#9 IR case Version 7[1][1].01.01.06

8/9/2019 #9 IR case Version 7[1][1].01.01.06

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Ingersoll-Rand (India) Ltd.: The Air Compressors Business at the Crossroads (A)

“Yes, I’ve done it!” cried out Sanjay Mehta jubilantly, breaking the silence in his office in Mumbai senior sales e"ecutive at Ingersoll#$and %India& 'td %I$'&, Sanjay had just received a letter of intent from (eccan )e"tiles 'td, confirming their interest in *urchasing a +entac +entrifugal ir +om*ressor for their manufacturing facility at Mumbai ver the last three hot summer months,

Sanjay had made several rounds to the cor*orate office and *roduction *lant of (eccan )e"tiles(uring these interminable months, he had a series of discussions -ith the com*any’s *urchase head,maintenance manager, chief of the engineering de*artment and finally the .oint /resident, trying toconvince them that their e"isting aging reci*rocating com*ressors, -hich su**lied all thecom*ressed air re0uirements to the com*any, and -hich the management *ro*osed to re*lace, could be substituted -ith Ingersoll $and’s %I$& +entac +entrifugal com*ressor, as 1it -as the best in itsclass, delivering highest 0uality air at the lo-est *ossible o*erating cost’ )his -as a sales *itch heused -ith all his clients, and -ryly he noted that his com*etitors’ sales e"ecutives, -ho also beat atthe same customer’s door, often close on his heels, must have doubtlessly been mouthing the same *latitudes to the very com*any e"ecutives -hom he had just met! Sanjay’s *erseverance seemed tofinally have *aid off, the *roof of -hich -as the letter of intent he just received, -hich he clutchedclose to his chest )he victory -as all the more s-eet since (eccan )e"tiles at one stage stronglyconsidered a com*etitor’s +entrifugal com*ressor as a suitable re*lacement, and -as in the *rocessof nearly finali2ing the deal It -as at that late stage -hen Sanjay heard of the on#going deal and1jum*ed into the fray’ 3esides, it -as the first breakthrough sales of I$ to this im*ortant customer,since a com*etitor -as -ell entrenched in this very im*ortant account, and generations of I$ salese"ecutives tried in vain to get a beachhead into this account

“3ook me on the ne"t .et ir-ays flight to hmedabad!” Sanjay re0uested )rish, the e"ecutive in#charge of travel bit of a brag that Sanjay -as, he desired immediately to meet Mr nand$anganathan, 4"ecutive 5ice /resident#ir +om*ressors, to announce in *erson his first big victoryafter having risen to the *osition of senior sales e"ecutive five months ago, and more im*ortantly thefoot#in#the#door beachhead order that he had just established for I$ -ith this *otentially im*ortantcustomer “nand -ill be delighted at this $s 67 lacs order! )he sale -ill hel* I$' to break thecom*etition’s stronghold in this account, *roviding tremendous o**ortunity to us for future business-ith (eccan )e"tiles, a leading te"tile manufacturer,” thought Sanjay to himself

$iding high on his achievement, Sanjay made it to nand’s office in 8aroda, hmedabad the veryne"t day, the 7rd of .uly 9olding (eccan )e"tile’s confirmation letter in one hand, Sanjay barged intonand’s office saying, “3oss! I have clinched this order of our dreams!” :uite sur*rised at Sanjay’sunscheduled visit, nand asked Sanjay to make himself comfortable on the chair across his table,-hile he carefully read through (eccan’s letter of intent )he grim e"*ression on nand’s face after he had finished reading the letter got Sanjay -orried “;hat’s -rong<” asked Sanjay, “ren’t youim*ressed< In fact, I -as floored -hen I read the letter” nand *aused for a moment and thenre*lied in a calm voice, “s im*ressive as this deal looks on the surface, I -ish you had not taken theorder” “I don’t understand, 3oss! I thought you -ould be very im*ressed -ith this (o you mean tosay that you don’t -ant this huge order<” asked Sanjay -ith mi"ed feelings of anger anddisa**ointment

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)his case has been *re*ared by Ms Shobitha 9egde, $esearch ssistant and /rof (5$ Seshadri, IIM, 3angalore, as a basis for classroomdiscussion rather than correct or incorrect handling of a managerial situation )he authors -ish to thank Ingersoll#$and %India& 'td for

*ermitting them to develo* the case, sharing its *ers*ectives and *roviding access to valuable information and insights during the *rocessof *re*aring this case )he authors also -ish to thank Mr ) >rishnamurthy, $esearch ssistant for his assistance Some of the datahave been disguised in the interests of confidentiality? @AAB Indian Institute of Management, 3angalore

8o *art of this *ublication may be re*roduced, stored in a retrieval system, or transmitted in any form by any means # electronic,mechanical *hotoco*ying, recording or other-ise C -ithout the *ermission of the co*yright holders

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“'ooking at it realistically” said nand, “t this *rice, this sale -ill earn us only a @E#7E *rofit Isee no sense in offering a -orld class, high value *roduct at such a heavily discounted *rice!” “;ellthen, if -e cannot afford to offer our com*ressor for $s 67 lacs, our com*etitors -ill be more thanha**y to offer theirs at a *rice DAE lo-er than our 0uote nd if it -ere not for my *erseverance and *ersistent meetings -ith the to* e"ecutives at (eccan )e"tiles, -e -ould have lost this deal to our com*etitors long ago! ny-ay I am too shaken u* no-, and need to com*ose myself first before

hearing from you on -hat you -ant me to do on this order,” said Sanjay raising his voice ;ithout-asting another minute, he -alked out of nand’s office in a huff

“+om*etition is driving do-n air com*ressor *rices and -e cannot afford to offer such *riceconcessions anymore )his needs to sto*, else I$' -ill bleed to death!” said nand to himself

Ingersoll-Rand (India) Ltd.

