Alok Industries Ltd Management Discussions.

Alok Industries (Alok or the Company) is one of Indias leading textiles Company with a presence across the value chain of both cotton and polyester products. The Company has been servicing a wide customer base spread across the world including major global brands and also has certain international operations.

The Company had been facing significant challenges in servicing its debt obligations over the years and debt restructuring efforts could not bear fruit.

The Honorable National Company Law Tribunal, Ahmedabad bench, ("Adjudicating Authority") vide its order dated 17 July 2017, initiated corporate insolvency resolution ("CIR") process of the Company in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 ("Code"). In terms of Section 23 of the Code read with Section 25 of the Code, the powers of the Board of Directors stand suspended and the management of the affairs of the Company vests in the resolution professional of the Company i.e. Mr. Ajay Joshi. Please refer to the discussion on revival plan of the Company for further details.

1 Economic Overview

1.2 Global Economy Overview

Global economy strengthened in 2017. Global GDP growth, which in 2016 was the weakest since the global financial crisis at 3.2%, rose to 3.8% in 2017. Major economic indicators continue to improve in a majority of the countries, and approximately 2/3rd of countries globally witnessed stronger growth in 2017 as compared to previous year. At the global level, growth is expected to remain stable at 3% in 2018 and 2019.

Chart 1 illustrates the growth in the overall global economy along with advanced and emerging economies. Advanced economies grew by 0.6 percentage points in 2017 to reach 2.3%, while emerging markets and developing economies saw growth of 0.4 percentage points in 2017 to reach 4.8%, as compared to 2016.

Global inflation remained stable in 2017 at a rate of 3%1, increasing by 0.2 percentage points from 2016. Despite low unemployment in many developed economies, wage pressures generally remained weak. This could be a result of rising inequality and limited bargaining power of people belonging to lower income scales.

Global productivity saw a cheerful uplift in 2017. After growing by a rate of only 1.3% in 2015 and 2016, global labour productivity increased by approximately 1.9% in 2017. Revival in global investments has played an important role in improving the global productivity levels. Growth in labour productivity was observed in countries across the globe. Among developed economies, Japan, U.S. and Western Europe have witnessed productivity growth strengthening over the past year, albeit from low levels. Average labour productivity growth in developed economies is estimated to have increased from 0.5% in 2016 to 1% in 20172.

The U.S. economy performed well in 2017, according to the key economic indicators. U.S.s GDP growth rate improved from 1.5% in 2016 to 2.3% in 2017, and it is expected to remain between 2%-3% range in near future. Unemployment rate stood at 4.4% in 2017, declining marginally by 0.5 percentage points as compared to previous year. Inflation/average consumer price index stood at 245 in 2017, increasing at 2% y-o-y as compared to 2016.1 This is a positive sign for the US economy as inflation is returning to target i.e. 2%. Labour productivity saw an average annual growth of ~0.8% during the last decade (2008-2017), however much lower than the 1997-2007 annual growth of 2%3.

After years of crisis, European Union economy is gaining momentum. European Unions economy witnessed y-o-y growth of 0.6 percentage points in 2017 to reach at a level of 2.6% while inflation increased to 1.7% as compared to 0.2% in 2016. Rise in inflation was primarily because of increase in prices of oil and fruit & vegetables as a result of bad weather conditions. Unemployment rate in EU saw a downward trend last year, declining from 7.6% in 2016 to 7.4% in 2017.1 As of now, UKs vote to exit the European Union, low potential growth, and an ageing population are all important challenges for EUs economy. For strengthening of economic condition, the European Union would need to focus on development of policies that support a stronger and more inclusive growth.

Japans economy, worlds third largest, grew at 1.7% in 2017. Unemployment rate has declined from 3.1% in 2016 to 2.9% in 2017. Inflation remains low, i.e. 0.5% y-o-y growth in 2017.1 After two decades of economic stagnation, Japans return to growth may be hampered by the twin challenges of an ageing population and the mountain of public debt built up.

Chinas GDP has been declining since 2010. Its growth in 2017 remained high, pegged at 6.9% but is expected to gradually decline as the population is ageing and economy witnessing a shift from investment to consumption focused. Total investment, as percent of GDP has declined over the past 5 years (47.2% in 2012 to 44.4 in 2017) and is expected to decrease further.1

At an overall level, trade is anticipated to rise as a result of the stronger domestic demand in the US. In Europe too, economic activity in 2018 and 2019 is projected to remain stronger. Moreover, the advanced economies in Asia are expected to deliver stronger growth, while the emerging and developing ones are expected to grow at around 6.5% over 2018-19, broadly the same as in 2017.

1.2 Indian Economy Overview

Indian economy is showing signs of recovery after a continuous decline since 2015. Indian economy is gradually recovering from the impact of demonetization in late 2016 and GST rollout around second quarter of 2017. Moreover, it is anticipated that India will recover fast with time in near future, bringing the major economic reforms to action. Tax reforms can make growth more inclusive in India and boost productivity.

Major policy changes like demonetization and GST rollout may have dampened GDP growth in the short-term, but it could also prove to have longterm benefits. It enhanced digital transactions to a large extent, which are now easier to track.

