INTERNATIONAL HOMETEX LIMITED
ANNUAL REPORT 2006-2007
Your Directors have pleasure in presenting the 17th Annual Report & the
Audited Accounts of the Company for the year ended 31st March 2007.
(Rs. in lacs)
Sales & Other Income 5669.74 3838.61
Profit before Interest, Depreciation & Tax 992.33 787.30
Less: Interest 307.84 226.67
Provision for Doubtful Debts 182.80 -
Depreciation 275.66 235.71
Profit before Tax 226.03 324.92
Less: Provision for Tax 29.00 29.00
Add: Deferred Tax (30.00) (215.00)
Profit after Tax 227.03 510.92
Balance Brought Forward from Previous Year 1161.51 650.59
Less: Expenses pertaining to Previous Year 34.49 -
Profit available for appropriation 1354.05 1161.51
Appropriation are made as under:
Transfer to Revenue Reserve - -
Balance carried to Balance Sheet 1354.05 1161.51
The sales and other income of the Company for the year under review was
Rs.5669.74 lacs as compared to Rs. 3838.61 lacs for the previous year.
There is an increase of 47.70% in sales and other income of the Company as
compared with the previous year. The Company has made a profit of Rs.227.03
lacs during the year as against Rs. 510.92 lacs for the previous year.
EXPANSION AND DIVERSIFICATION:
A) MULTI FILAMENT YARN (MFY) & BATHMAT:
The Company has been able to put the MFY division on stream during the
course of the year under review. The capacity utilization was around 45%
for the year under review. The Company has now in the process of setting up
the down stream activities and is envisaged to complete the same by October
The Company now envisages to start the setting up of the Bathmat plant from
Jan 2008 onwards. It has a 18 month construction time and is envisaged to
go on stream by the third quarter of 2009. The capital outlay for the
project is about Rs. 250 million and the funding for the same is currently
being tied up by the Company.
B) ACQUISITION OF SHARES IN A US COMPANY:
During the current year the Company has taken steps to acquire about 27%
shares in Gordon & Ferguson Inc (GFI). The Company is based in New York,
USA and is in the business of importing and distribution of Textiles. GFI
also owns three brands of repute in USA. The Company will now sell its
product directly to the US retailers thus improving its margins. The
Company will also heave access for these brands for the Indian market.
C) POWER PLANT:
The Company is in the process of setting up a mini power plant of about 3.5
MW at a capital outlay of Rs. 750 lakhs. This will have the advantage of
reducing the power cost of the Company by around 45% as well as making the
steam available for the Towel division at negligible costs. The project is
envisaged to be completed in about 18 months time.
The Board of Management have shown their keen desire for the Company to
make a foray into retailing of Home Textiles on a pan India basis. The
Company is studying the viability of the same and the various formats for
retailing. The Company is also in talks with Venture capitalists and is
taking a good look at the finance models available for the retailing
The Company has issued Redeemable Cumulative Preference Shares of Rs.240.55
Lacs during the year.
The Company has allotted 10,00,000 Equity Shares of Rs.10/- each (at a
premium of Rs.10/- per Equity Share) to Promoter Group Company & 17,55,000
Equity Shares of Rs.10/- (at a premium of Rs.10/- per Equity Share) to
others on preferential basis on 13th April, 2007 in terms of Special
Resolution passed at the Extra Ordinary General Meeting of the company held
on 29th March, 2007. The necessary formalities of listing of the said
shares on Bombay Stock Exchange Ltd. is being completed.
Keeping in view the requirement of funds for the working of the company,
the Directors do not recommend dividend.
Shri. V.K. Agrawal will cease to be Whole Time Director of the Company
w.e.f. 14th October, 2007. Due to age he has informed the Board that he is
not able to devote time for day to day affairs of the Company. Therefore he
has requested the Board that he is continue as Director of the Company but
he should be relieved from the position of the Chairman. The Board has
decided to appoint Shri. V.K. Agrawal as Chairman Emeritus.
