27
ALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success Company Background Incorporated in 1972, Alps Industries Ltd. (Alps) is one of India’s leading vertically integrated textile companies with a unique offering of natural dyes to the textiles industry. Its business spans over two segments - Textiles (89.1% of revenues) and Architectural products (10.9% of revenues). The company has strong brands viz. “Vista Home Fashions” (for home furnishings), “Le Pashmina” (for fashion accessories), “Response” (for office furniture fabric), “Vista” (for architectural products) and “Vista Floor Fashions” (for wooden floorings). Alps at present, has an approx. 33 TPD production capacity of yarn (7 TPD at the end of FY’05) which, with ongoing capacity additions, would increase to 100 TPD by Sept’06. The company has strong domestic as well as global distribution network. In India, it owns 70 outlets for its Le Pashmina Fashion Accessories and has 150 distributors with about 1400-1500 outlets for its Vista products. In the overseas markets, it has reach in USA, UK, South Africa, Europe, Hong Kong, Singapore, Australia etc. The clients of the company include reputed international brands like J. C. Penney, Wal-Mart, Target, Sears, GAP Inc. (USA); House of Fraser, Marks & Spencer, Ashley, Verricott, (UK); Pablo Paniker (Spain); etc. Company has a strong focus on R&D with unique expertise in application of natural Dyes. It has a process patent issued in July 1994, valid till July 2014 for application of natural dyestuffs extracted from plant material to textiles. The company raised Rs 498.06mn through the issue of 41,50,500 shares at Rs 120 in Sept’05 and has notified that it will raise upto Rs 1750mn through either ADRs/GDRs/Preferential allotment of warrants convertible into equity shares. Jan 3 rd , 2006 India Home Textiles and Architectural Products Bloomberg: ALPI@IN Reuters: ALPS.BO Fiscal Year: April-March Market Cap Rs 1432.69mn Outstanding Shares 10,874,300 Non-Promoter Holding 62.71% 3M Avg trading Volume 80,779.86 52-week high/low Rs 191/75.05 Current Price Rs 131.75/- Shareholding Pattern Promoters 37.29% Banks/ FIs/ MFs 10.56% NRIs/ OCBs/ FIIs 6.61% Public & Others 45.54% Stock Performance % 1M 3M 9M Absolute 18 (6) 29 Relative 12 (16) (10) 9M Performance vs. Nifty Source: NSE Indexed to 100 0.0% 50.0% 100.0% 150.0% 200.0% Apr-05 Jul-05 Oct-05 Jan-06 ALPS NIFTY *6 months annualized, **Company issued 4,150,500 Equity Shares in Sept’05 at a offer price of Rs 120 per share Source: Company & Four-S Research Particulars FY'02 FY'03 FY'04 FY'05 FY'06* Net Sales 1185.32 1318.70 1525.10 1778.62 2,178.35 Operating Profits 181.83 194.17 205.24 290.38 347.80 OPM (%) 15.34% 14.72% 13.46% 16.33% 15.97% Net Profit 45.05 51.82 56.07 141.34 187.20 NPM (%) 3.80% 3.93% 3.68% 7.95% 8.59% Net Profit after Extra-ordinary Items 122.60 42.75 55.88 142.09 187.20 EPS 19.78 6.90 8.42 21.13 17.21 Net Worth 477.83 521.36 613.03 749.82 NA RONW (%) 9.43% 9.94% 9.15% 18.85% NA ROCE (%) 11.12% 10.94% 11.05% 15.04% NA Financial summary in Rs mn

ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Embed Size (px)

Citation preview

Page 1: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

ALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success

Company Background

Incorporated in 1972, Alps Industries Ltd. (Alps) is one of India’s leading vertically integrated textile companies with a unique offering of natural dyes to the textiles industry. Its business spans over two segments - Textiles (89.1% of revenues) and Architectural products (10.9% of revenues).

The company has strong brands viz. “Vista Home Fashions” (for

home furnishings), “Le Pashmina” (for fashion accessories), “Response” (for office furniture fabric), “Vista” (for architectural products) and “Vista Floor Fashions” (for wooden floorings).

Alps at present, has an approx. 33 TPD production capacity of yarn (7

TPD at the end of FY’05) which, with ongoing capacity additions, would increase to 100 TPD by Sept’06.

The company has strong domestic as well as global distribution

network. In India, it owns 70 outlets for its Le Pashmina Fashion Accessories and has 150 distributors with about 1400-1500 outlets for its Vista products. In the overseas markets, it has reach in USA, UK, South Africa, Europe, Hong Kong, Singapore, Australia etc.

The clients of the company include reputed international brands like J.

C. Penney, Wal-Mart, Target, Sears, GAP Inc. (USA); House of Fraser, Marks & Spencer, Ashley, Verricott, (UK); Pablo Paniker (Spain); etc.

Company has a strong focus on R&D with unique expertise in

application of natural Dyes. It has a process patent issued in July 1994, valid till July 2014 for application of natural dyestuffs extracted from plant material to textiles.

The company raised Rs 498.06mn through the issue of 41,50,500

shares at Rs 120 in Sept’05 and has notified that it will raise upto Rs 1750mn through either ADRs/GDRs/Preferential allotment of warrants convertible into equity shares.

Jan 3rd, 2006 India Home Textiles and Architectural Products Bloomberg: ALPI@IN Reuters: ALPS.BO Fiscal Year: April-March Market Cap Rs 1432.69mn Outstanding Shares 10,874,300 Non-Promoter Holding 62.71% 3M Avg trading Volume 80,779.86 52-week high/low Rs 191/75.05 Current Price Rs 131.75/- Shareholding Pattern Promoters 37.29% Banks/ FIs/ MFs 10.56% NRIs/ OCBs/ FIIs 6.61% Public & Others 45.54% Stock Performance % 1M 3M 9M Absolute 18 (6) 29 Relative 12 (16) (10) 9M Performance vs. Nifty Source: NSE Indexed to 100

0.0%

50.0%

100.0%

150.0%

200.0%

Apr-05 Jul-05 Oct-05 Jan-06

ALPS NIFTY

*6 months annualized, **Company issued 4,150,500 Equity Shares in Sept’05 at a offer price of Rs 120 per share

Source: Company & Four-S Research

Particulars FY'02 FY'03 FY'04 FY'05 FY'06* Net Sales 1185.32 1318.70 1525.10 1778.62 2,178.35 Operating Profits 181.83 194.17 205.24 290.38 347.80 OPM (%) 15.34% 14.72% 13.46% 16.33% 15.97% Net Profit 45.05 51.82 56.07 141.34 187.20NPM (%) 3.80% 3.93% 3.68% 7.95% 8.59% Net Profit after Extra-ordinary Items 122.60 42.75 55.88 142.09

187.20

EPS 19.78 6.90 8.42 21.13 17.21Net Worth 477.83 521.36 613.03 749.82 NA RONW (%) 9.43% 9.94% 9.15% 18.85% NA ROCE (%) 11.12% 10.94% 11.05% 15.04% NA

Financial summary in Rs mn

Page 2: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 2 of 27

Research Report: Alps Industries Limited.

