Vardhman Textiles Ltd

Corporate Presentation
September 2010
Disclaimer
Certain statements made in this presentation may not be based on historical information or facts and may be “forward looking statements,” including those relating to general
business plans and strategy of Vardhman Textiles Limited (“VTL"), its future outlook and growth prospects, and future developments in its businesses and its competitive and
regulatory environment. Actual results may differ materially from these forward-looking statements due to a number of factors, including future changes or developments in
VTL's business, its competitive environment, its ability to implement its strategies and initiatives and respond to technological changes and political, economic, regulatory
and social conditions in India. This presentation does not constitute a prospectus, offering circular or offering memorandum or an offer, or a solicitation of any offer, to
purchase or sell, any shares and should not be considered as a recommendation that any investor should subscribe for or purchase any of VTL 's shares. Neither this
presentation nor any other documentation or information (or any part thereof) delivered or supplied under or in relation to the shares shall be deemed to constitute an offer
of or an invitation by or on behalf of VTL.

VTL, as such, makes no representation or warranty, express or implied, as to, and does not accept any responsibility or liability with respect to, the fairness, accuracy,
completeness or correctness of any information or opinions contained herein. The information contained in this presentation, unless otherwise specified is only current as of
the date of this presentation. VTL assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent
development, information or events, or otherwise. Unless otherwise stated in this document, the information contained herein is based on management information and
estimates. The information contained herein is subject to change without notice and past performance is not indicative of future results. VTL may alter, modify or otherwise
change in any manner the content of this presentation, without obligation to notify any person of such revision or changes. This presentation may not be copied and
disseminated in any manner.

THE INFORMATION PRESENTED HERE IS NOT AN OFFER OR SOLICITATION OF ANY OFFER TO PURCHASE OR SELL ANY EQUITY SHARES OR ANY OTHER
SECURITY OF VTL.

This presentation is not for publication or distribution, directly or indirectly, in or into the United States, Canada or Japan.

These materials are not an offer or solicitation of any offer of securities for purchase or sale in or into the United States, Canada or Japan.

This presentation is not an offer for sale of securities in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from
registration under the U.S. Securities Act of 1933, as amended. Any public offering of securities to be made in the United States will be made by means of a prospectus that
may be obtained from the Company and that will contain detailed information about its management, as well as financial statements. The Company does not intends to
register any portion of the offering in the United States

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Vardhman Textiles Ltd. (VTL)– an overview
● VTL is one of the largest listed, integrated textile manufacturing companies in the Country
 VTL has a strong position in the Indian textile sector in the manufacturing of fibre, yarn, sewing
thread and fabrics
 Also foraying into garment manufacturing through a collaboration with Nisshinbo, Japan with
production expected to begin in fiscal 2011.
 VTL and its subsidiaries have 20 manufacturing facilities across India and employs~25,000 people

● VTL is a market leader in its various product offerings

 VTL is one of the largest listed yarn manufacturer in India with a capacity of 870,000 spindles
 One of the leading manufacturer & exporter of cotton yarn in India
 One of the leading producers of sewing threads and hand knitting yarn in India

● Global alliances
 VTL has forged global alliances with leading textile companies such as American & Efird (A&E) Inc
USA, Marubeni & Toho Rayon, Japan and Nisshinbo, Japan

● Key Financials
 FY10: Revenues – Rs. 33507 Mn (US$ 712.9 Mn); EBITDA – Rs. 7531 Mn (US$ 160.0 Mn); PAT –
Rs. 3024 Mn (US$ 64.0 Mn)
All currency conversions in the presentation has been done at 1 US$ = INR 47 3
Textile & Clothing Industry
Global T&C industry will become a $938b market by 2015 The textile and clothing value chain

Source: Confederation of India Textile Industry (CITI)

● Textile and Clothing (T&C) Industry constitutes 4% of
India T&C industry will double by 2015 to a $100b market India’s GDP, 14% of Industrial Production and 14% of
total exports of goods. India is one of the few countries
which have a presence across the entire value chain of
the T&C Industry. (Source : CITI)

● T&C sales generated US $ 52 Billion in 2008: US $ 29.6

billion from the domestic market and US $ 22.4 billion
from exports.

