1

Project on

DIVERSIFICATION STRATEGIES - A STUDY OF TEXTILE INDUSTRY In the Subject Strategic Management Submitted to University Of Mumbai For Semester II of Master Of Commerce By Shruti Vikram Management !""# Under the $uidance of Prof %eetendra &ear '(!') '(!*

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C/0P1-2 +O3 1 2 3 4 & * , 8 Introduction

1I14Review of Literature Need & Objectives of Study Te ti!e Industry & "rofi!e of #o$%anies Researc' (et'odo!o)y Resu!ts & +iscussions Su$$ary & #onc!usions -ib!io)ra%'y

P0$- +O3 3 8 11 12 22 2& 44 48

3 C/0P1-2 ! I+12O,UC1IO+

+iversification is a for$ of )rowt' $ar.etin) strate)y for a co$%any/ It see.s to increase %rofitabi!ity t'rou)' )reater sa!es vo!u$e obtained fro$ new %roducts and new $ar.ets/ +iversification can occur eit'er at t'e business unit or at t'e cor%orate !eve!/ 0t t'e business unit !eve!1 it is $ost !i.e!y to e %and into a new se)$ent of an industry in w'ic' t'e business is a!ready in/ 0t t'e cor%orate !eve!1 it is )enera!!y enterin) a %ro$isin) business outside of t'e sco%e of t'e e istin) business unit/ +iversification is %art of t'e four $ain $ar.etin) strate)ies defined by t'e "roduct2(ar.et 0nsoff $atri 34ot!er and 4e!!er1 255*67

0nsoff %ointed out t'at a diversification strate)y stands a%art fro$ t'e ot'er t'ree strate)ies/ T'e first t'ree strate)ies are usua!!y %ursued wit' t'e sa$e tec'nica!1 financia!1 and $erc'andisin) resources used for t'e ori)ina! %roduct !ine1 w'ereas diversification usua!!y re8uires a co$%any to ac8uire new s.i!!s1 new tec'ni8ues and new faci!ities/ T'erefore1 diversification is $eant to be t'e ris.iest of t'e four strate)ies to %ursue for a fir$/

4 T'e %ur%ose of diversification is to a!!ow t'e co$%any to enter !ines of business t'at are different fro$ current o%erations/ 9'en t'e new venture is strate)ica!!y re!ated to t'e e istin) !ines of business1 it is ca!!ed concentric 3re!ated6 diversification/ #on)!o$erate diversification occurs w'en t'ere is no co$$on t'read of strate)ic fit or re!ations'i% between t'e new and o!d !ines of business: t'e new and o!d businesses are unre!ated/ 0ccordin) to t'e definition )iven by Steiner and ;eor)e 31<*<6 is fo!!owed accordin) to w'ic'1 diversification is %roducin) a new %roduct or service1 or enterin) new $ar.ets1 w'ic' invo!ve i$%ortant!y different s.i!!s1 %rocesses1 and .now!ed)e fro$ t'ose associated wit' t'e %resent %roducts1 services1 or $ar.ets/ !3! ,IV-2SIFIC01IO+ I+ 1/- CO+1-.1 OF $2O51/ S1201-$I-S +iversification is a for$ of )rowt' strate)y/ ;rowt' strate)ies invo!ve a si)nificant increase in %erfor$ance objectives 3usua!!y sa!es or $ar.et s'are6 beyond %ast !eve!s of %erfor$ance/ (any or)ani=ations %ursue one or $ore ty%es of )rowt' strate)ies/ One of t'e %ri$ary reasons is t'e view 'e!d by $any investors and e ecutives t'at >bi))er is better/> ;rowt' in sa!es is often used as a $easure of %erfor$ance/ ?ven if %rofits re$ain stab!e or dec!ine1 an increase in sa!es satisfies $any %eo%!e/ T'e assu$%tion is often $ade t'at if sa!es increase1 %rofits wi!! eventua!!y fo!!ow/ !3' V02IOUS 1&P-S OF ,IV-2SIFIC01IO+ 02-6 !3'3! Concentric ,iversification6 #oncentric diversification occurs w'en a fir$ adds re!ated %roducts or $ar.ets/ T'e )oa! of suc' diversification is to ac'ieve strate)ic fit/ Strate)ic fit a!!ows an or)ani=ation to ac'ieve syner)y/ In essence1 syner)y is t'e abi!ity of two or $ore %arts of an or)ani=ation to ac'ieve )reater tota! effectiveness to)et'er t'an wou!d be

& e %erienced if t'e efforts of t'e inde%endent %arts were su$$ed/ Syner)y $ay be ac'ieved by co$binin) fir$s wit' co$%!e$entary $ar.etin)1 financia!1 o%eratin)1 or $ana)e$ent efforts/ @inancia! syner)y $ay be obtained by co$binin) a fir$ wit' stron) financia! resources but !i$ited )rowt' o%%ortunities wit' a co$%any 'avin) )reat $ar.et %otentia! but wea. financia! resources/ @or e a$%!e1 debtAridden co$%anies $ay see. to ac8uire fir$s t'at are re!ative!y debtAfree to increase t'e !evera)ed fir$Bs borrowin) ca%acity/ Si$i!ar!y1 fir$s so$eti$es atte$%t to stabi!i=e earnin)s by diversifyin) into businesses wit' different seasona! or cyc!ica! sa!es %atterns/ Strate)ic fit in o%erations cou!d resu!t in syner)y by t'e co$bination of o%eratin) units to i$%rove overa!! efficiency/ #o$binin) two units so t'at du%!icate e8ui%$ent or researc' and deve!o%$ent are e!i$inated wou!d i$%rove overa!! efficiency/ Cuantity discounts t'rou)' co$bined orderin) wou!d be anot'er %ossib!e way to ac'ieve o%eratin) syner)y/ Det anot'er way to i$%rove efficiency is to diversify into an area t'at can use byA%roducts fro$ e istin) o%erations/ (ana)e$ent syner)y can be ac'ieved w'en $ana)e$ent e %erience and e %ertise is a%%!ied to different situations/ "er'a%s a $ana)erBs e %erience in wor.in) wit' unions in one co$%any cou!d be a%%!ied to !abour $ana)e$ent %rob!e$s in anot'er co$%any/ #aution $ust be e ercised1 'owever1 in assu$in) t'at $ana)e$ent e %erience is universa!!y transferab!e/ Situations t'at a%%ear si$i!ar $ay re8uire si)nificant!y different $ana)e$ent strate)ies/ "ersona!ity c!as'es and ot'er situationa! differences $ay $a.e $ana)e$ent syner)y difficu!t to ac'ieve/ 0!t'ou)' $ana)eria! s.i!!s and e %erience can be transferred1 individua! $ana)ers $ay not be ab!e to $a.e t'e transfer effective!y/

!3'3' Cong7omerate ,iversification6 #on)!o$erate diversification occurs w'en a fir$ diversifies into areas t'at are unre!ated to its current !ine of business/ Syner)y $ay resu!t t'rou)' t'e a%%!ication of $ana)e$ent e %ertise or financia! resources1 but t'e %ri$ary %ur%ose of con)!o$erate diversification is i$%roved %rofitabi!ity of t'e ac8uirin) fir$/ Litt!e1 if any1 concern is )iven to ac'ievin) $ar.etin) or %roduction syner)y wit' con)!o$erate diversification/ One of t'e $ost co$$on reasons for %ursuin) a con)!o$erate )rowt' strate)y is t'at o%%ortunities in a fir$Bs current !ine of business are !i$ited/ @indin) an attractive invest$ent o%%ortunity re8uires t'e fir$ to consider a!ternatives in ot'er ty%es of business/ @ir$s $ay a!so %ursue a con)!o$erate diversification strate)y as a $eans of increasin) t'e fir$Bs )rowt' rate/ 0s discussed ear!ier1 )rowt' in sa!es $ay $a.e t'e co$%any $ore attractive to investors/ ;rowt' $ay a!so increase t'e %ower and %resti)e of t'e fir$Bs e ecutives/ #on)!o$erate )rowt' $ay be effective if t'e new area 'as )rowt' o%%ortunities )reater t'an t'ose avai!ab!e in t'e e istin) !ine of business/ "robab!y t'e bi))est disadvanta)e of a con)!o$erate diversification strate)y is t'e increase in ad$inistrative %rob!e$s associated wit' o%eratin) unre!ated businesses/ (ana)ers fro$ different divisions $ay 'ave different bac.)rounds and $ay be unab!e to wor. to)et'er effective!y/ #o$%etition between strate)ic business units for resources $ay entai! s'iftin) resources away fro$ one division to anot'er/ Suc' a $ove $ay create riva!ry and ad$inistrative %rob!e$s between t'e units/

, #aution $ust a!so be e ercised in enterin) businesses wit' see$in)!y %ro$isin) o%%ortunities1 es%ecia!!y if t'e $ana)e$ent tea$ !ac.s e %erience or s.i!! in t'e new !ine of business/ 9it'out so$e .now!ed)e of t'e new industry1 a fir$ $ay be unab!e to accurate!y eva!uate t'e industryBs %otentia!/ ?ven if t'e new business is initia!!y successfu!1 %rob!e$s wi!! eventua!!y occur/ ? ecutives fro$ t'e con)!o$erate wi!! 'ave to beco$e invo!ved in t'e o%erations of t'e new enter%rise at so$e %oint/ 9it'out ade8uate e %erience or s.i!!s 3(ana)e$ent Syner)y6 t'e new business $ay beco$e a %oor %erfor$er/ 9it'out so$e for$ of strate)ic fit1 t'e co$bined %erfor$ance of t'e individua! units wi!! %robab!y not e ceed t'e %erfor$ance of t'e units o%eratin) inde%endent!y/ In fact1 co$bined %erfor$ance $ay deteriorate because of contro!s %!aced on t'e individua! units by t'e %arent con)!o$erate/ +ecisionA$a.in) $ay beco$e s!ower due to !on)er review %eriods and co$%!icated re%ortin) syste$s/

C/0P1-2 ' 2-VI-5 OF 4I1-201U2-

0 !ar)e nu$ber of studies 'ave been conducted on t'e to%ics re!ated to fir$Es %erfor$ance and diversification strate)ies of different co$%anies/ In t'is c'a%ter an atte$%t 'as been $ade to %resent in brief1 a review of !iterature avai!ab!e on t'e studies done so far/ T'e review of %ast studies 'as been %resented in order to %rovide a )!i$%se of wor. done in t'is area/