Shri Vineet Agrawal has been re-appointed as whole-time Director designated
as Chairman & Managing Director of the company w.e.f. 1st October, 2007 for
a period of three years. The respective resolution regarding his re-
appointment shall be approved by the Shareholders at the forthcoming Annual
Shri. A. Indu Sekhar Rao & Shri Rakesh Agrawal retire by rotation and being
eligible, offer themselves for re-appointment at the ensuing Annual General
The Auditors, M/s. Pravin Manudhane & Co., Chartered Accountants. Statutory
Auditors of the Company retire and offer themselves for re-appointment.
PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956:
None of the employees of the Company was in receipt of remuneration of
Rs.24.00 lacs per annum or Rs. 2.00 lacs or more per month. Hence,
provisions of Section 217(2A) of the Companies Act, 1956 read with the
Companies (particulars of employees) Rules, 1975 as amended, is not
applicable to the Company.
Additional information relating to the conservation of Energy, Technology
Absorption and Foreign Exchange Earnings and Outgo required under Section
217(1)(e) of the Companies Act, 1956 is set out in a separate statement
attached to this report and forms part of it.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to the requirement under Section 217 (2AA) of the Companies Act
1956, with respect to the Directors Responsibilities statement, the
Directors to the best of their knowledge and belief confirm that:
i) in the preparation of the annual accounts the applicable accounting
standards had been followed;
ii) the accounting policies selected had been applied consistently and
judgments made and estimates given are reasonable and prudent so as to give
a true and fair view of the state of affairs of the company as at 31st
March 2007 and of the profit of the company for the year ended on that
iii) the proper and sufficient care have been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act 1956 for safeguarding the assets of the company and for
preventing and detecting fraud and other irregularities;
iv) the annual accounts had been prepared on a going concern basis.
As stipulated by Clause 49 of the Listing Agreement, the Report on
Corporate Governance is given separately in this Annual Report. The
Certificate of M/s. Pravin Manudhane & Co., Statutory Auditors of the
Company regarding compliance of Corporate Governance Code is annexed to and
forms part of the Directors' Report.
Your Directors wish to place on record the valuable co-operation and
support received from the Banks, viz State Bank of India, The South Indian
Bank Ltd., Indian Overseas Bank & Union Bank of India, Government & Semi
Your Directors thank esteemed Shareholders for the faith reposed in the
Your Directors place on record their appreciation of Company's Employees at
all levels for their dedicated performance.
For and on Behalf of the Board
Place: Mumbai, V.K. AGRAWAL
Date : 5th July, 2007 Chairman
ANNEXURE TO THE DIRECTORS' REPORT:
Additional information as required under the Companies (Disclosure of
particulars in the Report of Board of Directors) Rules, 1988.
A. CONSERVATION OF ENERGY:
(a) Energy conservation measures taken by the Company:
- The Company has been taking continuous steps to conserve the energy and
minimize energy cost at all levels.
- Monitoring the overall energy consumption, by reducing losses and
(b) Additional Investment Proposals:
- The Company takes necessary steps for investments in energy saving
devices from time to time.
(c) Impact of measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of goods:
- Per unit Electric consumption has reduced from 1.80 to 1.61.
- Per Ltr. Furnace Oil consumption has reduced from 0.91 to 0.81.
(d) Total Energy Consumption and Energy Consumption per unit as per Form
'A' in respect of industries specified in the Schedule:
4) POWER AND FUEL CONSUMPTION:
Purchased- Units (KWH) 23.88,308 14,17,335
Total amount (Rs.) 1,17,04,487 58.81,664
Rate per unit (Rs.) 4.90 4.15
2. Furnace Oil:
Quantity - Ltrs. 6,97,755 7,11,225
Total amount (Rs.) 1,11,13,783 1,34,53,724
Average rate per unit (Rs.) 15.93 18.92
CONSUMPTION PER UNIT OF PRODUCTION:
1. Electricity (KWH):
Fabric / Kg. 1.61 1.80
2. Furnace Oil (Ltrs):
Fabric / Kg. 0.81 0.91
B) TECHNOLOGY ABSORPTION:
I) Research and Development (R &D):
1. Specific area in which R & D carried out by the Company:
a) Continuation of new fibres in the towel weaving viz. Modal Yarn, Bamboo
and its blends and organic cottons.
