TT Limited

7/25/2019 TT Limited

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LSCM || Group A04

LSCM FIELD PROJECT

Company: T.T. Limited

Group A04

Ayush Bohra (0087/51)

Devanshi Kesaria (0122/51)Puneet Aggarwal (0280/51)Sammyak Jain (0315/51)Shavir Bansal (0337/51)Vaibhav Kalani (0385/51)Mayank Verma (4021/21)

19thAugust, 2015


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TT LIMITED: Company Overview

Flagship company of 60 years old T.T. Group, founded by Dr. Rikhab ChandJain

A fully integrated textiles company and a self-contained textile producer andgarment manufacturer The company was awarded Top 100 SME of India Award for two consecutiveyears 2013 and 2014

T.T. Limited covers the entire spectrum of textile sector: cotton, yarn, fabric,garments and accessories.

Products:

Market: Manufacturing Capabilities:

65+

countries

1 ginning factory 5 spinning factories 2 knitting factories

25+ franchise production units


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55% of overall revenues come from export of Yarn;Garments form 38% of domestic revenues

Total Revenue(~680 Cr)

Sale ofProducts(~666 Cr)

Others(~14 Cr)

Exports(~424 Cr)

Domestic

(~242 Cr)

Cotton ~18 Cr

Yarn ~376 Cr

Fabric ~11 Cr

Garments ~1 Cr

Others* ~18 Cr

Cotton ~23 Cr

Yarn ~75 Cr

Fabric ~48 Cr

Garments ~92 Cr

Others* ~4 Cr

Break-down of Revenues, FY14-15

* Othersinclude Agro-Commoditiesand WindPower

LSCM || Group A04

80% productionfor Garmentsis outsourced

Yarn is thelargest sourceof revenues,therefore wewill focus onlyon this

business-line


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TextileIndustry

11% to industrialproduction

14 % to

manufacturingsector

4% to GDP ofIndia

12% of totalexport earnings

DirectEmployment - 45

million

Allied activities -54.85 million

050100150

67100

141

Domestic Textile Industry

US$ bn

2013-14 2016-17 2020-20210

20

40

60

80

100

40

65

82

Exports in Textile Industry

US$ bn

Industry Contribution Growth of Textile Industry

Industry Analysis


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IndustryHighlights

India claims to be 2nd largest manufacturer as well as provider of cotton yarn and textiles in the world- 25% share in cotton yarn industry across the globe- 12% of worlds production of cotton yarn and textiles

India enjoys a significant lead in terms of labour cost per hour over developed countries like US andnewly industrialised economies like Hong Kong, China, etc.- average wage cost in China stood at US$450 per month in 2012 vs US$200 per month in India

The fundamental strength of this industry flows from its strong production base of wide range offibres / yarns from natural fibres like cotton, jute, silk and wool to synthetic /man-made fibres

India is rich in traditional workers adept at value-adding tasks, which could give Indian companiessignificant margin advantage

RawMaterial Ginning Spinning Weaving Processing

Garment/ApparelProduction

Cotton,Jute, Silk,Wool

Fiber Yarn FabricProcessedFabric

Finalgarment/Apparel

Process

Output

Industry Analysis

Value Chain: Area of Focus


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LSCM || Group A04

Rising per capita income, favorable demographics and a shift in preference for brandedproducts is expected to boost demand

Robust direct cotton yarnexportscoupled with stabledomestic apparel demandto drivecotton yarn demand

Pointed andfavorable policiesinstituted by the government will give the industry a fillip

Increase in consumerism and disposable income has resulted inretail sectors rapidgrowth, with many global players entering Indian market

The centers of excellence focused on testing and evaluation as well asresource centers andtraining facilitieshave been set up

Changing lifestylesand increasing demand for quality products are set to fuel the need forapparel

Growth Drivers


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Porters 5 forces

Competitive Rivalry

Intense competition between established brands and private label Brands

Industry is highly fragmented with organised sector contributing only 31 per cent in 2011