Aggressive growth plans to fuel revenue growth: Revenues are expected to grow at a CAGR of 53.6% over next 2 years, from Rs 1,795.56mn (gross sales) in FY’05 to Rs 4,235.04mn in FY’07.

Yarn Capacity Expansion: Yarn revenues are expected to grow

from Rs 40.25mn in FY’05 to Rs 1835.04mn in FY’07. The company is aggressively expanding its spinning capacity from 33 tonnes per day (TPD) at present to 100 TPD by Sept’06. Company plans to sell approx. 80% of total yarn production in the market to cater to increasing domestic and international demand while awaiting implementation of its weaving capacity expansions. Company is setting up a new plant in Haridwar which enjoys

advantages of cheap electricity (per unit rate of Rs. 2.35 only) and income tax concessions (100% exemption for first five years and 30% for five years thereafter).

It has also taken on lease two spinning mills at Kashipur and Jaspur from Government of Uttaranchal for a period of 10 years.

Company is adding capacity to its vertically integrated textile unit in Sahibabad with the installation of some open-end rotors and line balancing equipment.

Wide range of Architectural Products: Revenues from architectural products are expected to grow at a 2 year CAGR of 43.2%, from Rs 195.07mn in FY’05 to Rs 400mn in FY’07, with the introduction of innovative & improved designs and high-end products such as Aluminum Composite Panels and Real Wood Flooring etc. Swelling middle class and boom in real estate is expected to provide boost to the demand of architectural products of the company.

Well poised to tap the export opportunities in the Post MFA

Era: Company targets its exports to reach Rs 650mn by the end of FY’06 from Rs 477.28mn in FY’05.

Investment Positives Aggressive growth

plans to boost revenue

Yarn revenues are expected to reach Rs 1835.04mn in

FY’07

Expansion of spinning

production capacity from 33 TPD to 100 TPD

Revenues of architectural products to

increase at a 2 year CAGR of 43.2%

Focus towards

increasing export operations

Location Capacity Status Contribution to Revenue

Haridwar 50 TPD Producing 15 TPD, will reach 50 TPD by Mar’06

from Q3’FY’06

Kashipur 25 TPD Producing 11 TPD, will go up to 25 TPD byApr’06

from Q3’FY’06

Jaspur 15 TPD Production expected to start in Apr’06, full capacity utilisation by Sept’06

from Q1’FY’07

Sahibabad 10 TPD Producing 6-7 TPD, will reach 10 TPD by March-April’06

Already contributing

Page 3: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 3 of 27

Research Report: Alps Industries Limited.

Exports grew at 52.3% YoY from Rs 217.50mn in HY’05 to Rs

331.30mn in HY’06. Company has expanded its export marketing team from 8 in the

beginning of FY’05 to 14 at present and has successfully ventured into new geographies like Australia and Singapore. It has also expanded its customer base in USA, UK and Spain during the same period.

Higher profitability & margins in future:

Moving up the value chain: The Company is expanding its capacity

to produce value added fibre dyed yarn which is expected to contribute to about 20% of sales in FY 07. Also, the company has successfully been improving its product mix with the introduction of distinctive products with high quality and better designs in the Architectural Products division. Recently it has launched high value products such as real wood flooring and Aluminum composite panels to the range of its Architectural products. Higher pricing of these value added products with their growing demand is expected to help increase overall realization and margin of the company.

Unique advantage in natural dyes: The Company has a process

patent for producing natural dyestuffs from plant material issued in July 1994, valid till July 2014. This provides the company a unique advantage in the preparation of natural dyes, and their application to textiles while ensuring shade standardization and colour fastness. This helps the company in a unique branding and product differentiation opportunity.

Predictability of long term revenue flow:

Textiles - Strong and growing relationships with leading global brands (J. C. Penney, Marks & Spencer, Wal-Mart, Sears, Park B. Smith, House of Fraser and Pablo Paniker etc.) provide predictability to the future flow of revenues to the company as all these clients are increasing their outsourcing from India. Recently, it bagged a new order for the supply of home furnishing products worth $2.35mn from its existing client Springs, USA (for onward supply to Wal-Mart). Company has also bagged an export order of fiber dyed yarn from Sri Lanka worth Rs 92mn in Dec’05.

Focus towards high value products

Process patent for producing natural

dyestuffs

Strong relationship with global brands

to provide predictability to

revenue

Page 4: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 4 of 27

Research Report: Alps Industries Limited.

Architectural Products: The Company has built strong relationships with architects, interior designers and contractors over the last 15 years. It also has strong distribution network of 150 distributors and approximately 1,400-1,500 outlets for Vista products. The network and relationships facilitate quick introduction of more architectural products. The company is well poised to leverage these advantages and tap the increasing demand resulting from the boom in the Real Estate.

Strong management capabilities to achieve growth: Management of

the company has successfully demonstrated its ability to scale up operations. The company has repeated its success first by moving from Home furnishings to Architectural products and then to fashion accessories. Today its brands are recognised as leaders in their segments. The company has also been adding new territories and clients to the existing list and also strengthening its product portfolio. At present, it is focusing to expand its textiles capacities with addition in spinning and then adding to weaving capacities in future.

The stock is trading at an attractive valuation: The Company’s is expected to achieve a revenue of Rs 2,315.12mn and Rs 4,235.04mn and net profits of Rs 190.01mn and Rs 338.80mn respectively for FY’06 and FY’07. At fully diluted basis (as company has issued 41,50,500 equity shares in Oct’05) its stock is trading at an attractive valuation of P/E multiple of 7.54 times for FY’06 expected earnings and a P/E of 4.22 times for FY’07 expected earnings. It should be noted that company plans to raise up to Rs 1,750mn through either ADRs/GDRs/Preferential allotment of warrants convertible into equity shares for setting up additional weaving and processing capacities, which may affect the EPS during the implementation period.