1/ (c+ou)a!! and Round 31<846 e a$ined cor%orate $otives for diversification and co$%ares t'e %erfor$ance of diversifyin) and nonA diversifyin) 0ustra!ian industria! fir$s/ No si)nificant difference a%%eared in t'e %rofitabi!ity of t'e two )rou%s of co$%anies1 and !itt!e difference e isted in t'e ris. faced by t'e two )rou%s/ "rofitabi!ity1 'owever1 a%%eared to be re!ated to t'e e tent of diversification/ 2/ ;erin)er et al 31<8<6 e a$ined %otentia! e %!anations for %erfor$ance differences a$on) $u!tinationa! enter%rises 3(N?s6/ T'e sa$%!e inc!uded t'e 155 !ar)est (N?s fro$ t'e F/S/ and ?uro%e/ +iversification strate)y was si)nificant!y re!ated to (N? %erfor$ance1 e tendin) Ru$e!tBs se$ina! researc' to internationa! business/ +e)ree of internationa!i=ation was a!so si)nificant!y re!ated to (N? %erfor$ance/ 3/ Ga!! 31<<&6 study addressed severa! 8uestions7 9'at is t'e effect of a fir$Es %revious %erfor$ance on its future diversificationH +oes diversification deter$ine %erfor$ance or does %erfor$ance deter$ine diversificationH Resu!ts su))ested t'at1 re)ard!ess of strate)ic ty%e1 'i)' !eve!s of %rofitabi!ity $ay be necessary1 but not sufficient re8uire$ents for diversification/ Li.ewise1 it was found t'at in certain situations1 su%erior %erfor$ance $ay serve as a substitute for diversification/

< 4/ -oswort' et al 31<<,6 e a$ined t'e re!ations'i% between diversification and fir$ %erfor$ance/ T'ey too. a sa$%!e of !ar)e 0ustra!ian fir$s coverin) t'e %eriod 1<8<A1<<4/ T'e resu!t indicated t'at diversification 'as ne)ative i$%act on fir$ %erfor$ance and contro!!in) for fir$ si=e/ &/ -ruc'e 325556 surveyd t'e discussion of !ast decades on cor%orate strate)y and 'ori=onta! diversification a$on) strate)y researc'ers and consu!tants/ In t'e %rocess of restructurin) and %rivatisin) t'e State Owned ?nter%rises1 #'ina faced t'e c'oice of a%%ro%riate cor%orate $ode!s in ter$s of diversity and )overnance/ T'e %a%er was $eant as a basis for discussion of t'ese issues1 and for a nu$ber of %ro%ositions on t'e %articu!ar considerations of diversification strate)ies in e$er)in) econo$ies 3!i.e $ain!and #'ina6 w'ic' are not necessari!y t'e sa$e as in deve!o%ed econo$ies/ */ ?!an)o and (a 325536 focussed on re!ations'i% between diversification and financia! %erfor$ance of t'e insurance industry usin) cross section and ti$eA series data for t'e years 1<<2 to 2555/ T'e findin)s indicated a FAs'a%ed re!ations'i% between t'e e tent of %roduct diversification and ris.Aadjusted returns/ ,/ Sin)' et al 325546 focussed on e %!ainin) t'e diversification discount/ Gowever1 t'ere is !itt!e direct evidence re)ardin) t'e re!ation a$on) owners'i% structure1 cor%orate )overnance and cor%orate diversification/ T'e resu!ts in t'is %a%er su))ested t'at a)ency issues do not account for fir$s ado%tin) a %articu!ar diversification strate)y/ 0!so1 t'e %erfor$ance conse8uences of t'e s'ift in t'e diversification strate)y and t'e subse8uent c'an)es in institutiona! and b!oc. owners'i% structures are not re!ated to a)ency issues/ In fact1 investors see$ not to avoid diversified fir$s %er se/ T'ey su))ested t'at

15 observed board and owners'i% differences between diversified and focused fir$s are due to t'eir bein) at different sta)es of cor%orate evo!ution/ 8/ #o!%an and Gi.ino 3255&6 found t'at t'e nature and $a)nitude of ca%abi!ities 'ad decisive i$%acts on t'e direction of diversification/ T'eir %ane! data ana!ysis s'owed t'at different diversification %at's actua!!y yie!ded contrastin) %erfor$ances/ T'e outco$es a!so su))ested t'at t'e effectiveness of s%ecific diversification sc'e$es was contin)ent on $acroecono$ic environ$ents/ F!ti$ate!y1 'owever1 on!y t'e co$$it$ent to tec'no!o)y1 not $ar.etin) or finance ensured !on)Ater$ %rofitabi!ity/

T'e above review of !iterature indicates $any of t'e studies re!ated to %rofit %erfor$ance and its re!ations'i% wit' different diversification strate)ies/ Te ti!e industry bein) t'e second !ar)est e$%!oy$ent )enerator after a)ricu!ture in India and needs researc'ersE attention for )rowt' in t'is sector/ F% ti!! now no study re)ardin) t'e %rofitabi!ity of te ti!e sector is done1 t'is study can be 'e!%fu! in decidin) t'e strate)ies to be fo!!owed by $ana)e$ent for %rofit )eneration/ In t'is study an atte$%t 'as been $ade to study t'e re!ations'i% between diversification strate)y and financia! %erfor$ance of so$e te ti!e co$%anies/

C/0P1-2 * +--, 8 OB%-C1IV-S OF S1U,&

11 *3! +--, FO2 1/- S1U,&6 +iversification is one of t'e $ost strate)ic decisions t'at $ana)e$ent ta.e/ Invo!vin) si)nificant ca%ita! outf!ows and entry into new %roducts and $ar.ets1 diversification 'ave far Ireac'in) i$%!ications for t'e or)ani=ationEs structure1 syste$s1 %rocesses1 and %erfor$ance/ 0!t'ou)' not easy to deter$ine to% $ana)ers need to ta.e infor$ed view of t'e !i.e!y i$%act of a diversification decision on !on) ter$ financia! %erfor$ance/ T'is researc' wi!! 'e!% in e a$inin) w'et'er co$%anies c!assified on t'e basis of t'eir diversification strate)ies differ in t'eir !on) ter$ %erfor$ance/ +iversification strate)ies 'ave been e a$ined to see w'et'er any strate)y 'as %roduced consistent!y )ood or %oor financia! %erfor$ance/ *3' OB%-C1IV-S OF 1/- S1U,&6 16 To identify various diversification strate)ies fo!!owed by t'e co$%anies/ 26 To ana!yse financia! %erfor$ance of t'e co$%anies c!assified on t'e basis of t'eir diversification strate)ies/

C/0P1-2 9 1-.1I4- I+,US12& 8 P2OFI4- OF COMP0+I-S 93!3! IMPO210+C-6

12 T'e te ti!e industry occu%ies a uni8ue %!ace in our country/ One of t'e ear!iest to co$e into e istence in India1 it accounts for 14J of t'e tota! Industria! %roduction1 contributes to near!y 35J of t'e tota! e %orts and is t'e second !ar)est e$%!oy$ent )enerator after a)ricu!ture/ Te ti!e Industry is %rovidin) one of t'e $ost basic needs of %eo%!e and t'e 'o!ds i$%ortance: $aintainin) sustained )rowt' for i$%rovin) 8ua!ity of !ife/ It 'as a uni8ue %osition as a se!fAre!iant industry1 fro$ t'e %roduction of raw $ateria!s to t'e de!ivery of finis'ed %roducts1 wit' substantia! va!ueAaddition at eac' sta)e of %rocessin): it is a $ajor contribution to t'e countryBs econo$y/

Its vast %otentia! for creation of e$%!oy$ent o%%ortunities in t'e a)ricu!tura!1 industria!1 or)anised and decentra!ised sectors & rura! and urban areas1 %articu!ar!y for wo$en and t'e disadvanta)ed is notewort'y/ 0!t'ou)' t'e deve!o%$ent of te ti!e sector was ear!ier ta.in) %!ace in ter$s of )enera! %o!icies1 in reco)nition of t'e i$%ortance of t'is sector1 for t'e first ti$e a se%arate "o!icy State$ent was $ade in 1<8& in re)ard to deve!o%$ent of te ti!e sector/ T'e te ti!e %o!icy of 2555 ai$s at ac'ievin) t'e tar)et of te ti!e and a%%are! e %orts of FS K &5 bi!!ion by 2515 of w'ic' t'e s'are of )ar$ents wi!! be FS K 2& bi!!ion/ T'e $ain $ar.ets for Indian te ti!es and a%%are!s are FS01 F0?1 F41 ;er$any1 @rance1 Ita!y1 Russia1 #anada1 -an)!ades' and La%an/ T'e $ain objective of t'e te ti!e %o!icy 2555 is to %rovide c!ot' of acce%tab!e 8ua!ity at reasonab!e %rices for t'e vast $ajority of t'e %o%u!ation of t'e country1 to increasin)!y contribute to t'e %rovision of sustainab!e e$%!oy$ent and t'e econo$ic )rowt' of t'e nation: and to co$%ete wit' confidence for an increasin) s'are of t'e )!oba! $ar.et/ 93!3' CU22-+1 SC-+02IO6

13 +eve!o%in) countries wit' bot' te ti!e and c!ot'in) ca%acity $ay be ab!e to %ros%er in t'e new co$%etitive environ$ent after t'e te ti!e 8uota re)i$e of 8uantitative i$%ort restrictions under t'e $u!tiAfibre arran)e$ent 3(@06 ca$e to an end on 1st Lanuary1 255& under t'e 9or!d Trade Or)anisation 39TO6 0)ree$ent on Te ti!es and #!ot'in)/ 0s a resu!t1 t'e te ti!e industry in deve!o%ed countries wi!! face intensified co$%etition in bot' t'eir e %ort and do$estic $ar.ets/ Gowever: t'e $i)ration of te ti!e ca%acity wi!! be inf!uenced by objective co$%etitive factors and wi!! be 'a$%ered by t'e %resence of distortin) do$estic $easures and wea. do$estic infrastructure in severa! deve!o%in) and !east deve!o%ed countries/ T'e e!i$ination of 8uota restriction wi!! o%en t'e way for t'e $ost co$%etitive deve!o%in) countries to deve!o% stron)er c!usters of te ti!e e %ertise1 enab!in) t'e$ to 'and!e a!! sta)es of t'e %roduction c'ain fro$ )rowin) natura! fibres to %roducin) finis'ed c!ot'in)/ T'e te ti!e industry is under)oin) a $ajor reorientation towards nonAc!ot'in) a%%!ications of te ti!es1 .nown as tec'nica! te ti!es1 w'ic' are )rowin) rou)'!y at twice rate of te ti!es for c!ot'in) a%%!ications and now account for $ore t'an 'a!f of tota! te ti!e %roduction/ T'e %rocesses invo!ved in %roducin) tec'nica! te ti!es re8uire e %ensive e8ui%$ents and s.i!!ed wor.ers and are1 for t'e $o$ent1 concentrated in deve!o%ed countries/ Tec'nica! te ti!es 'ave $any a%%!ications inc!udin) bed s'eets: fi!tration and abrasive $ateria!s: furniture and 'ea!t'care u%'o!stery: t'er$a! %rotection and b!oodAabsorbin) $ateria!s: seatbe!ts: ad'esive ta%e1 and $u!ti%!e ot'er s%ecia!i=ed %roducts and a%%!ications/ India $ust ta.e ade8uate $easures for ca%turin) its $ar.et by %ro$otin) researc' and deve!o%$ent in t'is sector/