Threat of New Entrants

100 per cent FDI (automatic

route) is allowed in the Indian

textile sector

A few large suppliers are

focusing on forward integration

Capital requirements to

establish a regional or a national

level operation are highBargaining Power of Suppliers

High availability of cotton along

with low cost of labour

Significant presence of small

suppliers has reduced the

bargaining power

Substitute Products

Low cost substitute productsfrom countries like Pakistan and

Bangladesh

Threat from unorganised sector

Bargaining Power of Customers

Major clothing brands have

better bargaining power over

textile manufacturers, as the

product differentiation is low and

number of players are high and

fragmented

Competitive Rivalry-MODERATE

Threat of new

entrants-MODERATE

Threat of

substitutes-HIGH

Power ofcustomers-MODERATE

Power ofsuppliers-LOW


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Key players/ Market Shares

The spinning industry is dominated by medium and large units There are1834 cotton/man-made fiber textile mills (non-Small Scale) in the country A few of the large spinning mills with their capacity are:

Company Capacity Market Cap (Rs. Cr)

Vardhaman Group 11,00,000 Spindles 6,055.84

Nahar Group 4,24,000 Spindles 94.91

Bannari Amman Spinning Mills

Limited

2,20,000 Spindles 342.66

Sangam Group 1,93,920 Spindles 913.79

Malwa Cotton Spinning Mills 1,40,000 Spindles 7.11Sambandam Spinning Mills Ltd 1,10,000 Spindles 34.01

TT Limited 1,00,000 Spindles 132.75

% COGS w.r.t Sales 2011 2012 2013 2014

TT 76% 78% 74% 77%

Vardhman 51% 56% 50% 49%

Nahar Group 49% 65% 54% 56%

Financial Analysis

2011 2012 2013 20140%

20%

40%

60%

80%

100%

% COGS wrt. Sales

TT Vardhman Nahar Group


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Macroeconomic factors affecting the industry

Mar'14 Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14 Oct'14 Nov'14 Dec'14 Jan'15 Feb'15 Mar'15

116 116 115112

116

107 105

9390

9289

85 87

Unit Procurement Cost (in Rs/Kg)

Exchange rate In the year 2007-08, the textile exports of India suffered badly due to sharp appreciation in rupeevis- vis the US$.

Global Stock Levels: The international cotton prices continue to remain sensitive to further changes in Chinas policy,especially with respect to release of its cotton reserves

Crude Oil Price: Movement in the crude oil prices will also be a driver for man-made fibre prices and hence thecotton prices

Global cotton availability: The domestic cotton yarn prices have been range bound at ~Rs. 165/Kg since November2014 after declining sharply since August 2014. However, domestic cotton prices are expected to remain underpressure on account of comfortable domestic and global cotton availability

Global Demand:The domestic yarn production has recovered since November 2014 after declining in the previoustwo consecutive months on account of rebound in the yarn exports, mainly to China

Effect on SCM: With pick up in the export demand, the capacity utilization of the Indian spinning industry hasimproved to ~98~99% levels after declining to ~93% in October 2014.Moreover, the domestic yarn inventory levels which had increased to ~17 days in October 2014 due to decline inexports have also reduced to ~13~14 days


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Scale

Except for spinning, all other stages face the problem of scale. Indian firms are typically smaller comparedto those abroad.

Skills

Three issues here are- Paucity of technical manpower, Low investment in training, Shortage of trainedoperators.

Inventory Management

Textile products are highly volatile in nature and have short life cycles. Demand changes quickly andmarket trends are highly variable.

Lead TimeBuying cycle for garments starts a year in advance generally. Demand forecasting in such a case wheredemand is highly variable is an important issue.

Visibility

Fast delivery of accurate information helps improve transparency. Lack of information leads to forecastingerrors and bullwhip effect.

Logistical Challenges

Logistical infrastructure in India is highly fragmented and underdeveloped. This leads to inefficiencies inthe supply chain.

Technology

Indian companies are technologically far behind foreign counterparts. Use of automation in inspection andmaterial handling is low in Indian firms.

Institutional Support

Textile policy has come a long way, but labor reforms, customs clearance, credit, etc. need to be catered to.