Strong relationship

with architects & contractors

Demonstrated management

capability to scale up operations

Low current valuations with

high profitability growth

Page 5: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 5 of 27

Research Report: Alps Industries Limited.

Industry Risks

Risk of raw material cost putting pressure on margins: Cotton is the basic raw material for the textile industry, the availability of which is dependent on good monsoon and agro-climatic condition. The price of cotton has shown fluctuations in the past. However, with the use of BT cotton seeds, yield per hectare is expected to go up substantially resulting in lower volatility in prices in future

Threat of competition: In the post MFA Era, the Indian Textile Industry

faces stiff competition from countries such as China and Pakistan which also has cheap labour and significant production capacities.

Company specific Risks

Exchange Rate risk: The Company earns approximately 26% of its revenue through exports. Thus appreciation of rupee could have a negative effect on the export realizations. In fact, the company has experienced this in FY’03 and FY’04. However, the company has shown resilience to foreign exchange fluctuations in FY’05 through astute foreign exchange management.

Threat of high tax liabilities affecting profitability: The Company

currently benefits from various income tax exemptions and reductions, which are applicable for companies having export income. The Government of India has announced the gradual elimination of some of the income tax exemptions that are available to Indian exporters. Non-availability of these tax exemptions will increase the Company’s future tax liabilities which may reduce the profits of the Company in future. However, its new spinning mill at Haridwar enjoys 100% income tax exemption for five years and 30% exemption for the next five years.

Investment Risk

Increase in raw material prices

may affect bottomline

Competition from China

Exchange rate

appreciation may effect export realisation

Possibility of

higher tax liability

Page 6: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 6 of 27

Research Report: Alps Industries Limited.

The operations of Alps industries are divided in two primary business segments viz. Textiles (comprising yarn, fabric, fashion accessories and home furnishings) and Architectural Products (comprising Venetian vertical & roller blinds, wooden floorings, awnings, aluminum composite panels and others). Its revenues have increased at a 3 year CAGR of 14.5% from Rs 1,185.32mn in FY’02 to Rs 1,778.62mn in FY’05. Segment wise

Textiles segment which contributed 89.1% to the total revenues of the company in FY’05 has grown at a 3 year CAGR of 14.8% from Rs 1,058.85mn in FY’02 to Rs 1,600.49mn in FY’05.

Architectural Products segment comprising 10.9% of total revenues in

FY’05 has grown at a CAGR of 11.7% over the last 3 years from Rs 140.07mn in FY’02 to Rs 195.07mn in FY’05.

Company has well established brands “Vista Home Fashions” (for

Home furnishings), “Le Pashmina” (for Fashion accessories), “Vista” (for Architectural products) and “Vista Floor Fashions” (for wooden floorings.

Region wise

Domestic sales constituted 73.4% of total revenues while exports constituted 26.6% of FY 05 revenues.

Business Background

Revenue Split

Source: Company & Four-S Research

Revenues increased at a 3 year CAGR of

14.5% Approximately 89%

revenue contribution from

Home Furnishing & Fashion

Accessories and the balance from

Architectural Products

Strong brand equity in

Architectural products

88.3%

11.7%

88.2%

11.8%

89.5%

10.5%

89.1%

10.9%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

FY' 02 FY' 03 FY' 04 FY' 05

Home Furnishing & Fashion Accessories Architectural Products

Page 7: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 7 of 27

Research Report: Alps Industries Limited.

Domestic revenues

Domestic revenues have increased at a 3 year CAGR of 18.4% from Rs 795.03mn in FY’02 to Rs 1,318.28mn in FY’05, due to focused strategy and higher domestic demand leading to higher volume and improved realisations for its products.

Realisations from Fabrics increased at a CAGR of 12.2 % for last

3 years. It increased from approx. Rs 37 per sq. mt. in FY’02 to Rs 52 per sq. mt. in FY’05.

Volumes of Venetian, Vertical and Roller Blinds (largest contributor to architectural product segment) increased at a CAGR of 35.1 % for last 3 years.

Within domestic market, the company has well diversified revenue mix

(North India-38% and West-30% of FY’05 revenues) as a result of wide distribution and sales network.

66.3%

33.7%

68.8%

31.2%

71.2%

28.8%

73.4%

26.6%

0%

20%

40%

60%

80%

100%

FY' 02 FY' 03 FY' 04 FY' 05

Domestic Exports

Source: Company & Four-S Research

795.0

913.6

1101.1

1318.3

0

200

400

600

800

1000

1200

1400

Rs

mn

FY' 02 FY' 03 FY' 04 FY' 05

Domestic Revenues

Source: Company & Four-S Research

CAGR 18.4%

Domestic revenue constituted 73.4%

& while exports 26.6% of total

revenues in FY’05

Domestic revenues increased at 3 year

CAGR of 18.4%

Growth in volumes and realisation

resulted in higher domestic revenues

Page 8: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 8 of 27

Research Report: Alps Industries Limited.

Exports

The company’s exports comprising of Textiles and fashion accessories increased at a CAGR of 5.7% over the last 3 years from Rs 403.89mn in FY’02 to Rs 477.28mn in FY’05. The export range has been expanded in FY’05 with the introduction of Yarn.

The Company is leveraging the opportunities opened up in the post MFA era. This is evident from the 52.3% growth in its exports from Rs 217.50mn in HY’05 to Rs 331.30mn in HY’06. With increasing focus of the company to expand its export operations, exports are expected to accelerate even further to reach Rs 650mn by the end of FY’06 from Rs 477.28mn in FY’05.

Company has expanded the strength of its export marketing team

from 8 in the beginning of FY’05 to 14 at present.

7%25%

30%38%

North South East West

Geographical Break Up of Domestic Revenues in FY’05

Source: Company & Four-S Research

Source: Company & Four-S Research

403.9415.1

445.8

477.3

360

380

400

420

440

460

480

Rs m

n

FY' 02 FY' 03 FY' 04 FY' 05

Exports

CAGR 5.7%

North India the largest contributor

to domestic revenues in FY’05

Company to expand into

exports of yarn

Exports increased at a 3 year CAGR

of 5.7%

52.3% growth in exports in first half

of FY’06

Page 9: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 9 of 27

Research Report: Alps Industries Limited.

It has added Australia and Singapore to its global markets in

FY’05 and also expanded its customer base in USA, UK and Spain during the same period.

The export order book of the company was of Rs 220mn as on October 2005.

Though the company exports to a large number of geographies, North

America constituted 39% while Asia & Australia constituted 36% of FY 05 revenues.

