Introduction to WELSPUN INDIA LTD.

Background of the company

Asias largest and the worlds 4th largest Terry Towel producer of Terry Towels Plants at Vapi (Gujarat) and Anjar (Coastal Gujarat) India Distribution network in 32 countries Exports revenue: 94% of total revenue (68% to the US market) Certification: Quality -ISO 9002/14001 and Social Accountability -SA 8000:2001 by M/S BVQI

Only Indian company to license a life-style brand in Home Textiles: Licensed Umbra worldwide Nautica for towels in US and Canada

Since its inception in 1985 with a small textile unit, the Welspun group has grown rapidly to become a market leader in every segment that is operates viz. Terry towels, Yarns and Saw pipes. Today, Welspun has an expected turnover of Rs. 45,000 Million for the Current year of which more than Rs 35,000 Million is expected from exports, 15000+ employees, presence in 50 countries and over 50,000 shareholders. The market capitalization of the group stands at approx Rs. 25000 million

Vision

Welspun Motto
Welspun just dont create product, it engineers satisfaction. Welspun Group has been the numero uno group in India that has deployed exceeding resources to ensure the optimum quality of its product. Within Welspun, quality of the product and service is of paramount importance. The endless tests, the microscopic examination ensures that all Welspun products are of world class quality and nothing less. Welspun treat each and every project as a challenge every achievement as a reason to set new goal. This strategy has enabled Welspun to have satisfied customer in the most developed and knowledgeable market Wespun dare to commit and deliver on our promises

Welspun Mission
Welspun endeavor to reach the leadership position in each Segment/Sector of our product/Service. Welspun is committed to satisfy their customer by providing such Quality Product/Service, Which give highest value to money. Welspun believe that employees are the most important asset through which it can reach the top in each category of our product/Service. Therefore, Welspun emphasize on their continuous improvement through upgradation of relevant knowledge and training. Welspun commits to continuous growth, so as to fulfill the aspirations of our Customers, Employees and Shareholders.

Welspun Milestone
3

1997-98: Outstanding Export Performance Award from the Govt. of Gujarat for exporting cotton yarn from Welspun cotton yarn limited.

1999-2000: Gold Trophy for special achievement for outstanding performance in made-ups, The top exporter award from TEXPROCIL

2003-04: Texprocil Gold Trophy for Highest Exports Performance. 2003-04: Texprocil Gold Trophy for special Achievement Outstanding Export Award for outstanding export performance by Ministry of Industry & Commerce

License to use the Egyptian Cotton Logo

Present Business Profile of Welspun Group Terry Towels Largest Terry Towel producer in Asia Bed Sheets One of the largest vertical bedding company of India. Polyester Filament Yarn One of the largest Specialty Polyester Filament Yarn producer In India Polyester Buttons and Resins Largest producer of Polyester Buttons in Asia SAW Pipes One of the largest capacities of Saw Pipes in Asia, outside Japan.

COMPANY PROFILE

Name of the Company: Registered Office & Works:-

WELSPUN INDIA LIMITED Survey no. 76, village Morai, Vapi, Dist Valsad Gujarat 396 191, INDIA.

Corporate Office: -

Trade World, B wing, 9th floor, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai 400 013 , INDIA

Board of Directors:Shri G.R.Goenka (Chairman) Shri B.K.Goenka (Vice Chairman & M.D.) Smt. Bala Deshpande (Nominee ICICI Venture) Smt. Renuka Ramnath (Nominee ICICI Venture) Shri Padmanabh Sinha (Nominee Dunearn Investments Pvt. Ltd) Shri Arun Kumar (Nominee IFCI Ltd) Shri Dadi B. Engineer (Director) Shri A.K. Dasgupta ( Director ) Shri F.Q. Kolman (Nominee Uti) Shri M.L. Mittal (Director Finance)

Organization structure
5

DIRECTOR

Sr. V.P
GCIL

D.G.M Admin

Sr. V.P H.R/Personnel

Sr. V.P Material/PPC

Sr. V.P TQM/P.DEV/DESIGN

D.G.M

Sr. Manager Maintenance

TQM

D.G.M HR/PR

D.G.M

G.M TQM

D.G.M COMMERCIAL

PPC

Sr G.M Costing Sr G.M Account Sr G.M Costing

Source: Company, HRM/HCM

Hierarchy
6

Chairman

Managing Director

Director Works

Department Heads

Middle Management

Sectional Head

Junior Manager

Workers

Source: Company, HRM/HCM Department

SWOT analysis of the Welspun

Strengths:
7

Moving up the value chain While volume will drive growth, Welspun is also making a conscious effort to increase contribution of sales from designer brands such Tommy Hifiger, DNKY Calvin Klein verses discount stores and mass merchants. This should result in higher realizations and margins expansion Diversifying to new geographies Welspun has been exploring opportunities beyond its principal market of the US. It is focusing on marketing initiatives in Europe, and is looking to take advantage of a reductions in import duty form 25 to17.5 percent on home textiles in Australia. Given its efforts in this direction, the export contribution form the us has reduced form 74 percent. Welspun expect these initiatives to diversify Welspuns revenue mix. Pricing methodology Effective market mapping according to technologies. Complementary positioning to the market segment enduring efforts on developing price points. Blended approach to integrate client product relationship through Right Pricing New ventures to contribute significantly to revenues Welspuns strategy to enter capital intensive projects, taking advantage of the tuf, is expected to result in revenues increasing significantly year after year. This will also reduce the company dependence on the terry towels business. In fact it is our belief that over the next four years, bed linen will start contributing 30 percent of total revenues. This will help Welspun transform itself from a single product company to a diversified home textiles business. Opportunity: Post quota with giant textile players in the US and EUROPE going belly up, India is the new manufacturing base after china. With west point Stevens and pillowtex. Two of the largest terry towel players in the us home textile capacities in the US is shrinking. Post the dismantling of quotas, key players like springs of US and Sheridan of Australia have also started outsourcing from south Asia. With its capacities in terry towels its wide product range and access to low cost, Welspun is well positioned to capitalize Its growth opportunity. Threats: Appreciation of Rupee The main company specific risk includes appreciation in the rupee of over 5 percent. From base level of rs.44 would lower export price realization and impact profitability by
8

