Vardhman Group

Rooted in Values, Creating World Class Textiles

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Overview of the Presentation

Brief Snapshot of Vardhman Group Business-wise Analysis Financial Performance Strategic Direction Corporate Social Responsibility Market Performance

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Vardhman Group
Incorporated in 1965 under the leadership of Mr. S.P. Oswal One of the largest integrated textile houses in the country with a turnover of over $700 million and a workforce of more than 23,000 employees One of the largest installed capacity in spinning in India at 800,000 spindles Amongst the largest Yarn producer in India Amongst the largest manufacturer & exporter of Cotton Yarn from India One of the largest consumers of raw cotton in the country Market Leader in Hand Knitting Yarn Second largest producer of Sewing Threads One of the leading integrated fabric producer Highest quality acrylic manufacturer of the country High economies of scale due to integrated operations and large cotton inventory holding capacity

VALUE ADDITION THROUGH SUPPLY CHAIN The unique business model of the company having presence in entire value chain from Fibre (acrylic) to Fabric gives it flexibility in down turn and advantages over competitors to rise in upturn of the industry cycle

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Group Snapshot
Vardhman Holdings Limited (VHL)
Year of Commencement Business Revenue (Rs.Mln) Market Status 1965 Investment & Financing 93 Listed on BSE, NSE ISIN Code: INE701A01023 Stake 26.66%

Vardhman Textiles Limited (VTEX)

1973 Yarn, Fabric, Steel 24,954 Listed on BSE, NSE ISIN Code: INE825A01012

Vardhman Yarns & Threads Ltd (VYTL)

Stake Business Capacity Revenue (Rs.Mln) Collaborations Market Status 51% RMG / Industrial / Speciality Threads 33 tpd Threads 60k spindles (captive) 3,324 J.V with A&E, USA Unlisted

VMT Spinning Co. Limited (VMT)

73% 100% Cotton Yarn 45,872 spindles 1,010 JV with Marubeni & Toho Rayon, Japan Unlisted

Vardhman Acrylics Limited (VAL)

59% Acrylic Staple Fibre 60,400 tpa 2,539 Listed on NSE ISIN : INE116G01013

VTL Investments Ltd

100% NBFC N.A 37 Unlisted

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Major Alliances...Partnering with Global Players

Fibre and Yarn Dyeing Gassed Mercerized Yarns Cotton Yarns Acrylic Fibre (ended in 2009) Fabric Dyeing & Finishing Sewing Threads Cotton Yarns Cotton Fabric Garments NIHON SANMO, JAPAN KYUNG BANG, SOUTH KOREA TOHO RAYON, JAPAN EXLAN AND MARUBENI CORP, JAPAN TOKAI SENKO, JAPAN AMERICAN & EFIRD (A&E) INC USA NISSHINBO, JAPAN NISSHINBO, JAPAN NISSHINBO, JAPAN 1992 1994 1995 1996 1998 2001 2002 2007 2009

Major Export Destinations

USA, EU, Australia, Canada, China, Egypt, Mauritius, Hong Kong, Indonesia, Israel, Italy, Japan, Korea, Malaysia, Singapore, U.K.

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Group Capacities
Yarn - Spindles (Mln)
0.75 0.51 0.40 0.39 0.50
16

0.87

Sewing Thread (Tons per day)

0.79 0.59
19 19 25

33 30

33

33

1998

2000

2002

2006

2007

2008

2009

2010 (E)
1998 2000 2002 2006 2007 2008 2009 2010(E)

Greige Fabric - Looms (No.)

810

900

900

Processed Fabric (Mln Mtrs pa)

82 82 82

42

432 208

460
15 0

30 20

144

160

1998

2000

2002

2006

2007

2008

2009

2010(E)

2007 2002 2006 1998 2000

2010 2008 2009 (E)

Other Capacities:

Dyeing-Tpd Mercerization-Tpd Acrylic Fibre-Tpa Steel-Mtpa

1998 25.50 1.70 16,500 65,000

2000 34.50 5.00 16,500 40,000

2002 52.00 6.75 16,500 40,000

2006 55.00 6.75 16,500 80,400

2007 55.00 8.00 18,000 80,400

2008 55.00 8.50 18,000 80,400

2009 55.00 10.00 18,000 80,400

2010 (E) 55.00 10.00 18,000 80,400

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Business-wise Analysis

Brief Snapshot of Vardhman Group Business-wise Analysis Financial Performance Strategic Direction Corporate Social Responsibility Market Performance

