIRM:Particulars
Vardhman 2009
Century 2009
Total debt
2493.32
1791.29
Total equity
1272.75
1478.47
Debt-to-Equity Ratio
1.95
1.21
47
The ratio of Vardhman in 2009 is 1.96 and Century has a ratio of 1.21 it shows that
Century has a better condition and it has a less financial risk and higher solvency and it
has a more safe position to pay his debt.
Times interest Ratio: - INTRAFIRM
Times interest earned = earnings before interest and taxes (EBIT)/interest
Particulars
2009
2008
EBIT
240.25
221.71
Interest
127.89
63.89
TI Ratio
1.87
3.47
INTERPRETATION:-
48
Times interest earned, sometimes called the interest coverage ratio, measures the
creditworthiness of a company, the ability of the company to meet its debt payments.
The ratio shows how many times a company could pay the interest on the annual debt
load. The higher the times interest earned, the more likely the firm can meet its
obligations.
times interest earned = earnings before interest and taxes (EBIT)/interest
The EBIT is the operating profit from the income statement. For the denominator, use the
interest expense from the prior four quarters.
Vardhman has a TI in 2008 is 3.55 and in 2009 it was 1.87, it means that organization has
a better TI ratio in 2008 compare with 2009 because higher TI indicates lower financial
risk and the business doing better at that time.
INTER FIRM:Particulars
EBIT
Interest
TI Ratio
Vardhman 2009
240.25
127.8v 9
1.87
Century 2009
482.39
103.01
4.68
The TI ratio of Vardhman in 2009 is 1.87 and Century has a ratio of 4.68 it shows that
Vardhman has a lower financial risk and it has a lower interest cut ratio and it has a lower
interest cut over profit.
Asset Utilization (Intra firm)
Return on Assets (ROA)
49
Return on assets = EBIT/net operating assets
Net operating asset=Net Block+ Capital W/P+ investment+ Net Current Asset
Particular
EBIT
Net operating asset
Ratio(in %)
2009
240.25
3766.07
6.38%
2008
221.71
3563.37
6.22%
INTERPRETATION:This ratio tells how effectively a business has been making its assets work. The ROA
measures the use of capital to make profit (before interest and income tax).
Return on assets =EBIT/net operating assets
This ratio is most useful when compared with the interest rate paid on the company’s
debt. When the cost of borrowing—the interest rate—is higher than the benefit of doing
business—the ROA, there’s a problem. For example, if the ROA is 10% and the interest
rate paid on its debt is 12%, the business’s profit was 2% lower than the interest it paid to
make that profit: it’costing money to stay in business. The asset ratio upon total asset in
2008 is 6.38% and in 2009 is 6.22% it shows that organization converted more asset into
cash following the previous year
Inter firm:- vg
50
Particular
EBIT
Net operating asset
Ratio
Vardhman 2009
240.25
3766.07
6.38%
Century 2009
482.39
3135.5
15.38%
INVENTORY TURN OVER RATIO (INTRAFIRM)
=COGS/ INVENTORY
Particular
2009
2008
COGS
1939.49
1794.8
INVENTORY
619.11
870.38
ITO Ratio
3.13
2.06
51
INTERPRETATION:The inventory turnover ratio is one of the most important financial ratios. Of all the asset
management ratios, it gives the business owner some of the most important financial
information. The inventory turnover ratio measures the efficiency of the business in
managing and selling its inventory. This ratio gauges the liquidity of the firm's inventory.
It also helps the business owner determine how they can increase their sales through
inventory control. Here is the calculation for the inventory turnover ratio. Generally, a
high inventory ratio means that the company is efficiently managing and selling its
inventory. The faster the inventory sells, the less funds the company has tied up.
Companies have to be careful if they have a high inventory turnover as they are subject to
stock outs. If a company has a low inventory turnover ratio, then there is a risk they are
holding obsolete inventory which is difficult to sell. This may eat in to a company's
profit. However, the company may be holding a lot of inventory for legitimate reasons.
They may be preparing for a holiday season in the case of the retail industry or preparing
for a strike, among other reasons.
Vardhman has a higher Inventory Turn Over Ratio in 2009 compared to 2008 it shows
that company is efficiently managing and selling its inventory in 2009
INTERFIRM
52
Particulars
COGS
INVENTORY
ITO Ratio
Vardhman 2009
1939.49
619.11
3.13
Century 2009
3882.1
670.52
5.78
INTERPRETATION:Century has a higher Inventory Turn Over ratio compare with Vardhman in 2009 it shows
century has more efficiency of the business in managing and selling its inventory, century
has the faster the inventory sells.
DSO Ratio:DSO Ratio=Receivables/Average Sales Per Day
Average Sales Per Day=SALES/365
Here receivable is the trade receivable of the organization
Particulars
2009
Receivables
275.67
Avg sales per day
6.73
DSO Ratio
40.96
2008
272.46
6.28
43.38
INTERPRETATION:A measure of the average number of days that a company takes to collect revenue after a
sale has been made. A low DSO number means that it takes a company fewer days to
collect its accounts receivable. A high DSO number shows that a company is selling its
product to customers on credit and taking longer to collect money. Due to the high
importance of cash in running a business, it is in a company's best interest to collect
outstanding receivables as quickly as possible. By quickly turning sales into cash,
a company has the chance to put the cash to use again - ideally, to reinvest and make
53
more sales. The DSO can be used to determine whether a company is trying to disguise
weak sales, or is generally being ineffective at bringing money in. For most businesses,
DSO is looked at either quarterly or annually.
For current scenario Vardhman has a higher DSO ratio compare with 2009 it shown
organization taking less no of days to collect its accounts receivable.
INTER FIRM
Particulars
Receivables
Avg sales per day
DSO Ratio
Vardhman2009
275.67
6.73
40.96
Century 2009
150.89
10.64
14.13
INTERPRETATION:It shows that century has taking a lesser no of days to collects its accounts receivable.
Due to the high importance of cash in running a business, it is in a company's best
interest to collect outstanding receivables as quickly as possible.