7-8percent. As exports contribute 80perecent of y05 revenues, a share that is only expected to increase. However the company follows a prudent foreign exchange policy by buying futures and thus largely isolating itself from the fluctuations of the foreign exchange. Raw material and other inputs The companys major raw material being cotton yarn dyes and chemical, power any fluctuation in prices of these commodities is likely to affect the prices of the finished product. The company accounts for the current cotton price while confirming the sales order and thus avoid adverse fluctuations in raw material prices. Competition
Vice president In a free trade regime, competition could be intense on both, the domestic and international such scenario, success of enterprises would be largely determined in terms Production/operati of their ability to meet quality, size and delivery and cost parameters. on

Working capital incentives The companys working capital requirements are generally due to typically high levels of debtors and General coupled with low credit periods provided byGeneral The inventory creditors. company has taken measures to reduce the inventory holding levels andManager reduce debtors Manager turnover days. One of these measures include shift towards effective supply chain Unit-2 management. Unit-1 Interest risk
Dy. General Dy. General interest. Any upward revision of interest rates on these loans would imply a higher Manager Manager Manager burden. The company uses appropriate measures Manager financial like swaping high cost debt, Packaging Spinning/open ended derivative products. Quality Assurancepacking credit etc to keep interest cost low. The Commercial papers Maintenance/Prod

The company has both rupee and foreign currency borrowing with floating rates of

new term borrowing for the projects are all under concessional rate of interest under the Sr. Officer TUFS schemes. Dy. Manager
Dy. Manager Quality Assurance Sr. Officer Worker Packaging

Dy. Manager Mainte./Prod

Sr. Officer Mainte./Prod

Sr. Officer Production/Operation Department Quality Assurance Worker Spinning /open

Officer Mainte./Prod

Departmental Structure

Officer Quality Assurance

Worker Mainte. /Prod

Source: Company, Production/Maintenance Department

Types of Raw Material

10

The main type of raw material used for the production of the terry towels is cotton. Welspun imports many different types of cotton from different part of the world the production process. The type of cotton and their location are mention below: PIMA- U.S.A LRA- MALKAPUN
Marketing MCV S GUNTUR Production Planning

Maintenane Equip. pare

SANKAR 4 HALVAD SANKAR 5 KALEDIA ORGANIC COTTON BIKANER FIBER COTTON CHINA PVA Fiber KUZLON JAPAN J 34 SARDOLGAND
Rewinding on cones Yarn dyeing Design Purchase RM Chemicals R.M (grey yarn)

Departmen t

S 4B KARJAIN ,MORBI
Warping: Direct/Section

Sizing

Beam Storage

No
Weaving: Doddy/Jacquard

Brief explanation of productionfolding and its flow charts Grey process

Shearing

Finish folding

11
Processing

req
Packing & Dispatch

Source : Company, Production/Maintenance

Inventory Management for Raw Material and Finished Material

12

The Raw material cotton which is unloaded from the truck is stored in cotton store 1 or cotton store 2 located in the premises of the Welspun near the production unit. After placing the lot of cotton at an appropriate place the cotton identification card is attached to the cotton bales. The format of CIC is shown below: Cotton Identification Card Mill Lot No: Date: Ware House No: _____

Station/Centre:

Cotton type:

No of Cotton Bales:___

Press Running No From:

To:

____

Remark:______________________________ Source: Company, Cotton Store This CIC is filled and attached to the cotton bales for identification and the copy is maintained in the register also. When the cotton placed in the warehouse a code is given to the each bales of cotton which is in the format mention below. Warehouse Number:_______ Location Number: Cotton type:_____

In above mention format the cotton is place and the code is recorded in the registered. This code is helpful in locating the cotton bales when it is required in the production unit. Location Number is the number written on the wall of warehouse, which helps in identification and locating the cotton bales. Similar is the procedure of storing the finished goods such as yarn and terry towels.

Store and Production: The issue slip is issued from the spinning department every morning at 9:30 am. This issue slip contains the detail of the cotton required in the
13

production unit in 3 shifts. The format of issue slip which is helpful in co-ordination between the production and store is mention below:

Bales Issue slip

Units No:

Sr No:____________ Date:_____________

Sr. No

Mixing %

Type Cotton

Mill Lot Number

Cotton Required

Issued cotton number of bales

Issued Gross weight in kgs

Source: Company, Cotton Store

Purchase and Production: Purchase department play an important role in Welspun India Limited. So purchase department has to co ordinate with production and party from which they are purchase.
14

Purchase department is called as mediator between production department and party(Vendor):

Production department

Purchase department

Seller

Purchase department firstly purchase the material as per the requirement of the production department. They call production department as user. Purchase department has to purchase the material from the party and that must be matched with the requirement of the user.

Production and dispatch: Dispatch department co-ordinates with the PPC (Production Planning and control) department for the dispatch of the particular product to the customer on time.

Personnel/HR department

Departmental Structure HR/HCM

DGM/HOD 15 HCM

Sr. Manager Managing ISO standards, SA800, NABL

Assist. Manager Managing Social Compliance

Assist. Manager Managing Training Spinning

Sr. Manager Managing Training weaving

Trainee officer

Structure for Personnel, IR, Administration department HOD

Sr. Manager

Sr. Manager

Assist Manager

Assist Manager

Trainee officer

Assistant Trainee Assistant

Source: Company, HRM/HCM Department

Function of Time office

Attendance Management and Absent Control (Swapping System) Attendance Management is done through swapping the card to the card reader, which record the attendance of an employee in the departmental
16

database and also in the database of the immediate head. Sometimes the physical verification of attendance of any particular employee is carried out by personnel department or by the immediate superior. Over time allocation According to the Welspun personnel department policy no worker should be allocated more than 25 hours /per month over time. Recruitment Salary and wage Preparation and Disbursement Employees of level equal to officer or above that attain their salary as direct deposit in their respective bank account while the other lower level employees get their wage in cash. Accident handling and Safety measure Grievance Handling Determination of Group Accident policy Management of Customer Audit This is an audit which is carried out by the customer to check whether the operation matches with their specification, standard and requirement. Date 15/06/07 was scheduled for the customer audit in Welspun.

