Post on 20-May-2015
Summer Training ProjectSummer Training Projectonon
Organic Cotton: An Opportunity for Organic Cotton: An Opportunity for Ludhiana textile industry to trade in Global Ludhiana textile industry to trade in Global
textile markettextile market
Undertaken atUndertaken at
AARTI INTERNATIONAL LIMITEDAARTI INTERNATIONAL LIMITED
Presented by:Presented by:Nitin GoelNitin GoelMBA-IB (2B)MBA-IB (2B)Roll No. Roll No. 9497223829194972238291
Indian Textile Industry
Second largest in the world
Second largest employment generator- 38 million
Segments:• Readymade garments• Cotton textiles • Man made textiles• Silk textiles• Woolen textiles• Handicrafts• Jute
Main markets: USA, UAE, UK, Germany, France, Russia ,
Canada
Major players
Arvind Mills
Raymonds
Vardhaman Spinning
Welspun India
Alok Industries Ltd
Madura Garments
Future Outlook
Will grow at an annualized rate of 16% between 2007 and 2012
Expected to reach a level of $115 billion by 2012
Share in world textile trade to increase from current 3% to 7%
Exports projected to increase from $19.24 billion in 2006-2007 to
$55 billion in 2012
17.37 million new jobs will be created in next five years - 12.02
direct and 5.35 indirect
Introduction to Aarti GroupIntroduction to Aarti Group
Group Profile
Registered office/Corporate office : G.T. Road, Millar Ganj, Ludhiana
Year of Incorporation : 1977
The Aarti Group comprises of:
Aarti Steels Limited Aarti International Limited Aarti Theatre Deepak hospital
Brief History Incorporated in 1977 in the name of Aarti Steels Limited at Ludhiana
Steel Plant with a capacity of 1.25lacs tones per annum
Steel Plant in Orissa (India) with the capacity of 0.5 million tons per annum
Diversified into yarn manufacturing in 1996 with the installe d capacity of 27000 spindles
Deepak Memorial Hospital located in Ludhiana is a multi specialty Hospital with 24*7 medical emergency facilities
Cinema which has been a constant source of joy to the residents
Mission & Vision
Mission
“Providing efficient & reliable services to the customer by adding genuine value to the product”
Vision
“To be globally recognized as a supplier of choice in this highly competitive global economy”
Business Portfolio
SHARE OF EACH BUSINESS IN GROUP TURNOVER
Product Range Yarn
Single yarn in count range of Ne 16s/1 to Ne 80s/1 100% Cotton- Combed Compact Yarn Hosiery Yarn
Double yarn in count range of Ne 16s/2 to Ne 80s/2 100% Cotton- Combed Compact Yarn Hosiery Yarn
Steel
Carbon
Spring Steel
Low Alloy Steels Wire Rods
Wires drawn and galvanized
Coal Washer
Sponge Iron
Introduction to Aarti International Ltd.Introduction to Aarti International Ltd.
Aarti Yarn Range Single yarn in count range of Ne 16s/1 to Ne 80s/1 100% Cotton- Combed Yarn 100% Cotton-Compact Yarn 100% Cotton-Hosiery Yarn
Double yarn in count range of Ne 16s/2 to Ne 80s/2
100% Cotton- Combed Yarn 100% Cotton-Compact Yarn 100% Cotton-Hosiery Yarn
Philosophies
Focus on Value Added Yarn
Improvement in Capacity Utilization
Focus on high value customers
Focus on improving yields
Quality policyCommitted to meet the customer expectations by
continuous efforts to improve process & technology
Quality objectivesTo provide better human resourcesTo achieve maximum utilization of resources
Departments Production Department
Research & Development Department
Maintenance & Engineering Department
Human Resource Department
Stores & Purchase Department
Excise & Dispatch Department
Marketing Department
Finance Department
Markets Major export destinations are as follows:
Hong Kong
China
South Korea
Taiwan
Bangladesh
European Union
Major domestic market destinations are as follows:
Gujarat
Mumbai
Uttar Pradesh
Delhi
Haryana
Punjab
Accolades & awards
USTERIZED quality certificate from USTER, Switzerland.