EPS Ratio:The portion of a company's profit allocated to each outstanding share of common
stock. Earnings per share serves as an indicator of a company's profitability
EPS RATIO=Net Profit-Preference Dividend/No Of Shares Issued
Particulars
Net Profit
Preference Dividend
2009
140.77
0
2008
122.54
0
54
No of Share Issued
Ratio
5.78
24.35
5.78
21.2
When calculating, it is more accurate to use a weighted average number of shares
outstanding over the reporting term, because the number of shares outstanding can
change over time. However, data sources sometimes simplify the calculation by using the
number
of
shares
outstanding
at
the
end
of
the
period.
Diluted EPS expands on basic EPS by including the shares of convertibles or warrants
outstanding in the outstanding shares number.
Earnings
per share is generally
considered to be the single most important variable in determining a share's price. It is
also a major component used to calculate the price-to-earnings valuation ratio. In this
case Vardhman has a higher EPS in 2009 compare with 2008 is 24.35 and 21.21 so the
outstanding share price is more high compare with the previous year
INTERFIRM:Particulars
Net Profit
Preference Dividend
No of Share Issued
Ratio
2009
140.77
0
5.78
24.35
2008
297.23
0
9.3
31.96
55
INTERPRETATION:Century has a better EPS value than vardhman it shows the value of share is more than
Vardhman, it depicted that the share value is more than the Vardhman.
Price / Earnings Ratio= Price/ Earnings per share (intra firm)
Particulars
2009
2008
Price of share
265.35 ( on 9th April 2009) 209.12 (on 9th April 2008)
EPS
24.35
21.2
P/E Ratio
10.89
9.86
Interpretation
The P/E Ratio equals the price of a stock divided by the earnings. The higher the P/E
ratio is, the more growth the company has seen or is expected to have. But this is also an
56
indication that the company is overvalued and things could be about to turn around. A
low P/E can signal a good time to buy, but it can also mean that the company is having
problems. The P/E ratio can be very helpful in assessing stocks but it needs to be
considered along with other important factors
Here Vardhman has a higher P/E ratio in 2009 it shows its growth rate is more than 2008.
Inter firm
Particulars
Price of share
EPS
P/E Ratio
Vardhman 2009
265.35 ( on 9th April 2009)
24.35
10.89
Century 2009
532.75 (on 9th April 2009)
31.96
16.67
Century has more growth the company has seen or is expected to have compared to
Vardhman.
POSITIVE AND NEGATIVE ASPECTS OF VARDHAMAN TEXTILES

Indian textile industry exports its 40% of output & out of this 40 it exports the
60% to USA and European market. And these were the markets which were most
affected by the recession.

But during the recession period Vardhman group has taken many steps to survive
such as improvement in its services like reliable delivery, superior quality & has
been able to generate economies of scale (change in input to change in return)
57

One of the strengths of Vardhman textile industry is that it is still working for the
expansion projects in the Satlapur,M.P.
Products of vardhman
Yarn- The sales revenue has increased by 18.01% than last year.
Fabric- sales revenue is increasing much faster than others i.e. its 31.1% higher than last
year. So the company should concentrate on its fabric product as it can provide more
profits.
Steel business- Vardhman’s Steel business is a drawback as demand for auto and its other
related uses of steel has decreased sharply. The Sales revenue has decreased by 13%
Reason for inefficiency- Vardhman is not utilizing its capacity to the fullest and
therefore even when it is experiencing the fall in the cost of raw materials the cost of
finished goods is not coming down.
5. BREAK EVEN ANALYSIS
5.1 VARDHMAN 2009
SALES= net operating income+ other recurring income + nonrecurring items+ other non
cash adjustment
SALES=2595.11 CR
CONTRIBUTION MARGIN=SALES-VARIABLE COST
SALES=2595.11
VARIABLE COST=MATERIAL CONSUMPTION+MANUFACTURING
EXPENSES+TAX CHARGES
VARIABLE COST=1846.33 CR
CONTRBUTION MARGIN=748.78 CR
CM RATIO= CM/SALESX100
58
= 748.78/2595.11X100
= 0.288535
BREAK EVEN POINT=FIXED COST/CM RATIO
FIXED COST=PERSONAL EXPENSES+SELLING EXPENSES+ADMIN
EXPENSES+CAPITALISED EXPENSES+DEP+FINANCIAL
EXPENSES
FIXED COST=606.75 CR
BREAK EVEN POINT=FIXED COST/CM RATIO
=606.75/0.288535X100
BREAK EVEN POINT=2102.865 CR
VARDHMAN 2008
SALES= net operating income+ other recurring income + nonrecurring items+ other non
cash adjustment
SALES=2325.9 CR
CONTRIBUTION MARGIN=SALES-VARIABLE COST
SALES=2325.9 CR
VARIABLE COST=MATERIAL CONSUMPTION+MANUFACTURING
EXPENSES+TAX CHARGES
VARIABLE COST=1681.07 CR
CONTRBUTION MARGIN=644.83 CR
CM RATIO= CM/SALESX100
= 644.83/2325.9X100
= 0.27723
BREAK EVEN POINT=FIXED COST/CM RATIO
FIXED COST=PERSONAL EXPENSES+SELLING EXPENSES+ADMIN
EXPENSES+CAPITALISED EXPENSES+DEP+FINANCIAL
EXPENSES
FIXED COST=522.28 CR
BREAK EVEN POINT=FIXED COST/CM RATIO
=522.28/0.27723X100
BREAK EVEN POINT=1883.9 CR
59
5.2 CENTURY 2009
SALES= net operating income+ other recurring income
SALES= 3917.32CR
CONTRIBUTION MARGIN=SALES-VARIABLE COST
SALES=3917.32 CR
VARIABLE COST=MATERIAL CONSUMPTION+MANUFACTURING
EXPENSES+TAX CHARGES
VARIABLE COST=2321.91 CR
CONTRBUTION MARGIN=1595.41 CR
CM RATIO= CM/SALESX100
= 1595.41/3917.32X100
= 40.72
BREAK EVEN POINT=FIXED COST/CM RATIO
FIXED COST=PERSONAL EXPENSES+SELLING EXPENSES+ADMIN
EXPENSES+CAPITALISED EXPENSES+DEP+FINANCIAL
EXPENSES+NON RECURRING ITEMS+OTHER NON CASH
ADJUSTMENTS
FIXED COST=1247.13 CR
BREAK EVEN POINT=FIXED COST/CM RATIO
=1247.13/40.72X100
BREAK EVEN POINT=3062.6 CR
ANALYSIS AND INTERPETATION
MARGIN OF SAFETY
Margin of safety= actual sales-breakeven sales
Vardhman 2009
Actual sales= 2595.11cr
Breakeven sales= 2102.865cr
Mos= 2595.11-2102.865
= 492.24 cr
This indicates that operational risk of the business is low as margin of safety of
Vardhman in the year 2009 is high which is beneficial for the company.