Some challenges in SCM faced in the industry


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Process Mapping: Production Capabilities(Spinning)

Gajroula

Rajula

Avinashi

3 production locations:

a)Gajroula, U.P Gajroula Spinning Mills(15,120 spindles)

Gangeshwar SpinningMills(18,000 spindles)

b)Rajula, Gujarat

Rajula Spinning Mills(26,112 spindles)

Gopeshwar SpinningMills(25,200 spindles)

c)Avinashi, Tamil Nadu Tirupati Spinning Mills

(13,104 spindles)


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Process Mapping: Raw Material Sourcing(Gajroula)

ProcurementState

Purchase

Amount (inRs. lacs)

Purchase

Quantity (inKgs)

Unit PurchasePrice (in Rs/Kg)

Avg

Procurement Days

Haryana 2,967 32,26,693 92 2.2

Maharashtra 2,102 17,72,326 119 5.1

Gujarat 2,044 22,46,505 91 4.1

Karnataka 600 5,26,062 114 4.7

A.P. 559 4,93,211 113 5.7

Rajasthan 157 1,44,514 109 2.8

33% of cotton (by weight) is being procured from Maharashtra, A.P. andKarnataka, having very high unit procurement cost as well as high averageprocurement days

Unavailability of desired quality cotton in Haryana and Gujarat, at times,forces the firm to procure cotton at high prices(through interviews ofProcurement officer)


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LSCM || Group A04

Process Mapping: Raw Material Sourcing(Rajula & Avinashi)

Procurement

State

Purchase

Amount (in

Rs. lacs)

Purchase

Quantity (in

Kgs)

Unit Purchase

Price (in Rs/Kg)

Avg

Procuremen

t Days

Gujarat 13,820 138,75,524 100 0.1

ProcurementState

PurchaseAmount (in

Rs. lacs)

PurchaseQuantity (in

Kgs)

Unit PurchasePrice (in Rs/Kg)

AvgProcuremen

t Days

Karnataka 1,276 13,48,165 95 3.1

A.P. 209 2,22,059 94 2.1


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LSCM || Group A04

Process Mapping: Raw Material Sourcing


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Process Mapping: Yarn type-wise Production

32CH 30CH 34CH 40CH 24CH0

1000000

2000000

3000000

4000000

5000000

6000000

RAJULA GAJROULA AVINASHI

32CH is the produced in the largest quantity and mostly in Rajula facility.

Weight (in kgs)


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LSCM || Group A04

Process Mapping: Export Sales

2%45%

7%

46%

Avinashi

Merchant Export

Gajroula

Rajula

Rs. ~376 Cr of yarnexports

Rajulacaters only toexports

45% of exports comefrom MerchantExports (very less

margins)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

41% 20% 15% 6%4% 14%

Product Wise Export Split

32CH 30CH 40CH 26CH 30KH Others

32CH, majorly produced

atRajula, is the mainexport productaccounting for almost Rs.~150Cr


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LSCM || Group A04

Process Mapping: Export Sales

Exports to China account for 56% of total export sales for the firm Relaxed import policies of China Latin America is a preferential market for India subsidy from govt.

Total China Colombia Bangladesh Peru Vietnam Korea Egypt Others

368

206

2823

2017

1615

43

Country-wise Exports (in Rs. Cr.)


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LSCM || Group A04

Process Mapping: Domestic Sales

More than 95% of domestic sales is catered byGajroulaunit

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

48% 20% 20% 12%

Product-wise Domestic Sales split

30CH 24CH 34CH Others

30CH yarn, majorlyproduced in Gajroula unit,

is the most-sellingdomestic product

30CH and 32CH are thefast moving products withhigh inventory turnoverand having highestdemand

P M P P d


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LSCM || Group A04

Process Mapping: Procurement-Production-Demand

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

All Locations

Units Sold Units Produced Units Procured

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Avinashi, TN


Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Gajraula, UP


Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Rajula, GJ


Weight (in kgs)


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Key Issues and Discussion Points High COGS as compared to industry standards:

Yarn Pricing issue (value added products by competitors)Manufacturing efficiency (machinery at par)

Power & fuel and labour costs are major manufacturing cost drivers Transportation costs

Make to stock vs make to order: Inventory carrying cost Ordering and handling cost Last minute pricing

Demand forecasting

Supplier contracts: Currently, no long term contracts Daily purchase from open market low risk taking capacity 5% sensitivity on purchase price (Operating Profit: 20% - 17% - 14%)

High Financial Costs

Economies of scale

Manufacturing facilities locations


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APPENDIX


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Process Mapping: Raw Material Procurement


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Reference Sheet

double click to open

Group_A04

alysis Workshe

TT Limited

Documents

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