AN

RESEARCH ARTICLE ON

PERFORMANCE ANALYSIS OF
TEXTTILE COMPANI IN INDIA

SUBMITTED TO
UNIVERSITY GRANTS COMMISSION
GANESHKHIND.PUNE 411007
FILE.NO.23-2881/11(WOR)
Submitted date:25/12/2013

SUBMITTED BY
DR. DILIP B. JOSHI
ASSOCIATE PROFESSOR
SMT. PNR SHAH MAHILA ARTS & COMMERCE COLLEGE
PALITANA-364270
GUJARAT

CONTENT OF THE ARTICLE

INTRODUCTION AND CONCEPTUAL FRAMEWORK OF FINANCIAL PERFORMANCE

REVIEW OF LITERATURE

BRIEF PROFILES OF TEXTILE INDUSTRIES IN INDIA

RESEARCH METHODOLLOGY

FINDINGS AND CONCLUSION

BIBLIOGRAPHY

INTRODUCTION AND CONCEPTUAL FRAMEWORK

Financial performance and financial analysis
Financial analysis refers to an assessment of the viability, stability and profitability of a
business, sub-business, or project. It is performance by professionals who prepare report
using ratios that make use of information taken from financial statement and other reports.
The effect on financial statement of laws and regulation varies considerably. Those rules and
regulation to which entities as subject constitute the legal and regulatory framework.
The legal provisions of laws or regulations have a direct effect on the financial statement.
Other rules and regulation are to be compiled with by management, or set the provisions
under which the entity is allowed to conduct its business, but do not have a direct effect on
an entitys financial statement. Some entities operate in heavily regulated industries.
Financial statement analysis is used to identify the trends and relationships between
analysts, creditors, and investors) of the financial statements need to evaluate a companys
profitability, liquidity, and solvency. The most common methods used for financial
statement analysis are trend analysis, common-size statements, and ratio analysis.
A companys financial statements provide various financial information that investors and
creditors use to evaluate a companys financial performance. Financial statements,
management can communicate with interested outside parties about its accomplishment
running the company.
REVIEW OF LITERATURE
In 1994, 29 Canadian Textile companies were evaluated accordingly result of efficiency
scores and return to sale was obtained to examine possibility of utilizing inefficient input by
two way-farther experience or vertical integration and they had used cone ration model to
find out then same.
In 2012, Indian Textile co, were analyses with a view to multi fiber Agreement (2004) of
WTO. Productive efficiency of Indian co, was necessary to get competitive advantage in
liberalized global market. Liquidity and profitability and be achieved at the operational level
by managing the circulating capital and to consider about cash as subject to convertibility
into non-cash items and back to cash items.
Indian accounts 22% of worlds installed capacity and is one of largest exporter of
yarn
In Global market.
India also accounts 25% share in world cotton yarn market.
Indian textile has worlds highest loom age of approx 61%.
Figures and restive for India contribution of 12% of worlds production of textile
fibers and yarns. Largest production of jute/2nd largest in silk and 3rd largest in
cotton ,
Fibers, yarns and 5th largest in synthetic fibers and yarn.

India has widest range of variety of textiles and is rich with traditional workers but
still
India is relatively small growing player in global market.

Recession adversely affected in Indian textile co. in 1980-1998 which had adverse
effect on output and capital.