It is worth mentioning that, key financial indicators like inflation and fiscal deficit improved significantly in 2017. Inflation rate in 2017 saw the largest decline since past four years. Average inflation rate in India declined to 3.6 % in 2017 as compared to 4.5 % in 2016.1 The decline in inflation was broad-based across major commodity groups, except housing, fuel and light. This decline in inflation rate is attributed to weaker domestic demand, combined with structural factors such as better food management by the current government. Fiscal deficit of the country has reduced from a level of 4.5% of GDP in 2013-14 to 3.24% of GDP in 2017-184. Unemployment has remained stagnant from last three years (201517), at 3.5%.1 Moreover, it is encouraging to note that, India got 100 rank in Ease of doing business index, as per World Banks Doing Business 2018: Reforming to Create Jobs report climbing 30 ranks over previous year.

During 2017, Government of India took several steps towards strengthening of its workforce. For instance, increased maternity benefits to 26 weeks paid leaves from existing 12 weeks, increased coverage for mandatory employee insurance i.e. coverage increased from Rs 15,000 per month to Rs 21,000 per month etc. Government also has plans to make major labour law reforms at the central and state levels and to introduce a National Employment policy in order to promote job creation and make growth more inclusive.

2 Overview of Textile and Apparel Industry

2.1 Global Textile & Apparel Market Overview

Global apparel consumption stood at US$ 1.8 trillion in 2017, which is expected to grow at a CAGR of 4% to reach about US$ 2.6 trillion by 2025. Europe and USA continue to be the largest apparel markets with ~42% share in 2017.

Table 1: Current and future global apparel market size (US$ bn.)



2025 (P)


1 EU-28








3 China




4 Japan




5 India




6 Brazil




7 Russia




8 Canada




9 RoW








China and India will be the fastest growing apparel market in the coming years due to their growing domestic demand. China is expected to overtake EU and USA to become the largest apparel market by 2025 with a share of 19% globally. EU and USA will still remain the key global markets, however their growth will be slow. India which currently has ~4% share of the global apparel market, is expected to grow its share to 6% by 2025.

Global Textile & Apparel Trade Overview -

Global textile and apparel trade in 2017 stood at US$ 750 bn. The same has grown at a CAGR of 2% during last ten years. Global apparel trade constitutes the majority share of 57% in the overall trade of textile and apparel. Global textile and apparel trade had witnessed a declining trend since 2014, however, in 2017 trade grew by 1% (y-o-y) indicating a resurgence in demand.

China is the largest exporter with 37% share in global textile and apparel exports in 2017, followed by India with 5% share. Other major exporters include Bangladesh, Germany, Italy and Vietnam.

Import Scenario of Major Textile and Apparel Markets

European Union

Data from European Textile and Apparel Confederation (EURATEX) suggests that overall import of textiles and apparel into Europe across all product types increased from US$ 121 Bn. in 2016 to US$ 127 bn. in 2017, with textile imports up 6% to reach US$ 34 bn while apparel imports increased by 4%.

In apparel category, womens-wear was the largest category with 36% share followed by mens wear 25% and babies wear 3%. China, Turkey, India, Bangladesh, USA, Cambodia and Pakistan were the major suppliers of textile and apparel products to EU.

United States

US imported textile and apparel products worth US$ 114 bn. in 2017, increasing by 0.5% as compared to previous year. Apparel was the largest imported category with 73% share followed by home-textiles (11%) and fabrics (6%). In apparel category, womenswear had the largest share of 38% followed by menswear (27%) and kidswear (3%). China was the largest supplier to US accounting for 36% share. Other major suppliers include Vietnam (11%), India (7%), Mexico (5%) and Bangladesh (5%).

2.2 Indian Textile and Apparel Market Overview

Textile plays an important role in the Indian economy. It contributes to ~14% to industrial production and 4% to GDP. With over 45 million people, the industry is one of the largest employers of the country. The size of Indias textile and apparel market, was around US$ 127 bn. in 2017. It is expected to touch US$ 300 bn. by the year 2025, growing at a CAGR of 11% between 2017-20255.

Category wise Exports of India

Globally, India is ranked 2nd in textile export with 6% share and 5th in apparel export with 4% share. Overall, India holds second position with 5% share of global textile & apparel exports. Indias textile and apparel exports stood at US$ 37 bn. in 2017 and have grown at 6% CAGR over the last decade. Availability of raw material, skilled manpower and favorable central & state govt. schemes would further help Indian exporters increase their market share and global competitiveness.

Apparel is the largest category exported from India having a share of 47% in the total textile and apparel exports during 2017. Home textiles is the second largest category exported from India with a share of 14%, followed by fabric exports (12%).

Share of fabric in textile and apparel exports from India has seen a decline over the last decade with 16% share in 2008 to 12% in 2017. On the other hand, share of apparel grew by 2% during the last decade. Home-textiles share has remained stagnant at 14% during the same period. India is focusing toward export of apparel and home- textile categories in order to capitalize on value addition.