Company exports to reputed stores like J.C.Penney, Target and Wal-Mart, in the USA; House of Fraser, UK; Marks & Spencer, UK; Pablo Paniker, Spain. It has also added a number of new customers in the current year viz. Sears, Bi & Co, Gap, Jeffrey Fabrics, Ashley, and Verricott of UK.

Recently, the company bagged a major order for the supply of home

furnishing products worth $2.35mn from Sears of USA. Company has also bagged an export order of fiber dyed yarn from Sri Lanka worth Rs 92mn in Dec’05. The company proposes to execute this order from its new spinning facility at Haridwar.

Source: Company & Four-S Research

Geographical Break Up of Exports in FY’05

39%

4%4%

36%

16%

North America Asia & Australia Europe South Africa Others

Company targeting

newer markets

North America constituted 39% of exports in FY’05

Strong & growing clientele

Page 10: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 10 of 27

Research Report: Alps Industries Limited.

Revenues from this segment have grown at a 3 year CAGR of 14.8% from Rs 1,058.85mn in FY’02 to Rs 1,600.49mn in FY’05. This increase is driven by improved realisations and higher volumes for most of the products in this segment.

The company has a process patent issued in July 1994, valid till July 2014 for producing natural dyestuffs from plant material. This gives company unique advantage in production of natural dyes and subsequently their application to textiles.

Its vertically integrated structure of production allows it to reap the

economies of scale while maintaining quality control throughout the process.

Margins (PBIT/Net Sales) of this segment have improved from 8.7% in

FY’04 to 11.9% in FY’05 due to new product offerings ,low cotton prices, improved export realisations (on account of depreciation of rupee in first half of FY’05) and efficient foreign exchange management. Margins however, were showing declining trend in FY’03 and FY’04 due to the company’s efforts to add overseas markets, strengthening of rupee and high sampling costs for new markets.

Product-wise break up

This segment of the company comprises yarn (fibre dyed, yarn dyed and grey), fabric, fashion accessories and home furnishings. The range of its fashion accessories includes products like shawls, stoles, mufflers, wraps, scarves and the similar items of fashion wear. The home furnishing product category includes bed linen, mats, durries, table linen and curtains and the fabric used for upholstery etc.

Textiles

Source: Company & Four-S Research

1,600.5

1,384.51,172.31,058.8

0200400600800

10001200140016001800

FY' 02 FY' 03 FY' 04 FY' 05

Rs m

n

0%

2%

4%

6%

8%

10%

12%

14%

in %

Revenues PBIT/Net Sales

Revenues from Textiles increased

at a CAGR of 14.8% over last 3

years

Improved

realisations and volumes

Margins from Textiles up from 8.7% in FY’04 to 11.9% in FY’05

Page 11: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 11 of 27

Research Report: Alps Industries Limited.

4.1%

26.9%

10.0%

59.0%

2.6%

29.8%

8.4%

59.2%

1.5%

29.0%

13.9%

55.6%

2.5%

30.9%

5.5%

61.1%

0%

20%

40%

60%

80%

100%

FY' 02 FY' 03 FY' 04 FY' 05

Yarn Fabric Fashion Accessories Products Made Ups

Made Ups contribute the maximum share (61.1% in FY’05) of revenues to Textiles followed by Fabrics (30.9% in FY’05).

Within this segment, Fabrics demonstrated highest revenue growth over

the last 3 years. Its revenues have grown at a 3 year CAGR of 20.1% from Rs 285.22mn in FY’02 to Rs 494.68mn in FY’05, due to increase in its realisations by 41% as well as in volumes by 22% in the corresponding period. However, revenues from Made ups (the largest contributor of the segment) have grown at comparatively lower rate of 16.1% (3 year CAGR) from Rs 624.39mn in FY’02 to Rs 978.25mn in FY’05.

Realisations from fashion accessories products have witnessed the

highest growth (71%) and increased from Rs 285 per sq. mt. in FY’02 to Rs 488 per sq. mt. in FY’05.

Made ups (largest contributor to this segment) experienced the highest

increase (35.4%) in volumes from 10,370,690 sq. mt. in FY’02 to 14,037,370 sq. mt. in FY’05.

The company has been strengthening this segment over time with large

design range, improved quality and value added features like use of natural dyes (providing distinctive features to products), etc. It has expanded the range of its fashion accessories by adding new products such as 100% Pashmina throws, light weight Pashmina shawls and scarves, viscose shawls and throws etc. Within its home furnishings range, the company has launched a brand “Response” for its office furniture fabrics.

Company is also considering the feasibility of setting up lifestyle retail

stores for Textiles (presently it has only one display showroom in Delhi).

h

Major contribution to Textiles from

Made Ups

Revenues from fabrics –fastest

growing product- increased at a 3 year CAGR of

20.1%

Continuous expansion of

segment

Source: Company & Four-S Research

Page 12: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 12 of 27

Research Report: Alps Industries Limited.

Major Competitors: Welspun India Ltd., Alok Industries, Bombay Dyeing, Riviera Exports and Paliwal etc.

Exports

The company exports are entirely contributed by the textiles division. It exports to countries like USA, UK, EU, Canada, South Africa and Hong Kong. It added Australia and Singapore to its global markets in FY’05 and also expanded its customer base in USA, UK and Spain during the same period. However, in FY’05, the maximum share of its export revenues was contributed by North America (39%).

Company exports to reputed stores like J.C.Penney, Target and Wal-

Mart, all of USA; House of Fraser, UK; Marks & Spencer, UK; Pablo Paniker, Spain. It has also added a number of new customers in the current year viz. Sears, USA; Bi & Co, Spain; Gap, USA; Jeffrey Fabrics, USA; Ashley, and Verricott of UK.

Research & Development

The Company is doing pioneering research work in the application of natural dyes to create value added distinctive products. It has a process patent issued in July 1994, valid till July 2014 for producing natural dyestuffs from plant material.

The company incurred the capital expenditure of Rs 8.43mn in FY’02

and Rs 11.74mn in FY’03 for the production and commercialisation of standardized Eco-friendly Natural Dyes in association with TIFAC. Recurring expenditures of R&D have increased at a 3 year CAGR of 52.6% from Rs 0.89mn in FY’02 to Rs 3.17mn in FY’05.

