Presentation on theme: "Total Embroidery Solutions 1 Corporate Presentation January 2007 Grabal Alok Impex Limited."— Presentation transcript:
Total Embroidery Solutions 1 Corporate Presentation January 2007 Grabal Alok Impex Limited
Total Embroidery Solutions 2 2 Forward Looking Statements This presentation contains statements that constitute forward looking statements including, without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to our future business developments and economic performance. While these forward looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that we have indicated could adversely affect our business and financial performance. Grabal Alok Impex Limited undertakes no obligation to publicly revise any forward looking statements to reflect future events or circumstances.
Total Embroidery Solutions 3 3 Section 1 Highlights Section 2 Industry Overview Section 3 Company Overview Contents
Total Embroidery Solutions 4 4 Investment Highlights Embroidery Industry Removal of quotas has opened export opportunities for textile manufacturers in China and India Strong demand for embroidery fabrics in the domestic as well as the international market Indian embroidery industry benefits from rich traditional heritage and skilled and creative labor at low cost With better access to international market, margins have significantly improved in the embroidery industry Grabal Alok Impex Limited Most modern & largest embroidery manufacturing capacity in India with an installed capacity of 9248 million stitches – Significant benefit from economies of scale Vast library of over 25,000 in-house designs – Strong team of experienced and creative designers Large customer base comprising of well known garment exporters, export houses and overseas buyers Technical and design support from Grabal, Austria Access to Alok s integrated manufacturing facilities Complete embroidery range to meet customer demand Higher value addition, resulting in better margins Acquired a stake of 26% in a UK based retailing company Hamsard 2353 Ltd for enhanced forward integration
Total Embroidery Solutions 5 5 Track Record * Annualized based on 6 months ended 30 September 2006 results CAGR 22.4% CAGR 32.1% CAGR 42.8% CAGR 34.7%
Total Embroidery Solutions 6 6 Financials Particulars2003-042004-052005-062006-07CAGR (%)* Rs Millions(Audited) Half Year Ended 30.09.2006 Net Sales460.3424.9568.7422.122.4% Operating Profit93.578.9146.4136.242.8% Interest15.717.618.631.9- Depreciation26.531.161.546.7- PAT33.323.745.038.432.1% Cash Profit61.554.9106.585.1- Ratios EBITDA Margins (%)20.31%18.57%25.74%32.27%- PAT to Sales (%)7.23%5.57%7.91%9.09%- RONW (%)11.09%7.26%11.97%-- ROCE (%)16.55%7.19%7.73%-- EPS (Rs)2.761.604.093.3734.7% * For the period between FY2004 and FY2007(annualized based on 6 months ended 30 September 2006 results)
Total Embroidery Solutions 7 Indian Textile Industry – An Overview
Total Embroidery Solutions 8 8 Opportunities - Global Textile Industry Removal of quotas has ushered a number of changes at demand as well as supply end Gradual shift of manufacturing base from high cost Western countries to low cost Asian countries China and India are the biggest beneficiaries of quota removal World textile trade expected to grow from US$ 480 billion in 2005 to US$ 650 billion by 2010 India to emerge as a preferred supplier due to strong legacy in textiles and the perceived need to reduce dependence on China Indias exports to grow from present level of USD 17 bn to USD 50 bn by 2010 USD 650 bn USD 480 bn. 2010 2005 Global Textile Trade Source: Home fashion magazine
Total Embroidery Solutions 9 9 Indian Textile Industry Strengths Self sufficient in raw material base - Major producer for a wide range of textile fibers like cotton, man-made, jute, linen and silk One of the few countries to have presence across the textile value chain from fiber production through spinning, weaving, knitting, dyeing & finishing to production of final products like apparels and home textiles Vast pool of workers, both skilled and unskilled as well as technicians and managers at relatively low cost Strong designing capabilities Flexible facilities that facilitate short runs for high fashion items and long run for basics Industry friendly policies by government to boost investments and facilitate trade Opportunities Healthy GDP growth of 7%-8% Rapidly increasing middle income group accompanied by rise in aspirations and purchasing power Per Capita textile consumption to go up from about 20 meters to 30 meters by 2010 Domestic Textile market alone expected to reach USD 50 bn in 2010 from the present USD 33 bn – assuming CAGR of 8.7% p.a.
