Grabal Alok Impex Limited Corporate Presentation January 2007
Forward Looking Statements This presentation contains statements that constitute “forward looking statements” including, without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to our future business developments and economic performance. While these forward looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that we have indicated could adversely affect our business and financial performance. Grabal Alok Impex Limited undertakes no obligation to publicly revise any forward looking statements to reflect future events or circumstances.
Contents Section 1 Highlights Section 2 Industry Overview Section 3 Company Overview
Investment Highlights • Removal of quotas has opened export opportunities for textile manufacturers in China and India • Strong demand for embroidery fabrics in the domestic as well as the international market • Indian embroidery industry benefits from rich traditional heritage and skilled and creative labor at low cost • With better access to international market, margins have significantly improved in the embroidery industry Embroidery Industry Grabal Alok Impex Limited • Most modern & largest embroidery manufacturing capacity in India with an installed capacity of 9248 million stitches – Significant benefit from economies of scale • Vast library of over 25,000 in-house designs – Strong team of experienced and creative designers • Large customer base comprising of well known garment exporters, export houses and overseas buyers • Technical and design support from Grabal, Austria • Access to Alok’s integrated manufacturing facilities • Complete embroidery range to meet customer demand • Higher value addition, resulting in better margins • Acquired a stake of 26% in a UK based retailing company Hamsard 2353 Ltd for enhanced forward integration
Track Record CAGR 22.4% CAGR 32.1% CAGR 34.7% CAGR 42.8% * Annualized based on 6 months ended 30 September 2006 results
Financials * For the period between FY2004 and FY2007(annualized based on 6 months ended 30 September 2006 results)
Opportunities - Global Textile Industry Removal of quotas has ushered a number of changes at demand as well as supply end Gradual shift of manufacturing base from high cost Western countries to low cost Asian countries China and India are the biggest beneficiaries of quota removal USD 650 bn USD 480 bn. 2005 2010 Global Textile Trade World textile trade expected to grow from US$ 480 billion in 2005 to US$ 650 billion by 2010 India to emerge as a preferred supplier due to strong legacy in textiles and the perceived need to reduce dependence on China India’s exports to grow from present level of USD 17 bn to USD 50 bn by 2010 Source: Home fashion magazine
Indian Textile Industry • Self sufficient in raw material base - Major producer for a wide range of textile fibers like cotton, man-made, jute, linen and silk • One of the few countries to have presence across the textile value chain from fiber production through spinning, weaving, knitting, dyeing & finishing to production of final products like apparels and home textiles • Vast pool of workers, both skilled and unskilled as well as technicians and managers at relatively low cost • Strong designing capabilities • Flexible facilities that facilitate short runs for high fashion items and long run for basics • Industry friendly policies by government to boost investments and facilitate trade Strengths • Healthy GDP growth of 7%-8% • Rapidly increasing middle income group accompanied by rise in aspirations and purchasing power • Per Capita textile consumption to go up from about 20 meters to 30 meters by 2010 • Domestic Textile market alone expected to reach USD 50 bn in 2010 from the present USD 33 bn – assuming CAGR of 8.7% p.a. Opportunities
Global Embroidery Industry • Demand for embroidery due to fashion and high value addition is increasing in manifold applications in garments, made ups, curtains etc • The world trade in embroidery is growing at a CAGR of 3%. Supply from Asia is rapidly growing at higher rate of 8% due to its wide application • Key producing countries: China, India, Korea, Switzerland, Turkey • Key consumer countries: Africa, Middle East, Asia Source : Market survey conducted by Gherzi Eastern Ltd.
Indian Embroidery Industry • Embroidery being a high fashion item has application both in the domestic and exports – Expected growth of about 14% CAGR for Indian embroidery industry • Indian embroidery enjoys the inherent advantage of traditional heritage and design capabilities • Embroidery is a labour intensive industry; India has a large pool of workers • Indian labour is skilled and relatively low cost resulting in finer embroidery at competitive prices - for Grabal Alok Impex cost of labor is 5% of sales; for most European manufacturers it would be 30-40% of the sales • India expected to be the second largest supplier of embroidered products after China Source : Market survey conducted by Gherzi Eastern Ltd.