The company has been engaged in developing eco-friendly natural

colourants for the colouration of all types of textile, food, cosmetics, pharmaceuticals, hairs, leather, cane products and other house products such as candle, paper and wooden toys or even for giving herbal wash. The distinctive R&D support gives company’s product a unique-ecofriendly appeal and also provides a unique branding opportunity as environmental consciousness increases. As of now the company has standardized 15 dyes using the raw materials such as Cutch, Babool bark, Kamala powder, Anar chilka and Myrobalan fruits etc. giving over 280 colours.

Exports entirely contributed by

Textiles

Recurring expenditures on

R&D increased at a CAGR of 52.6% over the last 3

years

Continuous R&D to improve process

efficiency and create value added distinct products

Page 13: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 13 of 27

Research Report: Alps Industries Limited.

Infrastructural Facilities

Location Present

Production

Production after

Expansion Implementation

Period Expansion Process

Site IV, Sahibabad-

an Integrated Textile Unit 6-7 TPD 10 TPD

by March-April 2006

Installation of some open-end rotors and

line balancing equipment

Haridwar- Fibre

Dyeing & Yarn

Spinning Mill 15 TPD 50 TPD by March 2006

Presently 2 out of 5 lines of production are

operational and remaining will become operational by the end

of Feb’06

Kashipur- Spinning

Mill 11 TPD 25 TPD by April 2006

Presently only 25,000 spindles are

operational and the remaining 25,000 spindles will be

operational by April'06 Jaspur-

Spinning Mill - 15 TPD

by September 2006

The plant will be operational in April'06

B-2, Ghaziabad- for Home

Furnishing Made-ups

Installed base of 275

stitching machines - - -

Expansion of infrastructural

facilities

Page 14: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 14 of 27

Research Report: Alps Industries Limited.

Revenues from this division have increased at a CAGR of 11.7% over the last 3 years from Rs 140.07mn in FY’02 to Rs 195.07mn in FY’05. This increase is driven by volume growth in its sub-segments, especially Venetian Vertical & Roller Blinds (3 year CAGR of 35.1%) and Wooden Flooring (3 year CAGR of 19.8%).

The company has been strengthening this segment over time by introducing new ranges of products to tap the increasing residential and commercial demands. Recently, it has introduced the high value products such as real wood floorings, Aluminum Composite Panels and Wall Panels in FY’06.

With the introduction of new products and quality designs, margins

(PBIT/Net Sales) of this segment have steadily increased from 6.7% in FY’02 to 13% in FY’05.

Company has developed strong relationships with architects, designers

and contractors over the last 15 years. It has about 150 distributors and approximately 1,400-1,500 outlets for its Architectural (Vista) products.

Product-wise break up

Architectural products of the Company comprise Venetian vertical & roller blinds, wooden flooring, awnings, umbrella and others. Company produces all these products in varied designs and quality.

Architectural Products

Revenues from Architectural

Products increased at a

CAGR of 11.7% over last 3 years

Improvement in margins with the introduction of

high quality products

Strong relationships &

distribution network

195.1

162.4156.3

140.1

0

50

100

150

200

250

FY' 02 FY' 03 FY' 04 FY' 05

Rs

mn

0%

2%

4%

6%

8%

10%

12%

14%

in %

Revenues PBIT/Net Sales

Source: Company & Four-S Research

Page 15: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 15 of 27

Research Report: Alps Industries Limited.

Venetian vertical & roller blinds contribute the maximum share (67.1% in FY’05) to the revenues of the Architectural Products followed by Wooden Flooring (11.7% in FY’05).

Alps Industries is the leader in its Window Covering range of products

with 20% market share and 30% branded market share.

Revenues from Venetian Vertical & Roller Blinds have grown at a 3 year CAGR of 25.4% from Rs 66.42mn in FY’02 to Rs 130.85mn in FY’05, due to high volume growth (3 year CAGR of 35.1%).

Wooden Flooring revenues have grown at a 3 year CAGR of 20% from

Rs 13.19mn in FY’02 to Rs 22.77mn in FY’05 primarily due to volume growth of 19.8% over last 3 years.

Revenues from Awnings have grown at a 3 year CAGR of 19.9% from

Rs 10.97mn in FY’02 to Rs 18.88mn in FY’05 as a result of increase in realisations from Rs 16,245.93 per piece in FY’02 to Rs 21,383.92 per piece in FY’05.

Though Umbrellas contribute very small proportion of the total

Architectural product revenues, its revenues have increased at a CAGR of 17.2% over the last 3 years.

Major Competitors: Mac Decor Ltd., Hunter Douglas, Aerolux Pvt. Ltd.

and Pergo India Ltd.

Source: Company & Four-S Research

9.4%

47.4%

7.8%0.4%

35.0%

6.3%

49.0%

16.9%0.4%

27.4%

7.0%

60.5%

12.2%0.2%

20.1%

9.7%

67.1%

11.7%0.4%

11.2%

0%

20%

40%

60%

80%

100%

FY' 02 FY' 03 FY' 04 FY' 05

Awnings Venetian Vertical & Roller BlindsWooden Flooring UmbrellasOthers

Venetian, Vertical

& Roller Blinds contributed 67.1% to the revenues of

Architectural Products in FY’05

Leader in Window Coverings with 30% branded market share

Fastest growth from Venetian

Vertical & Roller Blinds with 3 year

CAGR of 25.5%

Page 16: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 16 of 27

Research Report: Alps Industries Limited.

Revenues

Revenues have increased steadily at a CAGR of 14.5% over last 3 years, from Rs 1,185.32mn in FY’02 to Rs 1,778.62mn in FY’05, driven by higher volumes and improved realizations.

Revenues from Textiles increased at a CAGR of 14.8% to Rs

1,600.49mn in FY’05 from Rs 1,058.85 in FY’02. Revenues from Architectural Products Division increased at a

CAGR of 11.7% to Rs 195.07mn in FY’05 from Rs 140.07mn in FY’02.

Made ups (product of Textiles) is the highest contributor (54.5% in

FY’05) to total revenues. Profitability

Operating profits of the company increased at a CAGR of 16.9% from Rs 181.83mn in FY’02 to Rs 290.38mn in FY’05 with operating margins increasing from 15.34% in FY’02 to 16.33% in FY’05.

Financial Performance- Annual

Source: Company & Four-S Research

1185.3

1318.7

1525.1

1778.6

0200400600800

10001200140016001800

FY' 02 FY' 03 FY' 04 FY' 05

Revenue

CAGR 14.5%

Revenues

increased at a CAGR of 14.5%

over last 3 years driven by improved

realisations and higher volumes

Largest contribution to the

revenues from Made Ups

Operating profits increased at a 3 year CAGR of

16.9%

Page 17: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 17 of 27

Research Report: Alps Industries Limited.