Details Of Employees Personal File

Qualification certificate Date of birth certificate
17

Application for employment Photograph 10 in number Medical examination certificate Appointment Letter Form1 Nomination and declaration for ESI Form 2 Nomination and declaration for provident fund Form F Nomination and declaration of gratuity Union fee declaration Photocopy of I-card Personal History

Recruitment and selection at Welspun

Toward the growth of an organization in the competitive business world the effective and resultant manpower is of utmost importance and therefore a sound recruitment and selection policy enriches the foundation for employee moral and healthy industrial
18

relation, hence the right person at right time at congenial growth environment with in the organization. So at Welspun each department has been sanctioned with specific number of man power for specific post or designation. So when ever a vacancy arises in any department the HOD fills up the manpower requisition form where he mentioned the following details; Number of employee to be recruited Post and designation for which the employee is recruited Desired qualification Desired experience or exposure Reason for the vacancy created Targeted job responsibility Total sanctioned strength of department Current Strength of department

Job Description The human Resource manager prepares job description of the particular job for which the employee is to recruited. The job description is based upon MBO. That is his duties and responsibility and task to be performed is designed by keeping in mind the objective of the whole organization. Such a job description contains the Role of the employee
19

Objective of the particular role Authority given to him Resource required by him to perform the task Accountability Time required completing each and every job

Recruitment : Based on the job description and the desired qualification and experience. The HR manager starts searching for the prospective candidate through various resource like placement agencies, advertisement in newspaper and online (Naukari.com). When ever a large number of employees is to be recruited. Placement agencies or advertisement is used as service of recruitment.

Submit application

Selection: HRONLINE@welspun.co
The following steps are carried
\
m

Application Review out during the selection

Match with Requirement

process:

Notification of interview Schedule

20
Job offering Decision Interview

Source: Company, HRM/HCM Department

The HR manager scrutinize the application received on line (staff) . They match the application with the requirement and then the short listing of the applied candidate is done. Whenever a large number of candidate are to be selected a written test and group discussion is conducted by which the short listing of candidate is done. Then the short listed candidates are called for the final interview. About 7-8 candidate are called for the interview when 1 candidate is to be selected. Then the candidates are informed about the interview schedule and those who are not called are informed otherwise. Then the interview is conducted with the panel of 3-4 interviewers. Two interviewers are from HR and the others are the HOD and one another member from the concern department for which the candidate is to be selected. While selection Technical Skills, Technical Knowledge, Managerial Skill, attitudes of the candidates are considered to fit to the organizations adaptability.

The efficient employee is selected and information about selection by issuing an offer letter. The other candidates being called for the interview are reimbursed the fair. The HR manager negotiates about the salary, salary the break up and other terms and condition with the selected candidate. Then a confirmation letter is given to the new joining and other terms and condition. The concerned department is intimated about the conformation. Induction program
21

The new joiner is then introduced to the organization through induction program, which is carried out for a week. The HR department carries out the induction program. It is consist of the following Classroom induction Plant round Introduction to key people of the company Full training of SAP system Discussion about company policies and HR practices

Then the induction review meeting is conducted to take the feedback of the new joinee about the induction.

Training Types of training provided by the Welspun are to be their employee are Induction training Refresher training On-the-Job training In house classroom training External training program
22

Sensitivity training program

Some times the company receive the training brochures and calendar of various training institutes, if they find their training to be useful they send one or two employee to avail the training benefits. The employee then comes to and imparts training to other member of the organization Training need assessments For providing the training to employee, first of all the need for training is identified for which training need identification form is filled, which contain details like Reason for training Description of need Type of training to provide

Training evaluation and its effectiveness After the candidate receive the training he is asked to fill the training feedback form in which following feedback is given The trainee gives rating to various parameters of training The employee present job rating is mentioned, So as to compare it with post training performance Other record kept regarding training
23

1. Training record Training provided to each and every employee is maintain by the HR department which contain the following details Date Program detail Duration Result Remarks

2. Training attendance record When training is provided to a group of employee on attendance is maintain which contain the following detail Subject and venue of training Name of Faculty Name of participant Designation and employee Number Department of Employee
24

Signature

Performance appraisal Performance appraisal of employee in Welspun is done under a 3 tier system i.e. each and every employee is used by: 1. His immediate superior (called appraiser) 2. The Head of Department (called reviewer) 3. Self appraisal The appraisal form for the entire 3 appraisals is almost same and online except in case of self appraisal. The appraisal is done by listing the job and responsibilities there were assigned to the employee in this job design as per management by objective. Then the appraisal gives the rating to the performance of each and every job responsibility on a scale of 1 to 100. Then total of the score given by all the three is done and then mean of score is taken.

Depending upon the score, the investment is given to the employee. They are places under any of the following categories for increment A : 20 % increment B : 15 % increment C : 10 % increment D : 5 % increment So in this way increment is given to the employee by the appraisal done. Even promotion lay off and training need decision upon the appraisal.
25

Performance evaluation scheme (Incentive scheme) Under the scheme incentive is provided to higher level executive by evaluating their performance of a particular month or quarter. Their 80% of salary is fixed and other 20 % is variable and its depends upon their performance of the particular month. Under the scheme the duty or the task to be performed by the executive is pre-determined under job design. Now for each day or task is insured either in % or in numbers or Yes/No and mark out of 10 is given for each state of performance. E.g. if 50% of a task is performed then may be 6 out of 10 marks is given. The weighted score is calculated for all the tasks. And depending upon the total score of the performance (out of 10) the incentive is given to the higher level executive. Average training man-days/Employee level wise. The average training man-days is the average number of days of training provide to the employee of a particular level. The average training man-days for the worker level is 7 days for weaving and spinning process and the average training man-days for the staff level training is 25 days.

