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NSE
87.30
Change Change %
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Updated:13 Dec, 2019, 15:48 PM IST

BSE
87.00
Change Change %
-1.05 -1.19%

Updated:13 Dec, 2019, 16:01 PM IST

Dear Shareholders,

THE YEAR 2011–12 WAS ONE OF THE MOST CHALLENGING IN LIVING MEMORY WHERE CIRCUMSTANCES EXTERNAL TO THE COMPANY ERODED PROFITABILITY. THE RESULT WAS THAT DESPITE A MARGINAL TOPLINE INCREASE, WE REPORTED A NET LOSS OF Rs.21.79 CRORE, ONE OF THE FEW SUCH INSTANCES IN THE RECENT PAST. EVEN AS WE HAD NO REASON TO CELEBRATE, IT WOULD NOT BE OUT OF PLACE TO INDICATE THAT WE FINISHED THE YEAR UNDER REVIEW BETTER OFF THAN OTHERS IN OUR INDUSTRY. 

This decline was largely due to a sharp fluctuation in raw cotton prices, high inventory cost, depressed economic conditions and reduced US and European consumer spends.

It would be easy to lose hope in this prevailing environment; however, it would be important to reiterate that the long–term prospects of the Indian textile industry (yarn, fabric and denim) remain optimistic.

Factors that will accelerate demand

One is optimistic of the prospects of India's textiles sector for some good reasons:

Population growth: India's population rose 181 million to 1.21 bn in the last 10 years. Based on the existing trend, India will cross China's population by 2030.

Increasing affluence: According to data of Ministry of Statistics & Programme Implementation, India's per capita income increased from Rs.53,331 in 2010–11 to Rs.60,603 in 2011–12, resulting in increased disposable incomes. Besides, India's urbanisation is expected to increase from 30% to 40% over the coming decade; the 2.4% CAGR is among the fastest urbanisation rates in the world.

Growing youth: Half of India's population is below 25. Interestingly, in India, the working age has declined sharply, generating higher disposable incomes. Close to 65% of Indians between 20–60 years are working, leading to higher disposable incomes and lifestyle aspirations. Among BRIC nations, India is expected to remain the youngest with its working–age population estimated to rise to 70% of the total population by 2030 – the largest in the world.

Wealth at the bottom: Rural income is increasing significantly. Credible estimates suggest that a 1% increase in India's rural income translates into US$25 billion of buying power.

Annual rural household consumption stands at about Rs.50,000 – total rural consumption estimated at US$190 bn, making the rural consumption market greater than the GDP of Singapore and Hungary combined. Rural consumption is expected to treble in 10 years.

These factors are expected to drive the demand for textiles and yarn in India.

Buoyancy in the man–made fiber space

The domestic fibre consumption ratio in India is 41:59 between man–made fibres and cotton, while it is almost 60:40 globally. A growing paucity of agricultural land will tilt the ratio more in line with the global average. More importantly, the global ratio is expected to tilt in favour of man–made fibres due to limited cotton availability and growing land shortage.

India's growing focus on strengthening its food security (Union Budget 2012) is expected to result in favourable policies, making food crops more attractive and reducing the land availability for cash crops.

Considering an average 8% GDP growth in the current decade, the domestic demand for man–made fibres/filament yarns is estimated at 4.2 billion kg in 2014–15 and about 6.48 billion kg in 2019–20 (after adjusting for likely exports and imports). This implies capacity additions of about 1.8 billion kg (2014–15) and 4.6 billion kg (2019–20), which will require an investment of over Rs.90 billion (around US$ 2 billion) by 2014–15 and Rs.230 billion (around US$ 5.1 billion) by 2019–20.

Our gameplan

At RSWM, we are investing in sophisticated capacity creation. We are investing in fully–automated, state–of–the–art units to house contemporary equipment, requiring lesser land, people and utilities to produce quality, niche products with a global acceptance.

This has been reflected in our 51,840–spindle unit at Kharigram, reinforcing our position as the one of the largest player in India's spinning segment and 18,000 spindle addition in our denim unit. We should commence the operations by the end of first quarter of 2012–13. Our LAKSHYA is 7,00,000 spindles by 2016, enabling us to capitalise on emerging opportunities in India and the world.

Message to shareholders

Our dual strategy of combining capacity and technology will position us among leading global textile players.

Warm regards,

Ravi Jhunjhunwala,

Chairman 

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