Indias Manufacturing Scenario

The Indian textile industry is one of the largest in the world with a large raw material base and manufacturing strength across the value chain. Presence of mill sector and handloom both makes Indias textile industry unique as compared to other textile industries of the world. With an installed capacity of more than 50 million spindles and more than 8 Lakh rotors, Indias textile industry is the second largest in the world.7 Traditional sectors like handloom, handicrafts and power-loom units are the biggest source of employment for millions of people based in rural and semi urban parts of India.

Total fiber production in India decreased from 1,364 Mn. Kg. in 2016-17 to 1,319 Mn. 201718, witnessing a decline of 3%. Production of yarn remained almost stagnant as compared to previous year, pegged at 5,676 Mn. Kg. in 2017-18. However, fabric production registered a growth of 5% from 63,480 Sq. Mtr. in 2016-17 to 66,547 Sq. Mtr. in 2017-186.

Growth Drivers for the Indian Textile & Apparel Industry

• Rising disposable income of the country:

India has a large population base with more than 1.25 billion people. About half of Indias population is under 25 years. Young population of India will soon turn into working population, resulting in increased disposable income of the country. As a result of the increased purchasing power, major lifestyle categories would witness a boost in demand. Apparel would be one of the most important categories among other lifestyle products.

• Womens lifestyle shifting from home- oriented to career oriented: Driven by pressures of urban living, roles that an Indian women have to play are getting redefined. Along with household activities, women have started contributing to household income as well. India could boost its growth by 1.5 percentage points to 9% per year if around 50% of women join the work force. Currently, rate of womens participation in workforce stands at 27% in India.7 Number of working women in urban area is expected to get doubled from 3 crore in 2016 to 6 crore in 20 2 58. Increasing number of women in the workforce will boost the demand for womens work-wear segment.

• Shift from need based buying to aspiration based buying: About a decade ago, people in India purchased products as per their requirements. But now, scenario has changed completely. Consumers of India have become more focused towards improving their lifestyle and buying aspiration based products more.

• Increased urbanization: India has witnessed a drastic increase in urban population as a result of rising industrialization and expansion of cities. Growing urban culture is also affecting rural areas on a large scale. Increased urbanization has caused population of India to indulge more into the purchase of fashion and lifestyle products. This is going to have a major impact on growth of apparel consumption in India.

• Increased retail penetration: Growing

digitalization in India and increasing number of internet users have resulted in surge in online shopping. People find online shopping more convenient and versatile in terms of discounts, payment methods and return/exchange. Growth in online retail will also boost apparel sales in India.

Business Strategy

Alok Industries has created global scale of operations across its value chain and has enjoyed significant presence in domestic polyester filament yarn industry and global textile markets in the earlier years. The objective was to be prepared for the growing global apparel and textiles market for Indian Textile Industry. The strategy, accordingly was to create globally competitive capabilities across the value chain in cotton and polyester - to provide cotton yarn, finished fabrics including embroidery fabrics, bed linen, terry towels and polyester yarn. At peak level of operations, the Company was exporting its products to over 90 countries.

Alok has uniquely positioned itself in the cotton and polyester product streams. While in polyester there is manufacturing of partially oriented yarn (POY), texturised yarn (DTY), fully drawn yarn (FDY) and polyester staple fiber (PSF), on the cotton side there is complete vertical integration from cotton spinning to manufacturing of apparel fabrics, home textiles and garments. While each of these business divisions are like independent value generating entities, the focus is on offering a comprehensive product suite to cater to the ever demanding needs of customers .

Revival Plans for the Company and admission under the corporate insolvency resolution process defined under Insolvency and Bankruptcy Code, 2016

The Company was admitted under the CIR process in terms of the Code vide an order of Adjudicating Authority dated 18 July, 2017 ("Order"). Pursuant to the Order, Mr. Ajay Joshi was appointed as the interim resolution professional for the Company and was subsequently confirmed as the resolution professional ("RP") of the Company. During the CIR process, only one resolution plan dated 12 April, 2018 ("Resolution Plan") was received from JM Financial Asset Reconstruction Company Limited, JM Finance ARC - March 18 Trust and Reliance Industries Limited jointly ("Resolution Applicants").

Pursuant to promulgation of the Insolvency and Bankruptcy (Amendment) Ordinance dated 6 June 2018 ("Ordinance"), the voting threshold for approval of Resolution Plan was reduced from 75% to 66% of the voting share of the financial creditors. The Adjudicating Authority in an application filed by Alok Employees Benefit & Welfare Trust, vide its order dated 11 June 2018 directed the committee of creditors of Company ("COC") to re-look and proper consideration of the Resolution Plan. Accordingly, in compliance with the Order, the Resolution Plan submitted by the Resolution Applicants was again placed before the COC for consideration by the RP under Section 30 (4) of the Code (as amended by the Ordinance). The Resolution Plan was approved by the COC with 72.192% assenting voting share. Subsequently, vide its order dated 25 June, 2018, the Adjudicating Authority granted liberty to the RP to file the Resolution Plan for the approval of the Adjudicating Authority under Section 31 of the Code. The application filed by the RP for approval of Resolution Plan on 11 July, 2018 is currently pending adjudication before the Adjudicating Authority.