Total Embroidery Solutions 10 Global Embroidery Industry Source : Market survey conducted by Gherzi Eastern Ltd. World Market20022006CAGR In Quantity Terms (Kgs)91 mn154 mn14% In Terms of Value (USD) – World1457 mn1585 mn2% Asia865 mn1176 mn8.4% Demand for embroidery due to fashion and high value addition is increasing in manifold applications in garments, made ups, curtains etc The world trade in embroidery is growing at a CAGR of 3%. Supply from Asia is rapidly growing at higher rate of 8% due to its wide application Key producing countries: China, India, Korea, Switzerland, Turkey Key consumer countries: Africa, Middle East, Asia
Total Embroidery Solutions 11 Indian Embroidery Industry Indian Market20032008CAGR Domestic8.015.113.5% Exports3.05.914.5% Value in INR bn.11.021.014.0% Embroidery being a high fashion item has application both in the domestic and exports – Expected growth of about 14% CAGR for Indian embroidery industry Indian embroidery enjoys the inherent advantage of traditional heritage and design capabilities Embroidery is a labour intensive industry; India has a large pool of workers Indian labour is skilled and relatively low cost resulting in finer embroidery at competitive prices - for Grabal Alok Impex cost of labor is 5% of sales; for most European manufacturers it would be 30-40% of the sales India expected to be the second largest supplier of embroidered products after China Source : Market survey conducted by Gherzi Eastern Ltd.
Total Embroidery Solutions 12 Grabal Alok – Total Embroidery Solutions
Total Embroidery Solutions 13 Introduction Promoted by Alok Industries Limited in financial and technical collaboration with Grabal Group, Austria Leading manufacture of all kinds of embroidered products (like Edgings, Allovers, Guipures, Embroidered curtains, Embroidered Table-ware, Napkins etc.) for application on Home Textiles and Apparel. A professionally managed profit making company with a consistent dividend record since 1998-99 State of the art manufacturing facilities and strong designing capabilities
Total Embroidery Solutions 14 Corporate Structure Promoter Group 25.64% Alok Industries Limited Grabal Alok Impex Limited Grabal Alok International Limited Hamsard 2353 Limited 28.90% 13.63% 100.00% 26.03% Proposed to increase to 75% xx.xx % Indicates the current percentage hold
Total Embroidery Solutions 15 Promoters Established textile player with a turnover of Rs. 1420 crores (USD 312 mn) Most modern integrated facilities for home textiles, apparel fabrics, garments and texturising Well established contacts in the industry, both domestic and overseas Alok Group Embroidery group in Austria with more than 5 decades of experience Engaged in manufacturing all kinds of embroidered products for application in Home Textiles and Apparel. Technical and designing support, access to the new developments in European markets Grabal Group
Total Embroidery Solutions 16 Operations CurrentJune 2007 (Post Phase 1 expansion) June 2008 (Post Phase 2 expansion) Machine name / make No. of machines CapacityNo. of machines CapacityNo. of machines Capacity Schiffli – Lasser make, Swiss213,830254,6535510,826 Multihead - Tajima & Barudan make 145,1283011,3206022,930 Quilting Machine - MECA make12901 1 Total Capacity369,2485616,26311634,046 No. of Employees 700 + No. of Share holders1200 + Board of Director Total Directors - 8 Promoters - 3 Non-Executive - 5 Capacity in million stitches per annum Capacity Growth Estimated cost of capacity expansion for Phase 1 is Rs 250m and Phase 2 is Rs 1,500m
Total Embroidery Solutions 17 Customer Base African countries continue to be one of the largest markets for embroidery fabrics. Grabal Alok reaches 14 African countries through a network of distributors and traders Key apparel fabric customers Key home textile customers Key domestic customers: Orient Craft Limited, Morarjee Mills, Ambattur Clothing
Total Embroidery Solutions 18 Recent Acquisition Acquired a stake of 26% (starting in December 05) in a UK based retailing company Hamsard 2353 Ltd for £ 6.4 million. Hamsard 2353 Ltd operates retail stores across England, Scotland and Wales The stores operate under the name qs and are value for money stores to sell garments and home textile Completed the restructuring of the retail business by implementing a Creditors Voluntary Arrangement (CVA). The number of stores stands at 207 spread over 850, 000 sq. feet with an annual turnover of UK 110 mn and staff strength of 2670 Grabal Alok is considering a further investment of £ 8 million in Hamsard 2353 Ltd to increase its stake to 75% Rationale Behind Stake Acquisition Sourcing office being set up in India, resulting in reduction of 10%-15% in purchase cost. Strong synergy with Alok Group to supply garments/made ups to Hamsard. Turnaround of stores of Hamsard to create substantial shareholder value. Brands / stores /concept can be launched in India to capitalise on retail boom. Recent Investment in UK Based Retail Chain
Total Embroidery Solutions 19 Hamsard 2353 Ltd. Financials (£ millions) Operates 207 retail outlets across England, Scotland and Wales under the brand name qs The stores offer quality fashion products for women, men, girls, boys and babies and home wares The Company also owns the LEE SHARK brand and is franchise for NAF NAF brand Particulars2003-04 (31 st Jan 2004) 2004-05 (29 th Jan 2005) 2005-06 (31 st March 2006) 14 months 31st December 2006 (9 months) Net Sales208.00188.30199.6479.54 Gross Margin96.2489.1579.7636.97 Gross Margin (%)47.9%47.4%39.95%46.48% Store Costs78.1176.5096.0237.69 Warehouse & Distribution Costs5.405.306.243.07 Head Office Costs15.4510.7512.205.05 Financial Items0.14(0.55)17.640.68 Pre Interest Profit(2.58)(3.95)(17.02)(8.16) Interest(1.27)(1.40)(2.00)0.28 Profit Before Exceptional(3.85)(5.35)(19.02)(8.44)
Total Embroidery Solutions 20 Grabals strategy for Hamsard 2353 Ltd. Reconstitution of Board of Hamsard. The existing Board of directors will retire and new board to be constituted. Grabal and Hamsard to appoint 5 board members each. Mr. Ashok B. Jiwrajka to be appointed as the Chairman of Hamsard with a casting vote. Already appointed a senior person from Alok group as Vice Chairman of Hamsard. Changing the existing sourcing pattern of Hamsard. Hamsard presently sources 80% its requirement of fabric / garment from in and around U.K and 20% from other countries. Grabal to change this and source 80% of the requirement of fabric / garment from Asian countries like India and China and balance from in and around U.K. This would result in substantial savings in the procurement costs.