Welfare policy
1. Free Bachelors Accommodation for New trainee 2. A/C Subsidized mess for Lunch and Dinner for worker and staff 3. Subsidized canteen facility for Breakfast and evening snacks 4. 24 Hours Dispensary and Ambulance service 5. Free transportation facility through company buses from Vapi, Valsad to company according to working shift 6. UTI ATM facility in hostel premises 7. Group personal accident policy
26

Wages and Salary structure

The wages and salary structure is as per the rule and regulation of the government of Gujarat and government of India. The company follows the minimum wages act 1936 and according to it the minimum wages paid to worker is 103.20 Rs/day. The Formal salary structure for worker and staff is given below Wages Structure of Worker Basic HRA Compensatory allowance

Salary Structure of Staff

Basic HRA Special duty allowance Medical Allowance LTA (Leave and Traveling allowance) Bonus Convenience allowance
27

Washing allowance and children & education allowance

In above mentioned salary structure of staff member the medical allowance of 500 assistant category and upto 1250Rs allowance is given to the above assistant category employees are given by the Welspun. LTA allowance is given only to senior office or above category people which is given annually. Bonus is also given annually. Convenience allowance and children and education allowance is given to senior office and above category employee by the Welspun India limited.

Activities carried out for organization development: Effective personal productivity with LMI (Leadership management International) Welspun has tied up with LMI for some of their executive to ensure enhancement in their personal productivity. The coaching process through planning guide calls upon the participants to crystallize their thinking and schedule specific action to achieve their goals and vision for the future.

The program conducted from December 06 to march 07 has helped participant identify and enhance their leadership skills, make productivity, behavioral changes, control productivity, communicate more effectively, become a team player, delegate and empower, set goals and achieve result. As a part of OD intervention the HR team organized a two day development center workshop, wherein some of participant from across the group participated. This centre was being facilitated by a team of qualified assessors. The workshop was to those identified set of competencies for the group with the competencies of each participant and identity gaps.

Administration Activities
28

1. Transport bus services management for the employees 2. Security management 3. Staff mess and canteen management 4. Extra curricular activities such as annual day function, organizing cricket match etc 5. Local liaison 6. Discipline maintenance 7. Gardening

TQM department

Welspun is an ISO 9001:2000 certified company both for terry towel as well as for cotton yarns. In addition to the above they are also certified for ISO 14001. Having received a certification clearly means that the various quality parameter, the basic GM needs for environment safety, working condition for the workers, working process in industry are well as per the rules, guidelines and as per the rule book of the various
AGM
Weaving Processing

HOD/VP

inspection and certification authorities are to be meticulously honored and maintained.

Dy. Manager Dy. Manager The onus of maintaining this quality and other system lies with the TQM Departments. Sr. Manager

Organization structure and all Activity process chart:

Officer Dy. Manager 29 Assist. Manager Officer

Officer

Source: Company, TQM Department

Types of Instrument Used

Uster Tensorapid- It is a German yarn testing machine and it is used to test the strength of yarn. Cascade This machine is used to test the combined strength of yarn TPI testing It is used to test twist per inch in the yarn

Characteristics or specification of finished goods: The specification of finished good that is terry towel depends upon the customer requirement. The Welspun total quality management department compiles those requirement and prepare a well formatted document known as checklist of particular customer based on the specification provided by the customer ,this particular checklist is
30

circulated to various department as a customer specification and product requirement detail.Two sample checklist are attached in the annexure of the project.

Length Cutting

Length Hemming

Cross Cutting

Quality testing Level Chart:

Checki ng
Pass

fail

Reject

IMS issue

Cross switching

Folding

TQM Trolley AQL

Pass

Fail

Reject

Poly-bag Packing
Pass

31

Carton Packing

TQM Trolley AQL

Fail

Reject

Warehouse

Source: Company, TQM Department

Parameter tested at Various Level Checking After Cross Cutting 1. Length alter (loose stitching) 2. Mending 3. Stain 4. Patchy 5. B grade 6. Hole 7. Stitching over terry

32

Checking after cross stitching 1. Label and bar code position 2. Label and bar code correctness 4. Cross stitching discrepancy 5. Fold checking

The customer specified checklist is provided in the annexure

Purchase and store department

Departmental Structure

Vice president

Deputy General Manager

33

Purchase manager (Indigenous)

Purchase manager (Import)

Purchase manager (Packing Material)

Assistant Officer (Packing, Repairs, General stationry )

Assistant Officer (Electrical, Electronicall y)

Assistant Officer (bill passing)

Assistant Officer (Imported)

Assistant Officer (Project)

Assistant Officer

Assistant Officer

Assistan t Officer

Purchase requisition

Quotations

Source: Company, Purchase Department

Quality control checking Procedure for the purchase of stores and inventory

Get pass preparation

Bill passing

Goods receivable note

Online transaction

Valuation

34

Physical verification

Source: Company, Purchase Department

The purchase and material department basically performs the function of purchasing goods and raw material as required by the various department of the company. The range from the yarns purchase to the purchase of accessories and packing material for various order that are running in the company to the purchase of any other product and machinery as required by the company. There are some items they are purchased as follows. Cotton Yarns Spares and consumables Packing material Fabric
35

Production planning and control (PPC)

Having studied the various departments in action, now we need to look at the most important department that plans out work for various departments called production planning and controls department. The working and interconnectivity of PPC with various other departments is very fine-tuned and other department for information and inputs. Working of the PPC department Sale order issued raised by the Export Department is analyzed by the PPC department The order is broken down into the various parts to ascertain the possible completion dates of each process and hence finally workout the final completion
36

date of the order to which a certain buffer is kept before confirming the delivery date EX India to the buyer. The various detailing done by the PPC for the sale order as follows

Work out total yarns consumption for all order for the particular month or for future months provided the projection are available with them. Order the required quantity of the yarns for the particular for the particular month or month based on the projection available with them. Prepare the loom plan for the current as well as for the future orders, based on the type of design and the loom configurations based on the details, the size, the type of weave that needs to be made. The loom plan by the PPC is worked out looking at the current load and analyzing the total time taken to complete the various assignment and priority for the design need to be worked on the loom.

Exact deadlines for the purchase of grey yarn, weaving completion date, dying date etc is given by the PPC. Based on the loom wise production plan given to the weaving preparatory department, (that contains the total ground and total pile length that needs to be woven) the weaving preparatory department makes the beams for the specified looms. The PPC also given the dying department, a weekly as well as a fortnightly dying plan both Eco soft and for Eco Block based on the production planning that ultimately effects the dispatch the final order, Each department works according to the plan given by the PPC department and reporting status is maintained by the PPC of each process. In case of the finish folding department a weekly dispatch plan is provided. Hence PPC basically works at planning out for the entire order and breaks the order up into every

37

single activity taking into account the various parameters that would affect production and arrive at a production plan for each individual orders as whole. It is the job of the PPC to follow up with each department to ensure that completion of each activity is done. This aspect is the control activity. In addition to the above, the PPC department acts as a central focal point for each and every query that either the internal department in the organization, and or the Export Marketing at HO. All the details about the production and production control are sort from the PPC department.