60
Vardhman 2008
Actual sales=2325.9cr
Breakeven sales=1883.9cr
Mos= 2325.9-1883.9
=442 cr
It is very good for the company as this indicates that operational risk of the business is
low as margin of safety of Vardhman in the year 2008 is high but its lower when
compared to last year.
500
490
480
470
460
450
440
430
420
410
492.24
442
2009
MOS
2008
Fig in CR
Century 2009
Actual sales=3917.32 cr
Breakeven sales=3062.6 cr
Mos= 3917.32-3062.6
=854.32 cr
Century has a very high margin of safety and very low operational risk. Its even better
than vardhman and the company is doing really well.
900
800
700
600
500
400
300
200
100
0
854.32
492.24
MOS
vardhman
century
Fig in CR
61
6. SWOT ANALYSIS
6. 1 STRENGHS
 Company has large and diversified segments that provide wide variety of
products.
 Industry has Manufacturing Flexibility that helps to increase the productivity.
 Hard work put in is recognized and felicitated. A feeling that galvanizes the
Group into believing in more, in itself and reaffirming its commitment to offer
products that invoke trust and reliability.
 Vardhman offers the widest range of specialized grey and dyed yarns (NE 10
to NE 200) in cotton, polyester, acrylic and varieties of blends.
 The group offers value added products like Organic Cotton, Melange, Lycra,
Ultra yarns
 With setting up of
INTEGRATED YARN DYEING UNIT,the installed
capacity to process has increased to 20 tons of Yarn and 15 ton of Fibre per
day.
 Offers eco friendly blends, Anti bacterial finished yarn also available
 Though automation has taken place in many operations the industry is largely
labour oriented. Hence they can capitalize on cheap labour.
 The company is financially sound and has good amount of current assets and
reserves to pay off the liabilities, fulfill the anticipated cash requirements and
to work on the expansion plans.
http://0301.netclime.net/1_5/R/H/Y/Textile%20Industry.pdf
6.2 WEAKNESS
62
 Company is highly depended on cotton
 Lower productivity in various segments
 Lack of technological development that affect that productivity and other
activities in the whole value chain
 Profits before taxes are declining which can create financial decline
 Changing trends could lead to lower volumes
 Competition from other low cost industry or country Eg: china
 A lot of money is blocked because there is a lot of unsold stock.
 Improper use of available funds which are lying idle
6.3 OPPORTUNITIES
 Abundant raw material availability that helps company to reduce costs and
control lead time across the operation
 Availability of low cost and skilled manpower gives company a competitive
advantage.
 Availability of large varieties of cotton fibre and has a fast growing synthetic
fibre increase market
 India is one of the largest exporters of Yarn in international market and
contributes around 25% share of the global trade in Cotton Yarn
 Large potential ,domestic, international market
 Company has manufacturing flexibility that increase productivity..
 Product development and diversification to cater global needs
 Elimination of quota restriction leads to greater market development
 Market is gradually shifting towards branded readymade garments
 Increase disposable income and purchasing power of Indian consumer opens
new market development
63
 Textile being 2nd largest employment generator already has captured
government attention
 Greater investment and FDI opportunities are available
 Product development and Diversification to cater global needs.
 Growth rate of Domestic Textile Industry is 6-8% per annum.
 There is increasing growth potential in sustainable products
 A Japanese joint venture has opened wide opportunities for their textile
industry
 Overseas alliances to help move up the value chain and gain global presence.
6.4 THREATS
 Competition from other developing countries specially china
 Continuous quality improvement is needed as there are different demand
patterns all over the world
 Elimination in quota system will lead to fluctuations in export demand.
 Threat for traditional market for power loom and handloom products and
forcing them for product diversification
 Geographical disadvantages
 Lack of trade membership which restrict to tap other potential market
 International labour and environment laws.
 To balance the demand and supply.
 To make balance between price and quality.
 Unfavourable labour laws
 Fibre prices, especially cotton is determined to a large extent by factor such as
weather conditions
 Higher indirect taxes, power and interest rates
 Indian Textile Industry is highly Fragmented Industry.
 Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports
and transportation Time.
64
 The fabric and garmenting sector need modernization, which is under process.
http://0301.netclime.net/1_5/R/H/Y/Textile%20Industry.pdf
7. FUTURE PLANS OF THE COMPANY
The company is expanding and modernizing current capacities of spinning, weaving and
fabric processing at Baddi in Himachal Pradesh and Punjab. New facilities at Satlapur,
and Budni in Madhya Pradesh will enhance capacities. Post expansion, the total capacity
of spinning would go up from 536,440 spindles to 776,440 spindles, fabric processing
capacity from 4.2 million meters per month to 85.9 million meters per month, 28.3 MT
per day sewing thread, 54.5 MT per day mercerizing and dyeing of yarn and fabric, and
18,500 MTPA acrylic fibre. The company has already installed a 25 MW captive power
plant.
A licensing agreement is in place with American & Efird, Inc. USA for manufacturing
and distribution of the famous A&E branded sewing threads and tie-ups with world
leaders in Switzerland, Germany, Japan and Korea for its various products. VMT
Spinning Company, Vardhman Yarns & Threads, Vardhman Acrylics are subsidiaries
and Vardhman Threads, a step-down subsidiary. Serving top of the line customers like
Banana Republic, GAP, Esprit, and Ann Taylor, major export destinations include USA,
EU,
Australia,
Canada,
UAE,
UK,
Japan,
and
several
other
countries.