Ingersoll#$and, Inc, FS, a global major in the manufacture of a -ide range of e0ui*ment cateringto diverse industries, had established its Indian *resence over eight decades ago ;ith a businesshistory dating back to DGHD, e0ui*ment manufactured by the com*any such as jackhammers, sto**er drills, drifter#ty*e drills, air com*ressors, *o-er tools, hoists, etc, -ere *ut to use for many *restigious *rojects like the construction of the /anama +anal in D6A, construction of the 9oover (am %built bet-een ri2ona and 8evada& during the Jreat (e*ression, e"cavation -ork in the 8iagara Kalls, construction of the historic 4nglish +hannel )unnel and building of the )hree Jorges(am in +hina

;ith a turnover of over FS L 6 billion, Ingersoll#$and -orld-ide has a truly diversified *roduct

*ortfolio that includes construction e0ui*ment, mining machinery, com*act e0ui*ment,refrigeration e0ui*ment, trans*ort tem*erature#control e0ui*ment, security and safetye0ui*ment, and air and gas com*ressors Its remarkably diverse range of *roducts com*rise

industrial and commercial e0ui*ment and com*onents, most of -hich are *ositioned as number oneor t-o in their res*ective markets )he com*any serves four global gro-th market segmentsSecurity and SafetyN InfrastructureN Industrial /roductivity and +limate +ontrol ;ith close to O,AAA

em*loyees s*read across GA manufacturing facilities in @ countries, more than half of -hich arelocated outside the Fnited States, the com*any caters to industries as diverse as trans*ortation,manufacturing, construction and agriculture

Ingersoll $and made inroads into India in D6@D by incor*orating a *rivate limited com*any under thename Ingersoll $and %India& /vt 'td at +alcutta, ;est 3engal >no-n to be one of the first Indo#merican ventures in India, Ingersoll $and %India& commenced business as a trading com*any Inres*onse to the u*beat demand for engineered *roducts in India, Ingersoll $and %India& 'td %I$'& setu* its first manufacturing *lant in India in D6OB at 8aroda, Jujarat to manufacture reci*rocatingcom*ressors )he com*any -ent *ublic in D6HH, thereby diluting the foreign e0uity holding to HEIn D6HG I$' commissioned its second *roduction unit at 3angalore, >arnataka to manufacture do-n#the#hole hammer drills, -ater -ell drills, hand#held light drills and heavy duty blast#hole drills,

-hich find a**lication in construction, mining and -ater -ell drilling activities

)he years D667 to D66H -itnessed major ca*acity e"*ansions at both *lants of I$' Soil and as*haltcom*actors, gas com*ressors, and *neumatic tyre rollers -ere added to the com*any’s *roduct lineIn D66G I$' became the market leader in vibratory com*actors In D666, the com*any sold off itsJas +om*ressor business to (resser#$and India /rivate 'td dditions -ere made to the *roduct *ortfolio in @AAA -ith the introduction of ne- high#*ressure *ortable com*ressors for -ater#-elldrilling, 3la-#>no" as*halt sensor *avers -ith combination screed, and the +able 'ayair *ortablecom*ressors )he com*any also successfully launched indigenously built hydraulic drifter drills in

@

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the second 0uarter of @AAD Simultaneously, the range of stationary air com*ressors -as alsoe"*anded continuously, accom*anied by a significant thrust on rotary scre- com*ressors

;ith an annual turnover of $s AO@ crores %@AAD#@AA@& and em*loyee strength of about DAAA, I$'delivered a com*ounded annual gro-th rate of HO6E in revenues and BO@E in *rofits after ta" for the year @AA@ %4"hibit # D *resents *erformance highlights of the com*any& It takes *ride in being a

significant e"*orter of engineered goods from India, the annual e"*orts for @AAD#@AA@ being about$s GAA crores f these, air com*ressors accounted for the bulk of the e"*ort earnings ;ith anet-ork of @@ com*any offices and more than GA distributors offering Ingersoll $and *roducts andservices in the country, I$' serves its customers in t-o major markets, vi2, Industrial /roductivityand Infrastructure (evelo*ment

IRL’s Air Compressor Business

n air com*ressor is a machine, -hich is ca*able of com*ressing air thereby increasing its *ressurefrom a lo-er to a higher *ressure ll com*ressors act as sources of energy -herein the com*ressedair is used for control a**lications such as triggering, starting, sto**ing and modulating a motion or *rocess Small manufacturing *lants invariably use small com*ressors, -hich are installed close tothe *oint of use 'arge manufacturing *lants ty*ically use large com*ressors that are installed in ase*arate utility room along -ith the diesel *o-er generation sets %(J sets& ir +om*ressors areusually classified according to their ca*acities s*anning the lo- %AB horse*o-er %9/& to A 9/&,middle %A#DAA 9/& and high %DAA#@AAA 9/& ranges ;hile *ortable com*ressors are diesel#drivenand are used for construction and drilling, stationary ones are normally electric#driven and are usedin industrial a**lications

3ased on the method of com*ression, air com*ressors are classified into reci*rocating, rotary scre-and centrifugal com*ressors )hese com*ressors find a**lications in virtually all ty*es of industries, but are more intensively used in most *rocess industries and large#scale manufacturing *lants Someof the major industries that use com*ressed air are construction, cement, steel, refineries, glass, *lastic *rocessing, chemicals and *harmaceuticals, foundries and forge sho*s, te"tiles, /4) bottle# blo-ing and automotive manufactures )able C D lists the ty*ical a**lications of air com*ressors in afe- industries 4"hibit C @ *rovides the a**lications of com*ressed air in a )e"tile Industry

Table-1

Tpi!al appli!ations o" air !ompressors in di""erent industries

Industr #ome tpi!al appli!ations o" !ompressed air

/4) 3ottle#3lo-ing 3lo-ing the *re forms of bottles that are heated in dies using high *ressure air

Steel Kor "ygen enrichment of molten steel

utomobile )o *aint bare bodies of vehicles manufactured and to o*erate /neumatic )ools

+ement Kor transfer of cement through /neumatic conveying *um*s

/a*er P /ul* Instrumentation +ontrols

Koundry Kor /neumatic Moulding Q .olting of Mould )ables

Korging )o o*erate the /neumatic Korging 9ammer

Sugar +ombustion for Sul*hur 3urners

(airy Fsed for milk sachet *acking )he /neumatic +ylinders are actuated bySolenoid 5alves

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)he Indian o*erations of Ingersoll $and are organi2ed into t-o major business grou*s ir +om*ressors and Infrastructure )he ir +om*ressors business of I$' manufactures com*ressors of various ty*es and si2es in the t-o I$' manufacturing units located res*ectively at hmedabad and3angalore )he Infrastructure grou* manufactures drilling e0ui*ment for the mining industry and avariety of e0ui*ment for road building and construction industry at the com*any’s manufacturingfacility at 3angalore )able#@ belo- *resents the gro-th of I$' in the ir +om*ressors business

during the *eriod D666#@AA@ Jro-th in this segment de*ends heavily on ca*acity e"*ansions in themanufacturing sector and recurring revenue from e0ui*ment already su**lied to customers, such asthrough su**ly of re*lacement com*ressors or s*ares