Dispatch Department

Departmental Structure

38

Senior manager

Assistant Manager (warehouse)

Assistant Manager (container)

Assistant Manager (container)

Senior Officer (TQM, APL)

Senior Officer

Senior Officer (document delivery)

Officer (RTF)

Officer Officer Officer

Assistant Officer (RTF) Assistant Officer Assistant Officer Assistant Officer

Source: Company, Dispatch Department

Come from finish folding department

Conveyor belt

Procedure of the dispatch department

Scan

Pillateral 39

Posting

Mode dispatch and Logistics

In a Welspun India Ltd. dispatch department has got two mode of dispatch. Which are as follows: Container Truck
40

These two main modes of dispatch are equally effective in comparison to others.

Mumbai is the head quarters of the Welspun India Ltd. So all the delivery of the inventory would be sent to Mumbai, but some times Welspun India Ltd may directly dispatch the goods to customer. So these two sources is very useful for the delivery of the inventory. In a company for setting up the stocks there are two types of setup machines which are as follows. Dispatch department dispatch the inventory around 1200 tons. Pillateral: This machines useful in putting the stock in the warehouse to a specified location. It is very easy to operate so worker can easily put the stock in any place of the warehouse. There are 5 Pillateral with the company, Forclips: It is the machines useful in carrying the inventory from one place to one another, because the warehouse of the Welspun is very big and they maintain the stock of large volume so this machines is very effective.

Marketing Department
List of Major Competitors Anuvin Inds. Ltd. Divya Enterprises Ltd. Modern Terry Towels Ltd.
41

S R Industries Ltd. Sharadha Terry Products Ltd. Sheena Textiles Ltd. Terryfab (india) Ltd. Terrygold (india) Ltd. Towels India Exports Ltd. Vanasthali Textile Industries Ltd.

Brands available 1. Classic Bath towel 2. Embassy bath towel 3. Premium towels 4. Printed premium towel 5. Luxury bath towel Distribution channel Customer

Welspun

Selling agent

Value chain

42

Source: Web, India infoline presentation

Target Market Share

Source: Web, India infoline presentation

Account and finance department Finance Department

Departmental Structure

Vice president of account department

Assistant general manager (A.G.M.)

43

Officer (2) Senior Senior manager Officer

Assistant Manager (3)

Deputy Manager Manager

Deputy Manager Manager

Source : Company, Finance Department

WORKING MANAGEMENT

CAPITAL

Particulars Current assets Inventories Sundry debtors Cash and bank balances Loan and advances Total Current liabilities Liabilities

2004

2005

2006

607 335.27 470.8 1109.44 2522.51

1298.78 348.45 799.04 732.55 3178.82

1951.28 417.28 810.06 1017.04 4195.66

413.61

1386.38

819.11

44

Provisions Total Net working capital

22.25 435.86 2086.65

86.51 1472.89 1705.93

124.42 943.53 3252.13

net working capital 4000 3000 2000 1000 0 2004 2005 net working capital

Sale order (Export)

2006

years Working capital (EPC loan, PCPC loan)

Raw material purchase

procedure:
Production

Actual sale

Foreign bill purchase

Actual realization 45

Limit enrollment (FBP)

Source- Company Finance Department

Working capital ratios

Raw Material Inventory Raw Material Conversion Period (RMCP) = --------------------------------- X 365 Raw Material Consumed

2005.6 974.89 = ------------ X 365 2096.44 = 170 days =

46

2004-05 739.08 = ------------ X 365 1663.47 162 days

Work In Progress Inventory Work in progress Conversion Period (WIPCP) = ------------------------------------ X 365 Cost of Production 2005.6 779.47 = --------------- X 365 3805.43 = 2004-05 382.09 -------------- X 365 2731.65

75 days

51 days

Finished Goods Inventory Finished Goods Conversion Period (FGCP) = ---------------------------------- X 365 Cost of Production

2005.6 196.92 = ------------- X 365 3786.12 = 19 days = =

2004-05 177.61 -------------- X 365 2707.79 24 days

Inventory Conversion Period (ICP) = RMCM + WIPCP + FGCP 2005-06 2004-05 47

ICP = 170 + 75 + 19 = 264 days

ICP = 162 + 51 + 24 = 237 days

Debtors Debtor Conversion Period (DCP) = ----------------- X 365 Credit Sales 2005-06 417.28 = ------------- X 365 6537.34 = 23 days = = 2004-05 348.45 -------------- X 365 4763.10 27 days

Creditors Creditors Deferral Period (CDP) = --------------------- X 365 Credit Purchase

2005.6 746.98 = -------------- X 365 2268.13 = 120 days =

2004-05 1206.03 = -------------- X 365 1988.30 221 days

Gross Operating Cycle (GOC) = Inventory Conversion Period + Debtor Conversion Period 48

2005.6 = 264 + 23 = 287 days

2004-05 = 237 + 27 = 264 days

Net Operating Cycle (NOC) = Gross Operating Cycle (GOC) Creditors Deferral Period (CDP)

2005.6 = 287 120 = 167 days = =

2004-05 264 221 43 days

Interpretation
The Gross Operating Cycle in the year 2005-06 has increased as compared to last days in the year 2004-05. This is mainly due to increase in Inventory Conversion Period and Work-In-Process Conversion Period. The Net Operating Cycle in the year 2005-06 has increased as compared to year 2004-05. This is mainly due to the increase in the Creditors Deferral Period and due to increase in Sundry Creditors.

Tax structure

Taxes

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Indirect taxes

Direct taxes

VAT (4 % )

CST(3 % )

Excise tax (8 & 16%)

Service tax (12% )

Income tax (30+3+0.99 %)

Source-Company Finance Department

Incentives given by the government Welspun India Ltd co. is the manufacturer terry towels and yarn so government gives a grant to company on the basis of TUF scheme. Its full name is technology up gradation fund. Under these Scheme Company has to pay only 5% interest, while for the term loan they have to pay 9% interest per year. This is the only benefits company gets from the government. Financial MIS Welspun India Ltd. co. is has a SAP system so for the finance department there is an also module of finance in SAP system. Accounting method They use double entry method for accounting and on accrued basis.