The registered office of the company is at Chandigarh Road, Ludhiana, Punjab-141010.
(http://myiris.com/shares/company/writeDet.php?icode=mahspimi#fut)
Overall there is no shortfall in capacity globally. There is enough capacity available
across India, China, Bangladesh and Pakistan––the countries that have been investing.
Currently, there has been shortage of cotton yarn globally and there is filling up of an
inventory pipeline which has lead to hardening of yarn prices as the cotton prices have
gone up in the world.
65
Moving ahead, the company expect the remaining few months to be good and next year is
also expected to be good as eventually they expect the global economy to start recovering
towards the later of the year. As of now whatever increases in cotton prices have
happened, the yarn prices have also moved up simultaneously. The margins are slightly
better than what they were. Marginally, they may come down as the company move
ahead but they do not see a very major decline in margins moving ahead. As of now they
are comfortable with this debt level because they are planning the next phase of
expansion. The details will come out in the next three-four months, but over the next
three years they are planning to invest something like Rs 600-700 crore. So they expect
their debt equity levels to remain around 1.8-2 or so. Normally the company do not give
out guidance about the future because cotton industry is a volatile industry and a lot of
depends on cotton prices. They expect that the going will remain good. They tried to buy
the bonds earlier but were able to buy only USD 1 million of these bonds. As of now they
have no expectations of these converting. So there is almost full probability that they will
be paying off these bonds. The company has enough cash available in the company to
repay these bonds in February 2011. Not really but moving ahead in 2011-12, the interest
cost will go up because the interest of these FCCBs were not charged off with interest
because this was a zero coupon bond. So borrowing would be slightly higher when they
repay these bonds. So 2011-12 onwards the interest cost would be slightly higher than of
2010-11. For them to hike the stake, they will have to make an open offer because they
are already above the Securities and Exchange Board of India (SEBI) minimum of 55. As
of now, there are no plans of the promoters to increase the stake in the company.
http://www.moneycontrol.com/news/business/to-invest-rs-600-700crnext-3-yrsvardhman-textiles_446196.html
In the mid -1980s, the Vardhman group commenced its yarn conditioning activities and
from the outset, worked closely with the Swiss XORELLA AG, which developed this
technology and is the leader in the related market. Now the group is to expand its spindle
capacity from 5,50,000 to about 8,00,000 and XORELLA conditioning equipment of the
66
latest generation has been ordered for this purpose. Spinning mill capacity is to be
considerably enlarged and the newest XORELLA machines have been ordered. Initially
the company had 14,000 spindles; today it has more than 5,50,000.
(http://www.indiantextilejournal.com/corporate/CUdetails.asp?id=211)
Vardhman plans to increase its capacity in the high value added segments like weaving,
fabric processing and knitting along with technology upgradation of the spinning sector.
8. CAPITAL EXPENDITURE
Presence of Vardhman Textiles in entire textile value chain benefits the firm to capture
growing domestic and international market. It is expecting volume improvement with
increasing realization to improve bottom line at a CAGR of 21% over next two years.
Vardhman Textiles is going to be major beneficiary of strong consolidation witnessed in
the spinning industry. Wherein, total spinning capacity has increased at a CAGR of 1%
over a decade Vardhman was able to increase its capacity at 3.5% CAGR. Capacity
expansion of 50000 spindles and 2 million meters fabric will improve volume further.
Improving volume and reducing interest saddle with reducing debt is expected to improve
profitability of the company. Topline and bottomline are expected to grow at 15% and
21% respectively over FY09-FY11E. The firm holds consolidated debt of Rs2200 cr with
Rs450cr cash and Rs250 cr capex plan ahead. Strong free cash flow expected at Rs500cr
next year would be able to fulfill capex requirement and bring down debt level at
Rs2000cr by FY11E.
(http://indiansharemarket.in/buy-vardhman-textiles-ltd)
67
9. RECOMMENDATIONS
FOR SHAREHOLDERS
1. It is regular dividend paying company
2. The company has expansion plans & is still working on it.
3. It is improving its solvency ratio as compared to last year which means lower
financial risk.
4. Net EPS (earning per share) is increasing but has lower ratio than other firms.
5.
Every year the contingent liability is decreasing.
FOR LENDERS
1. It has more financial stability than its competitor firm as its current ratio is 2.64
which is better than Century whose current ratio is 1.21
2. It has high quick ratio that mean it has more strength of liquidity.
3.Vardhman has lower interest ratio which mean it has to pay less interest & has
taken lesser loan as compared to Century company.
4. Reserves & surplus has huge amount which shows it has sufficient
fund to pay
off the debts and loans.
For the betterment
1. It should control its cost because as compared to other firm the GPM is much lower
2. It should improve its net profit margin as it is lower than last year figures.
3. Current ratio should be improved as benchmark is 2:1 but company has 2.64 :1 so
it means the current assets should be employed somewhere else because the company
has it in excess.
4. The inventory should be managed properly & selling of inventory should be on
time as they have a lot of unsold stock. So it should improve its inventory turnover
ratio.
68
5. It should use its huge amount of reserve & surplus which are lying idle into
expanding the business.

Since the customer is very specific in terms of value so the company can
introduce new and alternative products whenever possible by adjusting the rawmaterial mixing as a result achieve better profitability.
As far as accounting is concerned, although the entire system is computerized, but
there still involves lots of paperwork. So this should be minimized b acquiring
more advanced accounting software. Company should put more efforts to
improve its liquidity position
LEARNING AND OUTCOMES
Through this project I learnt how to apply accounting concepts to read the financial
statements of an organization and how to read the financial ratios which help in assessing
the actual position of an organisation. This project helped us to get the insights on
Vardhman textiles and how the entire company operates. We got information on the
history, mission and vision of the company. We did the SWOT analysis of vardhman
textiles and saw the positives and the negatives of the company. What all the company
should make use of and what all it can work on for its growth.