Table-$

Re%enue & gro'th rates o" air !ompressors business Ingersoll-Rand (India) Ltd. (Rs. !rores)

es!ription *ar!h $++$ *ar!h $++1 *ar!h $+++ *ar!h 1,,,

ir +om*ressors business DDGB6 D@@OD DD67@ GOA7

)otal Sales of I$' AOH@ 77HHH D77 7H@H6

E Jro-th in ir+om*ressors 3usiness

#7@G E @HO E 7GHA E ###

Source nnual $e*orts of Ingersoll#$and %India& 'td

• Products and Applications

)he ir +om*ressors business of I$' offers its customers a -ide array of air com*ressors that havehigh 0uality, high reliability, lo- maintenance cost, use advanced technology, and are energyefficient )he com*any also offers its customers air com*ressor accessories and services )hecom*ressors manufactured by I$' are broadly classified into small com*ressors, mediumcom*ressors and heavy industry com*ressors based on the ca*acity of the machines )he ty*e of com*ressor and si2e of com*ressor are strongly correlated as sho-n in the follo-ing

#mall !ompressors: both Small $eci*rocating +om*ressors and $otary Scre- +om*ressors*edium Compressors: *redominantly $otary Scre- +om*ressorsea% Industr Compressors: 'arge $eci*rocating +om*ressors and +entrifugal +om*ressors

)he ty*e and si2e of com*ressors chosen for a *articular a**lication de*ends on the usage s*ecified by the customer

;hile small $eci*rocating +om*ressors are sim*le, rugged and very durable, they re0uire regular monitoring and fre0uent re*lacement of *arts )he $otating Scre- +om*ressor has become the most *o*ular source of com*ressed air for industrial a**lications It uses a more modern technology and isdesigned to *rovide *ulsation#free air @ hours a day Its o*erations are relatively 0uiet, It is energyefficient at full load, has reliable long life and *roduces im*roved air 0uality 'arge $eci*rocating+om*ressors and +entrifugal +om*ressors are very efficient, are suitable for large ca*acities, usevery critical technology in terms of design and com*onents, and cannot be easily substituted byalternate ty*es of com*ressors )able#7 lists the ty*es of com*ressors used in different industries

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/rices of a ty*ical I$' com*ressor in the above three categories -ould ty*ically fall in the follo-ingranges

+entrifugal com*ressors $s BA lacs to $s D@B lacs'arge reci*rocating com*ressors $s DB lacs to $s @A lacs$otary scre- com*ressors $s H lacs to $s G lacs

Small reci*rocating com*ressors $s OA,AAA

Table /

Air !ompressors: Te!hnolog orsepo'er (0) and *aret segments

Te!hnolog tpe 0 range

(appro2.)

Tpi!al maret segments

Small reci*rocating B#@A utomotive service, gas stations, construction,small industries

Small rotary B#A Small industries, garment manufacturers, autocom*onents

'arge reci*rocating 7A#HAA ir se*aration, sugar, *harmaceuticals, /4)

bottle#blo-ingMedium rotary BA#7AA uto com*onents, te"tile, medium engineering,cement

+entrifugal @BA#DAAA 5ehicle manufacturers, metal %steel, aluminium&, *etroleum refineries, te"tiles, auto com*onents

• Capabilities

)he I$' factory at 8aroda is the only I$ unit -orld-ide that carries out manufacturing and assemblyof all the ty*es of com*ressors ver the years, the Indian o*erations have built u* a high level of com*etence on *roduct engineering ca*abilities Fntil a fe- years ago, I$' -as a faithful

im*lementer of *roduct designs develo*ed by the engineering teams of the *arent com*any in FSIn the recent years, I$'’s *roven engineering skills, manufacturing skills, locali2ation skills, abilityto develo* *rototy*es, a**rove vendors, etc, have im*roved greatly )he com*any has conse0uentlyearned the consent of I$, FS to design and manufacture *roducts tailored to the s*ecific marketneeds in India )he *ercentage of the bill of materials %in terms of value& that has been indigeni2edhas *rogressively increased over the years and stands at about HA E )his figure ho-ever variesde*ending on the ty*e of com*ressor and customer a**lication )he other strengths of the 8arodaunit include financial management, value engineering and cor*orate governance

• Markets

)he ir +om*ressors business for I$' *redominantly comes from industries such as automotive,

automotive com*onents, te"tiles, metals %steel and aluminium&, *etroleum refineries and /4) bottling industry I$' is -ell entrenched in these markets Sales to these markets are handled directly by I$' or through distributors de*ending on ty*e of a**lication, com*ressor and customer+om*ressors re0uired for sim*le a**lications are handled by distributors Medium rangecom*ressors and 'arge $eci*rocating com*ressors are sold by both I$' and distributors +entrifugalcom*ressors are directly sold by I$' as these re0uire considerable technological kno-ledge andcom*etencies that ty*ically I$'’s distributors do not *ossess

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• Competition

tlas +o*co, 4lgi 40ui*ments 'td, >irloskar /neumatics %>/& and I$' are the key *layers in theorgani2ed sector for both medium %A#DAA 9/& and large %over DAA 9/& com*ressors. tlas +o*co isa major com*etitor of I$' in $otary and +entrifugal com*ressors 4lgi 40ui*ments is a major com*etitor of I$' in Small $eci*rocating and Small and Medium $otary com*ressors, -hile >/ is a

significant com*etitor of I$' in 'arge $eci*rocating and +entrifugal air com*ressors

tlas +o*co has been the market leader in small and medium $otary com*ressors for the *astseveral years In this segment, I$' *roducts have not managed to create a strong im*act +utthroatcom*etition in the small and medium $otary com*ressors has stunted the gro-th of I$' in thismarket segment Ingersoll $and is a leading manufacturer in the +entrifugal com*ressors and high *ressure reci*rocating com*ressor segments, -here technology so*histication levels are considerablyhigher than for other ranges of com*ressors I$' is the only com*any in India that offers a range of com*ressors from +KM %cubic feet *er minute& to DA,AAA +KM -ithout any *roduct ga* 3utcom*etitors have been trying to catch u* -ith I$' in the centrifugal com*ressor segment throughambitious gro-th *rograms including through foreign technical collaborations tlas +o*co haslaunched its *rogramme 1Investing for the future,’ -hich lays stress on develo*ment of ne- models

in centrifugal com*ressors for the local market )he *ro*osed merger of tlas +o*co -ith +hicago/neumatic, another large *layer, -ould result in broadening the *roduct *ortfolio of tlas +o*co, byadding +hicago /neumatics’ reci*rocating com*ressors to its stable of *roducts 4lgi 40ui*ments’tie#u* -ith Samsung )ech-in +o 'td, an affiliate of the South >orean Samsung grou*, is e"*ectedto bring the centrifugal com*ressors range of the >orean behemoth to India 4"hibit#7 *resents themarket *erce*tion of com*ressors manufactured by com*etitors of I$'