14 T'e $ood in t'e Indian te ti!e industry )iven t'e %'aseAout of t'e 8uota re)i$e of t'e $u!tiAfibre arran)e$ent 3(@06 is u%beat wit' new invest$ent f!owin) in and increased orders for t'e industry as a resu!t of w'ic' ca%acities are fu!!y boo.ed u% to 0%ri! 255&/ 0s a resu!t of various initiatives ta.en by t'e )overn$ent1 t'ere 'as been new invest$ent of Rs/&51 555 crores in t'e te ti!e industry in t'e !ast five years/ Nine te ti!e $ajors invested Rs/21 *55 crores and %!an to invest anot'er Rs/*1455 crores/ @urt'er1 IndiaBs cotton %roduction increased by &,J over t'e !ast five years: and 3 $i!!ion additiona! s%ind!es and 351555 s'utt!esA!ess !oo$s were insta!!ed/

93!3* FU1U2- P2OSP-C1S6 T'e industry e %ects invest$ent of Rs/11 451555 crores in t'is sector in t'e %ostA(@0 %'ase/ 0 Mision 2515 for te ti!es for$u!ated by t'e )overn$ent after intensive interaction wit' t'e industry and ? %ort "ro$otion #ounci!s to ca%ita!ise on t'e u%beat $ood ai$s to increase IndiaBs s'are in wor!dBs te ti!e trade fro$ t'e current 4J to 8J by 2515 and to ac'ieve e %ort va!ue of FS K &5 bi!!ion by 2515 Mision 2515 for te ti!es envisa)es )rowt' in Indian te ti!e econo$y fro$ t'e current FS K 3, bi!!ion to K 8& bi!!ion by 2515: creation of 12 $i!!ion new jobs in t'e te ti!e sector: and $odernisation and conso!idation for creatin) a )!oba!!y co$%etitive te ti!e industry/ T'ere wi!! be o%%ortunities as we!! as c'a!!en)es for t'e Indian te ti!e industry in t'e %ostA(@0 era/ -ut India 'as natura! advanta)es w'ic' can be ca%ita!ised on stron) raw $ateria! base A cotton1 $anA$ade fibres1 jute1 si!.: !ar)e %roduction ca%acity 3s%innin) A 21J of wor!d ca%acity and weavin) A 33J of wor!d ca%acity but of !ow tec'no!o)y6: vast %oo! of s.i!!ed $an%ower: entre%reneurs'i%: f!e ibi!ity in %roduction %rocess: and !on) e %erience wit' FS2?F 3?uro%ean Fnion6/ 0t t'e sa$e ti$e1 t'ere are constraints re!atin) to fra)$ented industry1 constraints of %rocessin)1 8ua!ity of

1& cotton1 concerns over %ower cost1 !abour refor$s and ot'er infrastructura! constraints and bott!enec.s/ 93' P2OFI4- OF S-4-C1-, COMP0+I-S 20%0S1/0+ SPI++I+$ 0+, 5-0VI+$ MI44S 4IMI1-, T'e #o$%any was incor%orated on 1,t' October1 1<*5 at #a!cutta/ T'e $ain objective of t'e co$%any was to $anufacture cotton yarn1 c!ot'1 sta%!e1 viscose yarn and %o!yester b!ended yarn/ In 1<8*1 t'e #o$%any received !etters of intent for t'e settin) u% of: a 121555 s%ind!es worsted s%innin) %roject and %rocess 'ouse for %rocessin) 245 !a.' $etres of suitin)s1 s'irtin)s1 sarees and dress $ateria!/ In 1<8, t'e co$%any undertoo. anot'er $odernisation %ro)ra$$e under w'ic' t'e !atest autoconers wit' s%!icin) and e!ectronic yarn c!eanin) arran)e$ents were insta!!ed/ Twisters a!on) wit' !atest cardin) $ac'ines were a!so insta!!ed under t'is %ro)ra$$e/ In 1<<5 co$%any started an e %ansion %!an under w'ic' *1<12 s%ind!es were added in t'e -answara Fnit/ In 1<<2 t'e co$%any undertoo. e %ansion of s%ind!es of %o!yester viscose yarn at -answara to increase its insta!!ations of "2v s%ind!es fro$ 181&,* to 2,1,<2 nu$bers/ 0!so anot'er %roject for $anufacture of "2c yarn was underta.en at -answara by insta!!in) <121* s%ind!es/ T'e #o$%any a!so undertoo. to insta!! <121* s%ind!es at -'i!wara for $anufacture of $i!an)e yarn/ In 1<<&1 t'e co$%any 'as entered into ne)otiations wit' +o$inion Te ti!e Incor%oration1 #anada1 for &174< %artners'i% for settin) u% an inte)rated 24 $i!!ion $eters %er annu$ 'i)' va!ue added +eni$ $anufacturin) faci!ity in (ad'ya "rades'/ T'e overa!! %erfor$ance of t'e co$%any i$%roved due to 'i)'er vo!u$e of sa!es1 better %roductA$i and

i$%rove$ent in tec'noAecono$ic %ara$eters des%ite continuous f!uctuation in yarn %rices owin) to fa!! in %o!yester sta%!e fibre/ In 1<<,1 t'e #o$%any entered into joint venture a)ree$ent wit' #a!u$ 0ustra!ia "rivate Ltd/ and +e 9itte Lietaer of -e!)iu$

1* for $anufacture of auto$otive furnis'in) fabrics/ In 2553 Rajast'an S%innin) and 9eavin) (i!!s Ltd/ diversified into )ar$ent $anufacturin) se)$ent/

$20VI1& I+,I0 4IMI1-, T'e #o$%any was incor%orated on 13t' (arc'1 1<8, as a "rivate Li$ited #o$%any under t'e na$e and sty!e of ;ravity Si!. (i!!s "rivate Li$ited/ In 1<<4 t'e co$%any was subse8uent!y converted into a %ub!ic !i$ited co$%any on 28t' Se%te$ber1 1<<4 in ter$s of t'e s%ecia! reso!ution %assed on 31st 0u)ust1 1<<4 under t'e na$e and sty!e of ;ravity Si!. (i!!s Li$ited and was re)istered wit' t'e Re)istrar of #o$%anies1 (a'aras'tra1 at (u$bai/ T'e #o$%any started its $anufacturin) activities in (asat1 Si!vassa1 Fnion Territory of +adra and Na)ar Gave!i in t'e year 1<8< by settin) u% a %roject for t'e $anufacture of )rey fabrics for suitin) and s'irtin)/ In 1<<,1 t'e co$%any %ro%oses to insta!! one Gi$son Scra)) draw te turisin) $ac'ine wit' 21* s%ind!es 3Indi)eneous6 in t'e e istin) factory of t'e co$%any at vi!!a)e (asat1 Si!vassa1 Fnion Territory of +adra and Na)ar Gave!i for a new %roject for $anufacture of yarn/ T'e co$%any 'as ta.en u% e %ansionAcu$Adiversification %ro)ra$$e at an ca%ita! out!ay of Rs/15 crores in year 2555/ In 25511 ;ravity 3India6 Ltd/1 for$er!y .nown as ;ravity Si!. (i!!s Ltd/1 !aunc'ed a fabric %orta!/ In t'e year 25531 t'e co$%any diversified into t'e infor$ation tec'no!o)y fie!d by for$in) a subsidiary ;ravity Infotec' Ltd/ (a'a%e in Navi (u$bai/ T'e co$%any started u% its subsidiary unit at

0,I1&0 BI240 +UVO 4IMI1-, T'e co$%any was incor%orated on 2*t' Se%te$ber1 1<&*/ @or$er!y t'e co$%any was .nown as Indian Rayon #or%oration Li$ited/ T'e co$%any started wit' t'e

$anufacture of viscose rayon yarn and fabrics1 c'e$ica! %roducts1 rubber!ined

1, %roducts1 bus'in)s and %ort!and ce$ent/ In t'e 1<&8 t'e co$%any entered into an a)ree$ent wit' Mon 4o'orn Internationa! #or%oration1 Mon 4o'orn Internationa! 3London61 Li$ited and Mon 4o'orn ?astern #or%oration1 Li$ited1 w'o a)reed to desi)n and su%%!y fro$ F/S/0/ and F/4/ t'e entire %!ant and $ac'inery for t'e co$%anyBs rayon factory/T'ey a!so a)reed to su%ervise t'e erection and insta!!ation as 9e!! as t'e co$$issionin) of t'e %!ant/ Mon 4o'orn Internationa! #or%oration a!so a)reed to invest joint!y wit' t'e @inancia! +eve!o%$ent @und Incor%oration1 F/S/0/ a su$ of F/S/ K2&1555 in t'e e8uity ca%ita! of t'e #o$%any/ In 1<,& 0 co!!aboration a)ree$ent was si)ned wit' #era$consu!t Lan)ent'a!1 Li$ited1 Swit=er!and for $anufacture of Lon) Red insu!ators and 'i)' a!u$ina bodies and in year 1<,* Lay S'ree Te ti!es & Industries1 Li$ited was a$a!)a$ated wit' t'e co$%any wit'/ In 1<,<1 t'e co$%any received a !etter of intent to set u% a new industria! underta.in) for t'e $anufacture of *1555 tonnes %er annu$ of so%'isticated insu!ators at Ga!o! in ;ujarat State/T'e #o$%any e ecuted a tec'nica! co!!aboration a)ree$ent wit' +ou!ton Insu!ators Ltd/1 of F/4/1 for new ran)e of %roducts for 455 4M trans$ission !ine and subAstation insu!ators and for i$%rovin) t'e 8ua!ity of %resent ran)e of %roducts/ In 1<831 t'e co$%any received !etter of intent to set u% a %!ant to $anufacture 851555 tonnes of w'ite ce$ent %er annu$ and a tec'nica! co!!aboration a)ree$ent wit' t'e Onuda ?n)ineerin) & #onsu!tin) #or%oratio1 Li$ited1 of La%an was a!so a%%roved by ;overn$ent/ T'e %!ant was co$$issioned in (arc' 1<88/ T'e co$%any started u% a carbon b!ac. %!ant at Re$i.oot in (ir=a%ur district of Fttar "rades' wit' an insta!!ed ca%acity of 251555 tonnes %er annu$/ In 1<8*1 New %roducts suc' as f!a$e retardent fabrics1 oi!2c'e$ica! resistant fire 'oses and rove boi!ed f!a yarn were deve!o%ed and co$%any a!so undertoo. to set u% a cera$ic unit to $anufacture 151555 tonnes %er annu$ of sanitaryware and 121555 tonnes %er annu$ of wa!! ti!es in Fttar "rades'/ T'e sanitary ware %roject was %ro%osed to be set u% in