Then we studied the internal and external environments of the company and how these
affect the working of the company. The entire company is extremely organised and it
follows a particular hierarchy that makes it function smoothly. Lastly, with the help of
ratios we could identify what factors affect in building up the solvency and liquidity of
the company. Is the company doing well in actual terms or is it incurring losses. Through
ratios we got the real picture of the exact position of vardhman textiles in front of its
competitor.
69
This project was very helpful in enhancing knowledge and building up certain broad idea
on what all little things can affect the working of an organisation. It will be of great help
for me in the future.
ANUSHKA AGARWAL
As a part of our assessment for the second semester, we were required to submit a group
report on an Vardhman Textile Ltd. My group members include Noor Bhatia, Anushka,
Sourabh Das and myself Manisha Batar. We had to act as a team and achieve our
objective in the given assignment. In the course, I was able to learn the skills of team
working and time management, report writing, accounting skills, a few IT skills, and
presentation skills.Team working includes division of work among the team members,
coordination and cooperation between team members and final compilation of each
member’s efforts. We divided our work according to the topics given in each log process
equally, helped each other in meeting set deadlines for the various parts of the
assignment and were finally able to complete the assignment on time with group efforts.
I was able to manage my time effectively and able to finish it on time. Academically,
this module required us to study the chosen company financial growth and accounting
ratios. Being from a Fashion Design background, I had no theoretical knowledge of
accounting. However studying through this semester i have gained lot of knowledge in
this field. I have come to know how organisation records its financial aspects and how
they calculate their profit and net sales.
MANISHA BATAR
Throughout this project I learnt how to calculate the critical financial ratio and
accounting concept which help me to understand the current position and current
condition of the organization. This project helps me to understand the current scenario
and current position of Vardhman in market. This project helps me to understand the
financial condition of Vardhman Textile. We analyze the external and internal
environment of the organization to conclude the positive and negatives of the
organization. The organization is well structured and well organized and a market leader
70
in his position. Through the financial ratios we are able to understand the profitability
factors and understand the current position in the market. Through the ratio we are able to
understand the exact scenario of organization. This project help me to understand all the
critical area of financial equation and able to understand other organization’s market
position.
SOURABH DAS
Having no prior knowledge of accounting, and no experience in this field, after
completing this project I have gaged knowledge about the accounting concepts and
principles and how these are applied and followed by every organization. The study of
PEST and SWOT has increased my horizon and has led me to think of the available
opportunities existing for vardhman in the market. Evaluating ratios and breakeven
analysis has helped in understanding the companies position in respect to its competitor.
Vardhman has come across as a flourishing industry and has the capability and capacity
to grow in the future.
NOOR BHATIA
CONCLUSION
In the end we would say that vardhman has lived up to name as it has been providing its
best to its customers. It religiously follows its mission and vision statements and strives
for excellence. It is continuously trying to expand and grow in the future . the company
not only works for the people outside but it always keeps in mind the well- being of its
people inside the organization and tries to provide them the best facilities it can.
Vardhman is able to pay all of its debt and has a strong financial backing . It is a good
idea for investors to invest in this company particularly fabrics. it is performing well and
is trying to work and be as strong as its competitor century . the company has strong
chances of being more successful and reaching new heights if it is able to pay more
attention to the management of its resources.
71
References:
http://www.vardhman.com/about_vardhman.asp
http://www.vardhman.com/about_mission.asp
http://www.vardhman.com/about_holdings.asp
http://www.vardhman.com/about_portfolio.asp
http://www.vardhman.com/about_achievements.asp
http://www.vardhman.com/quality_accreditation.asp
(http://www.scribd.com/doc/23432501/SWOT-Analysis
http://www.vardhman.com/products_yarns_overview.asp
http://www.vardhman.com/products_yarns_productprofile.asp
http://www.vardhman.com/products_yarns_machinery.asp
http://www.vardhman.com/products_yarns_operations.asp
http://www.vardhman.com/products_fabrics.asp
http://www.vardhman.com/products_fabrics_productprofile.asp
http://www.vardhman.com/products_fabrics_machinery.asp
http://www.vardhman.com/products_threads.asp
http://www.vardhman.com/products_threads_embroidery.asp
http://www.vardhman.com/products_fiber.asp
http://www.vardhman.com/products_fiber_productprofile.asp
(http://www.moneycontrol.com/stocks/company_info/directors_report
http://www.vardhman.com/about_performance.asp
72
http://0301.netclime.net/1_5/R/H/Y/Textile%20Industry.pdf
http://0301.netclime.net/1_5/R/H/Y/Textile%20Industry.pdf
http://www.fibre2fashion.com/textile-market-watch/company-brief/vardhman
http://indiansharemarket.in/buy-vardhman-textiles-ltd)
http://www.indiantextilejournal.com/corporate/CUdetails.asp?id=211)
(http://myiris.com/shares/company/writeDet.php?icode=mahspimi#fut
73
ANNEXTURES:
Annexure 1
Vardhman Textiles ltd.
Balance Sheet
Rs. Cr
Period & months
2009/03 2008/03 2007/03 2006/03 2005/03
SOURCES OF FUNDS
Owned Funds
Equity Share Capital
57.77
57.77
57.77
57.77
25.75
Share Application Money
0.00
0.00
0.00
0.00
12.76
Preferential Share Capital
0.00
0.00
0.00
0.00
0.00
Reserves & Surplus
1,214.98
1,114.37
1,034.26
903.90
761.81
Secured Loans
2,123.87
2,123.75
1,460.62
831.08
671.50
Unsecured Loans
369.45
267.49
263.65
271.15
78.08
TOTAL
3,766.07 3,563.37 2,816.29 2,063.89 1,549.91
Loan Funds
USES OF FUNDS
Fixed Assets
Gross Block
3,355.48
3,096.50
2,108.66
1,759.85
1,485.68
Accumulated Depreciation
1,173.61
1,074.28
930.75
818.77
728.10
Less: Revaluation Reserve
0.00
0.00
0.00
0.00
0.00
Net Block
2,181.88
2,022.22
1,177.91
941.09
757.57
Capital Work-in-progress
58.78
327.60
540.72
96.48
51.14
Investments
334.98
79.29
68.75
68.38
95.71
Current Assets, Loans & Advances
1,926.52
1,828.77
1,664.28
1,449.94
1,038.47
Less: Current Liabilities & Provisions
736.08
694.50
635.36
491.99
392.98
Total Net Current Assets
1,190.43
1,134.27
1,028.92
957.95
645.48
Miscellaneous Expenses not written off
0.00
0.00
0.00
0.00
0.00
Net Current Assets
74
TOTAL
3,766.07 3,563.37 2,816.29 2,063.89 1,549.91
Number of Equity shares outstanding (Cr.)