In terms of Section 25 of the Code, the Company is continuing to operate as a going concern. Further, since the application for approval of the Resolution Plan is pending with the Adjudicating Authority, therefore the financial statements of the Company are being presented on a going concern basis.

It is pertinent to note that certain financial creditors of the Company have filed applications before the Adjudicating Authority as well as the Honble National Company Law Appellate Tribunal, New Delhi ("Appellate Tribunal"), inter alia, challenging the Resolution Plan of the Company. These applications are pending adjudication before the respective tribunals. In the event, the Adjudicating Authority and/or the Appellate Tribunal (or any subsequent appeals) result in the rejection of the Resolution Plan, the Company may be liquidated upon the order of the Adjudicating Authority /Appellate Tribunal/subsequent appellate authority.

Financial Performance (Stand Alone)

During the current financial year also Companys sales continued to decline and it made losses. The main reason for losses were provisions / write off of debtors, provisions for impairment in investment and loans given to wholly owned subsidiaries of the Company and finance cost.

The reason for provisioning and write off of debtors is that over the last 4-5 years, manufacturing operations of the Company started coming down and reached about 30% capacity utilisation level. As a measure to counter the drop in sales, the Company increased the trading business in the domestic un-organised market. But due to the tight market situation, this market got affected adversely leading to defaults in payments, a build-up of debtors and elongation of the receivables cycle. The rotational cycle in the market started to disrupt and payments stopped against even the fresh supplies. Many of these parties from the un-organised market were small and fragmented traders who could not withstand the tight market conditions and closed their operations.

The Company, in accordance with the Generally Accepted Accounting Policies and Standards, made a complete provision for doubtful debts and wrote off debtors where required. Looking at the deteriorating situation in the un-organised market and recovery issues, the trading business was discontinued from July 2017.

The stand-alone results give the analysis of the textile business of the Company. Table 2 gives the summarised profit and loss statement of the Company in the current year compared to the previous year.

Table 2: Summarised Profit and Loss Account

(Rs. Crore


FY 2018 (12 Months Ended 31 March 2018)

FY 2017 (12 Months Ended 31 March 2017)

% to Sales

% to Sales

Domestic Sales



Export Sales



Net Sales



Other Income



Total Income




FY 2018

FY 2017

(12 Months Ended 31 March 2018)

(12 Months Ended 31 March 2017)

Material Costs





People Costs





Other Expenses





Total Expenses




















Interest & Finance Costs





Profit / (Loss) Before Tax





Add/ (Less): Provision for Taxes





Profit / (Loss) After Tax





Profit and Loss Analysis

• Net Sales for the year was Rs.5,381.95 crore comprising of domestic sales of Rs. 4,459.13 crore and export sales of Rs. 922.82 crore. In the previous year, the total sales were Rs. 8,326.06 crore comprising of domestic sales of Rs. 7,243.08 crores and export sales of Rs. 1,082.98 crore. The Company continued to witnessed lower level of operations due to working capital constraints. During the year Company exited the trading business due to losses and recovery issues on account of depressed market conditions, which has resulted into lower sales.

• Other Income for the year was Rs. 236.31 crore (previous year Rs. 165.69 crore). The major part of the other income was comprising of interest income on fixed deposit with banks kept for LC / BG margin Rs. 5.82 crore (previous year Rs. 10.70 crore), deemed interest on loans & advances given to subsidiary recognised under IND AS accounting Rs. 130.63 crore (previous year Rs. 118.51 crore), other interest Rs. 1.73 crore (previous year Rs. 0.68 crore) profit on sale of fixed assets, mainly office premises, Rs. 57.32 crore (previous year nil), exchange difference Rs. 13.94 crore (previous year Rs. 14.36 crore), dividend income Rs. 1.98 crore (previous year Rs. 1.67 crore), rent income Rs. 1.37 crore (previous year Rs. 1.46 crore, Sundry Credit balances written back Rs. 19.29 crore (previous year Rs. 0.04 crore) and miscellaneous income of Rs. 2.62 crore (previous year Rs. 19.24 crore).

• Material Cost was Rs. 5,161.20 crore in the current financial year as compared to Rs. 7,552.25 crore in the previous period. As a percentage of sales, material cost increased from to 90.71% in the previous period to 95.90% in the current year.

The increase in material cost is due to losses in the trading business due to depressed market conditions, inadequate working capital for better purchase, pricing pressure on sales, change in product mix, etc.

• People Costs was Rs. 275.68 crore in the current financial year as compared to Rs. 283.31 crore in the previous period. As a percentage to sales, it has increased to 5.12% as against 3.40% in the previous period.

• Other Expenses was Rs. 13,175.14 crore in the current year as compared to Rs. 2,496.03 crore in the previous period. The major items of other expenses for the year was provision for doubtful debtors Rs. 10,952.51 crore (previous year Rs. 118.22 crore), Provision for doubtful advances Rs. 608.69 crore (previous year Rs. 1,056.61 crore), bad debts written off Rs. 585.51 crore (previous year Rs. -1.04 crore), Power & Fuel Rs. 389.68 crore (previous year Rs. 402.47 crore), diminution in the values of investments Rs.27.10 crore (pervious year Rs. 132.69 crore), packaging material Rs. 114.46 crore (previous year Rs. 100.75 crore), Impairment of fixed assets Rs. 31.56 crore (previous year nil), Sundry balances written off Rs. 66.60 crore (previous year Rs. 2.94 crore), etc.