18 tec'nica! co!!aboration wit' Mi!!eroy and -oc' of t'e @edera! Re%ub!ic of 9est ;er$any and e8ui%$ent for t'e wa!! ti!es %roject were to be su%%!ied by SITI of Ita!y/ 0 tec'nica! co!!aboration wit' @e!ten & ;uji!!ene ?ner)ietic'nic ;$bG1 9est ;er$any was entered into for t'e $anufacture of condensor bus'in)s1 cou%!in) ca%acitors and instru$ent transfor$ers in t'e sa$e year/ In 1<8,1 t'e co$%any co$$issioned t'e e %anded worsted rayon %roject1 $ac'ines !i.e radio fre8uency drier and auto windin) unit wit' e!ectronic contro!s were insta!!ed/ @ancy doub!in) $ac'ines were a!so insta!!ed to %roduce fancy yarn/T'e wor.in) of #otton S%innin) division was adverse!y affected due to 'i)'er cotton %rice1 rise in %ower tariffs etc/ To rationa!ise t'e %roductA$i t'e co$%any %ro%osed to convert e istin) s%ind!es for %roduction of 'i)' va!ue added synt'etic yarn/ 0!so fancy doub!in) $ac'ines were insta!!ed for %roduction of fancy yarns/ To ensure its co$%etitive ed)e over ot'ers1 t'e division was u%)radin) its tec'no!o)y by addin) !atest $ac'ines suc' as Savio autoAconers1 twoAforAone twisters1 etc/ 0 new .i!n was co$$issioned in t'e year 1<88 at Ga!o! to $eet t'e )rowin) de$and for t'e co$%anyBs %roduct ran)e/ In 1<<51 t'e s%innin) and weavin) division undertoo. to furt'er $odernise a%art fro$ e %andin) its insta!!ed ca%acity for worsted yarn by 21455 s%ind!es/ In 1<<&1 t'e division undertoo. to set u% 8 continuous s%innin) $ac'ines on %ara!!e! yarn at an esti$ated cost of Rs 3* crores/ In 25511 0ditya -ir!a )rou% f!a)s'i% Indian Rayon wi!! ac8uire a &5/3& %er cent contro!!in) sta.e in "SI +ata Syste$s fro$ ;rou%e -u!!1 @rance1 for Rs/,1 crores/ In t'e year 25531 Indian Rayon entered into Infor$ation tec'no!o)y sector wit' t'e ac8uisition of Trans9or.s Infor$ation Services "rivate Li$ited/

BOMB0& 20&O+ F0S/IO+S 4IMI1-, T'e #o$%any was incor%orated as (udra @abrics "rivate Li$ited 3(@L6 on (ay 211 1<<2/ On October 131 1<<2 t'e co$%any was converted into a %ub!ic !i$ited

1< co$%any/ Subse8uent!y1 on Se%te$ber 351 2554 na$e of t'e co$%any was c'an)ed to -o$bay Rayon @as'ions Li$ited 3-R@L6/ In (arc' 255&1 wit' a view to conso!idate business of t'e )rou%1 -o$bay Rayon "rivate Li$ited 3-R"L6 was a$a!)a$ated wit' -o$bay Rayon @as'ions Li$ited and two %artners'i% fir$s of t'e ;rou%1 i/e/1 - R ? %orts and ;arden #ity #!ot'in) were ta.en over by -o$bay Rayon "rivate Li$ited and -o$bay Rayon @as'ions Li$ited res%ective!y/ T'e -o$bay Rayon ;rou% started in 1<8* wit' t'e incor%oration of -o$bay Rayon "rivate Li$ited/ T'e ;rou% is in t'e te ti!e industry 'avin) faci!ities for $anufacture of fabrics1 )ar$ents1 desi)n deve!o%$ent1 sa$%!in) etc/ "resent!y1 t'e )rou% is en)a)ed in carryin) out t'e activities of $anufacture of fabrics for do$estic sa!e and e %ort and $anufacture of )ar$ents for e %ort/ In 1<<8 co$%any started $anufacturin) faci!ities for woven fabric at Sona!e in T'ane district and )rou% a!so started t'e fabric e %ort/ -o$bay Rayon ? %orts was for$ed for underta.in) t'is business se)$ent/ In t'e year 2553 )rou% turnover reac'ed Rs/155 crores/ It started Si!vassa unit for $anufacture of woven fabric under Reyno!d S'irtin) "rivate Li$ited/ ;ar$ent $anufacturin) for e %orts was a!so started in t'e )rou%/ ;arden #ity #!ot'in) was for$ed for underta.in) t'is business/ In year 2554 t'e co$%any decided to set u% an inte)rated faci!ity for yarn dyein)1 weavin)1 %rocess 'ouse and )ar$ent $anufacturin) at t'e a%%are! %ar. in +oddaba!!a%ura near -an)a!ore/

04PS I+,US12I-S 4IMI1-, T'e #o$%any was incor%orated as a "rivate Li$ited #o$%any under t'e #o$%anies 0ct1 1<&* on 11t' (ay1 1<,2 under t'e na$e and sty!e of 0!%s Te ti!es "rivate Li$ited and subse8uent!y converted into %ub!ic !i$ited co$%any vide fres' certificate of incor%oration issued on 2nd Nov1 1<<4 and was rena$ed as 0!%s Industries Li$ited on 1& Nov1 1<<4 and anot'er fres' certificate of incor%oration was issued by RO#

25 4an%ur/ 0!%s Industries Ltd/ 3for$er!y .nown as 0!%s Te ti!es Ltd/6 was %ro$oted by S'ri 4/4/ 0)arwa! a we!! .nown tec'nocrat and industria!ist a!on) wit' 'is associates/ T'e #o$%any is en)a)ed in t'e $anufacturin) and e %ort of 'o$e furnis'in)s and se!!in) itBs %roduct ran)e of venetian and vertica! b!inds1 dra%ery rods1 and ot'er interior decorative and arc'itectura! ite$s under t'e estab!is'ed brand na$e of Mista Levo!or/ T'e co$%any 'as entered into an a)ree$ent wit' te ti!e de%art$ent of Indian Institute of Tec'no!o)y 3IIT61 +e!'i for %rovidin) t'e tec'nica! assistance/ In 1<,& t'e co$%any 'as been awarded by Gand!oo$ ? %ort "ro$otion #ounci!1 #'ennai for e %ort of its %roduct for t'e year1<,&A,*1 1<,,A,81 1<81A821 1<82A83 and 1<84A8&1 and 'ad received State ? %ort award fro$ ;overn$ent of F/"/ for t'e year 1<83A841 1<84A8&1 1<8,A881 1<88A8< and 1<8<A<5/ In year 1<8, t'e $ana)e$ent conceived t'e idea for settin) u% of %!ant for $anufacturin) ve)etab!e dyes1 dyein) of cotton fibre wit' ve)etab!e dyes and s%innin) of ve)etab!e dyed yarn1 weavin) of fabrics t'ere fro$ and convertin) into $ade u%s/ In 1<8< t'e co$%any ac'ieved anot'er $i!estone by enterin) into t'e a)ree$ent wit' Levo!or Lorent=en Inc/1 %resent!y .nown as Levo!or #or%oration1 one of t'e !eadin) $anufacturer of window coverin)s in F/S/0/1 to se!! and $anufacture in India t'e !ine of NLevo!orB %roducts e c!usive!y/ T'e #o$%any subse8uent!y introduced a new ran)e of Menetian b!inds under t'e brand na$e of Mista Levo!or/ +iversifyin) into t'e ran)e of interior decoratives1 t'e

co$%any introduced 0!u$iniu$ "ane!s for @a!se #ei!in)/ T'e co$%any setu% a researc' and deve!o%$ent win) in 1<<3 an a)ree$ent was entered into wit' Indian Institute of Tec'no!o)y 3I/I/T61 +e!'i for s%onsors'i% of researc' and deve!o%$ent %ro)ra$$e of ve)etab!e dyes/ T'e co$%any 'ad estab!is'ed a !ar)e $ar.etin) networ. in India and abroad/ T'e #o$%any %ro%osed to set u% a 155 %er cent e %ort oriented unit at Sa'ibabad Industria! 0rea1 in +istrict ;'a=iabad1 Fttar "rades'/

21 In 1<<& t'e co$%any 'as tieAu% wit' Levo!or #or%oration1 FS01 one of t'e !eadin) $anufacturers of window coverin)s in FS01 for $anufacture and sa!e of Levo!or !ine of %roducts in India/ In t'e year 1<<,1 co$%any 'ad a!so started business wit' new %arties in t'e internationa! $ar.et wit' w'o$ vo!u$e of business was e %ected to )row furt'er/ Sa!es of 9indow #overin) +ivision 3Mista6 'ad increased in t'is year/ T'e #o$%any 'ad !aunc'ed window awnin)s and )arden u$bre!!as in co!!aboration wit' @ranciaf!e #o$%any1 @rance/ It was decided to increase t'e weavin) ca%acity by insta!!in) additiona! 43 !oo$s/ In 1<<8 t'e %erfor$ance of window coverin) division 3Mista6 was adverse!y affected by t'e recession in t'e do$estic $ar.et/ In t'is

division a!so1 severa! new %roduct 'ave been added in order to widen t'e %roduct ran)e as we!! as1 .ee%in) in $ind custo$er service1 severa! i$%rovisations were $ade in t'e e istin) %roducts/ In 2551 0!%s Industries Ltd/ $a.ers of vista !evo!or b!inds 'ad introduced t'e N4aratB vertica! b!inds/

C/0P1-2 ; 2-S-02C/ M-1/O,O4O$&

It is i$%erative to decide u%on and docu$ent a researc' $et'odo!o)y we!! in advance to carry out t'e researc' in t'e $ost effective and syste$ic way/ T'is c'a%ter describes t'e researc' $et'odo!o)y ado%ted to serve t'e objectives of t'e study in an effective $anner/ T'is c'a%ter consists of t'e fo!!owin) sections7 #once%tua! @ra$ewor. Sa$%!e desi)n

22 #o!!ection of data 0na!ysis +one Li$itations of study T'ese sections are discussed as fo!!ows7