b) Trials of new chemicals in the Dyeing process to reduce the dye cycle
2. Benefit derived as a result of the above R & D:
a) Company has secured orders for Bamboo and its blends and organic
b) Cost of dyeing and steam consumption have been reduced owing to the
chemicals trials being done at the mill. The product also showed marked
improvement in its desired properties.
3. Future plan of Action:
Continuation of the measures already initiated by the Company. Introduction
of more process controls and detailed quality control as well as cost
4. Expenditure on R & D:
(Rs. in Lacs)
a) Capital - -
b) Recurring 3.01 5.37
c) Total 3.01 5.37
d) Total R & D Expenditure as a % of
Total turnover 0.06% 0.15%
II) Efforts in brief made towards technology absorption, adaptation and
1. The Company has been developing in house modification/improvement in
process technology in its various manufacturing sections, which when and if
found suitable have been integrated in the manufacturing process.
2. Benefit derived as a result of the above efforts:
The above have resulted in improving efficiency, quality & design of the
C. FOREIGN EXCHANGE EARNINGS AND OUTGO:
The information of Foreign Exchange Earnings and Outgo is contained in Note
No. 5 & 6 of the Notes to the Accounts.
For and on Behalf of the Board
Place: Mumbai, V.K. AGRAWAL
Date : 5th July, 2007 Chairman
MANAGEMENT DISCUSSION AND ANALYSIS:
1. Overall Review:
The Home Textiles market continues to grow for the Indian product. Having
said that the composition of growth and export percentage have changed. The
one single factor that has led to decline in the growth of export of
Textile goods from India is the appreciation of the Indian Rupee. A ten
percent appreciation of the Rupee vis-a-vis the dollar in the year under
review coupled with an inflation rate of around 5% has posed great
challenges to all exporters in general and especially for textile exporters
owing to stiff competition from neighboring countries as well as continued
growth in capacities within the country. A combined effect of the same has
been an erosion of margins as well as capacities being under utilized
within the country. If the Rupee continues its appreciation as is
anticipated it shall pose major hurdles in the home textile industry to
even maintain its exports at current levels.
On the other hand the retail market in India is getting more organized with
the set up of new retail chains across India. Also, with the per capita
consumption seeing a rise within India the demand for Home Textile goods
has increased significantly. The income of an average Indian middle class
has seen an upsurge and with this the increase disposable surplus has led
to increase in buying power. Thus demand for goods from within the country
having increased dramatically, more and more manufacturers are turning to
the local market for selling their products. Thus some of the unutilized
capacities have been moved towards the local market and although the price
realizations may riot be very remunerative to start with, but with the
organized retail trade growing rapidly in India it is a question of time
when these capacities shall be gainfully employed for sales within India.
One of the major worries for the, industry remains the continued investment
in additional capacities in almost every sphere of Home Textiles. With
funds under TUFS being available and the scheme having been extended,
additional investments at lower fund cost are being set up across the
countries. Further, with some states offering major sops to attract
investment there is some justification for setting up a unit in that state.
However, this leaves the existing units at a disadvantage and in a scenario
of over capacity within the country the new investment will merely boil
down to being a swap in capacities from old to new in the long term.
2. Business Segment:
a) Industry Structure & Development:
The hectic pace of investment in the Home Textiles industry continues
unabated. Also, during the period under review the Rupee appreciated
sharply against the dollar. A combines effect of the same has been the
under utilization of capacities. New capacities are being unable to get
enough business and have dropped prices in the hope of garnering business.