Supima Licence
Cotton USA Licence from Cotton Council International.
Spirituality at Workplace Award
Strengths
Good brand equity
Good technological base
High Production Capacity
Weaknesses
Comparatively high prices
Lesser degree of promotional activity
High labor turnover
Opportunities
Favorable demand conditions-large, growing domestic & international market
India - Ban on Cotton exports
The government allows 100 per cent FDI in the textiles sector under the automatic route
Threats
Cotton prices soar
Growing competition from yarn producing units in the unorganized sector
Competition from other established groups like Nahar, Vardhman, Anshupati Textiles, Malwa etc.
Ratio Analysis of Aarti International Ltd.Ratio Analysis of Aarti International Ltd.
Liquidity RatiosLiquidity Ratios
Current ratio
Year 2006-07 2007-08 2008-09
Current assets 167 193 186
Current liabilities
85 93 87
Current ratio 1.96:1 2.07:1 2.14:1
(Fig. In Crores)
Quick Ratio
Year 2006-07 2007-08 2008-09
Quick assets 71 62 76
Current liabilities
85 93 87
Quick ratio 0.84:1 0.67:1 0.87:1
(Fig. In Crores)
Activity Ratios Activity Ratios
Inventory turnover ratio
Year 2006-07 2007-08 2008-09
Cost of goods sold
284 218 278
Average inventory
98.5 115 121
Inventory turnover ratio ( in times)
2.88 1.89 2.3
Inventory holding period ( in days)
126.7 192.3 158.7
(Fig. In Crores)
Debtor turnover ratio
Year 2006-07 2007-08 2008-09
Net credit sales 275 276 345
Average debtors 64 61 64
Debtors turnover ratio
4.24 4.49 5.43
Debtor conversion period
86.1 81.3 67.2
(Fig. In Crores)
Creditor turnover ratio
Year 2006-07 2007-08 2008-09
Net credit purchases
248.5 190.7 187.9
Average creditors 10.57 11.43 11
Creditor turnover ratio( in times )
23.51 16.68 17.08
Average payment period ( in days )
15.52 21.88 21.37
(Fig. In Crores)
Capital structure ratiosCapital structure ratios
Debt –equity ratio
Year 2006-07 2007-08 2008-09
Debt 256 368 362
Equity 163 170 162
Debt equity ratio
1.57:1 2.16:1 2.23:1
(Fig. In Crores)
Proprietary ratio
Year 2006-07 2007-08 2008-09
Shareholder fund
162 170 162
Equity 444 238 536
Proprietary ratio
37% 71% 30%
(Fig. In Crores)
Solvency ratio
Year 2006-07 2007-08 2008-09
Proprietary 37% 71% 30%
Solvency ratio 63% 29% 70%
Profitability ratiosProfitability ratios
Gross profit ratio
Year 2006-07 2007-08 2008-09
Gross profit 73 58 68
Net sales 275 276 345
Gross profit ratio
26.6% 20.9% 19.6%
(Fig. In Crores)
Net profit ratio
Year 2006-07 2007-08 2008-09
Net profit 14.35 12.4 10.97
Net sales 275 276 345
Net profit ratio 5.2% 4.49% 3.96%
(Fig. In Crores)
Operating profit ratio
Year 2006-07 2007-08 2008-09
Operating profit
56 41 35
Net sales 275 276 345
Operating ratio
20.34% 15% 9.08%
(Fig. In Crores)
Return on shareholders’ equity
Year 2006-07 2007-08 2008-09
Net profit after taxes
14.35 12.4 10.97
Shareholders’ fund
275 170 170
Return on shareholders’ equity
5.22% 7.3% 6.45%
(Fig. In Crores)
Trend analysisTrend analysis
Trend of Turnover Years Sales (Rs. In Crores) Trend ( In %)
2004-05 143.68 100
2005-06 154.28 107.38
2006-07 274.92 191.34