;3! CO+C-P1U04 F20M-5O2<

@or t'e %ur%ose of t'e study1 t'e !ist of co$%anies in t'e Te ti!e industry wi!! be ta.en fro$ t'e website of Indiabu!!s securities Ltd/ T'e !ist inc!udes 2,4 co$%anies/ To fu!fi!! t'e first objective annua! re%orts of t'e co$%anies were studied to find t'e areas in w'ic' t'ey 'ave diversified/ #o$%anies are c!assified into re!ated1 unre!ated1 and non diversifiers on t'e basis of t'eir diversification strate)ies/ T'e study too. into account t'e %eriod of o%eration fro$ 2552A53 to 255*A5,/

;3' S0MP4- ,-SI$+ T'e %o%u!ation for t'e study was ta.en fro$ !ist of te ti!e co$%anies on t'e website of India -u!!s Securities Ltd/ It constituted 2,4 co$%anies/ T'e sa$%!e consisted of five te ti!e co$%anies1 w'ic' were se!ected on t'e basis of diversification strate)ies t'ey fo!!owed w'i!e t'e %eriod of study/ T'en t'e se!ected co$%anies were cate)orised accordin) to t'eir diversification strate)y/ T'ese are7 16 2e7ated ,iversification6 Rajast'an S%innin) and 9eavin) (i!!s Ltd/ 26 Unre7ated ,iversification6 ;ravity India !td/1 0ditya -ir!a Nuvo Ltd/ 36 +on) diversified6 0!%s Industries Ltd/1 -o$bay Rayon @as'ions Ltd/

23

;3*

CO44-C1IO+ OF ,010

T'e entire structure of data for t'e study rests so!e!y on secondary sources of infor$ation/ T'e study was carried out for t'e %eriod fro$ 2552A53 to 255*A5,/ +ata was co!!ected fro$ annua! re%orts of t'e co$%anies and fro$ so$e websites suc' as (oneycontro!/co$1 Indiabu!!s/co$ and (oney/rediff/co$/ T'e raw data in t'e for$ of various financia! ratios for t'e sa$%!e co$%anies was first recorded in a $aster tab!e and t'en subse8uent statistica! too!s for t'e ana!ysis were a%%!ied/

;39 0+04&SIS ,O+- O+ 1/- FO44O5I+$6

1. Growth in Assets 2. Growth in Sales 3. Growth in Net Worth 4. Growth in Gross Profit 5. Growth in Dividends 6. Growth in Return on a!ital "#!lo$ed %. Growth in Return on Net Worth

24 &. Growth in Gross Profit Ratio '. Growth in (!eratin) Ratio 1*. Growth in Net Profit ratio 11. Growth in ash Profit Ratio 12. Growth in "arnin) !er Share 13. Growth in +ar,et -alue of Share

;3; 4IMI101IO+S OF 1/- S1U,& 1/ T'e accuracy of t'e researc' is !i$ited by t'e .now!ed)e of t'e researc'er/ 2/ T'e ti$e factor acted as a considerab!e !i$it on t'e sco%e and e tensiveness of t'e study1 as t'e study was conducted for s'ort ti$e %eriod on!y/ 3/ T'e study bein) based on data avai!ab!e fro$ financia! state$ents of t'e co$%any suffered fro$ sa$e !i$itations t'at are in'erent in t'ese state$ents/

C/0P1-2 " 2-SU41S 0+, ,ISCUSSIO+ "3! C40SSIFIC01IO+ OF COMP0+I-S 0 !ist of te ti!e co$%anies fro$ website of Indiabu!!s Securities Li$ited was considered for t'e study/ On!y t'ree co$%anies $et t'e criterion of sa$%!e se!ection i/e/ t'ey diversified in t'e ti$e %eriod of study 32552A53 to 255*A5,6 and two undiversified co$%anies were se!ected wit' t'e 'e!% of si$%!e rando$ sa$%!in)

2& tec'ni8ue/ Se!ected co$%anies were t'en c!assified into t'ree cate)ories on t'e basis of t'eir diversification strate)ies as s'own in t'e tab!e 4/1/

"3!3! 1he basis of categorisation =as as fo77o=s6 !3 2e7ated ,iversifiers6 0 co$%any 'as been cate)ori=ed as a re!ated diversifier1 if it 'as entered into $ar.ets wit' si$i!ar distribution and ot'er $ar.etin) c'aracteristics1 or $anufactures %roducts usin) co$$on %roduction faci!ities and tec'no!o)y1 or 'as entered into vertica!!y inte)rated activities/ Rajast'an S%innin) and 9eavin) (i!!s Li$ited forayed into ready$ade )ar$ents as s'own in t'e annua! re%orts of t'e co$%any in t'e year 2553/ T'e si$i!arity of tec'no!o)y and $ar.ets and t'e e tent to w'ic' t'ey %rovide o%%ortunities to uti!i=e t'e faci!ities and resources of one business in t'e new business 'e!%ed to cate)ori=e it as re!ated diversified co$%any/ '3 Unre7ated diversifiers6 0 co$%any 'as been cate)ori=ed as a unre!ated diversifier1 if it 'as entered into $ar.ets wit' different distribution and ot'er $ar.etin) c'aracteristics1 or $anufactures %roducts usin) unco$$on %roduction faci!ities and tec'no!o)y/ ;ravity India Ltd/ initia!!y a te ti!e co$%any diversified into infor$ation tec'no!o)y i/e/ t'e tec'no!o)y used and t'e $ar.et bein) ta%%ed are a!! to)et'er different fro$ t'e e istin) business/ T'e e istin) faci!ities and resources were not used for t'e new business t'us1 cate)ori=ed as an unre!ated diversifier/ 0ditya -ir!a Nuvo Ltd/ a!so entered into -"O sector wit' t'e ac8uisition of (2s Tras9or.s Infor$ation Services "rivate Li$ited in w'ic' tec'no!o)y and $ar.etin) c'anne!s are different fro$ t'e e istin) one/ T'us1 t'is was a!so cate)ori=ed as an unre!ated diversifier/

2* *3 +on diversifier6 T'ese are t'e co$%anies w'ic' neit'er entered into any re!ated nor unre!ated business durin) t'e %eriod of study t'us1 considered non diversified co$%anies1 and were used for co$%arison %ur%ose in t'is study/ 0!%s Industries Ltd/ and -o$bay Rayon @as'ions Ltd/ are t'e two undiversified co$%anies ta.en into consideration for t'is study/

"3'3 FI+0+CI04 P-2FO2M0+C- 0+04&SIS "3'3! $ro=th in 0ssets Dears #o$%any (arB 53 RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 3,3/&< 1</,< 1438/* < 11/,5 (arB 54 454/51 21/52 1*,3/4 < 11/3, (arB 5& &88/25 25/31 184,/5 < ,3/1& (arB 5* ,12/24 25/*8 3,,1/1 8 248/3& (arB 5, 11,</* , 21/14 &<&*/3 8 82</58 3in J6 2&/8* 1/33 32/8* 134/4, #0;R

2, 0!%s Industries Ltd/ 12&/8< 131/&< 1<2/&8 4,,/38 *4,/1, 38/,4

0n asset is any owned %'ysica! object 3tan)ib!e6 or ri)'t 3intan)ib!e6 'avin) a $oney va!ue/ In ot'er words1 assets are econo$ic resources w'ic' are owned by a business and fro$ w'ic' future econo$ic benefits are e %ected to f!ow to t'e enter%rise/ T'ese assets are $eant to increase %roduction ca%acity of t'e business/ 0s s'own in tab!e 4/11 t'e co$%ounded annua! )rowt' rate of assets in a!! t'e five co$%anies is %ositive: t'is s'ows a rise in assets of t'e co$%anies fro$ year 2552A53 to 255*A5,/ -o$bay Rayon @as'ions Ltd/1 w'ic' is a non diversified co$%any 'ad t'e 'i)'est co$%ounded annua! )rowt' rate i/e/ 134/4, %er cent w'ic' was $ain!y due to t'e effect of increase in tota! current assets t'at increased fro$ Rs/1*/5* crores to Rs/33&/&& crores in t'e five year ti$e %eriod1 t'e current !iabi!ities of t'e fir$ increased fro$ Rs/11/15 crores to Rs/,8/4< crores and reduced t'e i$%act of increase in assets to so$e e tent/ Rise in tota! assets in anot'er non diversified co$%any i/e/1 0!%s Industries Ltd/ was 38/,4 %er cent w'ic' was $ain!y due to contribution of current assets w'ic' increased fro$ Rs/*2/2< crores in t'e year 2553 to Rs/2*</81 crores in t'e year 255,/ 0!t'ou)'1 current !iabi!ities a!so increased fro$ Rs/21/<< crores to Rs/&&/2* crores but t'e %ercenta)e increase was substantia!!y !ess t'an t'e increase in assets/ Si$i!ar!y1 tota! current assets of 0ditya -ir!a Nuvo Ltd/ w'ic' is in t'e cate)ory of unre!ated diversifiers a!so increased substantia!!y fro$ Rs/45*/31 crores 325536 to Rs/15<2/<* crores 3255,6 and t'e subse8uent increase in !iabi!ities was !esser i/e/ fro$ Rs/322/25 crores to Rs/&<3/88 crores t'us1 s'owin) a co$%ounded annua! )rowt' rate of 32/8* %er cent/ 0 re!ated diversified co$%any1 RS9( Ltd/ 'ad avera)e co$%ounded annua! )rowt' rate of assets i/e/ 2&/8* %er cent as its current assets

28 increased fro$ Rs/141/5< crores to Rs/2**/*4 crores and current !iabi!ities increased fro$ Rs/*1/*1 crores to Rs/152/48 crores/ ;ravity India Ltd/1 an unre!ated diversifier s'owed t'e !east co$%ounded annua! )rowt' rate of assets i/e/ 1/33 %er cent due to very $ar)ina! increase in current assets of t'e fir$ i/e/ fro$ Rs/</*2 crores 325536 to Rs/14/45 crores 3255,6 and re!ative!y t'e increase in current !iabi!ities was 8uite 'i)'1 t'at increased fro$ Rs/2/&2 crores to Rs/*/54 crores/

"3'3' $ro=th in Sa7es Dears #o$%any RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ (arB 53 (arB 54 (arB 5& (arB 5* (arB 5, 3in J6 44&/<1 *33/41 ,33/<3 <&</* 1542 18/&5 1&/5* 1,/<8 21/4 1</31 33/3< 1,/2* 1443/8 1&,3/8 18*&/8 2*4&/, 3425/, 2 4,/<1 131/8, 4 &5/*1 1&2/&1 8 153/88 1,,/8, < 1<8/<8 2*3 * 48</38 42</14 18/83 &</1* 2*/*2 #0;R