5.78
5.78
5.78
5.78
2.57
Bonus component in Equity Capital
35.43
35.43
35.43
35.43
16.17
Book Value of Unquoted Investments
282.14
24.67
24.67
24.33
21.80
Market Value of Quoted Investments
24.17
37.60
26.71
32.65
107.24
Contingent liabilities
237.51
215.03
486.82
323.51
379.44
Notes:
Annexure 2
Vardhman Textiles Ltd.
Schedule Operating Income
Schedule Operating Income
Rs. Cr.
Sales Manufacture
2,458.95
Sales Trading
32.97
Income from Job Works
3.46
Construction Income
0.00
Processing Charges
0.00
Property Development Income
0.00
Royalty & Tehnical knowhow income
0.00
Software Development & Training
0.00
Freight
0.00
Miscellaneous Services Income
0.00
Operating Income from Dividend
0.00
Operating Income from Interest
0.00
Operating Sale of Investment
0.00
Operating Income from Investment
0.00
Leasing Income
0.00
Hire Purchase Income
0.00
Consultancy & Financial advisory
0.00
Legal Income
0.00
Computer Hire Income
0.00
Income from fund Advances
0.00
Bill Discounting Income
0.00
Brokerage & Commission income
0.00
Underwriting Guarantee Commission
0.00
Issue Management Fees
0.00
Front end/Management Fee
0.00
Income from other Financial Service
0.00
75
Bank income from fund advances
0.00
Income from inter bank balances
0.00
Bank income from investments
0.00
Room rent received
0.00
Food & Beverages income
0.00
Income from other hotel services
0.00
Hospital Collections
0.00
Scanning Medication Income
0.00
Other Services Hospital
0.00
Divisional Income
0.00
Hire Of Meters
0.00
Wheeling Charges Recoverable
0.00
Miscellaneous Power Services
0.00
Fiscal Benefits received
0.00
Less Excise
38.67
Schedule Other Recurring Income
Schedule Other Recurring Income
Interest income
Dividend Income
Miscellaneous Income
Rs. Cr.
25.28
11.18
10.22
Schedule Material Consumed
Schedule Material Consumed
Raw Materials Consumed
Packing Materials Consumed
Stores & other consumables consumed
Purchase of trading goods
Decrease/(Increase) in inventory
Rs. Cr.
12,358.18
383.19
1,187.12
92.06
-117.30
Schedule Administrative Expenses
Schedule Administrative Expenses
Rates & Taxes
Rent paid
Rs. Cr.
1.30
1.02
76
Auditors Remuneartion
Printing & Stationery
Insurance premium paid
Travelling expenses
Other Administration expenses
0.29
1.87
3.04
2.78
22.33
Schedule Manufacturing Expenses
Schedule Manufacturing Expenses
Power & Fuel expenses
Miscellaneous manufacturing expense
Rs. Cr.
322.20
71.47
Schedule Personnel Expenses
Schedule Personnel Expenses
Wages & Salaries paid
Provident Fund/Gratuity expenses
Staff Welfare expenses
Rs. Cr.
137.25
16.25
1.99
Schedule Selling Expenses
Schedule Selling Expenses
Advertising Expenses
Sales Promotion Expenses
Distribution expenses
Other Selling Expenses
Sales Tax
Other Indirect Taxes
Rs. Cr.
1.28
2.24
45.80
34.39
0.00
0.00
Schedule Financial Expenses
Schedule Financial Expenses
Interest charges
Lease rent/Hire charges
Bank & financial charges
Trans. to General reserve
Trans. to Other Reserves
Net transfer to P & L Account
Rs. Cr.
123.68
0.00
3.93
Rs. Cr.
125.00
0.00
60.85
Schedule Reserves And Surplus
Schedule Reserves And Surplus
77
Share premium Reserve
General Reserve
Invest. Allow. util. reserves
Profit & Loss Account surplus
Capital Redemption reserve
Debenture redemption reserve
Export Reserve
Investment allowance reserve
Statutory Reserve
Sinking Fund
Contingency Reserve
Development Reserve
Tariff & Dividend Control Reserve
Deferred Tax Liability Fund
Debt Redemption Reserve
Foreign Projects Reserve
Special Reserves
Other Capital Reserve
Rs. Cr.
26.68
1,123.66
0.00
60.85
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
3.79
Schedule Secured Loans
Schedule Secured Loans
Fully Convertible Debentures
Partly Convertible Debentures
Non Convertible Debentures
Term Loans~FinSch.TermLoans
Foreign Currency Loans
Short Term Loans
Short Term Foreign Currency Loans
Deferred Payment Credit
Rs. Cr.
0.00
0.00
0.00
1,841.59
0.00
282.28
0.00
0.00
Schedule Unsecured Loans
Schedule Unsecured Loans
Fixed Deposits
Other Long Term loans
Short Term Loans
Bank Demand Deposit
Bank Saving Deposit
Bank Time Deposit
Tot Dep. held by the Banks in India
Total Deposits held outside India
Invest. of the bank outside India
Capital Contribution from Consumers
Rs. Cr.
1.03
299.43
69.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
78
Schedule Current Assets
Schedule Current Assets
Rs. Cr.
357.21
275.67
673.53
313.42
64.03
191.03
51.63
Cash & Bank Balances
Trade Receivables
Loans & Advances
Inventory-Raw Material
Inventory- Work In Process
Inventory- Finished Goods
Inventory- Other
Schedule Current Liabilities And Provisions
Schedule Current Liabilities And Provisions
Rs. Cr.