● The Indian Domestic T&C market is expected to grow

at a CAGR of 10% between 2008-15 to become a US
Source: CITI $57 billion market by 2015
4
Indian Textile Industry : Fundamentally strong
India has seen a steady rise in spinning & weaving capacities Yarn: Cotton yarn is the dominant product in the category

Source: Office of Textile Commissioner Source: Office of Textile Commissioner

Fabrics: Cotton continues to dominate but only has ~50% share Steady domestic consumption growth

Source: Office of Textile Commissioner Source: Office of Textile Commissioner,

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Vardhman Textiles Ltd : Our Strengths
Our Key Strengths Strong integration and diversified business operations
● Proven track record of execution
FY10
 Has been operating in the textile industry since
1965 and has become one of the largest textile
manufacturing companies in India

● Diversified business
 In FY10, VTL has 56% of total income coming
from yarn products; within the yarn products
the focus is on non-commoditized products

● Integrated business
 The business is a wholly integrated concern
operating across the entire value chain from
fibre to fabrics. This allows the Company to be
a one stop shop for customers including buying
houses, retailers, overseas garment
manufacturers, recognized export houses,
wholesalers and marketing agents

6
VTL - Financial highlights
Strong bottom line growth Rising margins with higher yarn realizations

Return ratios have rebounded Yarn and fabric continue to be the biggest segments

7
VTL’s capacities have steadily expanded
Spindles – Spinning capacity has increased at 12% CAGR Weaving Looms & processing have grown in tandem

Gradual growth in Sewing, Dyeing and Mercerization Steel & Acrylic fibre capacities have remained steady

8
Yarn – 56% of revenues
Global yarn price have run up ahead of Indian cotton prices
● One of the largest spinning capacities in the country
with > 0.87 mn spindles

● 12 production plants located in the states of Punjab,

Himachal Pradesh and Madhya Pradesh

● Technical tie-ups with the well recognized global

corporates from Japan and Korea.

● De-risked business through value added and specialized

Source: Company Estimates
products
Value Added Products
Compact Yarn Fibre Dyed
● Yarn-cotton spreads have hit a recent high. A bumper Cotton Lycra Gas Mercerised
domestic cotton crop has kept local cotton prices low Melange Yarn Fancy Yarns
Cotton Dyed Slub Yarns
while yarn prices have remained firm with higher PC Yarn Dyed Acrylic Yarns
international cotton prices and renewed demand from Yarn Dyed Hand Knitted Yarns
developed markets Specialized Products
Cotton Lyocell Cotton Silk
Cotton Bamboo Cotton Modal
● As a result cotton yarn manufacturers are benefiting Cotton Tencel Cotton Viscose
and are enjoying healthy margins Environment Friendly Products
Organic Cotton Fair Trade Yarn
Contamination Free Yarn

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Fabrics - 21% of revenues
● Continuing its onward march up the value chain, Segment sales are dominated by buying houses & distributors
the group entered Fabric business in 1992 with
Greige (unprocessed) Fabric

● Subsequently entered the Processed Fabric market

in 1999

● Current capacity is 900 looms & 90 million meters

of processed fabric per annum

● One of the few fully integrated fabric suppliers in

the country Better realisations supported fabric margin expansion

● Produce specialized fabrics like Yarn Dyed, Special

White, Melanges, Nylon, Modal & Linen.

● Doing specialized finishes like Teflon / Nanocare

(oil & water repellent), ETI etc.

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Sewing Thread - 10% of revenues
● The Group entered the Thread business in 1982 as a Segmental Sales – Industry & Channel sales > ~ 90%

forward integration to its Yarn business

● Current capacity is 33 tpd across 4 plants at Punjab,

Tamil Nadu & Himachal Pradesh

● In 2002, entered into a strategic alliance as a

licensee with American & Efird, Inc. USA (A&E) for
manufacturing & distribution of A&E branded
sewing threads in India

● Spun off the Threads business into a new company Healthy margin growth in a less crowded market

(Vardhman Yarns & Threads Ltd) in 2008 and

entered into a 51:49 Joint Venture with A&E

● Post creation of JV, increased the production

capacity for core spinning & filament threads with
A&E’s quality parameters

● Currently Vardhman owns one of the largest brands

of specialized threads in the country

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Other segments – 13% of revenues
Acrylic Fibre (7% of revenues) Steel (6% of revenues)
● Ventured into manufacture of Acrylic Staple ● Started Steel business in 1972 as a diversification
Fibre in 1999 - Vardhman Acrylics Limited strategy, with capacity of 35,000 tpa.