2< T'e ter$ Osa!esE is used for t'e sa!e of finis'ed )oods/ It $ay be cas' sa!es or credit sa!es/ T'e increase or decrease in sa!es s'ou!d be co$%ared increase or decrease in cost of )oods so!d/ 0n increase in sa!es wi!! not a!ways $ean an increase in %rofit/ T'e %rofitabi!ity i$%roves if increase in sa!es is $ore t'an t'e increase in cost of )oods so!d/ 0s s'own in t'e tab!e 4/21 -o$bay Rayon @as'ions Ltd/ 'ad t'e 'i)'est co$%ounded annua! )rowt' rate i/e/ &</1* %er cent due to a stee% rise in net sa!es t'at increased fro$ Rs/4,/<1 crores to Rs/48</38 durin) t'e %eriod of study/ T'e co$%ounded annua! )rowt' rate of net sa!es of 0!%s Industries Ltd/ was 2*/*2 %er cent in t'is five year ti$e %eriod/ T'e tota! inco$e of t'e fir$ increased fro$ Rs/13*/&* crores to Rs/4&*/5* crores due to t'is increase in sa!es/ 0ditya -ir!a Nuvo Ltd/1 RS9( Ltd/ and ;ravity India Ltd/ 'ad avera)e co$%ounded annua! )rowt' rate of net sa!es i/e/ 18/83 %er cent1 18/&5 %er cent and 1,/2* %er cent res%ective!y as t'e net sa!es of 0ditya -ir!a Nuvo Ltd/ increased fro$ Rs/1443/*< crores to Rs/3425/,* crores in t'ese five years/ Net sa!es of RS9( Ltd/ increased fro$ Rs/44&/<1 crores to Rs/1542/55 crores and t'at of ;ravity India Ltd/ increased fro$ Rs/1&/5* crores to Rs/33/3< crores/ "3'3* $ro=th in +et 5orth Dears #o$%any RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ (arB 53 (arB 54 (arB 5& (arB 5* (arB 5, 1*4/18 1,</<< 1<</34 2*8/53 354/18 </2& </*3 </<8 15/3, 15/,< 11,5/, 12*,/* 13&4/5 225,/* 3124/& < 3/*3 &,/2* 8 ,/34 *4/&2 * 4&/< ,,/&8 1 1&3/3* 24,/88 & 4<&/*4 2,&/1* 3in J6 13/13 3/13 21/*< 1*,/33 3*/88 #0;R

35 Net wort' or s'are'o!derEs funds inc!ude e8uity s'are ca%ita!1 %reference s'are ca%ita!1 free reserves suc' as s'are %re$iu$1 revenue reserve1 ca%ita! reserve1 retained earnin)s and sur%!us1 !ess accu$u!ated !osses1 if any/ 0s s'own in t'e tab!e 4/31 t'e co$%ounded annua! )rowt' rate of -o$bay Rayon @as'ions Ltd/ was 1*,/33 %er cent due to increase in e8uity s'are ca%ita! t'at rose fro$ Rs/1/55 crores to Rs/*3/55 crores and reserves t'at increased fro$ Rs/2/*3 crores to Rs/425/51 crores/ 0!%s Industries Ltd/ 'ad t'e second !ar)est co$%ounded annua! )rowt' rate of net wort' i/e/ 3*/88 %er cent1 t'is increase was due to cu$u!ative effect of increase in e8uity s'are ca%ita! w'ic' increased fro$ Rs/*/25 crores to Rs/32/&1 crores and increase in reserves w'ic' increased fro$ Rs/&1/51 crores to Rs/242/*& crores/ 0ditya -ir!a Nuvo Ltd/Es co$%ounded annua! )rowt' rate of net wort' was 21/*< %er cent w'ic' was $ain!y due to increase in reserves w'ic' increased fro$ Rs/11115/<1 crores to Rs/31531/24 crores Tota! s'are ca%ita! a!so contributed to t'is increase as it increased fro$ Rs/&</88 crores to Rs/<3/31 crores/ RS9( Ltd/ 'ad t'e avera)e co$%ounded annua! )rowt' rate i/e/ 13/13 %er cent w'ic' was due to cu$u!ative effect of increase in tota! s'are ca%ita! t'at increased fro$ Rs/1</88 crores to Rs/*5/*& crores and increase in reserves t'at increased fro$ Rs/144/35 crores to Rs/241/*& crores/ #o$%ounded annua! )rowt' rate of ;ravity India Ltd was just 3/13 %er cent w'ic' was due to increase in tota! s'are ca%ita! w'ic' increased fro$ Rs/&/<< crores to Rs/</55 crores/ T'is effect was furt'er decreased due fa!! in reserves of t'e fir$ t'at decreased fro$ Rs/3/2* crores to Rs/1/,< crores/

31

"3'39 $ro=th in $ross Profit Dears #o$%any RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ (arB (arB 53 54 (arB 5& (arB 5* (arB 5, 1</&8 &8/2, *1/& 112/2, 1<8/4 5/,3& 5/*,2 5/853 5/481 5/&31 1&8/&3 1&&/<, 1,1/8& 2<8/4& 423/83 2&/8, 41/3< <,/,& 34/8& <</5, 1,/,* 18/<2 2,/3& 41/8, *,/&3 #0;R 3in J6 &8/<1 A*/35 21/,4 35/81 35/*2

;ross %rofit is si$%!y t'e e cess of net sa!es over cost of )oods so!d/ 0s s'own in t'e tab!e 4/41 RS9( Ltd/ a re!ated diversifier 'ad !ar)est co$%ounded annua! )rowt' rate

32 of )ross %rofit i/e/ &8/<1 %er cent s'owin) )ood sa!es by t'e fir$ durin) t'e %eriod of study/ T'is rise in )ross %rofit was $ain!y due to increase in net sa!es of t'e fir$ w'ic' rose fro$ Rs/44&/<1 crores in t'e year 2552A53 to Rs/11542/55 crores in t'e year 255*A5,/ t'is increase was furt'er en'anced due to decrease in ot'er $anufacturin) e %enses of t'e fir$ w'ic' decreased fro$ Rs/1,/1& crores to Rs/11/2& crores T'is effect of increase in sa!es and decrease in ot'er $anufacturin) e %enses was reduced to so$e e tent due to increase in cost of )oods so!d as raw $ateria!s cost increased fro$ Rs/24</12 crores to Rs/*35/82 crores/ "ower and fue! cost a!so increased fro$ Rs/4</42 crores to Rs/11</52 crores/ ?$%!oyee cost increased fro$ Rs/3*/,4 crores in t'e year 2552A53 to Rs/,8/2< crores in t'e year 255*A5,/ T'e co$%ounded annua! )rowt' rate of -o$bay Rayon @as'ions Ltd/1 a non diversifier was 35/81 %er cent due to increase in net sa!es fro$ Rs/4,/<1 crores to Rs/48</3< crores and subse8uent!y t'ere was an increase in cost of )oods %roduced w'ic' reduced t'e effect of increase in sa!es/ #ost of raw $ateria!s increased fro$ Rs/2,/** crores to Rs/348/,8 crores w'ic' is a considerab!e a$ount/ T'ere was a!so an increase in e$%!oyee cost t'at increased fro$ Rs/5/4& crores to Rs/34/1* crores and ot'er $isce!!aneous e %enses a!so increased fro$ Rs/13/81 crores to Rs/2</&8 crores in t'e %eriod of study/ 0!%s Industries Ltd/Es co$%ounded annua! )rowt' rate was 35/*2 %er cent due to increase in net sa!es t'at increased fro$ Rs/131/8, crores to Rs/42</14 crores/ Si$u!taneous!y t'ere was a!so an increase in t'e cost of )oods so!d w'ic' reduced t'e effect of increase in sa!es on )ross %rofit/ Raw $ateria!s cost increased substantia!!y fro$ Rs/8</*2 crores to Rs/31&/88 crores 1 %ower and fue! cost increased fro$ Rs/4/1, crores to Rs/1,/8< crores1 e$%!oyee cost increased fro$ Rs/8/*4 crores to Rs/21/34 crores and ot'er $anufacturin) e %enses increased fro$ Rs/4/82 crores to Rs/12/3, crores in t'e five year ti$e %eriod/

33 0ditya -ir!a Nuvo Ltd/Es co$%ounded annua! )rowt' rate was 21/,4 %er cent s'owin) an increase in )ross %rofit due to increase in net sa!es w'ic' increased substantia!!y fro$ Rs/11443/82 crores to Rs/3/425/,* crores/ Subse8uent!y1 t'ere was considerab!e increase in direct costs i/e/ cost of raw $ateria!s increased fro$ Rs/,34/58 crores to Rs/11<1,/13 crores/ "ower and fue! cost a!so increased fro$ Rs/<*/&2 crores to Rs/333/,& crores1 e$%!oyee cost increased fro$ Rs/123/12 crores to Rs/1<3/22 crores and ot'er $anufacturin) e %enses increased fro$ Rs/&8/8* crores to Rs/153/4* crores in t'e five year ti$e %eriod/ ;ravity India Ltd/ 'ad ne)ative co$%ounded annua! )rowt' rate i/e/ A*/35 %er cent because t'e increase in cost of )oods so!d e ceeded t'e increase in net sa!es w'ic' reduced t'e )ross %rofit of t'e fir$/

"3'3; $ro=th in ,ividends (arB 53 RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ 2/3< 5/5* 22/4& 1 5/31 (arB 54 4/3< 5/5< 23/<& 1 5/33 Dears (arB 5& 4/82 5/5< 23/<& 1 1/51 (arB 5* */<4 5 41/,& &/< 1/22 #0;R 3in J6 (arB 5, */<& 23/85 5 A155/55 &1/32 1,/<8 8/88 &4/,, 2/&< &2/8<

#o$%any

S'are'o!ders are t'e rea! owners of a co$%any and t'ey are interested in rea! sense in t'e earnin)s distributed and %aid to t'e$ as dividends/ 0s s'own in t'e tab!e 4/&1 durin) t'e %eriod of study -o$bay Rayon @as'ions Ltd/ 'ad t'e 'i)'est co$%ounded annua! )rowt' rate in dividends i/e/ &4/,, %er cent as dividend %aid by t'e co$%any rose fro$ Rs/5/55 crores to Rs/,/88 crores 3in t'e above

34 tab!e inde one 'as been ta.en for t'e dividends %aid in year 2552A53 t'at were Rs/5/55 crores6 0!%s Industries Ltd/ 'ad t'e second 'i)'est co$%ounded annua! )rowt' rate of dividends %aid t'at increased fro$ Rs/5/31crores to Rs/2/&< crores/ RS9( Ltd/Es co$%ounded annua! )rowt' rate was 23/85 %er cent1 ne t was t'e 0ditya -ir!a Nuvo Ltd wit' 1,/<8 %er cent co$%ounded annua! )rowt' rate of dividends/ ;ravity India Ltd 'ad A155/55 %er cent co$%ounded annua! )rowt' rate as a!t'ou)'1 t'e co$%any %aid dividends in initia! years but in year 255&A5* and 255*A5, t'e fir$ did not %ay any dividends and 'ad ne)ative annua! )rowt' rate/