58.69
180.34
317.19
Current Liabilities & Provisions
Other Current Liabilities
Total Provision
Schedule Gross Block
Schedule Gross Block
Rs. Cr.
605.34
2,708.56
38.83
2.75
Land & Building
Plant & machinery
Other Assets
Intangible Assets
Annexure 3
VardhmanTextilesLtd
Profit and Loss
Rs. cr
Period & months
2009/03
2008/03
2007/03
2006/03
2005/03
2,456.71
2,294.79
2,095.64
1,895.12
1,852.86
1,390.32
1,232.10
1,098.08
935.89
1,023.37
INCOME
Net Operating Income
EXPENSES
Material Consumption
79
Manufacturing Expenses
393.68
402.54
351.01
306.65
258.08
Personel Expenses
155.49
160.16
133.24
116.17
103.99
Selling Expenses
83.71
99.02
105.43
145.29
131.04
Administrative Expenses
32.62
44.65
48.21
42.49
38.33
Capitalised Expenses
0.00
0.00
0.00
0.00
0.00
Cost of Sales
2,055.82
1,938.47
1,735.96
1,546.49
1,554.80
Reported PBDIT
400.89
356.32
359.67
348.63
298.06
Other Recuring Income
46.68
19.95
18.91
8.89
59.09
Adjusted PBDIT
447.57
376.27
378.59
357.52
305.28
Depreciation
207.32
154.56
119.45
101.34
97.01
Other Write-offs
0.00
0.00
0.00
0.00
0.53
Adjusted PBIT
240.25
221.71
259.14
256.18
207.74
Finanical Expenses
127.61
63.89
37.70
39.49
59.09
Adjusted PBT
112.64
157.81
221.44
216.69
148.65
Tax Charges
62.33
46.43
54.12
54.35
39.18
Adjusted PAT
50.30
111.38
167.33
162.34
109.46
Non-recurring Items
87.94
5.61
1.44
30.38
9.60
Other Non-cash Adjustments
3.78
5.55
2.94
3.60
1.70
REPORTED PAT
140.77
122.54
171.70
196.32
120.76
Equity Dividend
11.55
23.11
23.11
23.11
17.33
Preference Dividend
0.00
0.00
0.00
0.00
0.00
Retained Earnings
185.85
147.35
195.59
208.74
135.35
APPROPRIATIONS
Annexure 4
YARN PRODUCT PROFILE
80
Grey Cotton Yarn
Product
Description
High quality branded & combed autoconed yarns on cone with tail
end.
Counts
Available
Hosiery Branded- 10s to 40s Ne Combed - 16s to 60s Ne
Weaving Branded - 10s to 40s Ne Combed - 16s to 100s Ne
Open End - 6s to 16s Ne
Tyre cord - 2/2/14, 2/4/13, 2/14 & 4/14
Standard
Package
50 Kgs. for hosiery and weaving yarns. 65 kgs. for tyre cord yarns.
Availability
Ex-stocks
Additional
Information
T.F.O. / Ring doubled yarns can be made available on order. Special
counts can also be made against order.
USP
Bigger lots available ensuring uniformity during dyeing. Can offer
bulk quantities with minimal lead times. Siro Clean Yarns also made
against order.
Grey Acrylic Yarn
Product
Description
Wet spun Acrylic Yarns (both high bulk & regular)
Counts
Available
Hosiery : 1/22, 2/22, 2/36, 3/16, 4/16 Ne, 2/21 Semi Textile: 1/22,
1/40, 2/36, NT, 2/36 HT, 2/22 HT, 2/40, 2/60, 1/20, 2/30 Ne Blankets
2/19 Ne, 2/32 Nm
Standard
Package
Yarn on hanks - 60 Kgs. Yarn on cone - 50 Kgs.
Availability
Ex-stocks
Additional
Information
Special counts can be made against order.
USP
Made from fiber based on Japan Exlan technology. Yarn with better
dye uptake, good standing and brighter shades.
81
Grey polyester cotton yarn
Product
Description
Polyester cotton blended yarns in the blends 52:48, 65:35 and 35:65
Counts
Available
Hosiery Carded - 10s to 40s Ne Combed - 20s to 80s Ne Weaving
Carded - 10s to 40s Ne Combed - 20s to 45s Ne
Standard
Package
50 Kgs.
Availability
Ex-stocks
Additional
Information
Can offer any blend proportion subject to minimum order quantity.
Can also offer TFO and Ring double counts in both carded and
combed varieties
USP
Bigger lots available ensuring uniformity during dyeing can offer
bulk quantities with minimal lead times.
Special Blended Yarns
Product
Description
Cotton - Wool blended arn Cotton - Acrylic blended yarn Cotton Viscose blended yarn Polyester - Acrylic - Viscose blended yarn
Lycra - blended (in cotton and PC yarn)
Counts
Available
16s to 40s Ne 6s to 40s Ne (for Lycra blended yarn)
Standard
Package
50 Kgs.
Availability
Against order.
Additional
Information
Any blend can be offered subject to minimum lot size of 7 tonnes.
Can be made available in dyed formas well. 2 Ply TFO doubled yarns
can also be made available
Crayons
Product
Description
Crayons (Package Dyed Cotton Yarn ) in both branded and combed
varieties.
Counts
Available
16s to 40s Ne
82
Lot Size
35 Kgs to 650 Kgs
Standard
Package
45 Kgs
Availability
As per order
Shades
Available
300 shades from shade card besides Intended shades
Additional
Information
2 Ply TFO doubled yarns also available Can also offer cotton blended
yarns viz acrylic cotton and polyester cotton yarns Can also offer dyed
yarns suitable to withstand fast to mercerising process.
Rainbow
Product
Description
100% Cotton Fibre dyed cotton yarn in a single lot
Counts
Available
16s to 40s Ne
Lot Size
Minimum quantity 3.0 Tons per Shade.
Standard
Package
45 Kgs.
Shades
Available
300 shades from Shade Card besides indented shades.