• Exports

)he *arent com*any Ingersoll#$and follo-s a *olicy of global sourcing ccordingly, it hasidentified centers of e"cellence %+o4s& for manufacturing various *roducts in its different factories

around the -orld Its Indian *lant has been nominated as the +o4 for small air com*ressors u* to7A9/ ther I$ +o4s in manufacturing are located in the FS, 4uro*e and +hina I$'manufactures 1bare’ com*ressors for the FS market )he bare com*ressors are then *ackaged andsold in the FS +onse0uently, e"*orts of I$' entirely de*end on the *erformance of the FSeconomy Kurther, the emergence of Ingersoll#$and as a dominant *layer in the global smallcom*ressors market has made I)' a very strong sourcing base for e"*ort of this range of *roducts

A meeting 'ith the Ahmedabad sales team and "inan!ial !ontroller

;ith Sanjay Mehta having left his office on a bitter note, nand felt that it -as urgently necessary toget the vie-s of his sales team and the financial controller, Mr Suresh /rasad on the issue at hand%4"hibit C *resents the organi2ation chart of I$'& ccordingly, a meeting -as hastily convened in

the adjoining conference room nand also remembered to send out an e#mail to Sanjay re0uestingfor some 1fast facts’ on (eccan )e"tiles, so that this information could be factored into the on#goingdiscussions on the issue at hand, as if flo-ed in In the meeting -ith his senior colleagues athmedabad, he laid out the *ur*ose of the meeting in a terse manner, as -as his style

“Sanjay Mehta, our star 3usiness 'eader from Mumbai, met me a cou*le of hours ago,” begannand, “and he has been successful in *rocuring a $s 67 lacs order from (eccan )e"tiles for a+entac +entrifugal +om*ressor” )here -as a loud round of a**lause from the sales team “3ut I amnot too convinced that this is a good order as the *rofit margin is non#e"istent or -afer#thin,” hecontinued “and such deals only end u* *utting *ressure on our bottom#line, and in e"treme cases,

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even eroding it” )here -as hushed silence, -ith everyone -anting to fathom -hat the boss -astrying to get to )his -as surely different from the *ast -hen e"uberance filled the room -hen thecom*any *rocured such orders, es*ecially first#time beachhead orders from a customer firm, as -asthe case -ith the (eccan )e"tiles order

“)he ca*ital goods industry is being affected by the economic slo-do-n Jro-th in the industrial

sector has been sluggish over the last t-o years )his has had an adverse effect on the sales of our air com*ressors, -hich de*ends heavily on the activities in the industrial sector nd as you alreadykno-, this trend is likely to continue even this year I feel the $s 67 lacs order that Sanjay got iscause for us to celebrate in these trying times,” said 8aveen /arikh, one of the Sales 4"ecutives4ven before he could finish, his colleague 5idya Sagar added, “)hat’s true, the investment climatedoesn’t seem to be im*roving in the industrial sector In fact, many of my key customers are *ost*oning ca*acity e"*ansion *lans I *ersonally feel -e should grab -hatever orders -e get, solong as it is above our costs, even if it means offering heavy discounts, and selling -ell belo- theguidance *rice ;e should take on the order of (eccan )e"tiles because earning even a DE *rofit is better than making no sale at all! 4ven -orse, it the com*etitor takes the order, he -ould surely go toto-n -ith it and brag about it )hat -ould only further -eaken our market *osition!” “I agree -ithSagar on this *oint ver the last several months, our com*etitors have been offering customerse"tremely lo- *rices, often belo- their costs ;e at Ingersoll#$and can never dream of dro**ing our *rices to such levels, as these *rices violate the norms -e have been given from the cor*orate It -as but a -eek ago that I lost a big order from a leading Indian *harma com*any to our com*etitor, -hooffered a -ho**ing DE discount on our last *rice of $s DG lacs for a large reci*rocatingcom*ressor,” said (ebashish +hatterjee, the chain#smoking go#getter salesman of the hmedabadteam “;ith our com*etitors offering discounts at the dro* of a hat, customers today are accustomedto getting high 0uality e0ui*ment at ridiculously lo- *rices, and therefore I am not sur*rised thatSanjay has been forced to slash do-n the *rice for (eccan )e"tiles from our best *rice of $s DAGlacs, -hich itself is considerably belo- our list *rice of $s DDB lacs, to $s 67 lacs If -e are toretain our market share in the com*ressed air business today, customers have to be -ooed throughsubstantial discounts, and this has regrettably become the rule of the game,” lamented /ramodMahajan, a veteran in the sales team

Suresh /rasad, the Kinance +ontroller lit his cigar in slo- and measured movements, and then gavehis verdict “;hile it is true that you as salesmen are badgered by customers for stee* *rice cuts, it-ould be -orth-hile to look at our costs of manufacturing a centrifugal com*ressor )he major ra-materials that go into its manufacture are castings, aluminium and steel )he finished and semi#finished com*onents used are bearings, coolers and filters, s-itches, gauges, rotors, skid, control *anels, starters, housings and *i*ing lthough the entire manufactureQassembly of the machine isdone here at 8aroda, -e still take recourse to im*orts from the *arent com*any for some of thecritical com*onents by *aying a customs duty as high as @BE )hus, an overall estimate of our totalcosts, -hich includes *roduction costs, distribution costs and service costs, -ould be $s 6D7 lacsfor the +entac +entrifugal ir +om*ressor being considered for (eccan )e"tiles )he *resentincrease in ra- material *rices and the devaluation of the ru*ee -ill further im*act our in*ut costslso, as you all are already a-are, there is a lot of value *ackaged into the +entac +entrifugalcom*ressor Its robust design enables customers get trouble#free o*eration for DA#DB years, -ithoutany dro* in o*erating efficiency It delivers the highest 0uality of air at the lo-est o*erating cost Iunderstand from nand that there is a lot of clever design and several *ro*rietary features includingsome very im*ortant *atents that I$ holds that have gone into all the 1soft-are’ of building thatmachine )herefore, offering this *roduct at a *rice as lo- as $s 67 lacs -ould mean undervaluingthe *roduct 3esides, at the end of the day, -e -ill end u* losing money, should -e sell it at such alo- *rice, since there are a lot of hidden costs involved in the im*lementation, over -hich -e do nothave too much control I am afraid that the same is true for our entire *roduct range”

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“;e agree -ith -hat you say, Suresh 9o-ever customers are using the e"isting ruthless com*etitionto their advantage Su**liers are asked to give their best 0uotes )he customer then *its one su**lier against the other, eventually forcing the su**liers to offer rock#bottom *rices In this sense, I fear that as an industry -e are all to blame for accelerating the do-n-ard *lummeting *rices for com*ressors 9o-ever at the end of the day, -e sales *eo*le have sales targets to chase and marketshares to defend If -e do not sell our *roducts fearing that the *rofit being earned is not much, then