Operating profits of the company has increased due to: Improved Realisation: Realisations of most of the products in

both the segments have increased over a period of time, due to improved product mix (with the launch of innovative products & designs) in domestic as well as international markets. Fashion Accessories witnessed the highest growth (71%) in realisations from Rs 285 per sq. mt. in FY’02 to Rs 488 per sq. mt. in FY’05, followed by realisations growth in Fabrics (41%) from Rs 36 per sq. mt. in FY’02 to Rs 51 per sq. mt. in FY’05. Depreciation of rupee during the first half of FY’05 has also helped to improve export realisations. Export realisations of made ups (largest contributor to total revenue) have improved by 7.2% in FY’05 over FY’04.

Lower raw material costs: Lower cotton prices have resulted in the fall in raw material cost as a proportion of total revenue from 67.8% in FY’04 to 66.9% in FY’05. Cotton prices decreased from Rs 56,333.25 per metric tone in FY’04 to Rs 50,457.07 per metric tone in FY’05.

Improved Efficiency: Other direct expenses as a proportion of total revenue have fallen from 10% in FY’04 to 9.1% in FY’05, due to tight controls on the operating costs and improvement in operating efficiencies.

Economies of Scale: Higher revenues has led to the benefits of economies of scale for the company which resulted in a decrease in personnel expenses as a proportion of total revenue (decreased from 2.6% in FY’04 to 2.3% in FY’05).

290.4

205.2194.2181.8

0

50

100

150

200

250

300

350

FY' 02 FY' 03 FY' 04 FY' 05Rs

mn

0%2%4%6%8%10%12%14%16%18%

in %

Operating Profits Operating Margins

Operating profits

increased by 41.5% in FY’05

Operating margins

increased to 16.33% in FY’05 from 13.46% in

FY’04 due to improved

economic factors and cost control

measures

41.5%

Source: Company & Four-S Research

Page 18: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 18 of 27

Research Report: Alps Industries Limited.

Net profits of the company have steadily increased at a CAGR of 46.4% over 3 years, from Rs 45.05mn in FY’02 to Rs 141.34mn in FY’05 with net margins improving from 3.80% in FY’02 to 7.95% in FY’05.

Net margins slightly dipped to 3.68% in FY’04 from 3.93% in FY’03. However, margins recovered considerably in FY’05 (7.95%) with increase in net profits by 152.1% from Rs 56.08mn in FY’04 to Rs 141.34mn in FY’05 due to improved operating margins and fall in interest cost.

Return on capital employed (ROCE) has shown improvement over the

period of time and has reached 15% in FY’05 from 11.1% in FY’02 with increasing profitability and improving capacity utilizations.

Return on equity (ROE) is also improving and reached to 18.8% in

FY’05 from 9.4% in FY’02 as a result of higher profitability. Capitalisation

Debt equity ratio of the company increased in FY’05 (1.5%) due to increase in the debt component for the funding of its Haridwar plant.

Net Sale/Gross Block has increased from 1.3 in FY’02 to 1.6 in FY’05

demonstrating better utilisation of capacity.

152.1%

Source: Company & Four-S Research

Net profits increased at a 3 year CAGR of

46.4% 152.1% increase in net profits in FY’05

Substantial improvement in

met margins from 3.93% in FY’04 to

7.95% in FY’05

ROCE increased to 15% in FY’05 from

11% in FY’02

Interest coverage ratio improved due to low interest cost

and higher profitability

Particulars FY’02 FY’03 FY’04 FY’05

Total Debt / Tangible Net Worth (Debt/Equity) 1.4 1.3 1.1 1.5 Net Sales / Gross Block 1.3 1.4 1.5 1.6 Interest Coverage 2.2 2.3 2.3 3.3

45.0 51.8 56.1

141.3

020406080

100120140160

FY' 02 FY' 03 FY' 04 FY' 05

Rs m

n

0%1%2%3%4%5%6%7%8%9%

in %

Net Profit Net Margins

Page 19: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 19 of 27

Research Report: Alps Industries Limited.

The Interest Coverage ratio of the company has increased from 2.2 in FY’02 to 3.3 in FY’05 due to lower interest costs and higher profitability. The interest cost has come down as a result of the swapping of higher cost loans with lower cost loans and interest reduction.

Liquidity

Though the receivable days have come down, inventory days have increased in FY’05 as compared to FY’02 due to large volume of stocks maintained to launch new products.

Cash from operations decreased from Rs 171.6mn in FY’02 to Rs

62.1mn in FY’05 on account of CWIP at Haridwar unit under implementation.

Particulars FY’02 FY’03 FY’04 FY’05

Current Ratio 4.3 5.1 5.2 5.6 Days Receivables (as days of sales) 42.6 43.0 36.9 39.5 Days Inventory (as days of cost of sales) 143.1 146.5 143.6 152.3 Cash from operations (Rs mn) 171.6 103.20 106.5 62.1

Receivable days reduced from 43

days in FY’02 to 40 days in FY’05

Page 20: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 20 of 27

Research Report: Alps Industries Limited.

Gross sales have increased at an average quarterly rate of 7% over last 4 quarters from Rs 437.60mn in JAS’04 to Rs 572.90mn in JAS’ 05 with higher volumes for most of the products.

In JAS’05 gross sales have increased by 9.9% on QoQ basis and by

30.9% on YoY basis. This has been achieved on account of higher export performance of made-ups and fashion accessories, as well as 17% increase in domestic sales of the company in the first six months of the current year over the corresponding period of the last year.

Export revenues have increased at an average quarterly rate of 18.3%

over last 4 quarters from Rs 105.50mn in JAS’04 to Rs 206.90mn in JAS’05. In the first half of FY’06, export revenues have increased by 52.3% compared to corresponding period last year.

Operating profits have increased at an average quarterly rate of 10% over the last 4 quarters driven by increasing gross sales. Operating margins had been declining in AMJ’05 and JAS’05 on the account of increase in pre operational expenses for its Haridwar plant.

Net profits and margins had shown distorting trend in JFM’05 due to year

end adjustment of the deferred tax.