Additional
Information
2 Ply TFO doubled yarns also available
USP
Bigger lot sizes Uniformity in shade
Rangoli
Product Description
100% Cotton Melange Yarns
Counts Available
10s to 60s Ne Single and 2 Ply TFO doubled yarn
Lot Size
Minimum 500 Kgs per shade
Standard Package
50 Kgs.
Availability
Fast moving shades available ex-stock
Shades Available
Over 150 shades in the shade card besides Indented shades.
83
Also available Melanges with fast to Bleaching &
Mercerising.
Additional
Information
Paragon
Product
Description
Fiber Dyed Polyester Cotton blended yarn ( 65:35 blend)
Counts
Available
16s Ne to 40s Ne Single & 2 Ply TFO Double yarn
Standard
Package
50 Kgs
Availability
Fast moving shades available ex-stock
Shades
Available
Over 150 shades in the shade card besides indented shades
Additional
Information
Paragon brings together the richness of cotton and the strength of
polyester in dyed from Indented shades also available in a minimum
lot size of 1.0 to 1.5 Tons. Can offer any blend on request subject to
minimum lot size
Gassed Mercerised Cotton Yarn
Product
Description
100% Cotton Gassed Mercerised yarns in Grey, White Dyed, Grindle
and Melange form
Counts
Available
2/20, 2/40, 2/60 and 2/80 Ne
Lot Size
20 Kgs, 40 Kgs, 80 / 100 Kgs, 160/200 Kgs and 320/400 Kgs
Standard
Package
20/40 Kgs (One Kg Cone)
Availability
As per order.
Shades
Available
Over 400 shades in the shade card, 25 shades in melanges & 100 shades
in grindles. Indented shades are also developed
Additional
Information
Any count with a minimum quantity of 4 - 5 Tons can be made
available. Gassed Mercerized yarns provides the advantage of lusture,
negligible shrinkage and pilling free end product. Special product made
84
out of Egyptian (Giza) and American (Pima) cotton can be produced on
special request. Anti bacterial finished yarn also available on request.
Harmony
Product
Description
Fibre Dyed Polyester Cotton Melange Yarn (Blend 65:35)
Counts
Available
20s 30s & 40s Ne
Standard
Package
50 Kgs.
Availability
Fast moving shades available ex-stock.
Shades
Available
30 shades in 3 depths 5% dyed, 15% dyed and 60% dyed besides can
offer indented shades.
Additional
Information
Shades available in colour tones of Paragon (100% Dyed P/C Yarn) to
facilitate mix and match combination in fabric. Can offer any blend on
request subject to minimum lot size.
Speciality Yarns
Product
Description
100% Cotton & Blended - Spun and Structured Grey & Dyed Fancy
Yarns.
Range
Available
Spun Yarn 100% Bright Acrylic, Acrylic - Nylon, Acrylic - Wool Mohair
Structured Yarn 100% Cotton (Grey) - Boucle Yarn, Screw Yarn, Slub
Yarn, Knot Yarn 100% Acrylic (Dyed) - Boucle Yarn & Chenille Yarn
Acrylic Nylon (Dyed) - Boucle Yarn Viscose Nylon (Dyed) - Boucle &
Feather Chenille, Grindle Yarn
Counts
Available
1.4s 25s Ne
Lot Size
Cotton (Grey) - Minimum 500 Kgs. Melange - Minimum 600 Kgs. Dyed
- 30/60/120/180/200/500 Kgs
Shades
Available
As per Shade Card besides indented shades
Padam
85
Product
Description
A superior Tow Dyed, Bulked Acrylic Yarn made from Tow based
on Japan Exlan technology.
Counts
Available
2/31 DMM and 31 DMM
Lot Size
(minimum)
1500 Kgs.
Standard
Package
36 Kgs (On Cones)
Availability
Ex Stocks + Indents
Shades
Available
60 shades in the shade card. Lab Dips can also be developed for
indented shades
Additional
Information
Made from Tow based on Exlan technology. High resilience Superior
Colour depth. Richer, Warmer and wooly handle. High cover
factor/bulkiness
Daffodil
Product
Description
Tow Dyed Acrylic Bulked Yarn.
Counts
Available
2/31 DMM and 31s DMM.
Lot Size
(minimum)
1500 Kgs.
Standard
Package
36 Kgs. (On Cones)
Availability
Ex Stocks + Indents
Shades
Available
125 shades in the shade card. Lab Dips can also be developed for
indented shades
Additional
Information
Daffodil offers a richer and loftier handle, providing a higher cover
factor /bulkiness.
USP
Uniformity of shades & elimination of shade variation because of
bigger lots as against hank dyed yarn. Also available mixtures
86
(Marina and Grindles).
Hank Dyed Acrylic Yarn
Product
Description
Dyed Bulked and Regular Acrylic Yarns.
Counts
Available
2/31 DMM and 2/51 DMM. 2/30 Ne and 2/40 Ne
Lot Size
60 Kgs,; 150 Kgs, 200 Kgs and 500 Kgs
Standard
Package
32 Kgs (On Cones) Also available on hanks
Availability
As per order
Shades
Available
100 shades in the shade card Lab Dips can be developed for indented
shades
USP
Made from wet spun fiber based on Exlan technology. Yarn with deeper
- brighter shades, and better standing. Offers worsted spun 2/31 DMM
yarn which gives softer feel to the garments
Vardhman Knitting Yarn
Product
Description
Hand-Knitting Yarns available in Hank/Lachhi/Ball form/ ready to Knit
Counts
Available
2.5 DMM - 21 DMM in 1/2/3/4/6 Ply.
Lot Size
30/60/120/160/180/250/500 Kgs.
Standard
Package
60/24/16 Kgs. in Hank, Lachhi & Ball packing respectively.
Availability
Ex-stocks + Indents
Additional
Information
Over 25 products available for all age groups in various blends and
varieties of 100% Acrylic, acrylic - Nylon, Acrylic - Polyester, Acrylic Wool, Acrylic - wool- Mohair Knit Pack range - Cuddles, Cuddles 1-23 and Aao Bune (Learner’s Kit) also available.
http://www.vardhman.com/products_yarns_productprofile.asp
87
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