Total Embroidery Solutions 21 Grabals strategy for Hamsard 2353 Ltd… contd. Refurbishing the Stores Introduction of new products like bed linen and other furnishing items. Discontinuation of slow moving items. Carrying out extensive survey and if needed, re-brand the stores. Increase Revenue, cut procurement costs and with this, increase margins.
Total Embroidery Solutions 22 Capacity Expansion New Projects Grabal is further expanding its existing capacity by adding 4 Lasser Embroidery machines and 16 Multihead embroidery machines at a total project cost of Rs. 250 million Second stage of expansion to add 30 Lasser Embroidery machines and 30 Multihead embroidery machines Capacity in terms of stitches to increase by 7,015 mn. stitches from the present level of 9,248 mn. stitches to 16,263 mn. stitches by June 2007 and to 34,046 mn stitches by June 2008 Aggressive marketing to reach existing and new customers with enhanced capacity Current capacity fully utilized with all units operating three shifts round the year Yet demand is not fully met with outstanding orders from customers including unmet demand from Alok Industries' home textile and apparel division Current capacity fully utilized with all units operating three shifts round the year Yet demand is not fully met with outstanding orders from customers including unmet demand from Alok Industries' home textile and apparel division
Total Embroidery Solutions 23 Funding Requirement S No.ParticularsUS$ Millions 1Additional Stake in Hamsard 2353 Ltd.15.50 2Working Capital Loan to Hamsard 2353 Ltd.4.00 3Repayment of Loan taken for existing stake in Hamsard 2353 Ltd.11.00 4Regular Capital and other Expenditure in Grabal Alok9.50 Total40.00
Total Embroidery Solutions 24 Share Capital Equity Share CapitalRs.139.45 million (Fully diluted Rs. 202.9 million) Listed atBSE, Pune and Ahmedabad stock exchange Market PriceRs. 150.40 (US$ 3.3) as on 16.01.2007 Market CapitalisationRs. 2097 million (US$ 46.1 mn) 52 weeks high / LowHigh : Rs.163 (US$ 3.58) Low : Rs. 94 (US$ 2.1) CategoryNo. of shares% Of holding Promoters – Alok Industries Ltd.1,900,00013.63% Promoters – Indian3,576,03025.64% Foreign Collaborator787,5005.65% Sub-total6,263,53044.92% Mutual Funds1,000,0007.17% FII/NRIs/OCBs4,212,65130.21% Public/Corporate bodies2,468,75417.70% Total13,944,935100.00%
Total Embroidery Solutions 25 Expected Dilution ParticularsAmount in mn. (Rs.)Conversion price (Rs.)Equity Shares FCCB190.3143.754,350,000 Share Warrants218.001092,000,000 Total6,350,000 Shareholding pattern post all conversions CategoryNo. of equity shares% of shareholding Promoters – Alok Industries Ltd.1,900,0009.36% Promoters – Indian3,576,03017.62% Foreign Collaborator787,5003.88% Sub-total6,263,53030.86% Mutual Funds1,000,0004.93% FII/NRIs/OCBs10,562,65152.05% Public/Corporate bodies2,468,75412.16% Total20,294,935100.00%
Total Embroidery Solutions 26 Profit and Loss Analysis Operating Results Rs millions 2003-042004-052005-06 Operating Results Net Sales460.27424.89568.74 Operating Profit93.5078.91146.42 Interest15.7117.6118.62 Depreciation26.5431.1961.55 PBT49.6130.1266.24 PAT33.2723.6745.00 Operating Profit Margin (%)20.31%18.57%25.74% Profit After Tax Margin (%)10.78%5.57%7.91% Interest Coverage Ratio5.954.487.86 Return on Capital employed16.557.197.73 EPS (Rs.)2.761.604.09 Assumed 1US$=RS. 45.50 Nigeria, a key market for embroidery products, placed an embargo on all fabric imports during 2003-04. This affected Companys performance during FY2003-04. Since then, Grabal Impex has diversified its customer base resulting in significant improvement in financial performance