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Business - Yarn
Largest spinning capacity in the country with > 0.87 mln spindles 12 production plants located in the states of Punjab, Himachal Pradesh and Madhya Pradesh Technical tie-ups with the world leaders from Switzerland, Germany, Japan and Korea Amongst the largest exporter of yarn from India. The total export of the group is about 5% of total export of cotton yarn from the country Virtually a Supermarket for Yarn with a wide range of specialized grey, dyed, & a variety of blended yarns

Yarn - The journey so far.

14,000 spndls

Grey Carded Grey Combed

Auto-Coned

Branding of Carded Yarn

Blends (Acrylic, P/C, A/C)

Yarn Dyed

Melange (Rangoli)

Gas Mercerised

Compact / Contamination Controlled

Lycra

Organic Fair Trade

Vortex (MVS)

> 0.87 million spndls

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Yarn : De-risking the Revenue Model

De-risking by Value Addition
Value Added Products Compact Yarn Fibre Dyed Cotton Lycra Gas Mercerised Melange Yarn Fancy Yarns Cotton Dyed Slub Yarns PC Yarn Dyed Acrylic Yarns Yarn Dyed Hand Knitted Yarns

Melange

Slub Yarns

Compact

Cotton Lycra Yarn

Gas Mercerised

Hand Knitted yarns

Fancy Yarns

De-risking by Specialization

Specialized Products Cotton Lyocell Cotton Silk Cotton Bamboo Cotton Modal Cotton Tencel Cotton Viscose
Cotton Bamboo

Cotton Silk

Environment Friendly Yarns

Environment Friendly Products Organic Cotton Fair Trade Yarn Contamination Free Yarn
Organic Cotton yarn

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Changing Spreads in Cotton Yarns

4 3 3

Avg Cotton Prices Avg Yarn Prices (30s CH) Spread 1.0

1.2
1 1 1 1

($ per kg)

2 2

0.66
1 1 0
Jun06 Dec06 Jun07 Dec07 Jun08 Dec08 Jun09 Dec09

0 0 0

($ per kg)

Spread over Cot-A Index ($/kg)

1 40 1 20

53.01

Avg Cotton Prices Avg Yarn Prices (30s CH) 56.80 Spread

60 50 40

(Rs. per kg)

Spread over Indian Cotton (Rs./kg)

1 00 80 60 40 20 0
Jun06 Dec06 Jun07 Dec07 Jun08 Dec08 Jun09 Dec09

34.77

30 20 1 0 0

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(Rs. per kg)

Business - Fabric
Continuing its onward march on the value curve, the group entered Fabric business in 1992 with Greige (unprocessed) Fabric Entered the Processed Fabric market in 1999 Current capacity 900 Looms & 82 million meters of processed fabric. One of the few fully integrated fabric suppliers in the country Dedicated to product innovation, world class quality, state-of-art technology and excellence in service Produces fabrics for both tops (shirting) & bottom weights (trousers/pants) for the apparel segment Making specialized fabrics like
Yarn Dyed, Special White, Melanges, Nylon, Modal & Linen.

Doing specialized finishes like

Teflon / Nanocare (oil & water repellent), ETI etc.

Supplier of Fabric to Top of the Line customers

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Changing Proportion of Fabric Sales

Segment-Wise Sales
Other Exports
50% 40% 30%
19%

Process-Wise Sales
Brands Buying Houses
42% 39% 35% 30% 31% 37%

RM G Exports
70% 60% 50% 40%
17% 17%

Full Bleach
68%

RFD
60%

Yarn Dyed
65%

Piece Dyed
63%

Distributors
41% 35%

20% 10% 0%

30%
19%

14% 6% 4% 7% 6%

20%
7% 4% 7% 4%

9% 10%

13%

12%

9%

14% 10% 11%

16% 9% 12%

10% 0% 2006-07 2007-08 2008-09 2009-10 (Est.)

2006-07

2007-08

2008-09

2009-10 (Est.)

Full Bleach : Special whites Ready for Dyeing : For Prints & Garment Dyeing Yarn Dyed : Yarn is first dyed and then converted to fabric Piece Dyed : Fabric is manufactured first and then dyed

Buying Houses: Associated with International Labels, engaged in the sourcing & merchandising activity for them. Usually result in higher margins for fabric suppliers. Distributors: Works for a number of smaller brands / garmenters and places a collective larger order. RMG Exports: fabric can be sold directly to the vendor factory Brands: fabric supplied to prestigious Indian Brands like Madura Garments (Indian Rayon), Color Plus, Raymonds, Zodiac etc Other Exports: To Customers & Buying houses operating overseas which source fabric for vendors factories that are outside India

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Business - Sewing Thread

The Group entered Thread business in 1982 as a forward integration to its Yarn business. Current capacity 33 tpd in 4 plants at Punjab, Tamil Nadu & Himachal Pradesh. In 2002, joined hands with American & Efird, Inc. USA (A&E) for manufacturing & distribution of A&E branded sewing threads in India. Spun off the Threads business into a new company (Vardhman Yarns & Threads Ltd) in 2007 and entered into a 51:49 Joint Venture with A&E. The second largest brand of specialized threads in the country. A wide product range, which includes:
Apparel Sewing Threads Specialty Threads Textile Crafts Embroidery Threads Kite Flying Threads Tea Bags Cosmetic Threads Industrial Threads

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Business - Acrylic Fibre

Ventured into manufacture of Acrylic Staple Fibre in 1999 - Vardhman Acrylics Limited The plant was set up in Gujarat, in collaboration with Marubeni & Japan Exlan of Japan. Current Capacity 18,000 mtpa World class wet spun technology with highly automated, microprocessor controlled systems Products are marketed under the brand name VARLAN It is used in manufacturing of hand knitted yarns, blankets, jerseys, sweater, saris, upholstery, carpets etc.

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Business - Steel
Started Steel business in 1972 as a diversification strategy, with capacity of 35,000 mtpa. Subsequently capacity has been expanded to 100,000 mtpa. Caters to high technology quality conscious special & alloy steel segment Application of products in automotive components, forging, ball bearings, piston pins, engineering applications, railways, defense etc. Preferred OE supplier to leading OEMs like Telco, Ashok Leyland, Maruti, Hindustan Motors, Toyota, M&M and Escorts among others
Category Commercial Vehicles Cars / Multi Utility Vehicles Two-Wheelers Three-Wheelers Tractors Auto Components Others OEM Tata Motors, Ashok Leyland, Mahindra & Mahindra, Eicher Motors, Swaraj Mazda Maruti Udyog, Toyota, Tata Motors, General Motors, Hindustan Motors, Mahindra & Mahindra Hero Honda, Yamaha, Honda Scooters & Motorcycles, Kinetic, LML Bajaj Tempo HMT, PTL, ITL, Eicher Motors, Escorts, Tractor Engineers, TAFE, L&T John Deere, Mahindra & Mahindra Graziano, Bonfiglioli, Spicer, Dana, Meritor, Arvin Meritor, Isuzu, Shriram Pistons & Rings, India Pistons, Sona Okeygawa, Sona Koyo, Brakes India, Toyota Kirloskar Auto Parts Greaves, Simpson, Siemens India, Caterpillar India, Bharat Earth Movers, Railways

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Financial Performance

Brief Snapshot of Vardhman Group Business-wise Analysis Financial Performance Strategic Direction Corporate Social Responsibility Market Performance

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Group Financials
Vardhman Group
EBIDTA
1000 800 (Mln $) 600 400 200 0 2006 2007 2008 2009 90 95 95 111 510 584 646

Capital Employed
1,000 800

Revenue
749

931 795 613 511

(Mln $)

600 400 200 0 2006 2007 2008

2009

Steel, 8% Fibre, 7% T hread , 10%

Revenue Mix FY 2008-09

Fabric, 20%

Yarn, 55%

Note: Conversion for above data taken @ Rs.47/$

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Business-wise Financials
Yarn Business
EBIDTA
500 400 361 277 300 200 100 0 2006 2007 2008 2009 52 57 60 64 313

Fabric Business
EBIDTA
200

Revenue
416
150

Revenue
146

(Mln $)

(Mln $)

100 50 0

70 11
2006

88

96

10
2007

11
2008

19
2009

Thread Business
EBIDTA
100 80 (Mln $) 60 40 20 0 2006 2007 2008 2009
10 11 11 15 68 73 71 72

Revenue
100 80 (Mln $) 60 40 20 0 3

Fibre Business
EBIDTA Revenue

36 8

46 7

49

54

4 2009

2006

2007

2008

Steel Business
EBIDTA
100 80 (Mln $) 60 40 20 0 2006 2007 2008 2009 11 10 9 9 59 64 70 61

Revenue

Note: Conversion for above data taken @ Rs.47/$

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Strategic Direction

Brief Snapshot of Vardhman Group Business-wise Analysis Financial Performance Strategic Direction Corporate Social Responsibility Market Performance

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Strategic Direction
Yarn
Continuous capacity expansion to maintain customer satisfaction. There is a capital proposal of Rs.2,500 mln currently on the drawing board to increase the spindlage by 55 k taking the total capacity upto 0.93 mln spindles Continuous improvement in capacity utilisations through line balancing Focus on Value Added yarn (compact, blends, core spun, slub, organic etc) Focus on high value customers Focus on diversifying customer base

Fabric
Focus on Value Added products esp. cotton Lycra based fabrics & compact yarn based fabric New project commissioned in M.P. with reduced energy costs & improved logistics Formation of Creative Design Cell for strong thrust on Designing & Product Development Entering new market segments like work wear & OTC Developing new small distributors for high value fabric Strengthening of the RMGE segment Reducing cycle time & reducing lead time Strategic relationship with key exporters Developing yarn dyed shirting market

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Strategic Direction (cont)

Thread
In 2007 entered into a Joint Venture Agreement with American & Efird, Inc. USA in 51:49 ratio, for manufacturing & distribution of A&E branded sewing threads Consolidation of the thread business under Vardhman Yarns & Threads Limited It opens up a possibility of strategic tie-ups or attracting financial investors

Garments
Vardhman has forayed into Garments with a joint venture with Nisshinbo Textile Inc. for production of shirts in Ludhiana, Punjab (India) with Vardhman holding 51% stake. The shirts will be sold in India as well as exported to US, Europe & Japan. Vardhman is producing yarns & fabrics and will perform liquid ammonia processing with technology cooperation from Nisshinbo. Production expected to start from Dec 2010 with 1.20 mln units of which 400,000 will be sold in domestic market. Production slated to increase to 1.80 mln in 2nd year.

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Corporate Social Responsibility

Brief Snapshot of Vardhman Group Business-wise Analysis Financial Performance Strategic Direction Corporate Social Responsibility Market Performance

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Corporate Social Responsibility & Human Development

Sri Aurobindo Socio-Economic and Management Research Institute Sri Aurobindo College of Commerce and Management (One of the leading colleges of management in Ludhiana) Sri Aurobindo Public School Promoter member of Nimbua Greenfield Punjab Limited

Setting up of HRD centers for worker training In House Training and Development Centre for staff and management TQM and TPM Quality Circle, Competitions, Suggestion Scheme Olympiads Workers competition on skills and productivity Regular benchmarking

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Corporate Social Responsibility

Active member of Village Cluster Adoption Program (VCAP) in Punjab to improve the yield of cotton per hectare to match World average (724kg)
Year No of Villages 1 10 25 50 70 No of Farmers 121 2058 2947 5266 6557 Total cultivated area (Acre) 1608 29213 32934 69405 91624 Area under Cotton (Acre) 1241 13445 19185 43324 54099 Yield Achieved (Kg lint/ ha) 800 820 870 965 823 Punjab Yield (Kg lint/ ha) 391 551 641 751 592

2003-04 2004-05 2005-06 2006-07 2007-08

Started the Village Cluster Adoption Program in M.P. as well following the huge success of the same in Punjab. 2 Villages have been adopted so far with 316 farmers and total area under cultivation of 480 acres.

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Market Performance

Brief Snapshot of Vardhman Group Business-wise Analysis Financial Performance Strategic Direction Corporate Social Responsibility Market Performance

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Market Performance (VTXL)

450 400 350 300 250 200 150 100 50 0 2003

2004

2005

2006

2007

2008

2009

Vardhman Textiles Last price Market Cap (Rs mn) 52 Week High 52 Week Low

Rs/share 228.25 13,186 280.95 40.10

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