● The plant was set up in Gujarat, in collaboration ● Current Production Capacity: Steel Melting
with Marubeni & Japan Exlan of Japan. Shop 100,000 tpa ; Rolling Mill 80,400 tpa

● Current capacity is 20,000 mtpa ● Caters to high technology quality conscious

special & alloy steel segment
● World class wet spun technology with highly
automated, microprocessor controlled systems ● Application of round products in automotive
components, forging, ball bearings, piston pins,
● Products are marketed under the brand name engineering applications, railways, defense etc.
VARLAN©
● Preferred supplier to leading OEMs like Telco,
● It is used in manufacturing of hand knitted Ashok Leyland, Maruti, Hindustan Motors,
yarns, blankets, jerseys, sweater, saris, Toyota, M&M and Escorts among others
upholster, carpets etc.
● Steel business is being demerged from VTL; the
appointed date for demerger is January 1, 2011

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VTL - Segmental financials
Yarn business Fabric business

Threads business Fibre business

Segment financials are shown without inter-company adjustments 13

Risk-reward in various segments of the textile industry

Fibres
1 Kg
Rs 80 / Kg* or $1.70

Yarn
0.75 Kg
Rs 170/ Kg* or $2.71

Fabric
3.75 meter
Rs 90/meter* or $7.20

Garments
2 Trousers
$14.90*

Retail
2 Trousers
$42.50*
* These are indicative prices

Indicative prices 14
VTL Management
Name Designation Details Experience
 Is an M.Com. Gold Medalist from Panjab University Chandigarh and also holds directorships
Chairman & in 22 other companies
S .P. Oswal Managing  Holds Directorships in Confederation of Indian Textile Industry and New Delhi Institute of 43
Director Management. Conferred the Padma Bhushan Award for his contribution towards Trade and
Industry.
 B.Tech from IIT (Delhi) and an MBA from IIM Ahmedabad
 Holds directorships in 21 other companies including Vardhman Acrylics Ltd., Vardhman
Executive
Sachit Jain Texgarments Limited Vardhman Holdings Limited and VMT Spinning Company Ltd 21
Director
 Chairman of the Audit Committee of Vardhman Yarns & Threads Limited , VMT Spinning
Company Ltd and Vardhman Texgarments Limited

Executive  Masters in Commerce from Punjab University Chandigarh. Holds directorships in 13 other
Suchita Jain 21
Director companies including Vardhman Holdings Limited

 Director, Operations at Vardhman Fabrics, President of Vardhman Special Steels, Managing

MD, Vardhman Director in Vardhman Acrylics Limited
B K Choudhary 37
Acrylics Ltd.  Masters in Commerce from Meerut University and MBA from University of Jodhpur.
 Extensive experience within the group in project management and business operations
D L Sharma MD ,VYTL  Holds a B.Sc (Engineering) and MBA from Punjab Agricultural University, Ludhiana. 37

 He is a Chartered Accountant and a Graduate in Commerce from Ludhiana. Has extensive

Executive experience in the finance and yarns businesses within the group.
Neeraj Jain 19
Director  Also holds directorships in Vardhman Apparels Limited and Vardhman Textile Components
Limited
 Overall charge over the units of the Company situated at Baddi
President,
 B. Text from Technological Institute of Textiles & Sciences, Bhiwani. Has experience in
IMJS Sidhu Baddi 39
Maintenance Management, Production Management and Quality Control & Assurance in the
Operations
group.

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VTL - Key financials
INR Million USD Million
Particulars FY06A FY07A FY08A FY09A FY10A
FY06A FY07A FY08A FY09A FY10A
Revenues 19,481 21,621 23,877 29,654 33,507 414 460 508 631 713
EBITDA 4077 4067 4,150 4,798 7,531 87 87 88 102 160
Margin % 21% 19% 17% 16% 22% 21% 19% 17% 16% 22%
PBT 2,597 2,417 1,792 2,226 3,595 55 51 38 47 76
Margin % 13% 11% 8% 8% 11% 13% 11% 8% 8% 11%
PAT 2,043 1,900 1,381 1,917 3,024 43 40 29 41 64
Margin % 10% 9% 6% 6% 9% 10% 9% 6% 6% 9%

Total Assets 33,149 42,094 46,435 50,772 705 896 988 1,080
Net Worth 11,504 12,630 13,832 16,042 245 269 294 341
Total Debt 17,719 24,339 25,331 26,430 377 518 539 562

EBITDA / CE 13.8% 11.0% 11.5% 16.7% 13.8% 11.0% 11.5% 16.7%

RONW 16.5% 10.9% 13.9% 18.6% 16.5% 10.9% 13.9 18.6%

EPS - Basic 36.1 33.5 24.4 33.9 53.4 0.8 0.7 0.5 0.7 1.1

Most of the debt on the Company’s books enjoys TUF scheme benefits and hence much lower interest rates
All currency conversions in the presentation has been done at 1 US$ = INR 47
Financial highlights
NWC levels are relatively stable Comfortable net debt/equity considering most debt under TUFS