"3'3" $ro=th in 2eturn on Ca>ita7 -m>7oyed (arB 53 RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ 2/8 2/84 </43 1&/,1 4/<< (arB 54 &/4 2/*2 </<1 */*, &/2& Dears (arB 5& 3/&2 2/&8 ,*/*1 5/14 8/4< (arB 5* 4/* 2/22 &/<1 5/58 &/38 (arB 5, 4/5< 2/,8 4/1< 5/5, &/13

#o$%any

T'is is one of t'e $ost i$%ortant ratios used for $easurin) t'e overa!! efficiency of a fir$/ 0s s'own in t'e tab!e 4/*1 a re!ated diversified co$%any RS9( Ltd/Es return on ca%ita! e$%!oyed s'ows a f!uctuatin) trend as initia!!y it increased fro$ 2/8 %er cent to &/4 %er cent and t'en dec!ined to 3/&2 %er cent1 a)ain it rose to 4/* %er cent and t'en decreased to 4/5< %er cent/ Loo.in) at t'e overa!! trend durin) t'e %eriod of study it increased fro$ 2/8 %er cent to 4/5< %er cent t'us s'owin) an efficient use of s'are'o!derEs ca%ita! w'ic' was $ain!y due to rise in sa!es revenues of t'e fir$ /

3& ;ravity India Ltd/ w'ic' is an unre!ated diversifier1 initia!!y 'ad increase in its return on ca%ita! e$%!oyed fro$ 2/84 %er cent to 2/*2 %er cent s'owin) a %rofitab!e initia! %eriod but !ater on t'is va!ue decreased to 2/22 %er cent and fina!!y it a)ain decreased to 2/,8 %er cent/ T'e $ain cause of dec!ine in %rofitabi!ity of t'e fir$ was decrease in fir$Es net %rofit due to ado%tion of fau!ty strate)ies/ 0!t'ou)' t'e co$%any s'owed very )ood %erfor$ance in t'e $idd!e ti$e %eriod but t'ere was an overa!! decrease in 0ditya -ir!a Nuvo Ltd/Es return on ca%ita! e$%!oyed t'at dec!ined fro$ </43 %er cent to 4/<1 %er cent in five year ti$e %eriod/ 0 non diversifier 0!%s Industries s'owed increase in return on ca%ita! e$%!oyed fro$ 4/<< %er cent to &/13 %er cent s'owin) overa!! increase in %rofitabi!ity condition and efficient use of s'are'o!derEs ca%ita!/ In t'e $id if t'e ti$e %eriod co$%any s'owed its best %erfor$ance as it 'ad 8/4< %er cent return on ca%ita! e$%!oyed t'at .e%t on dec!inin) towards t'e end of t'e ti$e %eriod/ 0not'er non diversifier -o$bay Rayon @as'ions Ltd/ s'owed inefficient use of ca%ita! as its return on ca%ita! e$%!oyed dec!ined considerab!y fro$ 1&/,1 %er cent to 5/5, %er cent in t'e year 2552A53 to 255*A5, res%ective!y/

3*

"3'3? $ro=th in 2eturn on +et 5orth (arB 53 RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ &/32 &/3 8/<< 5/3 </5& (arB Dears (arB (arB

#o$%any

54 5& 5* (arB 5, 15/2& </24 15/1 14/4< 4/88 4/, 3/,* 3/8< 15/3* 8/3< 8/4, ,/2 5/2& 5/1* 5/1< 5/11 8/*< 18/21 </* 11/53

Si$i!ar as return on ca%ita! e$%!oyed t'is ratio a!so revea!s 'ow we!! t'e resources of fir$ are bein) used/ 0s t'e tab!e 4/, s'ows1 t'e increase in return on net wort' of RS9( Ltd/ t'at increased fro$ &/32 %er cent in year 2552A53 to 14/4< %er cent in t'e year 255*A5,/ T'is s'ows t'at fir$ efficient!y used its resources durin) t'e %eriod of study/ ;ravity India Ltd/ s'owed )radua! dec!ine in its va!ue of return on networt' fro$ &/3 %er cent to 3/8< %er cent1 s'owin) t'e dec!ine in %rofitabi!ity of t'e fir$ due to dec!ine in its net %rofits/ 0ditya -ir!a Nuvo Ltd/ s'owed f!uctuatin) trend as it initia!!y its return on net wort' increased fro$ 8/<< %er cent to 15/3* %er cent and t'en .e%t on decreasin) ti!! t'e end ti$e %eriod/ 0!t'ou)' t'e net %rofit of t'e fir$ was increasin)

3, durin) t'is ti$e %eriod t'e dec!ine was due to re!ative!y !ar)er increase in t'e net wort' of t'e fir$/ 0$on) t'e undiversified fir$s 0!%s Industries Ltd/ s'owed $ar)ina! increase in its return on net wort' fro$ </5& %er cent to 11/53 %er cent w'ereas1 -o$bay Rayon @as'ions Ltd/E return on net wort' dec!ined fro$ 5/35 %er cent to 5/11 %er cent/ T'us1 s'ows inefficient use of resources by t'e fir$/ "3'3@ $ro=th in $ross Profit 2atio (arB 53 RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ & 4/88 15/<8 &/4 11/5* (arB 54 3/&* 3/,4 </<1 8/18 15/21 Dears (arB 5& 4/3 3/,& </21 </41 13/28 (arB 5* &/44 2/4< 11/28 1&/&* 14/5& (arB 5, &/,, 1/&< 12/3< 1*/** 12/34

#o$%any

;ross %rofit ratio s'ows t'e efficiency wit' w'ic' t'e fir$ %roduces its %roducts/ 0s s'own in t'e tab!e 4/81 )ross %rofit ratio of RS9( Ltd/ 3re!ated diversifier6 increased fro$ &/55 %er cent to &/,, %er cent/ T'us1 fir$ was efficient!y %roducin) its %roducts/ ;ravity India Ltd/ an unre!ated diversifier s'owed dec!ine in its )ross %rofit ratio fro$ 4/88 %er cent to 1/&< %er cent as its )ross %rofit is dec!ine in t'is ti$e %eriod/ 9'ereas t'e ot'er unre!ated diversifier 0ditya -ir!a Nuvo Ltd/ s'owed increase in its )ross %rofit ratio fro$ 15/<8 %er cent to 12/3< %er cent due to increase in its )ross %rofit/ -ot' t'e non diversifiers s'owed increase in t'eir )ross %rofit ratios t'us s'owin) t'at t'e fir$s are fo!!owin) a %rofit $a.in) strate)y/ -o$bay Rayon @as'ions Ltd/Es )ross %rofit ratio increased considerab!e fro$ &/4 %er cent to 1*/** %er cent and t'at of 0!%s Industries Ltd/Es increased fro$ 11/5* %er cent to 12/34 %er cent in t'e five year ti$e %eriod/

38

"3'3A $ro=th in O>erating 2atio (arB (arB Dears (arB (arB

#o$%any RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/

53 54 5& 5* (arB 5, 14/4, 15/32 </5< </<3 15/31 8/22 */&3 */58 &/13 3/14 1&/*, 14/84 13/38 1&/& 1&/<1 */4, </3& 11/22 1,/54 18/,< 14/,& 13/&8 1*/44 1*/88 1&/4*

O%eratin) ratio $easures t'e cost of o%erations %er ru%ee of sa!es/ Gi)'er t'e o%eratin) ratio1 t'e !ess favourab!e it is1 because1 it wou!d 'ave s$a!! $ar)in 3o%eratin) %rofit6 to cover t'e interest1 inco$e ta 1 dividends and reserves/ 0s s'own in t'e tab!e 4/<1 t'e o%eratin) ratio of RS9( Ltd/ dec!ines fro$ 14/4, %er cent to 15/31 %er cent t'us s'owin) a %rofitab!e condition as it s'ows t'at cost of o%erations %er ru%ee of sa!e of t'e fir$ )oes on dec!inin)/ ;ravity India Ltd/ a!so s'owed decrease in t'e ratio t'us1 s'owin) a %rofitab!e condition but t'e ot'er unre!ated diversifier1 0ditya -ir!a Nuvo Ltd/ s'owed o%%osite trend as its ratio .e%t on increasin)/ Its va!ue increased $ar)ina!!y fro$ 1&/*, %er cent to 1&/<1 %er cent/ -ot' t'e undiversified co$%anies s'owed increasin) trend in o%eratin) ratio t'us t'ey were unab!e to reduce t'eir o%eratin) costs wit' t'e increase in sca!e of o%erations/

3< "3'3!( $ro=th in +et Profit ratio (arB 53 RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ 1/<2 3/2, ,/14 2/28 3/<2 (arB 54 2/8, 2/*2 8/22 3/&* 3/** Dears (arB 5& 2/48 2/2 */54 */83 ,/<3 (arB 5* 2/,8 2/52 */<, </58 </54 (arB 5, 4/1, 1/2* */4, 15/<< ,/51

#o$%any

Net %rofit ratio indicates t'e efficiency of $ana)e$ent in $anufacturin)1 se!!in)1 ad$inistrative and ot'er activities of t'e fir$/ 0s t'e tab!e 4/141 s'ows increase in net %rofit ratio of RS9( Ltd/ fro$ 1/<2 %er cent to 4/1, %er cent due to increase in its net %rofits fro$ Rs/8/,4 crores to Rs/44/5, crores/ Net %rofit ratio of ;ravity India Ltd/ decreased fro$ 3/2, %er cent to 1/2* %er cent due to decrease in net %rofit of 'e fir$/ Net %rofit ratio of 0ditya -ir!a Nuvo Ltd/ a!so decreased fro$ ,/14 %er cent to */4, %er cent1 a!t'ou)'1 its net %rofit rose fro$ Rs/15&/33 crores to Rs/224/<, crores/ T'is dec!ine was due to subse8uent !ar)er increase in sa!es t'at rose fro$ Rs/11443/82 crores to Rs/31425/,* crores durin) t'e %eriod of study/ 0!%s Industries Ltd/Es net %rofit ratio increased fro$ 3/<2 %er cent to ,/51 %er cent due to increase in its net %rofit t'at rose fro$ Rs/&/18 crores to Rs/35/3& crores/ -o$bay Rayon @as'ions Ltd/ s'owed a considerab!e increase i/e/ 2/28 %er cent to 15/<< %er cent due to increase in net %rofit fro$ Rs/1/15 crores to Rs/&4/41 crores/