Financial Performance- Quarterly

90.083.983.0

66.861.4

48.545.153.2

31.928.5

0

20

40

60

80

100

JAS' 04 OND' 04 JFM' 05 AMJ' 05 JAS' 05

Rs

mn

0%2%4%6%8%10%12%14%16%18%

in %

Operating Profits Net Profit Operating Margins Net Margins

437.6 437.3

500.5 521.4

572.9

0

100

200

300

400

500

600

Rs m

nJAS' 04 OND' 04 JFM' 05 AMJ' 05 JAS' 05

Revenues

Source: Company & Four-S Research

Source: Company & Four-S Research

Increase in gross

sales at an average quarterly rate of 7% over last 4

quarters

Exports increased at an average

quarterly rate of 18.3% over last 4

quarters

Operating profits increased at an

average quarterly rate of 10% over last 4 quarters

Page 21: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 21 of 27

Research Report: Alps Industries Limited.

Peer Comparison- FY’05

Alps Industries derives dominant proportion (89.1% in FY’05) of its revenues from the business of Textiles and it is expanding into yarn business, thus, it has been benchmarked against the competitors in the respective areas.

Alps Industries is a relatively smaller player (with sales of Rs 1,778.6mn) with specialisation in the application of natural dyes on textiles. However, the company is aggressively adding to its spinning capacity which will increase its production capacity to 100 TPD by Sept’06 from 33 TPD presently.

Alps has the second highest growth in operating profits, which have

increased at a 3 year CAGR of 16.89%.

*Above financial comparisons have been made at companywide level and not segment wise.

Source: Company & Four-S Research

Peer Comparison

Net

Sales 3 Year CAGR

Operating Profit

3 Year CAGR PAT 3 Year

CAGR Operating

Margin Net

Margin ROCE

Alps 1,778.60 14.49% 290.4 16.89% 141.3 46.40% 16.20% 7.90% 15.00%

Alok 12,245.00 29.41% 2,383.80 34.85% 892.5 33.03% 19.50% 7.30% 10.30%

Welspun 4,935.80 23.83% 1,080.60 16.64% 394.7 51.10% 21.90% 8.00% 12.60%

NSM 4,431.70 1.22% 577.50 NA 160.4 NA 13.00% 3.62% 3.20%

RSWM 7,992.80 15.70% 909.70 NA 184.1 52.40% 11.38% 2.30% 11.00%

Source: Company & Four-S Research

1,779

12,245

4,936 4,432

7,99316.2%

19.5%21.9%

13.0%11.4%

8.0%

3.6%2.3%

7.9% 7.3%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

AlpsIndustries

Alok Welspun NSM RSWM

Rs M

n

0%

5%

10%

15%

20%

25%

in %

Net Sales PAT Operating Margin Net Margin

RSWM- Rajasthan Spinning and Weaving Mills Ltd. NSM- Nahar Spinning and Mills Ltd.

Comparable Margins

Comparable 3 year CAGR of PAT

Second Highest

growth in Operating Profits

Page 22: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 22 of 27

Research Report: Alps Industries Limited.

Peer Comparison- FY’06 Annualised

Though, the company operates at lower operating margins (16.2%) than Alok and Welspun, it is constantly striving to increase the margins through tight costs control measures and efficient financial management. Change in its product mix towards higher value products and expansion into yarn (including differentiated value added yarn) business is also expected improve margins.

Company’s net margins in FY’05 were 7.9% compared to 7.3% of Alok

and 8% of Welspun. Its net profits have grown at a 3 year CAGR (from FY’02 to FY’05) of 46.40% vis-à-vis 33.03% and 51.10% of Alok Industries and Welspun India respectively.

The company has the highest ROCE of 15% in FY’05 among its peers

due to tight operating cost control measures.

Alps Industries is expected to achieve the highest YoY growth of sales and operating profits of 23.05% and 19.77% respectively in FY’06.

Alps is also expected to have maximum net margins of 8.55% in FY’06.

Valuation Comparison

With the trailing P/E of 7.99x*, based on diluted earnings, Alps trades at a significant discount of to all the companies. The company has aggressive expansion plans in place and hence offers better scope of capital appreciation.

Net Sales YoY

Growth Operating

Profit YoY

Growth PAT YoY Growth

Operating Margin

Net Margin

Alps 2,188.60 23.05% 347.8 19.77% 187.2 32.45% 15.89% 8.55%

Alok 12,892.20 5.29% 2,592.00 8.73% 920.2 3.10% 20.11% 7.14%

Welspun 5,884.68 19.23% 1,093.56 1.20% 468.9 18.83% 18.58% 7.97%

NSM 4,776.48 7.78% 530.38 (8.16)% 286.5 78.64% 11.10% 6.00%

RSWM 7,877.40 (1.44)% 687.40 (24.44)% 209 13.53% 8.73% 2.65%

Source: Company & Four-S Research

Highest ROCE of

15% in FY’05 Highest expected growth of Sales and Operating

Profits

Low P/E offers better scope for

capital appreciation

Source: Company & Four-S Research

P/E EV/Sales EV/EBIDTA P/BV Alps 7.9* 1.5 9.2 1.62 Alok 10.0 1.6 8.4 1.74 Welspun 17.8 2.7 12.3 2.32 NSM 26.8 1.4 10.8 0.73 RSWM 12.3 0.8 7.3 1.36

*Company issued 4,150,500 Equity Shares in Sept’05 at offer price of Rs 120 per share

Page 23: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 23 of 27

Research Report: Alps Industries Limited.

Global Textile

World textile trade is expected to grow from $395bn in 2005 to $565bn in 2010 due to

the opportunities offered in post MFA era.

Huge opportunity post MFA regime: The phase out of MFA has offered huge opportunities in global textile business and it is expected that export share of India to US market would increase from 4% to 15%.

The Global textiles and clothing markets are integrating over the period of time,

providing huge business opportunity for the countries like India and China having integrated manufacturing facilities, access to low-cost raw material and cheap labour.

However, China is subject to export limits for 3 more years post 2005, while at the

same time its currency is appreciating. While, India-with a presence across the textile value chain looks well poised to

benefit from demand growth in itself, as well as from the diversification strategies of global retailers.

Global Home Textile

As per Mckinsey estimates, the global trade in Home Textiles currently stands at $9bn

and is expected to rise to $23 bn by 2010, almost two and a half times, over the next 5 years.

Strong growth opportunity in Home Textiles: Major Home Textile companies in the

US like Pillowtex and Westpoint Stevens have already filed for bankruptcy under chapter 11. These suppliers accounted for 20-25% of the total US production. This represents a highly profitable opportunity for cost competitive players in India and China.

Large global retailers, such as Wal-Mart, JC Penney, The Gap, Ikea (Sweden), Cades

(France), OTTO (Germany), are increasing sourcing from India because of its potential to provide one-stop shopping.