• Operating Earnings before Interest, Depreciation, Tax and Amortization (EBIDTA), was loss of Rs. 12,993.76 crore for the year as compared to loss of Rs. 1,839.82 crore in the previous year.

• Depreciation is Rs. 527.80 crore in the current year as compared to Rs. 512.63 crore in the previous year.

• Interest expense for the year was Rs. 4,682.87 crore as compared to Rs. 3,273.52 crore in the previous period.

• Net Profit / (Loss) After Tax there was a loss of Rs. 18,215.62 crore in the current year against a loss of Rs. 3,502.43 crore in the previous period.

Cash Flows

Table 3 gives the abridged cash flow statement of the Company Table 3: Summarised Cash Flow Statement

(Rs. Crore)




31 March 2018

31 March 2017

Net cash (used in) /generated from operating activities



Net cash (used in) / generated from investing activities



Net cash (used in) / generated from financing activities



Net (decrease) / increase in cash and cash equivalents



Cash and Cash equivalents as on year end
At the beginning of the period



At the end of the period



Net (decrease) / increase in cash and cash equivalents



Textiles Business: Operations Review Overview

Alok is into single segment business i.e. Textiles. Within Textiles, Aloks business mainly comprises of Cotton spinning, Apparel fabric (Wovens & Knits), Home textiles (Sheeting & Terry Towel), Garments and Polyester. The division wise sales and its bifurcation into domestic and export is given in table 4 and Chart-9 below:

Table 4: Snapshot of Aloks product-group wise sales distribution

(Rs. Crore)


12 M YTD ENDED 31 MAR 2018

12 M YTD ENDED 31 MAR 2017



































































































Chart 9: Share of different product groups in total sales

Chart 9 shows that the highest share of sales is from woven apparel fabric accounting for 44.71% as compared to 60.08% in the Previous year. This is followed by polyester yarn whose share has increased from 23.99% in the previous year to 32.93% in the current year, followed by sheeting (Bed sheets) whose share has increased to 9.86% in the current year from 6.64 % in the previous year. The share of cotton spinning for the current year was 7.07% as compared to 6.85% in the previous year. The share of terry towels for the current year was 1.26% as compared to 0.82% in the previous period and lastly garment share was 0.89% as compared to 0.55% in the previous year.


Aloks export business was affected due to the liquidity crunch adversely impacting production and uncertainty in the minds of customers about getting timely delivery due to the ongoing CIR process. Consequently, export sales reduced to Rs.922.82 crore in the current year as against Rs. 1, 082.98 crore in the previous period.

Table 5 gives the share of different regions in Aloks exports. The share of Aloks exports to different regions of the world is given in Chart 10. USA remains the dominant market with 47.23% share in the current year. The share of Asia has decreased from 35.34% in the previous year to 31.19% in the current year, while that of Europe has increased from 14.09% in the previous year to 16.52% in the current year.

Table 5: Regional Distribution of Exports


31 MAR 2018

31 MAR 2017

Rs. Crore

US$ Mn

% of Exports

Rs. Crore

US$ Mn

% of Exports
















Asia - Pacific














North America







South America





















Manufacturing Capacities

Table 6 gives the manufacturing capacities of the Company in different divisions. Table 6: Aloks Manufacturing Capacities



Capacity p.a. 2017-18

Spinning - Cotton Yarn



Home Textiles
Sheeting Fabric

Mn. Mtrs


Equivalent Sheet Sets

Mn. Sets


Terry towels



Apparel Fabrics
Woven fabric

Mn. Mtrs






Mn. Pcs


Continuous Polymerisation



Partially Oriented Yarn (POY)/Chips



Draw Texturised Yarn (DTY) (out of POY capacity)



Full Drawn Yarn (FDY)



Polyester Staple fibre / Cationic Yarn



Master Batch



Quality, Safety, Health and Environment

At Alok, continuous efforts at developing world class processes and quality assurance are a fundamental and nonnegotiable part of the way business is conducted. There is regular focus in manufacturing and allied practices to adhere to the concept of get it right - first time and every time. To achieve this, the Companys products, manufacturing processes and equipment are rigorously checked for quality standards and process deviations, if any.