2007-08 276.09 192.16
2008-09 345.43 240.42
Trend of Net Profit / Loss
Years Net Profit (Rs. In Crores) Trend ( In %)
2004-05 17.49 100
2005-06 18.61 106.4
2006-07 14.35 82.05
2007-08 12.41 70.95
2008-09 10.97 62.72
Trend of EPSTrend of EPS Years EPS (Rs.) Trend (In %)
2004-05 25.98 100
2005-06 25.29 97.34
2006-07 16.61 63.93
2007-08 14.03 54
2008-09 11.47 (31.25)
Introduction to the ProjectIntroduction to the Project
Organic cotton
Originates from organic agricultureCertified ‘organic’ by certification bodiesAims for an optimum and sustainable use of local
natural resourcesNo application of external inputs like pesticides,
chemical fertilizers, herbicides and chemically treated or genetically modified (GM) seed
External ‘organic’ inputs may be usedMore labour intensiveYields are lower
Standards
Global Organic Textile Standard (GOTS)To be labelled “organic” requires fiber to be at least 95%
organic. (The remaining 5% can be conventional fiber, but not of the same fiber as the organic portion)
OE 100 and OE BlendedOE 100 only allows a minimum of 95% organic fiber
(exclusive of threads or non-textile accessories). The remaining 5% cannot be cotton.
OE Blended requires at least 5% organic cotton content for the blended standard allowing the remaining fiber to be any fiber, including conventional cotton.
Global Organic Cotton Market
Retailers• C&A (Belgium)• Nike, Inc. (Oregon, USA)• Walmart (Arkansas, USA)• Williams-Sonoma, Inc.
(California, USA and recorded last year as Pottery Barn)
• H&M (Sweden)• Knitwear (New York,
USA)
• Coop Switzerland• Green source Organic
Clothing Co. (Washington, USA)
• Levi Strauss & Co. (California, USA)
• Target (Minnesota, USA)• Adidas (Germany)• Nordstrom
Manufacturers Organic cotton yarns, fabrics, and finished goods
producing regions includes:• China• Southeast Asia• Indonesia• India• Pakistan• Bangladesh• Turkey• Mexico• United States
Global retail sales of organic cotton products
Source: Organic Exchange 2009 Market Report
Future outlook
According to OE forecasts:
Global organic cotton market will grow 20 to 40 percent in both 2010 and 2011
Reaching about $5.1 billion market in 2010 and $6.0 billion market in 2011
Title of the ResearchTitle of the Research
Organic cotton: An opportunity for Organic cotton: An opportunity for Ludhiana textile industry to trade in Ludhiana textile industry to trade in
global textile marketglobal textile market
Objectives of the research
To know the trend of export of organic cotton textile products from Ludhiana & the reasons for such trend.
To know the companies’ integration with valid operational certificate for manufacturing & trading organic cotton textile product.
To know the factors considered while procuring raw material for organic cotton textile product.
To know the factors influencing people to enter into organic cotton textile industry.
Research Methodology
Research Design
The research design of the project is descriptive as it describes data and view points of the organic cotton textile products manufacturers & exporters in Ludhiana.