-e -ould end u* making no sales at all If -e e"tend this line of reasoning, soon, -e -ill have no jobs to kee*!” remarked /ramod sarcastically “In these difficult market conditions, sales reali2ationsare not going to come easily ;hen -e salesmen have fought hard on a business deal to ultimatelyclinch the order, -e are no- hearing that it is better off not making the sale, because *rofits are lo-!I think this is being really unreasonable,” grumbled Sagar

“I see no danger in the -ay -e are doing business at *resent ;e -ill -in some orders and -e -illlose some ur air com*ressor business has managed to re*ort relatively im*ressive *erformancefigures even amidst heightened com*etition and slo-do-n in the user sectors,” commented 8aveennand seemed to rebuff 8aveen “(on’t forget that our good *erformance has been on account of shar* increase in e"*orts of air com*ressors, cou*led -ith im*rovement in sales of s*ares andservices s it is, our e"*ort *rogram is already under com*etitive *ressure from our o-n +hina *lant, -hich is much more *roductive and cost#effective com*ared to our *lant” %4"hibit C B *rovides the sales distribution of air com*ressor business of I$'&

“+hea*er im*orts and com*etition from the unorgani2ed sector is also becoming a cause for -orry)hese t-o sources account for about one#third of the sales in the reci*rocating com*ressor segment,-hich means lo-er margins for us in this segment,” mused Sagar . “;e should also bear in mind thatcom*etitive *ressures on our customers are forcing them to look at reduction in their costs )his isyet another reason for customers to s0uee2e out the best deal from their su**liers, and this isha**ening across the board of su**liers, covering ca*ital goods, ra- materials and consumables,”added (ebashish “+ustomers are sho-ing reluctance to *ay for features accom*anying our *roducts, and *rice has become the *rinci*al *urchasing criterion,” mentioned Sagar “+ustomersundoubtedly *refer to have a more durable and more reliable com*ressor over a less durable andreliable one at the same *rice,” added 8aveen “If I$' has to maintain its *osition in the market, itneeds to fight com*etition on *rice )his makes it all the more im*ortant that -e acce*t even the 1notso *rofitable’ orders such as that of (eccan )e"tiles,” Sagar em*hatically concluded ;anting tos-ing the entire team to his reasoning, he continued, “;e at I$' manufacture a -ide range of com*ressors that are high on 0uality, suited to the needs of our customers ;e have a commendableafter#sales service and a strong *resence in the e"*ort market to the Fnited States I see that *ricingis and -ill be the only factor affecting our *erformance ;e -ould be unnecessarily *utting our *erformance under *ressure by not -illing to offer *rices that our customers -ant I feel that -eshould sho- more fle"ibility in our a**roach to *ricing and not be too fi"ated in getting *remium *ricing, as -e a**ear to be doing I firmly believe that the days of juicy *rices are long gone and -emust no- -ake u* to the realities of the market”

)he meeting had gone on for t-o hours

“lthough *rice is critical, a sale cannot be *urely *rice#driven If left to the customer, he -ill onlyfight on *rices and our *rofit line -ill get eroded even though to*line gro-th may be maintainednd this certainly doesn’t ring -ell for the com*any I cannot but hel* com*are -hat is ha**ening tous -ith -hat ha**ened in ancient $ome many thousands of years ago! I$' is today e"*eriencing-hat I call the 1gladiator syndrome’ +om*etitors, like gladiators, are fiercely s-inging their s-ordsfighting each other, -hile the customer sits in the stands cheering -ildly In the end, both gladiatorsend u* bleeding ne gets so badly hurt that he is as good as dead, -hile the other -ho is alsogrievously injured, is *roclaimed by the customer to be the -inner ll this time, the customer is

G

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sitting in the stands, -atching the battle -ith much delight, and ha**ily a**lauding )he *rice -ar going on in the air com*ressor market has I$' already bleeding!” said nand em*hatically

“9o- then do you *ro*ose -e do business, if not on *rice< )o my kno-ledge, I$'’s strengths lie inmanufacturing high 0uality air com*ressors ;e have been doing feature#additions to e"isting *roducts fairly fre0uently ;e have been introducing ne-er, more so*histicated machines regularly

)his is critical for both maintaining and e"*anding our market share *art from this, -hat else do-e have that -e can leverage u*on<” 0uestioned /ramod 8o one *resent in the meeting had anans-er to this sage 0uestion nand decided it -as time to conclude the meeting “/ramod hassummed u* our *redicament -ell I suggest each of you think through the situation and come u*-ith -hat you think -e ought to be doing going for-ard ;e are in an emergency situation of sortsas you all -ill recogni2e 'et’s *lan to meet in ten days’ time, to skin the cat In the mean time I haveasked Sanjay in Mumbai to feed us -ith a lot more information on (eccan )e"tiles” n this note,the meeting concluded )he team dis*ersed leaving nand behind, engrossed in thought

etails on e!!an Te2tiles sent b #an3a

n reaching his office at Mumbai, Sanjay found an urgent email -aiting for him from nand 9e0uickly assembled the follo-ing details *ertaining to (eccan )e"tiles and dis*atched them to him

Manufacturers of one of the finest cotton fabrics for over a century in India, (eccan )e"tiles 'td,Mumbai has carved a niche for itself in the domestic te"tiles industry Incor*orated in the year DG6H,the com*any today is a trendsetter in cotton te"tiles and has a strong *resence in Yarn and (enim as-ell ;ith an annual turnover of $s 6HB crores %@AAD#@AA@& and e"*orts of $s 7BA crores %@AAD#@AA@&, the com*any’s fabrics have made their *resence felt in highly com*etitive internationalmarkets such as ustria, ustralia, 3ahrain, 3angladesh, 3elgium, +anada, +hina, F4, F>,FS and Rimbab-e

)he com*any’s *roduction facility situated in Mumbai is s*read over an area of 7A acres Itmanufactures -orld#class cotton fabric such as Jrey, bleached, dyed, *rinted and yarn dyed -ovenfabrics in various -eaves and *atterns (eccan )e"tiles also im*arts finishes such as Mercerised,/re#shrunk, 4merised, ;ash#n#;ear, and 4asy#care suited to the end customers’ needs and tastether fabric varieties *roduced by the com*any include Sheetings, /o*lins, +ambrics, Mulls, 'a-ns,Kull 5oiles, (uck fabrics, (rills, )-ills, Satins, Suitings, Shirtings and Kurnishing Kabrics

balanced blend of modern, so*histicated machinery -ith a highly skilled and dedicated -orkforcehas seen the com*any through a very difficult *eriod for the )e"tile industry over the last fe- yearsIncreased in*ut costs, de*ressed market conditions, demand recession, general economic slo- do-nin the country and a sluggish global demand have forced (eccan )e"tiles to regulate *roduction of fabrics in accordance -ith the falling demand in both domestic and e"*ort markets