Healthy Interest coverage Strong earnings recovery

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The Road Ahead

Yarns Fabrics Threads Garment Steel

 Capacity  Focus on value  Develop the  JV with Nisshinbo  The Steel business
expansion of added products market for value Textile Inc for is being demerged
75,000 spindles such as Lycra added segment garments with from VTL
like automobiles, VTL holding 51%
 Improving  New project premium  The appointed
capacity commissioned in footwear etc.  Production will date for demerger
utilization MP, India – 40 start in Dec, 2010 is January 1, 2011
mmpa , 400 looms  Building up with 1.20m units
 Maintain focus on export business in and will be 1.80m
value added yarn  Reducing cycle Indian sub in second year
products time & lead time continent on a
non compete basis  Raw materials
 Further diversify like yarn & fabrics
with other A&E
customer base are sourced from
subsidiaries.
Vardhaman

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Investment rationale

Integrated production, large • Large integrated textile company with a presence across the value chain
capacities and economies of scale • Experienced management with a presence in the textile business since 1965

Large and steadily growing • The textile and clothing industry in India which contributes to 14% of total exports
industry and is expected to double to $ 100bn by 2015

Reputation across a diverse range • Diverse product range allows the Company have a de-risked model
of products • Leading position in most product categories; strong clients relationships

Strong distribution and • There is a strong distribution and marketing network through relationships with
marketing networks wholesalers, buying house, distributors etc.

Alliances with recognized global • VTL has consciously made an effort to enter into alliances with recognized global
corporate’s players to bring their expertise and knowledge to VTL’s product portfolio.

Competitive price –value • VTL is very competitive due to the scale of integrated operations, procurement
positioning capabilities, technological expertise, inventory holding power etc.

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Annexure
VTL – Group Structure
Vardhman Textiles
Limited (VTL)
1973

Yarn, Fabric, Steel

Rs. 27,672 mn

Listed on BSE, NSE

VTL
Vardhman Yarns & Vardhman Acrylics VMT Spinning Co. VTL
Texgarments
Threads Ltd (VYTL) Limited (VAL) Limited (VMT) Investments Ltd
Ltd (VTGL)
51% 59% 73% 100% 51%
VTL Stake
RMG / Industrial / Acrylic Staple Fibre NBFC Garments
Business 100% Cotton Yarn
Speciality Threads

33 tpd threads 20,000 tpa N.A N.A

Capacity 45,120 spindles
70k spindles (captive)

Revenue Rs. 3,324 mn Rs. 2,745 mn Rs. 1,010 mn Rs. 37 mn NA

Collaborations - Marubeni & Toho -

A&E, USA Nisshinbo, Japan
Rayon, Japan

Market Status Unlisted Listed on NSE Unlisted Unlisted Unlisted

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Major global strategic alliances
Product Alliance Partner Year

Fibre and Yarn Dyeing Nihon Sanmo, Japan 1992

Gassed Mercerized Yarns Kyung Bang, South Korea 1994

Cotton Yarns Toho Rayon, Japan 1995

Acrylic Fibre (JV ended in 2009) Exlan and Marubeni Corp, Japan 1996

Fabric Dyeing & Finishing Tokai Senko, Japan 1998

Sewing Threads American & Efird (A&E) Inc USA 2001

Cotton Yarns Nisshinbo, Japan 2002

Cotton Fabric Nisshinbo, Japan 2007

Garments Nisshinbo, Japan 2009

VTL has forged major alliances with global players with an aim of forward integration and moving up the value chain

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 The Technology Upgradation Fund Scheme (TUFS)
Investments under the TUF scheme have steadily risen
● TUFS was introduced by the Government in April
1999 with an objective to enable textile companies to
modernize and expand their units at low cost by
providing interest subsidy of 5 per cent.

● The scheme was extended up to the Eleventh Plan in

the Union Budget 2007-08 however subsidy on
spinning sector was reduced to 4%.

● The spinning sector has been the largest beneficiary of

the TUFS, utilizing around 33 per cent (Rs. 163 Source: Textile Ministry
billion) of the total amount disbursed under the
scheme up to September 30, 2008. Consequently, the
spinning sector grew without requisite investments in
the downstream industries.

● All the loans of Vardhman Textiles Ltd (VTL) fall

under TUFS and are hence eligible for a Government
subsidy. Majority of these loans enjoy a subsidy of 5%
for technology/capacity expansion.

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Thank You