Source of Finance a. Banking Institution

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b. Equity,Debenture,Preference shares c. Privative and preferential allotment

Types of Meeting

AGM (Annual General Meeting) Once in year. Last time held on 28th sep 2005 EGM (Extraordinary General Meeting) Not Fixed, Last time held on 20th March 2005 BOD(Board of Directors Meeting) At least Once a year, Last time held on 5th May 2005

The foreign exchange rate analysis which involves Rupee appreciation risk associated to the organization. The study involves analysis of exchange rate risk and its impact on organization. (Welspun India Limited)

The magnitude of the problem is a corporate wide because the following risk mentioned above affect all the department of the organization, as all the department are interrelated in the organization and dependent on each other. The risk mentioned above affected the profitability and the operation of the organization.

Area being studied is the foreign exchange rate analysis & its impact on the profitability of the organization.
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Background of study

The impact of above mentioned concern of organization has huge impact on the profitability of the organization. The major reason for conducting the study is to find out factor which decreases the profit percentage of sale in year 2005-2006. Due to above mentioned fact, the study of these factors become important for the organization.

Importance of Study

The study carried out on the above mentioned risk concerned to the organization will be helpful to the organization in analyzing the future condition of the organization if the following trend remains to continue of rupee appreciation or fluctuation in the floating interest rate of debt or borrowing.

The study conducted display the affect of rupee appreciation to the profitability of the organization. Thus study will help organization to decide on future option of operation keeping the impact of risk analysis on the organization.

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Overview of the project

Objective:

One of the fundamental principles of management is setting up of objective and then tying to achieve it by meticulously following certain set of principle.

Objective is the most important part of any research project. All the activities of the project revolve around its objective.

Objective of foreign exchange management is Risk analysis, financial planning and forecasting of forex rate.

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Rupee Appreciation risk objective -: To analyze the fluctuation in the foreign currency viz that of India rupee To find out profit percentage of annual sales To analyze the effect of change in ex-change rate on sales revenue

Research Methodology

A research design is purely and simply true framework or plan for a study that guides true collection and analysis of data. It is blue print that is followed in completing a study. Problem Definition: To analyze the adverse effect of Rupee appreciation on the profitability of the organization. Methods of data collection & Sources: Both primary and secondary source of data is used for collecting data for the project. As primary sources data, the annual reports and the various SAP report of the organization is used. As secondary source data, the report of Welspun India Limited by various government and non-government institution is used.

Time required for the research project: 15days Mainly two type of research designs are used for the project which are mentioned below: 1. Exploratory Research Design: In Exploratory Research Design, as literature survey, the annual report of 2004-2005-2006 is used and various SAP generated
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sales reports are used. As Experience survey, the required information are gathered from the experience professional of finance and costing department of the organization. 2. Descriptive Research Design: In Descriptive Research Design, as statistical the trend method is used.

Data Analysis and Interpretation

Annual Production, Sale and Inventory holding table Sales in Million Annual Inventory Production Tones holding MT+(PCs+Mtrs000) MT+(PCs+Mtrs000) MT+(PCs+Mtrs000) 2002 7962 7198 764 2003 8622 8409 213 2004 11352 10827 525 2005 30661 20428 10233 2006 43179 29497.04 13681.96 Source: Company, Annual reports Year

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Analysis of Annual Production-: Annual Production graph show the consistent growth in the production at Welspun India Limited. The growth in the production in year 2002, 2003 were slow but with the introduction of new Anjar plant in year 2004 and at fully operation capacity in year 2005 the growth in the production have increased tremendously.

Analysis of Sale trend: The Sale trend graph clearly depicts the continuous growth in the sales volume which is the sign of increase continuous increase in the demand of the product in the market.

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Interpretation of Annual Inventory Store: The graph displays the annual Inventory hold by the company after the sale of the product. It is clearly seen in the graph over the year the annual Inventory holding of company has increased gradually. With the heavy finished inventory holding company incurs cost, but reason for holding heavy finished inventory might be the wish of management to run the production plant at its full capacity and to have the benefit of volume.

Annual Sales Revenue & Profit table Sales in Rupee (Million) 2599.60 3010.30 3293.17 4455.93 6114.19 Profit in Rupees (Million) 152.50 271.10 300.29 385.80 415.49

Year 2002 2003 2004 2005 2006

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Analysis of Annual Sales revenue and Profit -: With the increase in the sales volume there is an increase in the sales revenue which is clearly depicted in the sales revenue trend graph. Similarly over the year the profit of the company has increased with the increase in sale volume.

Annual Profit % of Sales table Year 2002 2003 2004 2005 2006 Profit % of Sales 5.866287 9.005747 9.11857 8.658125 6.795504

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Interpretation of Profit % of Sales Trend-: The profit % of Sale clearly depicts the fact that there has been decrease in the profit with respect to the sale volume and sale revenue generated by the company. There can be many reasons for the problem out of them some are mentioned below: 1) Rupee Appreciation 2) Low efficiency of Plant 3) Low market demand 4) Low supply to the market

From above mentioned probable cause of decrease in the profit percentage of sale, it assumed that the plant run at the good efficiency. The market demand and supply growth are clearly mentioned in the production and supply graph above thus theres no problem regarding market demand and supply of the product.

Thus Rupee appreciation can one of the major cause of decrease in the profitability of the company which would be analyzed in the proceeding sections of the report. Here comes the major role of foreign exchange management which
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is to analyse the rupee appreciation and adopting defensive strategies for reducing risk arising from fluctuation in forex rate.

Introduction to Foreign Exchange Markets

The guiding principle for international financial management, like domestic financial management, is the shareholder wealth maximization. International financial management, however, differs from domestic financial management, as it has to deal with multiple currencies, interest rates, inflation rates and foreign exchange and political risks. There are a number of ways in which an international company can finance its
60

foreign operations. It should strive to reduce its risk and minimize cost. It should take advantages of government subsidies and tax asymmetries.