Existing mills owing to set up of new capacities have lost some business
and all this because the industry has not been able to increase its market
size owing to the Rupee appreciation which is making the Indian Home
Textiles steeply priced when compared to our competing countries. It is
anticipated that the trend shall continue in the medium term thus putting
pressure on capacity utilizations as well as profitability.
A couple of factors helped the industry. Firstly, a stable cotton helped
the industry at a time when it would have been unable to absorb the shock
of any rise in raw material prices. Secondly, the growth in demand for Home
Textiles goods from within the country. This has helped in reducing the
under utilization of capacities to start with and with a promise of being a
big market in the medium term, especially with the growth of organized
retail trade within the country.
Multi Filament Yarn Division:
The company's new venture is the manufacture of Polypropylene, Nylon &
Polyester multi filament yarn. The industry has seen an increase in raw
material prices owing to the firming up of crude prices. Most of the
increase, the industry has been able to pass on, which has led to the
increased prices of the end product. Also, cheaper imports mainly from
China has had some effect on the demand for Indian manufactured goods. A
rising rupee has also affected the industry by bringing about lower
realizations. The industry has tried to mitigate this by importing its
requirement of raw materials and thus trying to keep its profit margins
b) Opportunities & Threat:
The company is committed towards being a niche player in Bath Textiles.
It's vision to be a Bath solution company is a step closer. During the
period under review the Company commissioned its Extrusion plant for the
manufacture of Multi Filament yarn in Polypropylene, Nylon & Polyester. The
Company's product quality has been well appreciated in the market and the
Company is now in its second phase of setting up the downstream facilities
for manufacture of value added yarn for the Home Textiles sector. This
phase is set to be completed by October 2007 and the company is already
inundated with orders for its products from Oct/Nov 2007. The Company's
plan for the setting up of the Bathmat manufacturing plant shall be taken
up from Jan 2008 onwards and has a completion time of 18 months.
The Company's Terry Towel division continued to maintain its share in the
value added segment. The appreciation of the Rupee has put a lot of
pressures on the Company's margins and the Company has thus been able to
only marginally improve the bottom line. The company could maintain the
profit levels owing to better utilization of capacities as its UVR eroded
by around 9% in the year under review. The industry continues to be plagued
by over capacities within the country as well as around the world. Thus
competition is severe and prices tend to be under pressure especially in a
scenario where demand from developed countries have either stagnated of
have reduced a bit because of slow down in their economies.
During the year under review, electricity prices were raised in Maharastra.
In the new price structure the per unit cost of electricity has risen from
Rs. 3.90/- unit to an average price of around Rs. 5.70/- unit i.e. a 46%
increase in the electricity cost. The Company has been unable to pass on
this increase in cost to the buyers in full as competition from other
manufacturers within the country has made it difficult for any upward
revision in prices. On the other hand the Company was able to save costs in
the purchase of furnace oil by 15% and owing to better utilization of the
steam generated from the boiler the company has been able to bring down the
Furnace Oil consumption from 0.91 ltrs / kg of fabric to 0.81 ltrs / kg of
fabric. i.e. a saving in consumption by 11%. This has to an extent set off
the increase in cost of electricity in the Terry Division. However, in the
Multi Filament Yarn division the Company continues to bear the brunt of
rise in Electricity cost and is exploring the possibility of setting up a
mini power plant of about 3.5 MW to bring the cost of electricity down to
Rs. 2.75/- unit and have the steam available at negligible cost.
On the marketing front, the Company has taken steps to acquire a 27%
holding in a USA based Company viz., Gordon & Ferguson Inc. The Company is
in the textile import and distribution business and had a turnover of about
Usd 20 million for the year ended 31/12/06. G&F also owns three strong
brands in the US market. The Company now envisages to sell its product
under these brands within the USA. This shall have the benefit of firstly
being able to deal directly with US retailers and thus being able to shore
up the margins in the coming years. Also, the company has access to these
Brands for the Indian market and is studying the best way possible launch
these brands in India in the mid terms.
