terrygold india ltd Management discussions

TERRYGOLD (INDIA) LIMITED ANNUAL REPORT 2011-2012 MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL RESULTS Rs. In Lakhs Year ended March 31 2012 2011 Total Revenue Nil Nil Operating, Financial & Other Expenses 24.33 0.27 Loss before Depreciation, Interest and Non-Cash Charges 24.33 0.27 Depreciation & Non-Cash Charges 0.00 0.00 Interest 0.00 0.00 Net Loss 24.33 0.27 Operations As you are aware that the Terry Towel products basically belong to the group of pile fabrics, wherein additional loose (with lesser tension) yarn is introduced to form loops called as piles to give a distinct appearance and effect. In the present age, pile formation is microprocessor controlled with high level of accuracy and distinct features. Towels are subject to changing fashion and demand new designs with different fabric finish, loop pile and flat structures that are manufactured on the improved equipment with use of new-age computer based technology of toweling with 100% Cotton Absorbent Long Looped perfect towels. The capital goods have been imported from Japan and backed by State of- Art technology and commenced the commercial production in 1996 with an Operating Capacity of 800 M T per Annum. We have such strengths to meet such a wide verity of product range to meet the increasing demands apart from an item of personal use and in the institutional market such as Hotel Industry, Hospitals, Holiday Homes Restaurants etc., The Company had suffered a major Fire Accident during August 2000 that destroyed the Stock and Assets and the Insurance Company repudiated the claim of the Company for Rs.242.71 Lakhs that had resulted into a major cash crunch. The net worth of the company as on March 31, 2000 became negative and the Honble BIFR had declared Company as Sick Industrial unit and registered the Case No.210/2000 on 02.03.2001 and appointed IDBI as operating Agency for formulating a rehabilitation package keeping in view the provisions of Section 18 of the SICA Act. The unit is not operational since December 2004. Till last decade, Indian terry towel industry was dominated by decentralized Handloom and Powerloom sectors of Panipat, Karur, Erode, Mumbai, Sholapur, Ahmedabad and Delhi constituting the share of over 80% of the total production of Towel Industry. But, for the last 10 years, many of the organized~secfors have entered in this segment. Organized Sectors are mainly moving from mid low end to mid high end market whereas decentralized Sholapur, Panipat are concentrating more on low end and domestic market. Some of the high quality power loom fabrics from decentralized sectors are being slowly accepted in leading markets of USA and EU. Many of the Indian companies are also expected to enter in the World Market predominantly through acquisition and branding with this segment in the years to come. The estimated annual production terry towels are 100,000 tons and will likely to go up to 115,000 tons with ongoing expansion and new investment by 2012 in the country. Revival Efforts The Company is having two Secured creditors being IDBI & State Bank of Hyderabad. IDBI had assigned its debit to SASF, Mumbai. SBH has assigned its debt to ASREC India Ltd.. On the confirmation of Assignment of Debit by SBH in favour of ASREC (India) Ltd (ASREC) the Company had reached an OTS with Deutsche Bank being the Attorney holder of ASREC on 02.03.2007 for full & final settlement of dues. The Company had also reached a Settlement OTS with the other secured being SASF (IDBI) on 18.06.2007. This could not sustain as the issues related to the Charged Documents are needed to be sorted-out as the investors identified by the promoters are willing to infuse the funds as they are keen to revive the unit as the envisaged arrangement has a firm back arrangement of the entire production. The Secured Creditors were appraised on the present agitated political situation on Telangana and no new investment is taking place in this sector as no body is willing to lock-up funds and this is being considered favorably and a fresh Compromise OTS was submitted on 23.04.2012.. Your Directors are fully confident to resolve the pending issues and revive the operations shortly. Pending fmalization of issue of charged documents, no interest was provided on principal outstanding loans for the year under review. Future Prospects The usage of towels in domestic market is constantly increasing with the expansion of hospitality services and opening of Trade Centers and Malls. The Market for Terry Towel has been growing rapidly. The Indian domestic Textiles industry is worth Rs. 1,75,000 Crore. The Terry Towel Sector is zooming with the new EXIM Policy and increase in demand from US Markets. USA is the Worlds single largest buyer for Made-ups and Terry Towels. India, China and Pakistan together supply 65% towels, 81% of sheets and 79% of comforters imported by USA. While India has a dominant position in Americas terry towel import with a share of around 26%, Indias home textile contributes around 22% i.e. US $ 4.1 billion to Indias textile export of US $ 19 billion. However, the share of terry towel is just 5.8% of total home textile export i.e. US $ 255 million in 2005-06 and US $ 239 million in 2006-07, and there is a room to grow. Till recent time, marketing effort was concentrated in USA, but many are looking for other markets of the EU and other parts of the World. In view of this the Company is confident of serving new markets with higher profitability on its revival.