BRIEF PROFILE OF THE TEXTILE INDUSTRIES

[i] Mafatlal Industries
It manufactures textiles and textile chemicals. The mills are equipped to do bleaching,
dyeing, calico printing, mercerizing, calendaring, sanforising, anti-creasing and texturising.
Mafatlal Fine Spg. & Mfg. Co. Ltd, along with Gujarat Industrial Investment Corporation Ltd.
(GIIC) and Hindustan Oil Corporation Ltd., had promoted Gujarat Gas Co. Ltd., for the
purchase of distribution of natural gas to industrial, commercial and domestic consumers in
Gujarat.
[ii] S. Kumars NationL wide Ltd
S. Kumars Group was founded in 1948 by Shri. Abhayakumar Kasliwal and Shri
Shambhukumar Kasliwal by establishing textile distribution network and subsequently
commencing textile manufacturing activities. The Company has became a public Company,
vide special Resolution Passed on 7th July 1992 and fresh certificate of change of name as
issued on 28th September 1993.It is engaged in the business of trading in synthetic/blended
fabrics.
S.Kumars Synfabs Ltd. was promoted keeping in mind the S. Kumars Group overall
corporate strategy and given objectives of segregating the export business from the local
business.
[iii] Welspun India ltd
Welspun Limited was incorporated on 17th January 1985, as a private limited company in
the name & style of Welspun Winilon Silk Mills Pvt. Ltd. at Mumbai. The main object of the
companies to manufacture Polyester filament yarns and texturised yarns. The Company was
promoted by G.R.G. group headed by G.R.Goenka. It has established yarn texturising unit at
palghar district.
[iv] Siyaram Silk Mills Ltd
The Company manufactures - synthetic fibres incorporated on - 29th June,1978 as a private
limited company converted into a public limited company on - 16th April 1980. Promoter
Mahabir Prasad Poddar , Dhara Prasad Poddar and Purushottamdas S.Mahasaria.
[v] Shri Dinesh Mills Ltd
Incorporated on - 1st July, 1935, at Baroda originally known as - Maharani Woollen Mills
manufacturing woolen fabrics certificate of commencement of business - on 17th February,
1936 The company manufactures woolen & warsted goods, felt cloth, basic chemicals,
electroplating salts and chemicals, brightness and addatives, electroplating equipments,
Plant & machinery, seat magnetic pumps, buffing and polishing compositions and polishing
wheels.In 2003 Delisting of shaes from vadodara stock exchange in 2005 company has
recommended 12% dividend.
[vi] Digjam ltd.
Incorporated on - 15th March 1948, at Mumbai. The company manufactures - all kinds of
woolen and worsted yarns and piece goods. In 1981, 8,38,796 bonus shares issued in

proportion of 1:1. This company received government's approval to further expand the
spinning capacity in 1982.
[vii] Oswal Spinning and Weaving Mills
Incorporated under the name- Oswal Cotton Spinning and Weaving Mills Ltd. on 19 th
September,1955 Registrar of Companies - Punjab at Jalandhar The name of the company
changed to - Oswal Spinning & Weaving Mills Ltd. After change the name of company
certified on - 26th February 1965. The main objective of the company- to manufacture of
textile, anaspati, Ghee and Alloy Steel Casting.Originally the company commenced its
business with the manufacture of wollen and worsted yarn. promoted by - Mr. Dharam Paul
Oswal and M. Raj Paul Oswal under the able guidence of late Mr. Lachman Dass Oswal.
RESEARCH METHODOLOGY
The subject of the present study is Performance Analysis of Textile Companies in India. In this
chapter introduction and importance of textile industry in given. The study covers analytical
study of financial performance of 7 leading units of textile industry. The financial study and
analysis is important for knowing the efficiency, liquidity and for other aspects of financial
performance and so does the researcher. As textile sector is one of the biggest in India its
financial aspects also affect stake holders like share holders, investors , bank etc. the researcher
feels that its financial performance is necessary. Other related issues have been discussed
herewith. Universe of the study of major textile sector.
The researcher is not able to take the exact data of 10 years but has only able to present 8
years data.
The major textile industries includes;
[i] Siyaram Silk Mills Ltd
[ii] Digjam Ltd
[iii] Oswal Spinning and Wvg Mills Ltd
[iv] Shri Dinesh Mills Ltd
[v] Welspun India Ltd
[vi] S. Kumar National wide Ltd
[vii] Mafatlal Industries Ltd
OBJECTIVES OF THE STUDY
The main objectives of the study can be listed as follows ;
- To examine position of textile industry
- To assess the financial strength
- To examine liquidity position
- To measure financial efficiency
- To analyse the activity of the firm
- To suggest ways and means to improve performance

HYPOTHESIS
[1] ANNOVA useful for inter unit comparison
[2] NULL HYPOTHESIS there will be no any significant difference among the activity,
profitability , capital structure and working capital ratios of the selected textile units come from