Diversification of sourcing: After the SARS crisis in China, buyers have begun

diversifying their sourcing across regions. Major buyers like Wal-Mart, Gap Inc, Levi-Strauss have been sourcing garments and madeups from India.

Annexure I- Industry Overview

Page 24: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 24 of 27

Research Report: Alps Industries Limited.

Domestic Textile

India is today one of the leading nations in textiles. It contributes about 23% to the world spindleage (Second largest).

Size of Indian textiles industry is worth more than $27bn. Out of this domestic industry is

worth $15bn and export market is valued at approx. $12bn.

India has a leading position in the exports and is among the top three nations in yarn (25% share, rank1), made-ups (17%, rank 2), and grey fabric (11%, rank 3). This is despite the fact that Indian textile industry is highly fragmented with even the largest player commanding less than 2% of industry size.

India's exports to US registered a growth of 27% rising from $1379mn to $1746mn

during the Jan-April 2005.

A report from Exim Bank has observed that the Indian textile sector has the potential to reach an export value of $70bn by 2014.

Domestic Home Textile

India is the Second largest producer of home textiles in the world with a 17% share of the world trade. India has the Natural advantage of abundant raw material supply and skilled/technical manpower.

During the Q2’FY’06, the Indian home textile exports witnessed a growth of more than

300% YoY in value terms.

Page 25: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 25 of 27

Research Report: Alps Industries Limited.

Amount in Rs mn

Annexure II – Profit & Loss Statement (Consolidated)

Particulars FY'02 FY'03 FY'04 FY'05 FY'06*

Net Sales 1185.3 1318.7 1525.1 1778.6 2,178.35

Less Operating Expenses 1003.5 1124.5 1319.9 1488.2 1830.6

Direct Expenses 885.2 981.2 1186.7 1352.0 1,462.40

Salaries & Wages 38.9 45.8 40.3 40.6 44.0 Others 79.4 97.5 92.9 95.6 324.2 OPBDITA 181.8 194.2 205.2 290.4 347.8Less Interest & Finance Charges 55.9 56.1 59.2 65.3 72.6 Less Depreciation & Amortization 58.6 67.8 70.8 75.2 68.0 OPBT 67.4 70.3 75.2 149.8 207.2Add Non Operating Income/Other Income 1.2 2.5 3.3 2.0 1.0 PBT 68.5 72.8 78.6 151.8 208.2 Less Provision for current Tax 5.0 5.5 6.5 8.5 21.0 Less deferred tax 18.5 15.5 16.0 2.0 - PAT 45.0 51.8 56.1 141.3 187.2Less Proposed Dividend & Depreciation Written Back (73.9) - - - - Less Prior Year Adjustments (3.7) 9.1 0.2 (0.7) - Net Profit 122.6 42.7 55.9 142.1 187.2EPS 19.8 6.9 8.4 21.1 17.2

*6 months annualized. **Company issued 4,150,500 Equity Shares in Sept’05 at Rs 120 per share

Page 26: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 26 of 27

Research Report: Alps Industries Limited.

Particulars 31st Mar 02 31st Mar 03 31st Mar 04 31st Mar 05 I. Sources of Funds 1.Share Holder's Fund 633.5 572.1 645.2 775.8(a) Equity Share Capital 62.0 62.0 67.2 67.2 (b) Preference Share Capital 95.0 - - - (c) Reserves & Surplus 476.5 510.1 578.0 708.6 2.Deferred Tax Liability/(Asset) 85.0 100.5 116.5 118.53.Minority Interest 4.Loan 576.7 686.4 670.5 1,150.0(a) Secured 486.1 648.7 637.4 1,021.8 (b) Unsecured 90.6 37.7 33.2 128.1 TOTAL (1+2+3+4) 1,295.3 1,359.0 1,432.2 2,044.3II. Application of Fund 1. Net Fixed Assets 767.9 759.3 787.3 1,258.2Gross Block 891.1 932.5 1,000.9 1,104.3 Less Depreciation (154.1) (202.1) (250.4) (302.3)Net Block 737.0 730.5 750.5 802.0 Add CWIP 30.9 28.8 36.9 456.2 2. Investments 11.91 25.0 17.8 4.73. Net Current Assets (A-B) 454.8 523.9 594.9 755.4A. Current Assets 591.7 652.3 737.3 919.3 (a) Inventories 399.0 457.7 526.4 629.7 (b) Debtors 140.3 157.5 156.3 195.2 (C) Others 52.4 37.1 54.6 94.4 B. Current Liabilities 137.0 128.4 142.4 163.9 (a) Creditors and other liabilities 127.7 119.4 131.4 143.9 (b) Provisions 9.3 9.0 10.9 20.0 4. MISCELLANEOUS EXPENSES 60.69 50.7 32.2 26.0TOTAL (1+2+3+4) 1,295.3 1,358.9 1,432.2 2,044.3

Amount in Rs mn

Annexure III – Balance Sheet

Page 27: ALPS INDUSTRIES LIMITED - Four-S · PDF fileALPS INDUSTRIES LIMITED Strategies and Services for Stakeholder Success ... spinning production capacity from 33 TPD to 100 TPD Revenues

Page 27 of 27

Research Report: Alps Industries Limited.

About Four-S Services Four-S Services provides customised business and financial research to organizations across the globe. The company also provides Investor Relations consulting to corporates based on in-depth sectoral and company research. The company has an impressive client profile and a team of analysts covering the key sectors including Finance & Banking, IT & Telecom, Retail, Media & Entertainment, Pharmaceuticals, Infrastructure and Manufacturing amongst others. For further information on the company please visit www.four-s.com

Disclaimer The information contained herein has been obtained from sources believed to be reliable but is not necessarily complete and its accuracy cannot be guaranteed. No representation, warranty, guarantee or undertaking, express or implied, is made as to the fairness, accuracy or completeness of any information, projections or opinions contained in this document or upon which any such projections or opinions have been based. Four-S Services Pvt. Ltd. will not accept any liability, whatsoever, with respect to the use of this document or its contents. This document has been distributed for information purposes only and does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. This document shall not form the basis of and should not be relied upon in connection with any contract or commitment whatsoever. This document is not to be reported or copied or made available to others. The company may from time to time solicit from, or perform consulting, or other services for, any company mentioned in this document.

For Further details/clarifications please contact: Puneet Jain

[email protected] +91 9810027640

Four-S Services Pvt. Ltd. 409, Meghdoot, 94, Nehru Place New Delhi – 110019, India