$ising in*ut costs for electric *o-er, -ater, labour, diesel oil, cou*led -ith stiff com*etition in theorgani2ed sector of the te"tile industry has made (eccan )e"tiles ado*t a rigorous system of costde*loyment +learly, the thrust in the com*any is no- on cost reduction and costs are being managedsystematically, covering both fi"ed and variable costs

(eccan )e"tiles has a re*utation among its su**liers as being an aggressive buyer, demanding thehighest *roduct 0uality and the best service at lo- *rices )he *urchase function sends out the $K:%re0uest for 0uotation& to su**liers and *lays a key role in deciding the vendor along -ith the/resident

6

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A resear!h team !reated to gather "urther in"ormation on e!!an Te2tiles

;ith a desire to get a better understanding of the challenges being faced by (eccan )e"tiles, nandcreated a 1fact finding’ team that com*rised of Sanjay, /ramod and (ebashish )he idea -as to havethe team s*end time in the *remises of (eccan )e"tiles talking to *eo*le and collating informationon *roblems being faced by the com*any Sanjay had managed to establish a fairly good ra**ort -ith

the /resident of (eccan )e"tiles over the last fe- months, and this hel*ed the I$' team get hisconsent to interact -ith officials of the various de*artments in the com*any, su**osedly for the *ur*ose of 1better understanding their needs’

ver the ne"t one -eek the fact finding team held intense discussions -ith the heads of the sales Pmarketing, *urchase, maintenance, finance and manufacturing at (eccan )e"tiles )he findings of the team -ere summari2ed s nand read through the re*ort, he learnt the follo-ing

• Sales P Marketing function is under enormous *ressure to increase the com*any’s domestic and

international market shares lthough the com*any has so far been e"*orting about AE of its *roduction, de*ressed e"*ort markets and increasing com*etition from domestic and global *layers resulted in reduction of the *ercentage of e"*orts of the com*any’s *roducts in all

*roduct lines Similar com*etitive *ressures -ere at *lay in the domestic markets, -here severe *rice *ressure from both domestic and foreign com*etition -as the reality for the com*any atevery turn, leaving no sco*e for *rice increase on any of the *roducts in its e"isting *roductrange

• )he com*any’s falling turnovers and *rofits over the last three years has had the Managing

(irector %M(& -orried 9e is being *ushed hard by the +hairman and 3oard of (irectors toincrease the earnings *er share of the com*any by 7AE )he board directed the M( to embark on consolidation -ith *articular em*hasis on im*roving o*erational efficiency throughim*lementing strict measures for cost control and financial restructuring of the com*any to thee"tent *ossible

•

In his drive to cut costs and minimi2e -aste in the com*any, the M( has given the 5ice/resident %Manufacturing& a clear mandate to reduce cost of *roduction in the three divisions,vi2, te"tiles, cotton yarn and denim ;hile the 5/ %Manufacturing& -as -orking on develo*ingenergy conservation measures and absor*tion of ne- technology to im*rove *rocess efficiencyand *roduct 0uality, he had also asked the heads of de*artment of *urchase, maintenance andhuman resource to trim costs

• >no-n to be shre-d e"tractors of *rice concessions and service su**ort from vendors, the

*urchase de*artment has over the years created a lot of negative feelings amongst its vendorsSu**liers have had enough -ith (eccan )e"tile’s *urchase *olicy of 1*ay the least and get themost’ (irectives from the to* management to control costs further had the 5/ /urchase at(eccan )e"tiles in a tight s*ot 9e strongly felt that *ressuri2ing vendors further for *rice cuts

-ould only end in them discontinuing su**lies to the com*any

• ver the last 7 years the utility manager had encountered numerous *roblems -ith many of the

e0ui*ment %such as e"haust fans, transformers, motors etc& *urchased by the com*any 9e feltthat this -as due to the mercenary *olicies ado*ted by the com*any in *rice negotiations -ith itssu**liers $e*eated breakdo-ns of e0ui*ment had affected *lant o*erations resulting in themanufacturing de*artment sco-ling at the utility manager )he maintenance de*artment hasoften failed to come to the rescue of the utility de*artment during such breakdo-ns due toshortage in man*o-er

DA

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• )he maintenance head, gave some first hand information regarding *roblems being faced by

(eccan )e"tiles on account of *oor com*ressor *erformance over the last 7 years Most of theinstrumentation of the manufacturing *lant at (eccan )e"tiles is *o-ered by high#*ressure airMachine tri**ing occurred on a number of occasions on account of lo- air *ressure in thesystem, caused due to leakages )he lo- air *ressure has been causing *lant breakdo-ns and the

time being s*ent to revive *lant o*erations has been on an average, @ to 7 hours Machinetri**ing of this nature ha**ens at least DB times a year 4very time there has been a *lant breakdo-n, direct loss in revenue to (eccan )e"tiles has been a**ro"imately $sG lacs )hus,every year, direct loss in revenue associated -ith lo-#air#*ressure *lant breakdo-ns has been$sD@A lacs *art from the direct revenue losses, there are additional costs (eccan )e"tiles hadto incur Kor instance, some to he e0ui*ment -ould get damaged due to conse0uential thermalstresses +ost of overtime for em*loyees, cost of -ork in *rocess at various stages that had to be1dum*ed’, and costs of re*airs -ere realities that the com*any faced )he cost of lo-#*ressureair had thus been 0uite substantial )o counter this, the com*any increased the com*ressed air ca*acity by adding a ne- large com*ressor to the system about t-o years ago )he enhancedcom*ressed air ca*acity led to underutili2ation of the additional com*ressor

•

In follo-ing the instructions of the M(, the 5/ %Kinance& -as all set to ensure that the com*anyram*ed u* its *rofitability anyho- 9is a**roach to containing costs and enhancing *rofits-ould clearly be through time#tested methods stee* reduction in overheads, variable costs as-ell as sales P marketing e"*enses, and controlling investments in $P(

)he team also sent nand co*ies of the *rofit P loss statement, balance sheet, and income statementof (eccan )e"tiles %as *rovided in 4"hibits#O, H P G& for his *erusal