identical populations. The acceptance of null hypothesis would suggest that there is no
significant difference between productivity ratios of the units came from identical population in
such textile units as the comparison. Performance analysis of textile companies in India of the
above companies covered in the study will be fully examined. The conclusion drawn and
suggestions attempted will fully examined. The conclusion drawn and suggestions will be
provide practical guidance to the management of the companies to promote for improvement
of financial performance of their companies as well as consumers, investors, financial managers
and worker for taking decisions related to their own regard of interest.
SCOPE OF THE STUDY
There are approximately 1200 medium to large scale textile mills in India. 20% of these mills are
located in Coimbatore-Tamilnadu has 34 million cotton textile spindles for manufacturing cotton
yarn. Cotton yarn accounts 70 % of Indias textile exports of Indian textile exports almost 80 %
comes from coaser yarns. Consequently there is a need to upgrade the technology.
PERIOD OF THE STUDY from 2002 to 2011.
DATA COLLECTION
For the purpose of financial performance of Indian textile industry, the secondary data will be
used. It is not gathered specially to meet the needs of the problem at hand. For the study, data
will be collected for the period of 2002 2011 of the accounting year from published annual
reports of their registered offices or stock exchanges by visiting personally or by post. The figure
contained in the annual reports and accounts will be rounded off to crores upto 2 decimal
places. All the collected data will be presented and formulated in the form of condensed
balance sheet and income statement. All the ratios and mentioned statement will be analysed
and interpreted.
TOOLS FOR ANALYSIS
[1] Ratio Analysis
[2] Trend analysis
[3]Statistical Analysis chi square test, arithmetic mean, standard deviation , coefficient of
variation.

CONCLUSIONS & SUGGESTIONS

From the entire study, some finding and conclusions have inferred out. A researcher has
tried to represent them. Analytical performance has been done of the leading seven
companies for the period of study 2002 to 2011. For that data has been analyzed through
various tests like- chi square, mean, standard deviation, coefficient of variance ANNOVA.
Data for the seven companies such as Digjam Ltd., Mafatlal Ind. Ltd, Oswal Spinning & Wvg
Mill Ltd., Shri Dinesh Mills Ltd, S Kumar Nationwide Ltd., Siyaram Silk Mills Ltd. and Welspun
Ltd. were considered for the tenure 2001 to 2011 for statistical analysis. Entire data has
been classified into three
categories viz. Profitability ratio, Working capital and Activities.
Profitability ratios were considered for Gross profit margin (%), Net profit margin (%),
Return on Capital Employed (%), Return on Net Worth (%) and Earning Per Share.
Working capitals were considered for Current ratio, Quick ratio, Long term Debt Equity ratio,
Number of Days in Working capital and Interest cover ratio.

Also the Activities such as Inventory Turnover ratio, Debtors Turnover ratio, Asset Turnover
ratio and Average Raw Material Holding are considered for the statistical analysis. Mean,
Standard deviation and coefficient of variation (C.V.) are computed for all the above
mentioned categories and are listed in table 1.1.1 to table 1.3.4.
Also Analysis of Variance (ANOVA) is carried out to study the difference between the various
companies for above mentioned categories. ANOVA are described by means of tables 2.1 to
2.3
Along with the above mentioned conclusions and findings the researcher has represented
his opinion through individual suggestions to the concerned companies.
The suggestions given by the researcher can be listed as under;
[1] Shri Dinesh mill ltd must maintain its highest comparative gross profit margin
and Mafatlal has to seriously concentrate on its lowest margin.
[2] Siyaram silk mill has to maintain its consistency in gross profit margin for
long term
[3] There is a significant difference between gross profit margin of different
companies
[4] There is no significant difference between net profit margin of the companies
for S Kumar ltd it is matter of serious consideration
[5] Digjam having lowest return of capital which an alarming situation of the
company
[6] Dinesh mills should continue its consistency on the return on net worth.
[7] Oswal has to take serious steps as their EPS is the lowest among all.
[8] Mafatlal has to have more accurate financial concern as their current and quick
ratio is the lowest of all.
[9] Smallest value of standard deviation indicates greater consistency in number
of days of working capital for majority of the companies.
[10] Other companies must observe Oswal Ltd to maintain consistency in interest
cover ratio.
[11] All the companies have high difference in inventory cover ratio that is positive
signal but it must maintain consistency and this may affect debtor turnover
ratio also.
[12] Asset turnover and average raw material ratios are highly different which
indicates that all the companies need to undergo process of strategic activity
analysis

ANALYSIS OF VARIANCE (Profitability ratio)

ANOVA

Gross profit margin

Sum of Squares

Df

Mean Square

Sig.

6573.230

1095.538

6.177

.000

11173.388

63

177.355

17746.618

69

Between Groups
Within Groups
Total

Hypothesis: Profitability ratios H01: There is no significant difference in between Gross profit
margin (%) of different companies
ANOVA

Net profit margin

Sum of Squares

df

Mean Square

Sig.

3769.251

628.208

2.041

.073

19388.155

63

307.748

Between Groups
Within Groups

Total
23157.405
69
Hypothesis: H02: There is no significant difference in between Net profit margin of different
companies
ANOVA

Return on Capital Employed

Sum of Squares

df

Mean Square

Sig.