Foreign Exchange Rate is the price of one currency in terms of the other currency. Spot Rate is the current exchange rate, and is used for immediate delivery of currency (which is two business days). Forward Rate is the price determined today for delivery in the future. Forward premium or discount for direct quote:

Each nation has its own official currency, which is normally issued by the central bank of each country. The official currency is used for denominating trade transactions that happen within each country's domestic geographical area. In the global village of today, however, firms operating in different countries trade with each other. When goods are traded across boundaries, the selling firm would like to receive consideration in a currency that it can put to use and the buying firm would like to pay in a currency that it receives when it sells goods that it manufactures. Further, firms as well as governments borrow both domestically as well as internationally. When they trade or borrow internationally multiple currencies come into play and there has to be a market which enables participants to buy and sell currencies in such a way that they can convert the inflow or outflow into the currency of their choice.

The market that facilitates such exchange of currencies is the Foreign Exchange Market. The world is emerging as a global economy because of flow of goods, services and capital. For each transaction of goods and services there is a corresponding currency transaction, which forms a part of international network of payments. The foreign exchange market is that in which currencies are bought and sold against each other. The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in
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value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.

Foreign Exchange brief history

The Breton Woods Agreement was initiated in 1944 in an effort to keep cash from draining out of war-ravaged Europe. Currency values were pegged to the U.S. Dollar, which was then pegged to the price of gold. The modern era of foreign exchange first emerged in 1971 with the collapse of the Breton Woods Agreement. The U.S. Dollar was no longer convertible into gold, signalling an increase in currency market volatility and trading opportunities. The collapse in 1973 of the subsequent Smithsonian and European Joint Float agreements signalled the true beginning of the free-floating currency exchange system that drives the markets today. Starting in the 1980's, computer technology extended the reach of the exchange marketplace. Today, the values of the major world currencies are independent of each other, with intervention available to the states only through the central banking system.

The forex capital management Advantages:

24 hour trading through secure web based FX Trading Station with the stability and strength to handle thousands of transactions in real time. Real time account information to help manage profit and loss, buy/sell orders and margin position. Integrated automatic margin call feature that helps minimize risk. Firm pricing streamed in real time, regardless of order size.
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Order transaction and confirmation in just seconds. Customized analysis software. Custom designed management accounts to fit a specific portfolio's needs. 24-hour customer support for online trading. Commitment to the highest quality of service for all investors. Partnership with FX, with operations in 14 countries and US$4 billion in customer equity. Constant liquidity making entering and exiting positions easy, regardless of transaction size. Volumes of real time data and reports to assist in making the right decisions. State-of-the-art back office systems. Performance Ranking Reports on Forex Trading Advisors Experience with a broad range of clients, including financial institutions, corporations, fund managers and individual investors.

Types of risk in foreign exchange

One can broadly classify, particularly from a corporate point of view, the foreign exchange risks into three categories. Transaction Risk This risk arises from the movement of exchange rate between the date of transaction to the date of the cash outflow or inflow. By way of example, in case of an import transaction, if the

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transaction is denominated in a foreign currency and the foreign currency appreciates, the amount payable by the exporter in its domestic currency would go up. Translation Risk A corporate may have investments in subsidiaries abroad or may open branches for doing business abroad. When the financial results of the subsidiary or branch are consolidated in the preparation of financial statements of the parent entity, the consolidated results are subject to a translation risk due to a change in the exchange rates between the date of those investments and the date of consolidation. Economic Exposures Economic exposure is the risk, which emanates from the impact of exchange rate changes on the core business model itself. This type of exposure may arise even when the local currency's parity with other major currencies has not changed. In the context of banks, Foreign exchange risk can arise for a variety of reasons. Banks could have FX exposure arising from its income earning activities, its costs, its assets and its liabilities. Assets in the form of foreign currency loans given to customers as well as investments denominated in some foreign currency give rise to this risk.

Analyzing Rupee Appreciation

months jan feb mar apr may

2004 45.4 45.2 45.1 44.6 43.95

2005 43.65 43.55 43.6 43.7 43.55

2006 45 44.09 44.3

2007

44.8245 45.2226

44.2117 44.012 43.7936 42.0176 40.0596

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jun jul aug sep oct nov dec

45.1 45.5 46.1 46.15 45.75 45.45 44.9

43.35 43.45 43.35 43.55 43.8 44.95 45.6

45.8886 46.3675 46.4461 46.0281 45.3582 44.7209 44.4781

40.5905

Profitability Analysis
YEAR 2005
TRANSACTION change in exchange rates profit due change in forex rates.

% change in forex rate 0.781078

0.355

36189.3 4

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2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

2.18 0.75475 -1.5283 -0.68 1.24678 2.55001 2.24 -0.06881 1.99426 -0.09 2.487 0.39416 3.475 0.30514 0.35845 3.1394 0.075 0.085 0.22493 0.20493 0.495 0.325 0.325 0.145 0.10328 0.75351 1.055 0.785 0.785 0.868 0.41 1.565 3.57001 0.32915

168476. 7 74357.0 6 -105970 -25753.1 106294. 5 81277.9 134185 -3831.17 188176. 1 -6309.28 612499. 2 22724.8 5 243608. 5 32.39 6529.53 831001. 7 2264.92 4064.45 1117.69 1222.25 9061.83 11433.2 21789.0 3 13642.4 2 14335.8 8 41953.5 2 68073.2 55945.7 6 58839.5 8 19117.5 3 5314.39 228031. 3 108080. 8 4513.2

4.744287 1.652979 -3.4152 -1.52535 2.774939 5.843286 5.112988 -0.15858 4.597188 -0.20742 5.740997 0.90946 8.017997 0.70325 0.826302 7.29584 0.172851 0.195943 0.519469 0.473061 1.15036 0.752315 0.752315 0.334255 0.238082 1.738943 2.451778 1.812933 1.812933 2.01019 0.944265 3.636997 8.248637 0.764931

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36 37 38 39 40 41 Total profit/loss

0.55999 -0.08 0.85 0.84831 1.3 1.29

20353.2 4 -5186.66 14909 14858.1 5 43943.4 8 9412.92 3393246 7

1.297174 -0.18387 1.957172 1.953281 3.010653 2.986803

currency trend 2005

exchange rate($) 46 45 44 43 42 jan feb mar apr may jun jul aug sep oct nov dec months

profit due change in forex rates.