Introduction • Promoted by Alok Industries Limited in financial and technical collaboration with Grabal Group, Austria • Leading manufacture of all kinds of embroidered products (like Edgings, Allovers, Guipures, Embroidered curtains, Embroidered Table-ware, Napkins etc.) for application on Home Textiles and Apparel. • A professionally managed profit making company with a consistent dividend record since 1998-99 • State of the art manufacturing facilities and strong designing capabilities
Corporate Structure PromoterGroup 28.90% 25.64% 13.63% Alok Industries Limited Grabal Alok Impex Limited 100.00% Grabal Alok International Limited xx.xx % Indicates the current percentage hold Proposed to increase to 75% 26.03% Hamsard 2353 Limited
Promoters Alok Group Grabal Group • Established textile player with a turnover of Rs. 1420 crores (USD 312 mn) • Most modern integrated facilities for home textiles, apparel fabrics, garments and texturising • Well established contacts in the industry, both domestic and overseas • Embroidery group in Austria with more than 5 decades of experience • Engaged in manufacturing all kinds of embroidered products for application in Home Textiles and Apparel. • Technical and designing support, access to the new developments in European markets
Operations Capacity Growth Capacity in million stitches per annum Estimated cost of capacity expansion for Phase 1 is Rs 250m and Phase 2 is Rs 1,500m
Customer Base • African countries continue to be one of the largest markets for embroidery fabrics. Grabal Alok reaches 14 African countries through a network of distributors and traders • Key apparel fabric customers • Key home textile customers • Key domestic customers: Orient Craft Limited, Morarjee Mills, Ambattur Clothing
Recent Acquisition Recent Investment in UK Based Retail Chain Rationale Behind Stake Acquisition Strong synergy with Alok Group to supply garments/made ups to Hamsard. Brands / stores /concept can be launched in India to capitalise on retail boom. Sourcing office being set up in India, resulting in reduction of 10%-15% in purchase cost. Turnaround of stores of Hamsard to create substantial shareholder value.
Hamsard 2353 Ltd. • Operates 207 retail outlets across England, Scotland and Wales under the brand name “qs” • The stores offer quality fashion products for women, men, girls, boys and babies and home wares • The Company also owns the “LEE SHARK” brand and is franchise for “NAF NAF” brand Financials (£ millions)
Grabal’s strategy for Hamsard 2353 Ltd. • Reconstitution of Board of Hamsard. • The existing Board of directors will retire and new board to be constituted. • Grabal and Hamsard to appoint 5 board members each. • Mr. Ashok B. Jiwrajka to be appointed as the Chairman of Hamsard with a casting vote. • Already appointed a senior person from Alok group as Vice Chairman of Hamsard. • Changing the existing sourcing pattern of Hamsard. • Hamsard presently sources 80% its requirement of fabric / garment from in and around U.K and 20% from other countries. • Grabal to change this and source 80% of the requirement of fabric / garment from Asian countries like India and China and balance from in and around U.K. • This would result in substantial savings in the procurement costs.
Grabal’s strategy for Hamsard 2353 Ltd… contd. • Refurbishing the Stores • Introduction of new products like bed linen and other furnishing items. • Discontinuation of slow moving items. • Carrying out extensive survey and if needed, re-brand the stores. • Increase Revenue, cut procurement costs and with this, increase margins.
Capacity Expansion • Current capacity fully utilized with all units operating three shifts round the year • Yet demand is not fully met with outstanding orders from customers including unmet demand from Alok Industries' home textile and apparel division • Grabal is further expanding its existing capacity by adding 4 Lasser Embroidery machines and 16 Multihead embroidery machines at a total project cost of Rs. 250 million • Second stage of expansion to add 30 Lasser Embroidery machines and 30 Multihead embroidery machines • Capacity in terms of stitches to increase by 7,015 mn. stitches from the present level of 9,248 mn. stitches to 16,263 mn. stitches by June 2007 and to 34,046 mn stitches by June 2008 New Projects Aggressive marketing to reach existing and new customers with enhanced capacity
Expected Dilution Shareholding pattern post all conversions
Profit and Loss Analysis Nigeria, a key market for embroidery products, placed an embargo on all fabric imports during 2003-04. This affected Company’s performance during FY2003-04. Since then, Grabal Impex has diversified its customer base resulting in significant improvement in financial performance Assumed 1US$=RS. 45.50
Balance Sheet Analysis Assumed 1US$=RS. 45.50
Current Year Performance Assumed 1US$=RS. 45.50 * Loss on sale of machines
Thank You Contact Details GRABAL ALOK IMPEX LIMITED Peninsula Towers, Peninsula Corporate Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai – 400 013. Contact Nos. 022 – 24996200 / 500 Fax No. 022 – 2493 6078