The 'a "or'ard4

It -as a busy morning on the DA th of .uly nand bro-sed through Sanjay’s email containing fastfacts on (eccan )e"tiles and mulled over the findings of the com*any as re*orted by his s*ecially

a**ointed research team 9e -as still not convinced about the *rice decided on the centrifugalcom*ressor for (eccan )e"tiles “It is just not *rofitable!” he said “Should I$' continue to bleeddoing business this -ay<” he asked himself “If -e carry on doing the business the -ay -e have been doing for the last fe- years, -e -ill come under enormous bottom#line *ressures lso -e -illend u* gro-ing the com*any at about the same rate as the gro-th of the economy”

“ir com*ressors are a com*le" technology *roduct, -ith a lot of value locked in it Sadly, todayeven these have been dragged do-n to commodity status! )he combined *ressure from the customer and com*etition is forcing *rices of com*ressors to hit all time lo-s ur *roducts have a lot of value built into them 9o- can my salesmen convince customers that highly engineered *roductslike air com*ressors should not be *urchased sim*ly on the basis of *rice< Fnless -e get better *rices, -e cannot continually im*rove the technology, and this -ill over a *eriod of time also im*act

the customer adversely”

nand recollected some of the concerns e"*ressed by Simon Mc(onald the /resident, Industrial)echnologies during a recently held meeting in the global head0uarters in FS “)here is muchmore *otential for air com*ressors in the Indian market,” Simon had said confidently to nand 9e based his judgment of the *otential of the Indian market, -hich in turn -as founded on the overalle"citement about India in the develo*ed -orld, and the fact that this slee*ing giant -as beginning to-ake u* Its over a billion *eo*le -ere hungry for all ty*es of goods and services, and all that meantgreat times for com*anies in the -estern -orld t least that is -hat the -estern business media-anted com*any honchos like Simon to believe “You guys in I$' are not ca*itali2ing on this

DD

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o**ortunity Something is missing some-here You have the right kind of *eo*le, the re0uiredtechnological skills, the market seems to be there, but your gro-th has not been any-here near the1aha’ that I have been ho*ing for!” nand came a-ay from this meeting -ith a clear directive that hehad to gro- the domestic air com*ressor business at a faster cli* In *arting, Simon advised nandthat the -ay for-ard -as for I$' to 1do something very different’ nand -as too seasoned amanager to ask Simon if he kne- -hat that 1something very different’ should be!

s nand *ensively si**ed his second cu* of coffee, he felt it -as im*erative to slo- do-n, if notchange, the commoditi2ation of air com*ressors If a leading *layer like I$' itself accelerated thecommoditi2ation, there -as not going to be too much ho*e in that business in the years to come! 9e-as to not only *reserve the com*any’s *rofit *osition, but also gro- the air com*ressor business *rofitably “I$' has to beat the commodity cycle It has to come out of the 1gladiator syndrome’ andmove ahead aggressively to ram* u* to*# and bottom#line gro-th and market shares ;e also need toe"*and the *ond, and enlarge the market in -hich -e *lay,” he told himself 3ut the 0uestion -as“9o-<”

D@

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52hibit - 1

6inan!ial 0er"orman!e o" IRL during the period 1,,7-$++$ (Rs. !rores)

es!ription 8ear

$++1-$++$ $+++-$++1 1,,,-$+++ 1,,7-1,,,

Sales AOH@ 77HHH D77 7H@H6

ther Income @DOA @A7H @AG7 DB77

4"*orts in value HGG GGH O@HG B@OB

/rofit fter )a" 7O77 BDAB B@7G B@B

/rofit fter )a" as E of Sales 6DE DB@DE D@OHE DBBE

+J$ for )otal Income %E& HO6 H77 D@OA ###

+J$ for /rofit after )a" %E& BO@ DAGO D7BA ###

Source nnual $e*orts of Ingersoll#$and %India& 'td+J$ C +om*ounded nnual Jro-th $ate

D7

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52hibit $

Appli!ations o" Compressed Air in a Te2tile Industr

In a )e"tile *lant, ra- material %cotton& undergoes many *rocesses from the time of recei*t into themill untill the final cloth is made 3roadly the o*erations can be classified as

S*inning # +onverting +otton to Yarn %threads&;eaving # +onverting Yarn to +loth/rocessing # 3leaching Q (ying of +loth Q /rinting)e"turi2ing # /rocess -here /artially riented Kilament Yarn %/Y& is stabili2ed through

heating and dra-ing

4ach of the above *rocesses use machines that are *o-ered by com*ressed air )he com*ressed air re0uirement for some of the )e"tile machines is listed belo-

9ame o" Te2tile

*a!hine

6un!tion es!ription Air

0ressure

gs;Cm$

<olume

o" Air

C*6=

3ale *ener, 3ale3reaker, Scutcher

*ening and cutting bales DA#DB D@

+arding $emoving -aste fiber O#H @#7

+omber +ombs the cotton in carding drums O#H @#7

(ra- Krame (ra-s the combed cotton to silvers O#H @#7

S*eed Krame )-ists the silvers O#H @#7

$ing Krame Several silvers are combined into thick Silver O#H @#7

'a* Kormer Several thick silvers are t-isted to yarn O#H

+one ;inding +ombing the yarn onto 3obbins or +ones O#H B#DB

uto +oner .oins yarns that break during -inding on +ones GB 7B

ir .et 'ooms +arrying the yarn across G @G#G

+KM # +ubic Keet *er Min

*art from finding a**lications in the above *rocesses, com*ressed air is used

• )o hold em*ty 3obbins %+ones& bet-een end *lates

• )o *ressuri2e drafting tubes by *assing the com*ressed air through /neumatic +ylinders

• )o s0uee2e rolls -ith /neumatic +ylinders

• )o blo- air on the yarn to kee* it clean P free from dust and im*urities

• Fsed in /neumatic +ylinders that are actuated through 4lectrical Solenoid 5alves Some

/neumatic +ylinders are used for doing various o*erations such as o*ening Q closing duct doors

D

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52hibit-/

*aret per!eption o" !ompressors manu"a!tured b

IRL and its !ompetitors on a s!ale o" 1 (poor) to 1+ (e2!ellent)

0rodu!t *anu"a!turerAtlas

Cop!

o

5lgi

5>uipme

nts

irlosar

0neuma

ti!s

Ingersoll-Rand

India Ltd.

Lo' 0 Compressors

/rice /erce*tion H G # O T

:uality /erce*tion G H O G

$eliability H G B G

)echnology leadershi* G H O H

*edium 0 Compressors

/rice /erce*tion G H # H

:uality /erce*tion G H # H$eliability G O # H

)echnology leadershi* G H # H

igh 0 Compressors

/rice /erce*tion H # G U O T

:uality /erce*tion H # O U G

$eliability H # O U G

)echnology leadershi* H # B U G

U 'arge reci*rocating com*ressors only T /erceived as “*remium brand,” not the chea*est in the market

DB

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DO

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9ote: #haded positions re"le!t sales and mareting "un!tions

DH52hibit - ?