UniverseAll the manufacturers & exporters of organic cotton textile products
PopulationAll the manufacturers & exporters of organic cotton textile products
in Ludhiana
Sampling UnitAny single individual or firm who manufactures & exports organic
cotton textile products
Sampling TechniqueConvenience sampling technique and Snowball technique
Sample size40
Limitations of the study
Elements of biasness might have crept in
Only 40 respondents have been contacted due to time constraint
Generally the respondents were busy in their work and were not interested in responding
Respondents were reluctant to disclose complete and correct information about themselves and their organizations
Data Analysis and InterpretationData Analysis and Interpretation
Products Yarn Fabric Garment
Knitted Woven Knitted Woven Knitted Woven
No of responses 12 6 16 4 19 4
No of
respondents
40 40 40 40 40 40
Percentage 30% 15% 40% 10% 47.5% 10%
Table 5.1-No of organic cotton textile products manufacturers & exporters in Ludhiana
(N=40)
Fig. 5.2- Annual turnover of the manufacturers & exporters in the year 2009-10
(N=40)
Fig 5.3- Proportion of export of organic cotton products out of total sales
(N=40)
Fig 5.4-Export trend of organic cotton textile products since manufacturers have started making
(N=40)
Fig 5.5-Factors resulting in an increasing demand of organic cotton textile products
(N=40)
Fig 5.6-Factors resulting in decreasing & constant demand of organic cotton textile products
(N=40)
Fig 5.7-No. holders of valid operational certificate applicable for the production/ trade of organic cotton textile products
(N=40)
Fig 5.8-Holders of different types of operational certificate
(N=40)
Consideration of various parameters while procuring raw material for organic cotton textile products
Rating No. of respondents Product
Most considered (+2) 23 46
More considered (+1) 8 8
Neutral (0) 8 0
Less considered (-1) 1 -1
Least considered (-2) 0 0
Total 40 53
Mean 1.325
Table 5.9(a)-Rating of payment terms factor
(N=40)
Rating No. of respondents Product
Most considered (+2) 26 52
More considered (+1) 13 13
Neutral (0) 1 0
Less considered (-1) 0 0
Least considered (-2) 0 0
Total
Mean
40 65
1.625
Table 5.9(b)-Rating of price factor (N=40)
Rating No. of respondents Product
Most considered (+2) 16 32
More considered (+1) 14 14
Neutral (0) 9 0
Less considered (-1) 1 -1
Least considered (-2) 0 0
Total 40 45
Mean 1.125
Table 5.9(c)-Rating of quality factor (N=40)
Rating No. of respondents Product
Most considered (+2) 4 8
More considered (+1) 14 14
Neutral (0) 14 0
Less considered (-1) 6 -6
Least considered (-2) 2 -4
Total 40 12
Mean 0.30
Table 5.9(d)-Rating of lead time factor (N=40)
Rating No. of respondents Product
Most considered (+2) 12 24
More considered (+1) 12 12
Neutral (0) 8 0
Less considered (-1) 3 -3
Least considered (-2) 5 -10
Total 40 23
Mean 0.575
Table 5.9(e)-Rating of long term relationship factor
(N=40)
Rating No. of respondents Product
Most considered (+2) 7 14
More considered (+1) 12 12
Neutral (0) 11 0
Less considered (-1) 7 -7
Least considered (-2) 3 -6
Total 40 13
Mean 0.325
Table 5.9(f)-Rating of reputation of supplier factor (N=40)
Fig 5.10-Combined result of various parameters while procuring raw material
Rating No. of respondents Product
Most influencing (+2) 17 34
More influencing (+1) 11 11
Neutral (0) 5 0
Less influencing (-1) 4 -4
Least influencing (-2) 3 -6
Total 40 35
Mean 0.875
Factors influencing people to enter in to organic cotton textile products business
Table 5.11(a)-Rating of increasing basket size factor
(N=40)
Rating No. of respondents Product
Most influencing (+2) 4 8
More influencing (+1) 18 18
Neutral (0) 14 0
Less influencing (-1) 2 -2
Least influencing (-2) 1 -2
Total 40 22
Mean 0.55
Table 5.11(b)-Rating of Highly profitable factor (N=40)
Rating No. of respondents Product
Most influencing (+2) 3 6
More influencing (+1) 16 16
Neutral (0) 14 0
Less influencing (-1) 7 -7
Least influencing (-2) 0 0
Total 40 15
Mean 0.375
Table 5.11(c)-Rating of Necessary for survival factor (N=40)
Rating No. of respondents Product
Most influencing (+2) 11 22
More influencing (+1) 18 18
Neutral (0) 6 0
Less influencing (-1) 4 -4
Least influencing (-2) 1 -2
Total 40 34
Mean 0.85
Table 5.11(d)-Rating of to remain competitive factor (N=40)
Rating No. of respondents Product
Most influencing (+2) 1 2
More influencing (+1) 12 12
Neutral (0) 9 0
Less influencing (-1) 13 -13
Least influencing (-2) 5 -10
Total 40 -9
Mean 0.225