"3'3!! $ro=th in Cash Profit 2atio (arB 53 (arB 54 Dears (arB 5& (arB 5* (arB 5,

#o$%any

45 RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ 11/52 */84 12/18 3/4< </58 8/84 &/* 11/38 4/84 8/42 ,/*2 &/28 15/4< 8/84 12/28 ,/31 4/<& 15/*3 15/,1 12/43 */<3 2/<1 8/42 12/84 15/&

0s s'own in t'e tab!e 4/111 cas' %rofit ratio of re!ated diversifier1 RS9( Ltd/ is decreasin) fro$ 11/52 %er cent to */<3 %er cent t'us s'owin) a decrease in cas' )enerated fro$ t'e sa!es of t'e fir$/ Si$i!ar!y in case of bot' t'e unre!ated diversifiers i/e/ ;ravity India Ltd/ and 0ditya -ir!a Nuvo Ltd/1 cas' %rofit ratio was dec!inin) t'us s'owed t'e dec!ine in cas' %rofits of bot' t'e fir$s/ T'e non diversified co$%anies s'owed increase in cas' %rofits as t'e cas' %rofit ratio of -o$bay Rayon @as'ions Ltd/ increased considerab!y fro$ 3/4< %er cent to 12/84 %er cent and cas' %rofit ratio of 0!%s Industries Ltd/ increased fro$ </58 %er cent to 15/& %er cent/

"3'3!' $ro=th in -arning >er Share #o$%any RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ (arB 53 4/3< 5/82 1,/&< 15/<, ,/4* (arB 54 </2 5/,8 21/<2 3/*1 8/34 Dears (arB 5& 8/38 5/&2 18/<< 2/2 21/52 (arB 5* 11/, 5/43 31/21 3/,1 14/*4 (arB 5, 1</54 5/43 24/11 8/*4 </33

41 0s s'own in t'e tab!e 4/121 RS9( Ltd/Es earnin) %er s'are is increasin) fro$ Rs/4/3< to Rs/1</54 as its nets %rofit increased fro$ Rs/8/,4 crores to Rs/44/5& crores and t'e nu$ber of s'ares increased fro$ 1<8/84 !acs to 231/4< !acs1 t'e effect of increase in dividends %aid was ne)!i)ib!e/ 0ditya -ir!a Nuvo Ltd/Es earnin) %er s'are increased fro$ Rs/1,/&< to Rs/24/11 due to increase in net %rofit fro$ Rs/15&/33 crores to Rs/224/<, crores and nu$ber of s'ares increased fro$ &<8/,, !acs to <33/5& !acs/ ;ravity India Ltd/Es earnin) %er s'are decreased fro$ Rs/5/82 to Rs/5/43 as its net %rofit dec!ined fro$ Rs/5/<< crores to Rs/5/<4 crores and nu$ber of s'ares increased fro$ *5/51 !acs to <5/52 !acs/ ?arnin) %er s'are of 0!%s Industries Ltd/ increased fro$ Rs/,/4* to Rs/</33 due to increase in net %rofit t'at rose fro$ Rs/&/18 crores to Rs/35/3& crores1 t'is effect was reduced as t'e increase in nu$ber of s'ares was !ar)er t'at rose fro$ *1/<< !acs to 32&/14 !acs/ -o$bay Rayon @as'ions Ltd/Es earnin) %er s'are decreased fro$ Rs/15/<, to Rs/8/*4 due to re!ative!y !ar)er increase in nu$ber of s'ares issued fro$ *1/<< !acs to 32&/14 !acs in t'e five year ti$e %eriod/

"3'3!* $ro=th in Market Va7ue of Share #o$%any RS9( Ltd/ ;ravity 3India6 Ltd/ 0ditya -ir!a Nuvo Ltd/ -o$bay Rayon @as'ions Ltd/ 0!%s Industries Ltd/ (arB 53 1</,& 13/* <3/<3 */*& 14/8 (arB 54 3&/&3 18/13 1,3/** 12/8& 18/,8 Dears (arB 5& ,1/48 14/38 311/*, 23/3 3&/3< (arB 5* 118/23 12/53 &&2/23 4,/53 *</5& (arB 5, 11&/<8 </<8 <<*/<3 35/38 88/,&

(ar.et va!ue is t'e %rice of s'are of t'e fir$ in security $ar.ets/ 0s s'own in t'e tab!e 4/14 0ditya -ir!a Nuvo Ltd/ 'ad t'e !ar)est increase in $ar.et va!ue as its $ar.et va!ue increased substantia!!y fro$ Rs/<3/<3 to Rs/<<*/<3/ 0!%s Industries Ltd/

42 and RS9( Ltd/ s'owed t'e avera)e $ove$ent in $ar.et %rices/ -o$bay Rayon @as'ions Ltd/Es $ar.et va!ue increase fro$ Rs/*/*& to Rs/35/38 in t'e five year ti$e %eriod/ ;ravity India Ltd/ s'owed a dec!ine in its avera)e $ar.et va!ue fro$ Rs/13/* to Rs/</<8/

C/0P1-2 ? SUMM02& 0+, CO+C4USIO+S T'e researc' %roject O+iversification strate)ies and financia! %erfor$ance7 a study of te ti!e industryE was underta.en wit' t'e fo!!owin) objectives7 16 To identify various diversification strate)ies fo!!owed by t'e co$%anies/ 26 To ana!yse financia! %erfor$ance of t'e co$%anies c!assified on t'e basis of t'eir diversification strate)ies/ T'e te ti!e co$%anies for t'e %ur%ose of study were ta.en fro$ t'e website of IndiaA bu!!s Securities Li$ited/ T'e study was carried out for five years %eriod fro$ 2552A53 to 255*A5,/ On!y t'ose co$%anies were c'osen for t'e study w'ic' diversified eit'er into a re!ated sector or an unre!ated sector/ T'e se!ected co$%anies were t'en

43 c!assified accordin) to t'eir diversification strate)y I Rajast'an S%innin) and 9eavin) (i!!s Ltd/ 3re!ated diversifier61 ;ravity India Ltd/ 3unre!ated diversifier61 0ditya -ir!a Nuvo Ltd/ 3unre!ated diversifier61 -o$bay Rayon @as'ions Ltd/ 3non diversifier61 0!%s Industries Ltd/ 3non diversifier6/

?3! Findings of the study Te ti!e sector is )rowin) at very fast %ace since !ast few decades due to increasin) de$and and ra%id!y c'an)in) trends/ 0!$ost a!! t'e sa$%!e co$%anies s'owed %ositive )rowt' rates/ 16 -o$bay Rayon @as'ions Ltd/ w'ic' was a non diversifier s'owed t'e $a i$u$ )rowt' rate of tota! assets w'ic' was $ain!y due to increase in its tota! current assets/ It a!so 'ad t'e !ar)est )rowt' rate of net sa!es w'ic' furt'er !eads to increase in )ross %rofit of t'e fir$ w'ic' was a!so !ar)est for -o$bay Rayon @as'ions Ltd/ and ;ravity India Ltd/ s'owed !owest )rowt'/ 26 -o$bay Rayon @as'ions Ltd/ 'ad t'e !ar)est )rowt' rate of net wort' w'ic' was $ain!y due to increase in reserves and e8uity s'are ca%ita! of t'e fir$ durin) t'e %eriod of study and ;ravity India Ltd/ s'owed t'e !owest )rowt'/ 36 -o$bay Rayon @as'ions Ltd/ 'ad t'e 'i)'est co$%ounded annua! )rowt' rate in dividends and ;ravity India 'ad t'e !owest )rowt' as co$%any did not %ay dividends in t'e !ater %eriod of t'e study/ 46 RS9( Ltd/ s'owed an increasin) trend for return on ca%ita! e$%!oyed and return on net wort'/ 9'ereas1 0ditya -ir!a Nuvo Ltd/ s'owed a !ar)est dec!ine in t'e return on ca%ita! e$%!oyed and -o$bay Rayon @as'ions Ltd/ s'owed !ar)est dec!ine in return on net wort'/

44 &6 0ditya -ir!a Nuvo Ltd/ 'ad t'e stron)est $ar.et %osition durin) t'e %eriod of study/ *6 0ccordin) to )ross %rofit ratio1 o%eratin) ratio1 net %rofit ratio and cas' %rofit ratio fi)ures for t'e five years -o$bay Rayon @as'ions Ltd/ is t'e best %erfor$er and ;ravity India was t'e worst %erfor$er/ ,6 Ma!ue of coefficient of variation s'owed t'at 0ditya -ir!a Nuvo Ltd/ is t'e $ost ris.y of a!! co$%anies and ;ravity India Ltd/ is t'e !east ris.y co$%any/ 86 Overa!!1 it was found t'at non diversified co$%anies s'owed better financia! %erfor$ance and unre!ated diversifiers s'owed t'e worst financia! %erfor$ance durin) t'e %eriod of study/

?3' Suggestions 16 It 'as been seen fro$ t'e researc' t'at co$%anies !i.e 0!%s Industries Ltd/ and -o$bay Rayon @as'ions Ltd/ t'at did not diversify durin) t'e %eriod of study %erfor$ed best/ So1 it is su))ested t'at diversification does not necessari!y i$%rove t'e %erfor$ance of t'e co$%anies/ #o$%anies s'ou!d %ro%er!y scan t'e $ar.ets and t'eir own resources before )oin) for diversification/ 26 It was a!so seen t'at re!ated diversifiers %erfor$ better t'an unre!ated diversifiers due to o%erationa! and functiona! syner)ies/ T'erefore1 co$%anies s'ou!d %refer to diversify in re!ated business/

4& 36 9'i!e ado%tin) any diversification strate)y1 co$%any s'ou!d .ee% in $ind t'eir core co$%etencies/

?3* Sco>e for further research T'e %erfor$ance of t'e co$%any can be furt'er e %!ained by considerin) t'e as%ects ot'er t'an financia! as%ects/ T'e %resent study was a s'ort ter$ study due to ti$e constraint/ Researc' can be furt'er %ursued for !on)er %eriod to eva!uate t'e !on) ter$ effect of diversification strate)ies on fir$sE %erfor$ance/ T'is researc' was done on te ti!e sector on!y/ @urt'er researc' can be done on different industria! sectors or an overa!! sector wise study can be done to .now t'e i$%act of diversification on different sectors/

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-oswort' +1 +aw.ins "1 Garris ( and 4e!!s S 31<<,6 +iversification and t'e %erfor$ance of 0ustra!ian enter%rises/ +el3ourne :nstitute Wor,in) Pa!er '@/ www.#el3ourneinstitute..o#1w!1w!1''%n2&.!df/

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4, #o!%an I ( and Gi.ino T 3255&6 #'an)in) econo$ic environ$ents1 evo!vin) diversification strate)ies and differin) financia! %erfor$ance7 La%anEs !ar)est te ti!e fir$s1 1<,5A2551/ :ndustrial and .or!orate .han)e !97 8<,A<45/

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