The Companys adherence to internationally recognized certification standards and compliances has been recognized by renowned certification bodies (see Table 7). Today, the Company has the following accreditations:

Table 7: Certification- Division, Plants & Location Covered

Certification Division / Plant / Location
ISO 14001:2015 (EMS) Process House, Vapi (Normal & Wider width)
OHSAS 18001:2007 (Integrated Management • Terry Towel, Vapi
System) • Weaving, Silvassa
• CP, POY, FDY,PSF and Texturizing, Silvassa
• Spinning and Knitting, Silvassa
• Embroidery, Silvassa
• Made Ups & Garments, Vapi
Certification Division / Plant / Location
Social Accountability • Process House, Vapi (Normal & Wider width)
• Weaving, Silvassa
• Made Ups & Garments, Silvassa
• Terry Towel Division, Vapi
• Made Ups & Garments - Vapi
GOTS: Global Organic Textile Standards/ OCS- • Head Office, Mumbai
Organic Content Standard. • Spinning & Knitting Division, Silvassa
• Weaving Division, Silvassa
• Process House (Normal & Wider Width), Vapi
• Made-ups & Garments Division, Silvassa
• Terry Towel Division, Vapi
• Hemming Division, Silvassa
• Made-ups Division, Vapi
• Embroidery Division, Silvassa
Fair Trade • Spinning & Knitting Division, Silvassa
• Weaving Division, Silvassa
• Process House (Normal & Wider Width), Vapi
• Made-ups & Garments Division, Silvassa
• Terry Towel Division, Vapi
• Hemming Division, Silvassa
• Made-ups Division, Vapi
OEKO Tex Standard - Product Class • Made -ups (Product Class I & II)
I & II • Woven & Knitted Fabric (Product Class I & II)
• Texturized Yarn (Product Class I)
• Cotton and blended yarn (Product Class I)
• Terry Towels (Product Class I & II)
• Garments (Product Class I)
NABL • Process House Lab Normal Width, Vapi

Alok also holds the following certifications:

• NABL Lab Certification ISO 17025:2005 for Normal Width plant, Vapi

• Egyptian Cotton Certificate

• TS 16949:2009 (Automotive standard) -Polyester Plant, Silvassa

In addition to the certifications, Aloks performance, especially in exports of cotton goods and polyester

yarn have been recognized through successive awards from TEXPROCIL and SRTEPC over the years.

Human Resource

Alok has always maintained that one of the key resources it has are its human resources and it takes all care to ensure that employees remain connected and motivated. The fact that most of the key employees continued with the Company in these challenging

times by itself indicates the commitment of its human resources. During the period under review, employee training and engagement activities could not be taken up due to difficult operating conditions.

Subsidiaries - Textiles


Through its step down subsidiary Alok Industries International Limited, Alok has a 100% stake in Mileta, a Czech based fabric manufacturing Company. Miletas facilities are located in Horice (Weaving and Administration) and Cerny Dul (Processing) in the Czech Republic.

Mileta has high end technological skill in yarn-dyed fabrics and hemming that results in higher per unit realisations. The Mileta range of products includes handkerchiefs, high quality shirting, batistes and voiles, complete line of functional table linen and bed linen. Alok also uses Miletas extensive marketing network in Europe, Russia and Africa to promote its existing products.


UK Retail: Store Twenty One

Alok held a 99.87% equity in Grabal Alok (UK) Ltd (Grabal (UK), a Company that used to operate the Store Twenty One chain of value-format stores in UK, through its step down subsidiary Alok Industries International Limited and Grabal Alok International Limited.

The Company was continuously making losses and during the period under review it underwent restructuring by way of Creditors Voluntary Arrangement (CVA) and also stores which were making losses were closed down. However, the CVA scheme could not be implemented due to scarcity of funds and finally Grabal Alok UK was taken under liquidation on 10th July 2017. The process of liquidation is on presently. Considering this, the Company has made full provision of the investment / advances given to the said subsidiary.

Real Estate: Alok Infrastructure Limited

The Company had made investments in the realty sector through its 100% subsidiary Alok Infrastructure Limited. The plan was to create value and monetise the same at the right opportunity. However, depressed market conditions in the real estate space resulted in: (i) the Company having to dispose off some of its assets at losses and (ii) restricting the Companys ability to monetise the land bank at Silvassa. The Company has sold its investment in two joint ventures (held through Alok Infrastructure Limited) in the course of the financial year ending 31st March 2018. The Company has also provided for the loans / advances to the extent not recoverable from its subsidiaries.

The performance of all of subsidiaries and step down subsidiaries are given in table 10.

Consolidated Results

Tables 8, 9, and 10 give the profit and loss highlights, balance sheet highlights and Company wise sales of Alok as a consolidated entity

Table 8: Consolidated Profit and Loss Summary

(Rs. Crore)


31 March 2018

31 March 2017


% to Sales


% to Sales

Net Sales



Other Income



Total Income



Material Costs





People Costs





Other Expenses





Total Expenses





Operating EBIDTA










Operating EBIT










Operating Profit Before Tax





(Rs. Crore)


31 March 2018

31 March 2017


% to Sales


% to Sales

Less : Provision for Taxation





Profit After Tax





Share of profit / (loss) from associates (net)



Profit After Minority Interest



Table 9: Consolidated Balance Sheet Summary

(Rs. Crore)


As at 31.03.2018

As at 31.03.2017

Share Holders Funds



Non Current Liabilities



Current Liabilities



Total Equity and Liabilities



Non Current Assets



Current Assets



Total Assets



Table 10: Company wise sales in total Consolidated Sales

(Rs. Crore)

Name of the Company






Profit /(Loss)

1 Alok Industries Limited





2 Alok Infrastructure Limited





3 Alok International Inc.





4 Mileta A.S





5 Grabal Alok (UK) Limited





6 Alok Industries International Limited





7 Grabal Alok International Limited





8 Alok World Wide Limited





9 Alok Global Trading (Middle East) FZE





10 Alok Singapore Pte Limited





11 Alok International (Middle East) FZE










Effect of elimination entries





Consolidated (Loss) / Profit





Sustainable Business Practices and Corporate Social Responsibility (CSR)

Alok has always striven to be a leader in sustainable integrated, textile solutions delivering value through environmentally and socially responsible textile products. In addition to its commitments towards quality and health, safety and environment there are certain specific initiatives that related to sustainability and social development.