4167.486

694.581

.243

.960

180279.437

63

2861.578

184446.922

69

Between Groups
Within Groups
Total

Hypothesis: H03: There is no significant difference between Return on Capital Employed of

different companies
ANOVA

Return on Net Worth

Sum of Squares

df

Mean Square

Sig.

54926.281

9154.380

1.483

.198

388828.788

63

6171.886

Between Groups
Within Groups

Total
443755.069
69
Hypothesis: H04: There is no significant difference between Return on Net Worth of different
companies
ANOVA

Earning Per Share

Sum of Squares

df

Mean Square

Sig.

51334.145

8555.691

.743

.617

724992.529

63

11507.818

Between Groups
Within Groups

Total
776326.674
69
Hypothesis H05: There is no significant difference between Earning Per Share of different
Companies
Source:- All company annual report 2002 to 2011 .

ANALYSIS OF VARIANCE (Working capital)

ANOVA
Current ratio

Between
9.627
6
1.605
7.486
.000
Groups
Within
13.503
63
.214
Groups
Total
23.130
69
Hypothesis : H06: There is no significant difference between Current ratio of different companies
ANOVA
Sum of
Mean
Squares
df
Square
F
Sig.
Quick_ratio
Between
117.496
6
19.583
57.331 .000
Groups
Within
21.519
63
.342
Groups
Total
139.015
69
Hypothesis: H07: There is no significant difference between Quick ratios of different companies
ANOVA
Sum of
Squares

df

Mean
Square

F
Between
426.794
6
71.132
7.697
Groups
Within
582.249
63
9.242
Groups
Total
1009.044
69
Hypothesis : H08: There is no significant difference between Long term Debt Equity ratios of
different companies
Long_term_Debt_Equity_ratio

Number of Days in Working capital

ANOVA
Sum of
Squares
Between
2538419.795
Groups
Within
748252.284
Groups
Total
3286672.079

Sig.
.000

df

Mean
Square

Sig.

423069.966

35.621

.000

63

11877.020

69

Hypothesis : H09: There is no significant difference between Number of Days in Working capital of
different companies
ANOVA
Sum of
Squares

Mean
Square

F
Between
403.468
6
67.245
1.629
Groups
Within
2600.329
63
41.275
Groups
Total
3003.797
69
Hypothesis : H010: There is no significant difference between Interest cover ratios of different
companies
Interest cover ratio

Source:- All company annual report 2002 to 2011 .

df

Sig.
.154

ANALYSIS OF VARIANCE (Activity)

Inventory Turnover ratio

Between
Groups
Within
Groups
Total

ANOVA
511.431

85.238

948.256

63

15.052

1459.686

69

5.663

.000

Hypothesis : H011: There is no significant difference between Inventory Turnover ratios of different
companies
ANOVA
Sum of
Mean
Squares
df
Square
F
Sig.
Debtors Turnover ratio
Between
847.005
6
141.167
41.620
.000
Groups
Within
213.684
63
3.392
Groups
Total
1060.689
69
Hypothesis : H012: There is no significant difference between Debtors Turnover ratio of different
companies
ANOVA
Sum of
Mean
Squares
df
Square
F
Sig.
Asset Turnover ratio
Between
12.797
6
2.133
16.882
.000
Groups
Within
7.959
63
.126
Groups
Total
20.756
69
Hypothesis : H013: There is no significant difference between Asset Turnover ratio of different
companies

ANOVA
Sum of
Squares

Mean
Square

F
Sig.
Between
62703.810
6
10450.635
32.247
.000
Groups
Within
20417.341
63
324.085
Groups
Total
83121.151
69
Hypothesis : H014: There is no significant difference between Average Raw material Holding of
different companies
Average Row material Holding

Source:- All company annual report 2002 to 2011.

df

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PERIODICALS / PROJECT REPORTS
_ Management accountant
_ Chartered accountant
_ Chartered Financial analyst
_ Fact for you
_ Commerce
_ Investment week
_ Cement review
_ Cement Manufacturers association publication
_ Business India
_ Manorama year book
_ Bombay Stock exchange Official directory
_ R.B.I.Bulleting
_ Annual Reports of selected companies.
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_ Report on Determinants of Employment in Indian Textile Industry, submitted to
Indira Gandhi Institute of Developmental Research -Mumbai

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