Air Compressor Group, India(Year 2002)

Executive Vice President Air Compressor Group

SCM

General Manager -

Operations &SCM

Group Controller

Group HumanesourcesManager

AssociateVice President -

S!stems

GeneralManager -

Special Pro"ects

#aroda

Operations

$angaloreOperations

General Manager -

Mar%eting &Sales-P$M

P$M-Mar%eting &Sales

domestic'

P$M ( )argeecip.Exports

Head - A*termar%et

Parts

Service

COE+are,ouse &nterco Parts

General Manager -

Customer Solutions

$usiness)eader

) S!stems

$usiness )eader

M( ecip&S!stem

Components

$usiness)eader

H S!stems

Engineering.)S

EngineeringMS

EngineeringHS

Air Centres$ranc,es/istri0utors

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DG

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52hibit @

#ales istribution o" Air Compressors Business

Ingersoll-Rand (India) Ltd.

12

312

412

512

612

712

812912

:12

;12

3112

3;;: 3;;; 4111 4113 4114 Year

S a l e s

P e r c e n t

a g e

Exports

Spares

Completes

Source Ingersoll#$and %India& 'td

Total Business o" Air Compressors o" IRL (Rs. Crores)

es!ription 8ear ending

*ar!h $++$ *ar!h $++1 *ar!h $+++ *ar!h 1,,,

ir +om*ressors DDGB6 D@@OD DD67@ GOA7

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52hibit

8earl 6inan!ials o" e!!an Te2tiles

Fnits $u*ees +rores


*ar!h

$++$

*ar!h

$++1

*ar!h

$+++

*ar!h

1,,,

#ales 6HBD@ D,BHAO D,77G@D D,@6GA

ther Income BO6O DBH7 DG7G D@BB

$a- Material @@G6O 7BH6 AAA AAA

/o-er and Kuel HH6@ DBAH7 AAA AAA

4m*loyee 4"*enses DOOOH DOA@O AAA AAA

4"cise DAOOG DHA@7 AAA AAA

ther 4"*enses @6OG AAO D,A6GO6 D,ADA@B

perating 0ro"it D7DD@ DO6OD @76B@ @GBB

Interest @B@@ H66D 6BG DDA@

ross 0ro"it DO@GO DAB7 DO77@ DG7AG

(e*reciation B@OD GD7G 66HA 6@D

)a"ation @O6H 7DAA @B DADH9et 0ro"it ; Loss GDD7 77@@@ 7DHD GAHH

5>uit Capital OD7G OD7G HBA6 HBA6

/M %E& D7 DDO DHG6 @D6H

J/M %E& DBHH HDB D@A7 DAA

8/M %E& HGO @@BB @77 ODH

4/S %in $s& D7@@ BD7 @@ DAHO

8ote /M # *erating /rofit MarginJ/M # Jross /rofit Margin

8/M # 8et /rofit Margin4/S # 4arnings *er Share

@A

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52hibit D

Balan!e #heet o" e!!an Te2tiles

Fnits $u*ees +rores


*ar!h

$++$

*ar!h

$++1

*ar!h

$+++

*ar!h

1,,,

#ERC5# 6 6E9#

'ners 6und

40uity Share +a*ital OD7G OD7G HBA6 HBA6

$eserves P Sur*lus G77GG GD@B@ H77AH HD7GO

Loan 6unds

Secured 'oans D@ D6A6@ 7DHH @GBG

Fnsecured 'oans 7GGOB 77BGD 6H HOO)otal D,@O7B D,AAO7 D,BH@A D,O6766E#5# 6 6E9

6i2ed Assets

Jross 3lock G@7GA HGGHO D,HGBG D,BH

'ess $evaluation $eserve AAA AAA AAA AAA

'ess ccumulated (e*reciation HA6H @D7 O7AH7 B7D66

8et 3lock 7B@G7 7OH7@ GHGB 6@@G

+a*ital -ork#in#*rogress @BH7 7O O@6 D@BO

Investments BG76 OAH DGBG7 6OG7

9et Current Assets

+urrent ssets, 'oans P dvances HOGHG H7D7B GHG7 67@G'ess +urrent 'iabilities P/rovisions

7AOGA 7DD@H 7DHB@ @HH7H

)otal 8et +urrent ssets OD6H @AA6 B7A7D OBO6D

Miscellaneous e"*enses not -ritten D@ @7@ @DD B@A

)otal D,@O7 D,AAO7 D,BH@76 D,O676G

8ote

3ook 5alue of Fn0uotedInvestments

BHHGG OA767 DG@7@ GH@

Market 5alue of :uotedInvestments

O6 767 BDH DGH@

+ontingent liabilities D6@7@ @AHGG 77D @7HG6

8umber of e0uity sharesoutstanding %in 'acs&

OD7GD OD7GD HBA6D HBA6D

@D

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52hibit 7

In!ome #tatement o" e!!an Te2tiles

Fnits $u*ees +rores


*ar!h

$++$

*ar!h

$++1

*ar!h

$+++

*ar!h

1,,,

In!ome:

*erating Income GGBAO D,7AH@O D,O7HD D,76AAD

52penses

Material +onsumed @HHAG B7AB7 BOD B@A7

Manufacturing 4"*enses D@DO7 D6G@ @D@A @AAG

/ersonnel 4"*enses DOOOH DOA@O D7O7G D7HA7

Selling 4"*enses DA6@ D6BO7 @@B6H DHB@6dministrative 4"*enses HD@ 66A@ H6H@ HGGH

+ost of Sales H@ D,DG7OG D,@DGOD D,A6HA@

*erating /rofit DAO D@7B6 @BDA @6@6G

ther $ecurring Income GO7 7@GA 7DGH 7A67

djusted /3(I) DG6@H DBO76 @HO6H 7@76@

Kinancial 4"*enses BBO 6DHD DDA@B DDOGH

(e*reciation B@OD GD7G 66HA 6@D

ther -rite offs DB@ @G@ 7A @H7

djusted /3) H6OG #D6B@ O76G DD@DH

Ta2 Charges @O6H 7DAA @B DADH

djusted /) B@HD #BAB@ B6H7 DA@AA

8on $ecurring Items @GO@ 7GAG@ #7D@6 #DOGO

Reported 9et 0ro"it G7O 777D 7@O@ GOB6

4arnings before **ro*riation DDAAA @6H6 GDG7 D77G

40uity (ividend @HO@ DGD DD@O DBA@

(ividend )a" AAA DGG D@ DOB

Retained 5arnings G@7H @HBA O677 DDHDH

@@

Documents

#9 IR case Version 7[1][1].01.01.06