India – Economic Condition The Indian economy expanded at 6.9% in fiscal year 2011-12, its slowest pace in three years. The government expects a better showing in 2012-13 and has pegged growth at 7.6% for the new fiscal year. Manufacturing sector expansion is slow. Indias headline inflation edged up to 6.87% on higher food costs. The Reserve Bank of India is widely expected to cut the repo rate—the main policy rate—by 25 basis points to 8.25% to spur growth when it reviews policy next Tuesday. The RBI has already cut banks reserve requirement by 125 basis points in two moves since late January, making more money available for lending.
Current Economic ScenarioIndicator Impact on the Stock Prices and Business EnvironmentGross National Product Favourable because of High Growth RateGeneral Employment Level Unfavourable because of high level of unemploymentDomestic Savings Rate Favourable because of high DSRInterest Rates Unfavourable because of High Interest RatesTax Rates Unfavourable because of High ratesForeign Exchange Position Favourable for export oriented sectorBalance of Payments Unfavourable because it is negativeInflation Unfavourable because of High InflationAgricultural Production Unfavourable because of constant declinePower Supply Unfavourable because of crisis
India – Textile Industry Overview• One of the earliest sector to come into existence in India; instrumental part in the freedom movement.• Accounts for 14% of IIP and 20% of total exports.• Earns 27% of the foreign exchange and contributes 5% to the GDP.• Employs 38 million people and is a $55 billion industry.• Second most important sector after Agriculture.• 100% FDI allowed.• Attractive Investment Opportunity
India – Textile Industry Overview• Currently in Expansion Stage• Driven by continuous increase in domestic demand• Improved Technology in production• Fabric Production rose to 60,996 million sq.m in FY’11 from 52,665 million sq.m in FY’07.• Potential to increase its textile and apparel share in the world trade from 4.5% to 8% and reach a value of $80 billion by 2020• In the world textile scenario, it is the largest producer of jute, second largest producer of silk, third largest producer of cotton and cellulosic fibre/yarn and fifth largest producer of synthetic fibre/yarn.
Industry Analysis• Past Performance• Labour conditions• Attitude of the Government• Competitive Conditions• Stock Prices
SWOT AnalysisStrengths Weaknesses• Post 2005, removal of quota • Fragmented Industry restrictions to give a major boost • Effect of Historical Government• Export Target of $80 billion by 2020 Policies• Cost Competitiveness • Technological ObsolescenceOpportunities Threats• Indian Companies need to focus on • Need to improve the working Product Development conditions of the people involved in• Increased use of CAD to develop the profession designing capabilities • Need to revamp consumer• Investing in trend forecasting to enable consciousness growth of industry • Tackle Chinese Aggression over the• Low per capita consumption International Market
Companies’ Fact FileType of Company Public Limited Type of Company Public LimitedFounded 1925 Founded 1879Key People Gautam Hari Key People Nusli Wadia Singhania Jeh and Ness WadiaHeadquarters Mumbai, India Headquarters Mumbai, IndiaMain Products Fabrics, Garments, Main Products Bed Linen, Towels, Designer Wear, Furnishings Denim, Cosmetics & ToiletriesMarket Cap Rs. 2219.53 crore Market Cap Rs 2054.2 croreFace Value Rs. 10 Face Value Rs.10Tag Line The Complete Man Tag Line Bring Style Home, Happy Home to You
Non Financial Analysis• Both Raymond and Bombay Dyeing are under professional management yet headed by a family.• Integrity of the Management is top notch and they have been in business for more than 85 years now.• Both the companies have hit their 5 year lows in 2009 due to the impact of the recession of 2008.• Both the companies have dynamic and young leaders as their Managing Directors.• Over the last one year investors have remained bullish on both these shares for the long term.
Corporate Social Responsibility• Raymond Embryo Research • Housing Centre for cattle and J. K. Trust • Education Gram Vikas Yojana • Healthcare• Education• Raymond Tailoring Initiative
Consumers – Bombay Dyeing• Caters from medium to high end market segment• Aiming to scale down prices of its bed and bath portfolio• Innovation with new technologies will help cut costs and maintain quality• Bed and bath offerings are expected to retail between Rs. 499 and Rs. 699 while their current range begins at Rs. 699
Consumers – Raymond• Caters to the premium upper middle and high end segment of the market• Launch of ‘Makers’ shows the outlook of Raymond towards the economy segment and targeting the youth• The strategy of Raymond is to sell the brand through multi- brand outlets (MBOs) which is where there are typical tier 2 and tier 3 customer shops.• So this brand will not affect the positioning of Raymond brand which is largely sold through its exclusive brand outlets (EBOs) and larger MBOs.
Highlights of the Profit & Loss Account PAT - 156% PAT - 177.47% Net Sales - 25% Net Sales - 20% Operating Profit - Operating Profit - 7.95% 18.39% Manufacturing and Exceptional Indirect Expenses - Expenses - 97.34% 18.67% Decrease in Stock PBT and Exceptional Items - 4.3% - 39.5%
Highlights of the Balance Sheet Investments - > Net Current 50% of the assets Assets - 184% Total shareholders’ Capital Work in funds and Reserves - Progress - 50.6% 61.87% Total shareholders’ Net Current Assets - funds and Reserves - 50.36% of the assets 3.75% Net Current Investments – Assets - 246.27% 12.5% Total Debts - Unsecured 14.25% Loans – 48.63%
Dividend History Dividend History - Raymond60%50%40%30%20%10%0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201260% Dividend History - Bombay Dyeing40%20% 0%