Total Embroidery Solutions 27 Balance Sheet Analysis Assumed 1US$=RS. 45.50 Analysis Of Balance Sheet Rs millions 2003-042004-052005-06 Equity Share Capital82.90 113.95 Reserves and Surplus121.92105.79237.11 Share Warrants--21.80 Tangible Net worth204.86188.74372.86 Preference Shares69.203.20- Unsecured Loans-437.9344.07 Long term Loans104.45188.75930.36 Current Liabilities147.00239.23192.66 Net Fixed Asset195.46426.88900.97 Current Asset333.70634.79643.63 Ratios Current Ratio2.272.653.34 Long Term Debt(net of cash) :Equity0.551.362.55 Total Debt(net of cash):Equity0.881.772.84
Total Embroidery Solutions 28 Current Year Performance Assumed 1US$=RS. 45.50 Particulars 30.09.2005 [6 Months] (Provisional) (Rs in mn) 30.09.2006 [6 Months] (Provisional) (Rs. In mn) 30.09.2006 [6 Months] (Provisional) (USD. In mn) % increase / (decrease) Net Sales265.32422.129.2859.10% Operating Profit 67.85 136.222.99 100.77% Interest6.7231.950.70375.45% Depreciation25.3446.751.0384.49% Extra Ordinary Items* 13.97--- PBT21.8357.521.26163.49% PAT19.7738.390.8494.18% Cash Profit59.0885.141.8744.11% Ratios Operating Profit Margin (%)25.5732.27 - Profit After Tax Margin (%)7.459.09 - Interest Coverage Ratio10.104.26 - * Loss on sale of machines
Total Embroidery Solutions 30 This document has been prepared by Grabal Alok Impex Ltd, ("Grabal"), for information purposes only. You must independently determine, with your own advisors, the appropriateness for you of the securities/transaction before investing or transacting. Grabal accepts no liability whatsoever for any consequential losses arising from the use of this document or reliance on the information contained herein. Grabal does not guarantee the accuracy or completeness of information which is contained in this document and which is stated to have been obtained from or is based upon trade and statistical services or other third party sources. Any data on past performance, modelling or back-testing contained herein is no indication as to future performance. No representation is made as to the reasonableness of the assumptions made within or the accuracy or completeness of any modelling or back-testing. All opinions and estimates are given as of the date hereof and are subject to change. The value of any investment may fluctuate as a result of market changes. The information in this document is not intended to predict actual results and no assurances are given with respect thereto. This document is being made available in the UK to persons who are investment professionals as defined in Article 19 of the FSMA 2000 (Financial Promotion Order) 2005. Outside of the UK, it is directed at persons who have professional experience in matters relating to investments. Any investments to which this document relates will be entered into only with such persons. This document is not for distribution to retail customers. NO ACTION HAS BEEN MADE OR WILL BE TAKEN THAT WOULD PERMIT A PUBLIC OFFERING OF ANY SECURITIES DESCRIBED HEREIN IN ANY JURISDICTION IN WHICH ACTION FOR THAT PURPOSE IS REQUIRED. NO OFFERS, SALES, RESALES OR DELIVERY OF THE SECURITIES DESCRIBED HEREIN OR DISTRIBUTION OF ANY OFFERING MATERIAL RELATING TO SUCH SECURITIES MAY BE MADE IN OR FROM ANY JURISDICTION EXCEPT IN CIRCUMSTANCES WHICH WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS. THIS DOCUMENT DOES NOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ISSUES RELATED TO AN INVESTMENT IN THE SECURITIES/TRANSACTION. PRIOR TO TRANSACTING, POTENTIAL INVESTORS SHOULD ENSURE THAT THEY FULLY UNDERSTAND THE TERMS OF THE SECURITIES/TRANSACTION AND ANY APPLICABLE RISKS. THIS DOCUMENT IS NOT A PROSPECTUS FOR ANY SECURITIES. INVESTORS SHOULD ONLY SUBSCRIBE FOR ANY TRANSFERABLE SECURITIES DESCRIBED HEREIN ON THE BASIS OF INFORMATION IN THE RELEVANT PROSPECTUS (WHICH WILL BE PUBLISHED), AND NOT ON THE BASIS OF ANY INFORMATION PROVIDED HEREIN. Disclaimer