Ethical Fibre

At the first stage of its value chain is procurement of cotton, which is the Companys predominant fibre utilisation. Increasingly, the world is witnessing the promotion of ethical fibres like

• Organic cotton, which is cotton grown without the use of external synthetic agricultural inputs like fertilizers and pesticides and helps conserve the environment from the harmful effects of the use of hazardous agro chemicals

• Fair Trade cotton fibre

• Better Cotton, which involves educating the cotton growers to adopt the Best Management Practices in cotton cultivation for more sustainable yields

• Recycled cotton and polyester for spinning plant.

A shift from conventional fibre use to these ethical variants significantly reduces the environmental impact of growing conventional, resource intensive cotton and help marginal cotton growers economize on farm expenses.

Alok has led from the forefront amongst Indian companies adopting use of such fibres. The Company is GOTS certified and a member of Better Cotton Initiative (BCI) quality manufacturer supplying Organic and Better Cotton textile products to the worlds leading brands in Europe and the US. As a Fair Trade (FLO) certified Company, Alok values the fair price concept across the value chain. The Company has been instrumental in a few of the well-known Organic and Fair Trade cotton projects in India and abroad.

Similarly, Cotton made in Africa (CMiA) is another important variant of sustainable cotton which Alok can use based on the specific requirements of its customers.

Sustainable Manufacturing

In addition, Alok remains committed to sustainable manufacturing operations, which also implies use of newer and cleaner technology, use of eco-friendly dyes for all processing, treatment of post-dyeing effluents, installation of reverse osmosis (RO) units to recover fresh water from the treated one and installation of Selective Catalytic Reduction (SCR) systems in the exhaust of the DG sets to reduce oxides of Nitrogen.

The Company encourages the use of recycled products and has set up a recycled polyester unit with an initial 20 tons/ day of capacity to recycle polyester and polyester yarn waste, flakes and PET bottles to produce 100% recycled polyester fibre.

Social Development

In the previous years, Alok had been regularly working on improving the quality of life in communities where it operates by adopting measures that benefit the local population in terms of direct and indirect employment. In the process, the Company has also played an active role on providing training and employment to local tribal women.

Alok had also given its support in establishing a school - Alok Public School - in Silvassa, which now has a student base of close to 750 and is a much coveted school in the township and surrounding areas. The School has been granted the esteemed CBSE affiliation and also recognized as a New Generation CBSE school for its innovative methods and practices.

However due to paucity of funds, the Company has not been able to spend any amount during the year on its social development activities.

Risks & Risk Mitigation

This section contains the Companys view on risk and the critical risk factors for the Company. This section also provides the manner in which the Company manages risk through its risk management processes.

Raw Material

The Companys operations and profitability are significantly dependent on the timely availability and price of raw materials used in production process. The primary raw materials for textile operations are cotton and PTA & MEG. The Company also buys cotton yarn, polyester yarn and fabrics of specifications required by customers but are not produced in its plants.

Being an agricultural commodity, prices of cotton are affected by a range of factors like changes weather conditions affecting sowing, government policies and regulations. Governing taxes, tariffs, duties, subsidies, import and export restrictions on agricultural commodities and commodity products, etc. All of these influence pricing and demand- supply situation in this industry. The planting of certain crops versus other uses of agricultural resources, the location and size of crop production, volume and types of imports and exports, etc. determine availability of cotton. As the tables 11 and 12 below show cotton prices during 2017-18, after some reduction, stabilised and are moving in an upward directions in the last few months.

For Companys polyester yarn operations, PTA and MEG are the major raw materials that are required in manufacturing POY and other polyester yarn. Being petrochemical products, prices of PTA and MEG are linked to naphtha prices and ethylene prices, respectively, which in turn fluctuate in line with fluctuations in the crude oil prices as can be seen from the Chart below.

As can be seen from the chart above, both PTA and MEG prices were on upward trend during the financial year 2017-18 and have moved in tandem with the increase in the price of crude oil.

PTA prices moved from USD 645 per ton in April 2017 to USD 769 per ton in March 2018 and continued to increase and reached to USD 996 per ton in October 2018.

MEG prices have also increased from USD 719 per ton in April 2017 to USD 943 per ton in March 2018 and have come down to USD 858 per ton in October 2018.

Being a commodity product, the prices of finished goods like Texturised Yarn (DTY) and Fully Drawn Yarn (FDY), etc. also move with the movement in raw material prices albeit with a lag on both sides.