The Company is also studying the feasibility of getting into retailing. The
Company plans to retail Home Textiles on a pan India basis. The Company is
in the process of making its presentations to Venture Capitalists and
seeking guidance on how best to enter this venture and the modes of finance
available for the same. Once it has been able to make a bankable report on
its foray into retail the management shall approach the shareholders for
their necessary approvals.
c) Risks & Concerns:
The towel division continues to be plagued by over capacity. Also, with
stiff competition from Pakistan and China on the low to mid end and from
Turkey and Brazil on the mid to high end there is a difficulty in getting
remunerative prices. This continues to have a negative impact on the
profitability of the Company.
The rise in electricity cost is hampering the Multi Filament Yarn division.
Any further increase in the same shall have adverse impact on the divisions
working. As the towel division requires steam in big quantities and the
Multi Filament Yarn requires lots of electricity, the company is in the
process of setting up a mini power plant to meet its requirement as almost
50% of current costs of steam and electricity. The Company plans to
complete the same in 18 months time.
The appreciation of the Rupee by around 15% in the last 18 months has
deeply affected the working of the Company. The UVR in the towel division
is down 9% owing to the same and it is only because of capacity
utilizations that profits could be maintained. Although the government did
increase the DEPB by 3% it has been too late as also grossly insufficient
to meet the requirements. If the rupee continues to appreciate in the
future the company's profits and capacity utilizations will be adversely
It has been the Company's endeavor to be a multi-product company and to be
in the value added sector. To this end all steps taken by the Company are
slowly and steadily falling into place. The Company's aim to be a bath
solution Company is set to fructify in the year 2009 once the bath mat
project is set up. The Company now has a marketing arm in one of the
biggest markets for Home Textiles i.e. USA. These shall have the effect of
helping the Company to maintain a 15-20% growth levels in the next few
years as well as improve the realizations of the Company's product.
Steps taken to set up the power plant shall result in huge savings as
combined billing for these two for both division included on 85% capacity
basis is about Rs. 350 lakhs per year and this can be got down to about
Rs.200 Lakhs annually. This saving of Rs. 150 Lakhs will help reduce cost
and shore up the margins.
The Company is very optimistic that with all the above efforts taken in the
prior years the Company is now set to have a sustained growth and to meet
the challenges that the industry faces currently and in the future.
3. Internal Control Systems and their adequacy:
The Company has proper and adequate systems of internal checks and controls
in order to ensure that all assets are safeguarded against loss from
unauthorized use or disposition and that all transactions are authorized,
recorded and reported correctly. Management regularly reviews the internal
control systems and procedures to ensure orderly and efficient conduct of
4. Financial Performance:
For the year the Company recorded the sales and other income of Rs. 5669.74
Lacs registering a growth of 47.70% over a previous year. Profit was
Rs.227.03 Lacs as against Rs. 510.92 Lacs for the previous year.
5. Human Resource Development / Industrial Relations:
The human resources of the Company is its prime asset contributing through
dedicated hard work, creativity and innovation in the productivity, and
profitability of the Company. The Company seeks to attract and retain best
talent available. The Company presently has 343 employees on its rolls.
Industrial relations have been cordial and satisfactory during the year
6. Cautionary Statement:
Statements in this Management Discussion & Analysis describing the
company's objectives, projections, estimates, expectations or predictions
may be 'forward looking statements' within the meaning of the applicable
securities law and regulations. These statements are based on certain
assumptions and future expectations/events. Actual results could however
differ materially from those expressed or implied. Important factors that
could make a difference to the Company's operation include global demand-
supply patterns, raw material availability and prices, cyclical demand and
pricing in the company's principal markets, changes in the government
regulations and tax structure, economic development within India and the
countries in which the Company conducts business and other incidental
factors such as litigation and industrial relations.
The Company assumes no responsibility in respect of forward looking
statements herein which may undergo changes in the future on basis of
subsequent developments, information or events.