1000000 500000 0 -500000

0.78

3.64

0.91

0.47

0.33

1.81

%forex rate changes

YEAR 2006
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2.99

-1.5

-0.2

-0.2

7.3

TRANSACTI ON

Change in exchange rate.

Profit due to fluctuation in forex rate

% change in forex rate 0.616828194

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

0.28004 0.90066 1.60009 1.56 2.455 2.1725 2.455 2.455 1.9675 2.1875 -1.74643 -0.105 1.555 1.17127 1.23252 1.3625 0.475 0.775 0.13638 0.0575 0.44766 -0.01509

2894.47 598.76 2.011300137 153394.6 3.61275683 120949.9 3.522239783 263556.5 5.573212259 94275.51 4.900468054 400029.5 5.573212259 246277.1 5.573212259 193817.1 4.419113931 189044.9 4.937644602 -28701.5 -3.72690995 -23221.3 -0.22522523 128579.8 3.458629893 225990.7 2.62131707 203260.4 2.74855327 184570.3 3.047246296 68261.35 1.048102383 11969.1 1.72145713 7409.12 0.298694967 6238.93 0.125717409 1304.73 0.999408383 -1304.42 -0.03365111

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23 24 25 26 27 28 29 30

-0.8425 0.5025 -1.0975 2.46 -2.34 -2.46 -1.8225 -2.34

-249131 -1.82883812 32816.41 1.139003797 -131874 -2.40061246 96013.21 5.578863817 -106103 -5.03930225 -98602.6 -5.2840726 -68577 -3.96907497 -77243.5 -5.03930225

Total profit/los s

1,867,461

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currency trend 2006

exchange rate($) 47 46 45 44 43 42 jan feb m ar apr m ay jun jul aug sep oct nov dec months

500000 400000 300000 200000 100000 0 -100000 -200000 -300000

profit due to change in forex rates

-0

-3.7

5.57

3.05

0.13

70

5.58

0.62

3.61

5.57

4.42

0.57

2.62

1.72

1.14

-5.3

-5

Interpretation
The above table shows the effect of currency fluctuation on the export of the company. The foreign currency transactions are recognized at the rate existing on the date of transaction. The net gain/loss arising from the difference between the accounted value and actual payment is recognized as revenue item. In the above analysis last four years data shows the company has made profit through out the year because of fluctuation. Following tables shows the profit made by the company.

YEAR 2004 2005 2006 (forecasted) 2007

PROFIT (RS.) 133,94,220 33,93,247 18,67,461 24,14,864

15000000 10000000 5000000 0 2007(forec asted) 2004 2006 2005

profit

year

In year 2004 there is a huge profit in compare to other years because from currency fluctuation graph of 2004 you can see that the max payment received during the month june to November. So, welspun has taken maximum benefit of currency fluctuation in this particular year. In year 2006 max loss is there due to the rupee fall down at the time of payment received. May be their prediction was wrong .so net profit was reduced.

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The company has more than 85 % of export of product which make company more expose to the currency transaction risk. The rupee appreciation against dollar has major impact on earning of the company because company transact only in U.S dollar for their export product. The below Trend Table is based on the assumption that the same trend of sales and rate fluctuation will follow as that of previous year. Thereby using the trend analysis the profit due to fluctuation in exchange rate is as below. Profit due to change in forex rate for year 2007 41098.52 90373.48 149887.9 147713.5 221421.1 196114.7 233144.9 209047.3 170378.7 186159.9 -87669.9 17422.69 45733.85 142598 116997.3

transactions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

% change forex rate 0.01545 -0.08101 2.919717 2.227975 5.041095 1.629415 7.447758 5.050241 3.906418 3.797686 -1.0345 -0.71521 0.162253 2.410168 4.396755

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16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Total profit due forex rate fluctuation

113614.2 116871.6 51495.64 71059.22 31209.78 27133.97 54549.42 26362.31 -26103.3 73044.37 -15713.2 186125.8 -68822.5 -70499.8 -35885 24,14,864

4.193773 3.9947 1.440056 0.154559 -0.05092 -0.11082 -0.25318 -0.40527 -6.34009 -0.13618 -5.13179 1.54489 -5.0488 -4.95279 -4.04998

Results and Findings

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From the study conduct on the financial credentials of the company following results have come up. 1) Percentage decrease in the profitability of the organization in the year 2005-2006. 2) Positive chances of the rupee appreciation for next months to come if the government monetary or fiscal policy remains unchanged. 3) The change in forex rate has the great impact as company carry out its transaction in foreign currency, the appreciation in rupee affect the profitability of company. Thus, company is highly exposed to the rupee appreciation risk and which affects its profitability.

Conclusion
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The above conducted study concludes that Welspun India limited is heavily exposed to the rupee appreciation, which in the adverse case might affect the companys profitability. The main reason of company being exposed to such risk is relying on the foreign market and consumer for the product produced, which include lots of foreign currency transaction and dependence on the foreign market condition.

Recommendation & Suggestion

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Welspun India limited exports more that 95% of the their product to the foreign countries like U.S.A, Europe, Australia, china etc where companys transaction takes place only in U.S Dollar. With Rupee appreciating against U.S dollar due growth in the Indian economy or due to decline in the U.S economy, the company might lose its profitability. To overcome this problem completely is difficult but company can go for any of the following methods to reduced the risk exposure. 1) Company can perform transaction with the customer who are from country other than U.S in their currency if the currency show less volatility compare to the U.S dollar e.g. With European country customer company can perform transaction in EURO which also a stronger currency. 2) Company can also perform transaction with the customer in the Indian rupee with the fixed rate in the Indian currency. 3) Company can also adopt the means of forward or future contract to enjoy consistent profit from the stronger currency. 4) Company can also use Swap option available to reduced risk associated in the foreign transaction.

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Bibliography

Books References-: Financial Management By Prasana Chandra Statistics for Management By Rubin Financial Management I.M Pandey

Literature Reviews Welspun Annual Reports Induction Manual Employee General Policy

Web based Reviews Google search engines www.welspun.com

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