The Companys products have markets both in domestic as well as exports. Overall, exports have in the past and in future will account for sizeable part of the sales revenue. The exports markets, predominantly USA and Europe, are very competitive with very high emphasis on timely delivery.

Ability to develop products as demanded by customers and design capability are critical for exports markets and the Company has been successful in meeting these demands over the years and as late as 16-17 also won the export award instituted by the Government. At the same time, India no longer enjoys preferred market access and this is allowing countries like Bangladesh

to become price competitive. As a result, while the overall demand for textile products in Companys major markets is not declining, other nations like Bangladesh are competing aggressively to capture market share. The Company is progressively widening its markets with increasing focus on Asia and some countries in Africa to mitigate the challenges that are likely to arise in the developed markets. To its credit the Company has been able to retain key customers in USA and Europe, albeit with lower volumes, despite the current situation of the Company. In the event the Resolution Plan is implemented by the Resolution Applicants, , the Company is confident of bringing into its fold, customers who have moved away in the last two years given the quality of the products and capacity to supply large volumes consistently.

The domestic apparel fabric market is fragmented with low cost competition and longer credit terms which the Company is not in a position to provide. However, the Company has started building relationships with large retailers (physical and on line) to supply fabrics and garments and once the Company stabilizes, increasingly large volumes are expected to be supplied and the Company expects that it will be able to command a preferred supplier status given the quality, design capability and the capacity available to provide large volumes on a consistent basis.

The Company has always been a leading supplier of Polyester Yarns over the years given its large capacity and the quality and the range of its products. Even though the Company has been operating only at 50%

of its capacity due to the adverse financial situations, it has continued to utilize fully, the balance 50% even today and managed to obtain some premium pricing. Stabilized operations when achieved should re-establish the Company as a premium supplier of Polyester Yarn and fiber.

Information Technology Risk

Ever increasing dependency on information technology systems on business process, communications, MIS, controls and customers / vendors management make it most important to minimise disruptions of information technology systems. Unavailability of application or loss of data can result in impairment of business and production processes.

The Company runs a centralised database application with the primary data centre at the corporate office with commensurate IT infrastructure. Disaster recovery of data and application is achieved through servers installed in two different locations outside the Corporate office. Adequate back up power is provided through multiple UPS systems and external power backup of the Corporate office.

Infrastructure, WAN and LAN are secured through secured MPLS links, firewalls, well defined role based authorisations for system and applications access and enterprise vide end point security.

Due to the liquidity crunch prevailing over the last few years, the Companys ERP system is not under Annual Maintenance Contract (AMC) from SAP and is being managed by the in-house team. In case of major SAP related issues or system shut-offs, the Company may not get timely support from SAP and can face some disruption in operations. The Company plans to migrate to the updated version of the SAP and also carry out much needed replacement of its hardware, much of which is very old on priority once the implementation of the Resolution Plan starts.

Financial Risk

The large debt burden and rising interest cost caused defaults in payment of its obligations leading to the Company being admitted under the CIR process on 18 July, 2017 vide an order of the Adjudicating Authority. The application filed by the RP for approval of Resolution Plan on 11 July, 2018 is currently pending adjudication before the Adjudicating Authority. In the event the Resolution Plan is approved, the capital structure and the associated risk profile of the Company is expected to significantly change and therefore at the moment, the management is not able to comment on the future capital structuring of the Company and the resultant change in the risk profile.

Currency Risk

The Company is subject to significant currency exposure risk given its significant dependence on exports. At the same time, the Company, at present, cannot avail any facilities from the banking system that allows it to hedge the currency exposure. Once the Resolution Plan, if approved by the Adjudicating Authority is implemented by the Resolution Applicants, the Company expects to obtain necessary lines from the banking system and institute a hedging policy to mitigate currency risks.


Subject to the adjudication of the Adjudicating Authority and other appellate authorities in relation to the approval of the Resolution Plan and with the support of the Resolution Applicants, the Company is well positioned in terms of capacities, capabilities and established customer relationships to capitalise on market opportunities. The Companys operations are affected mainly due to lack of adequate working capital. Approval of the Resolution Plan would enable the Company to progressively ramp up operations.

Internal Control and Adequacy

The Company has in place well established framework of internal control system, commensurate with the size and complexity of its business. The Company has an independent internal audit function covering major areas of operations and is carried out by external firms of Chartered Accountants engaged for this purpose.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations and are made on the assumption that the Resolution Plan for the Company will be approved / upheld by the Adjudicating Authority and the Appellate Authorities at various levels and implemented. As explained in the discussions under "Revival Plan", in case the challenges to the plan succeed, then the Company may be ordered to be liquidated by the concerned authorities. These statements have been based on current expectations and projections about future events. Wherever possible, all precautions have been taken to identify such statements by using words such as anticipate, estimate, expect, project, intend, plan, believe and words of similar substance in connection with any discussion of future performance. Such statements, however, involve known and unknown risks, significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest and other costs and may cause actual results to differ materially. There is no certainty that these forwardlooking statements will be realised, although due care has been taken in making these assumptions. There is no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise