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Indo Rama Synthetics (I) Ltd.

Analyst Meet Mumbai 21 Oct., 2004

The Meet Highlights


1. Polyester Growth Potential
Opportunities for Polyester in India Demand drivers Edge over other Fibres Conclusion & outlook

2.

Plan to Capitalize on the Opportunity


Expansion project Participation in Global PET business

3.

Indo Rama Performance


Financial Performance Operating performance 2
2

Factors to Stimulate Polyester Growth in India


Polyester Competitively Produced

Edge over Competing Fibres

Polyester Growth Potential

Favourable Demand Drivers

Versatile Product Characteristics


3

Polyester Industry Growth in India The Enablers Polyester Polymer Operating Rates
Adequate availability of Raw Materials (i.e. PTA & MEG)

Long Term View Polyester Industry*

Existence of world scale & world-class production facilities

Source: PCI

* Including PET chips 4

Polyester Capacities Shifting from Taiwan / Korea

Source : PCI
5

Polyester Capacities Shifting to China / India

Source : PCI
6

Demand Drivers for Polyester


Increase in per capita consumption due GDP growth & urbanisation Value added & innovative new product development
Home textiles Geo textiles Auto textiles, etc.
100% 80% 60% 40% 20% 0% 41% World India

3% 4% 43% 16%
93%

Industrial Applications Home Textiles Apprael

Source : Tecoya

Untapped non-apparel sector offering great potential


7
7

Edge Over Competing Fibres


3,000

2,947 2,703 2,811

2,942

2,902

2,888

2,926

Cotton & Cotton & polyester polyester constitute constitute more than more than 90% of total 90% of total fibre fibre consumption consumption in the in the country country

2,500

2,000

1,500

1,343 1,220 1,087

1,352

1,433

1,511

1,614 Polyester Cotton

1,000

500

1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

% share of Polyester % share of Cotton

1997-98 29 71

1998-99 1999-2000 2000-01 30 31 31 70 69 69

2001-02 33 67

2002-03 34 66

2003-04 36 64

% share of polyester consumption continue to increase expected to reach 50% by 2010


8

Summing up on Triggers from Growth


Polyester growth to escalate & remain high Best in Class Indian polyester players will prosper post Jan, 2005 Operating rates in polyester industry in healthy shape Non-apparel use - Major market to exploit

9
9

Factors Limiting the Growth


Unfavorable duty structure for polyester compared to competitive fibres
Earlier Yarn & Fibre - Cotton Yarn - Blended Yarn - PSF - POY/PFY/FDY Fabric - 100% Cotton - Blended - 100% Polyester 9.20% 13.80% 18.40% 28.60% 10.00% 10.00% 10.00% Current 4.08% 8.16% 16.32% 25.50% 4.08% 8.16% 8.16% Duty Reduction 5.12% 5.64% 2.08% 3.10% 5.92% 1.84% 1.84%

Escalating crude prices leading to sharp increase in PTA / MEG costs


Current Margin under pressure Impacting demand growth in the short term
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10

Enablers of Growth for IRSL


Globally PTA & MEG is in short supply
RM supplies to IRSL well covered

Will result in reduced production of polyester Opportunity for margin improvement in future

Expansion plan on target to meet the demand opportunities post Jan, 2005

IRSL continues to be bullish on growth outlook of Polyester industry


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11

Indo Ramas Plans to Capitalize on the Textile Opportunity

Polyester Capacity Expansion Existing V/s Planned


600
600

35 15

500 400 300 200 100 0

(in '000 tpd)

300
15 15 120 0 20 140

300

260

150 Existing Cap.

140 Expansion Cap.

290

Total Cap.

PSF

POY

FDY

CHIPS

Total capacity after expansion will be 600,000 tpa


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Moving with Time on Technology


Parameter Technology - CP Technology - PSF Technology POY Polymer plant Individual plant cap. PSF plant Line capacity Present Plant Dupont /Chemtex Toyobo Barmag 3 nos (180 240 tpd) 5 lines 70 90 tpd line New Project Zimmer Zimmer Barmag 2 nos (400 tpd) 2 lines 175200 tpd line
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14

Strengthening the Backbone.


Parameter Type of Plant Present DG plant Projected Cogeneration with steam turbine 2 x 15 MW Rs. 1.70 / Kwh

Capacity Cost of Power Generation

51 MW Rs. 2.75 / Kwh

Operating cost to come down on energy


15
15

Manpower Productivity to Frog leap.


No. of Heads 1800
1600 1400 1200 1000 300 800 280 600 400 200 0

1685 355

MT / Head
400 380 360 340 320

1246

240

260 240 220 200

Existing
Number

Total (After expansion)


MT/Head

. Improvement of >50% post expansion


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16

Time Schedule for Project Start-up


Product PSF POY Time Line Dec05 / Jan06 Feb06 / Mar06

17
17

Project Funding
Amount
(Mn. Rs.)

IKB & DEG Indian Banks Internal Accruals Total Polyester Project

4530 1110 2960 8600

18
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Benefits from Expansion..


Operating cost of the new plant lower compared to existing plant Operating cost of existing plant will also come down Commercial Production by early 2006 synchronized with the completion of IOCs PTA plant at Panipat of 530,000 MTs. Annual Sales from the new project Rs. 2000 cr. (approx.) [Asset Turnover
Ratio more than 2 in a capital intensive project] Lower Capital Cost of ~ 30% Lower Funding Cost of ~16% Lower Operating Cost Increased productivity

New Plant has the following additional advantages:


1.65 1.45 1.25 1.05 0.85 0.65 0.45

1.51 1.18 0.9 0.61 0.35


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

EPS to enhance since equity base remains constant DE Ratio continues to be favorable

0.25

Debt Equity Ratio

19
19

IRSL Goes Global in PET Business


IRSL invested to Starpet (USA) 24% stake Indopet (Thailand) acquires Starpet Indopet also setting-up new project in Lithuania (EU state) with capacity of 210,000 tpa to manufacture bottle grade PET resin Indopet to emerge as one of the largest global PET producers IRSL holding of Starpet swapped with ordinary shares of Indopet IRSL holding in Indopet - 8.46% This offers IRSL an opportunity to participate in PET business on a global scale
20
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Indo Rama Synthetics (I) Ltd


Performance Update

Financial Highlights 1 H FY05


Rs. Crore Gross Sales Sales (Net of Excise & interdivisional sales)

1H 2004-05 1167.36 879.66 6.20 599.62 16.34 115.98 731.94 153.92 17%

1H 2003-04 1148.30 885.15 9.92 642.03 17.14 102.09 761.26 133.81 15%

Variance 19.06 (5.49) (3.72) 42.41 0.80 (13.89) 29.32 20.11

% Change

2% (1%) (38%) 7% 5% (14%) 4% 15%

Other Income Consumption of RM, etc. Staff Cost Other Expenditure Total Expenditure Operating EBDITA
Operating EBDITA %

22 Note : ( ) = unfavourable
22

Financial Highlights 1 H FY05


Rs. Crore
Non-operating Inc/ (Exp) EBDITA Interest Cost EBDT Depreciation Profit Before Tax
Provision for Taxation

1H 2004-05
(22.95) 130.97 21.82 109.15 49.52 59.63 2.74 24.22 32.67 3.71%

1H 2003-04
22.71 156.52 28.83 127.69 49.16 78.53 5.99 25.36 47.18 5.33%

Variance
(45.66) (25.55) 7.01 (18.54) (0.36) (18.90) 3.25 1.14 (14.51)

% Change

(201%) (16%) 24% (15%) (1%) (24%) 54% 4% (31%) 23


23

- MAT - Deferred Tax Profit After Tax PAT Percentage Note : ( ) = unfavourable

Financial Highlights Qtr 2


Rs. Crore Gross Sales Sales (Net of Excise &
inter-divisional sales)

Q1 2004-05 558.20 416.64 3.37 278.54 7.65 56.06 342.25 77.76 19%

Q2 2004-05 609.16 463.02 2.83 321.08 8.69 59.92 389.69 76.16 16%

Q2 2003-04 672.99 516.77 4.05 351.77 9.19 57.39 418.35 102.47 20%

Variance Q2 vs Q2 (63.83) (53.75) (1.22) 30.69 0.50 (2.53) 28.66 (26.31)

% Change

(9%) (10%) (30%) 9% 5% (4%) 7% (26%)

Other Income Consumption of RM, etc. Staff Cost Other Expenditure Total Expenditure Operating EBDITA
Operating EBDITA %

24 Note : ( ) = unfavourable
24

Financial Highlights Qtr 2


Rs. Crore
Non-operating Inc/ (Exp) EBDITA Interest Cost EBDT Depreciation Profit Before Tax
Provision for Taxation Q1 2004-05 (29.95) 47.81 11.98 35.83 24.49 11.34 0.56 4.07 6.71 1.61%

Q2 2004-05
7.00 83.16 9.84 73.32 25.03 48.29 2.18 20.15 25.96 5.61%

Q2 2003-04
8.07 110.54 11.43 99.11 24.60 74.51 5.68 25.24 43.59 8.44%

% Variance Change Q2 vs Q2

(1.07) (27.38) 1.59 (25.79) (0.43) (26.22) 3.50 5.09 (17.63)

(13%) (25%) 14% (26%) (2%) (35%) 62% 20% (40%) 25


25

- MAT - Deferred Tax Profit After Tax PAT Percentage

Analysis of Sales Mix


H1 : 2004-05
13% 7% 4% 47% PSF POY Chips FDY DTY
6% 4% 44%

H1 : 2003-04
14%

29%

32%

Rs. 1167.36 Cr.

Rs. 11,48.30 Cr.

PSF & POY constitute >75% of total sales


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Growth in Operating EBIDTA


18%

17%

16%

15%

14%

1H FY04

1H FY05

Procurement & Operating efficiencies resulting in improvement of margins


27

27

Prudent Financial Management


200 175
Rs Cr.
28.83 188.0

30 28

125 100 75 50

114.4

24
21.82

22 20

1H FY 04 Loan Repayment

1H FY 05 Interest Cost
28
28

Rs. Cr.

150

26

Rewarding the Shareholders

Interim Dividend

10%

29
29

House Open for Questions


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