Table 5.11(e)-Rating of helps in branding or differentiation factor
(N=40)
Rating No. of respondents Product
Most influencing (+2) 19 38
More influencing (+1) 10 10
Neutral (0) 7 0
Less influencing (-1) 3 -3
Least influencing (-2) 1 -2
Total 40 43
Mean 1.075
Table 5.11(f)-Rating of global demand factor (N=40)
Combined result of factors influencing people to enter into organic cotton textile products business
Fig 5.12-Factors influencing people to enter into organic cotton textile products business
Steps Regulate
pricesFavourable
global policies
Create awareness
of eco-friendly products
Encourage farming of
organic cotton
Incentives to farmers
to grow organic cotton
Others
No of responses 24 7 17 9 6 1
No of respondents 40 40 40 40 40 40
Percentage 60% 17.5% 42.5% 22.5% 15% 2.5%
Table 5.13-Steps that government should take to boost the sales of organic cotton textile products in the global textile market
(N=40)
FindingsThere are 30% knitted & 15% woven organic cotton
yarn manufacturers & exporters, 40% knitted & 10% woven fabric manufacturers & exporters & 47.5% knitted & 10% woven garments manufacturers & exporters in Ludhiana out of 40 respondents.
Maximum no. of respondents exporting organic cotton textile products are having annual turnover above 40crores.
The maximum no of respondents export less percentage of organic cotton textile products of their total sales where as only few respondents are exporting 30% to 40% & above 40% organic cotton textile products of their total sales.
An increasing demand of organic cotton textile product in the overseas market has resulted in an increase in the exports of organic cotton textile products.
High prices & availability of substitutes are the most important factors which have resulted in constant & decreasing exports of their organic cotton textile products.
All the respondents have valid operational certificate for the production & trading of organic cotton textile products.
Maximum no of respondents dealing in organic cotton textile products hold both GOTS & OE certificates & there are 35% of total respondents who holds only GOTS certificate & 2.5% of total respondents hold only OE certificate.
Price is the most important factor which is most considered at the time of purchase of raw material for organic cotton textile products.
Global demand, competition & increasing basket size has more influenced the respondents to enter into organic cotton textile products business.
Government should more regulate prices of organic cotton textile products, create awareness of eco-friendly products, encourage farming of organic cotton & make favourable policies so as to boost the sales of organic cotton textile products in the global textile market.
Conclusion and SuggestionsConclusion and Suggestions
Conclusion
Demand for organic cotton textile products is increasing in the global textile market because it is of better quality & skin friendly.
Very less percentage of organic cotton textile products are exported from Ludhiana.
High prices & availability of substitutes can lead to decrease in the demand of organic cotton textile products.
All the manufacturers & exporters hold valid operational certificate for manufacturing & trading organic cotton textile products.
Price, payment terms & quality factors are more considered at the time of procurement of raw material for organic cotton textile products.
Increasing global demand, high profit margin & increasing competition are attracting more people to enter into organic cotton textile products business.
There is less government support in promoting export of organic cotton textile products from Ludhiana.
Suggestions and Recommendations
Awareness should be created among the consumer towards environment friendly & skin friendly products.
The manufacturers & exporters of organic cotton textile products should be more cautious while purchasing raw material & should consider lead time.
The manufacturers & exporters of organic cotton textile products should try to maintain strong relationship with the supplier so that their own supply should not get affected.
Government should regulate the prices of organic cotton textile products because products of organic cotton are more costly than its substitutes.
Government should provide incentives to the farmers to encourage organic farming.
There is more scope of export of organic cotton textile products in U.S. & European markets.
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