VARDHMAN TEXTILES LTD.

INTRODUCTION: Vardhman textile Limited is an integrated textile

manufacturer company headquartered in Ludhiana. It was set up in 1965
by Shri V.S Oswal and Shri Ratan Chand Oswal with 6000 spindles to
manufacture cotton. Currently, VTL manufactures yarns, fabrics, acrylic
fibre, sewing threads and garments. VTL as of now has 1.1 million
spindles and a capacity to manufacture over 580 metric ton of Yarn per
day. It has manufacturing facilities in Punjab, Madhya Pradesh and
Himachal Pradesh. The company markets its products in the European
Union, the United States and the far East.
Vision: “Rooted in Values, Creating World Class Textiles.”
Mission: It aims to be world class textile organisation that produces
diverse range of products for global textile market. It aims to achieve
customer delight through excellence in manufacturing and customer
service that is based on creative combination of state-of-the-art
technology and human resources,
Values:
 Faith in bright future of Indian Textiles and continued expansion in
areas of textile industry.
 Customer focus in all operational areas.
 Offer products of best quality for premium market segments
through TPM and Zero-defect implementation.
 Integrated diversification and product range expansion
 Encourage innovation for constant improvements and achieve
excellence in all functional areas.
 Appreciate their role as a responsible corporate citizen.

Employee Strength: 19,308 as on 31st March 2019

 Largest spindles count in India

 Largest manufacturer of hand knitting Yarn in India.
 Leading Manufacturer and exporter of cotton yarn and fabric in
India.
FINANCIAL ANALYSIS OF THE COMPANY:
1. Top Line, EBIDTA, EBIT and Bottom Line Growth:
PARTICULARS 2015 2016 2017 2018 2019
Total Revenue 6952.2 6005.8 6583.8 6445.6 7100.6
EBIDTA 1279.3 1286.8 1753.2 1100.3 1416.5
EBIT 747.05 912.55 1409.8 860.31 1162.5
Net Income 445.67 624.07 994.27 592.44 740.55

Graph:

Top Line, EBIDTA, EBIT and Bottom Line Growth

8000
6952.2 7100.64
7000 6583.8 6445.62
6005.8
6000

5000

4000

3000

2000 1753.16
1279.26 1286.8 1409.76 1416.48
994.27 1100.31 1162.46
747.05 912.55 860.31 740.55
1000 445.67 624.07 592.44

0
2015 2016 2017 2018 2019

Total Revenue EBIDTA EBIT Net Income

Analysis:
a. There is steep incline of 37.24% in EBITDA from 2016 to 2017.
This is because of increase is company’s other income due to the
fact that company sold its one of the units in 2017.
b. As company’s expenses increased in 2018, a drop in EBIDTA,
EBIT and Net income is seen.

2. Efficiency Ratios:

PARTICULARS 2015 2016 2017 2018 2019

Total Asset Turnover Ratio 0.98 0.80 0.88 0.78 0.79
Invested Capital Turnover Ratio 1.31 1.11 1.22 0.98 0.99
 Fixed Asset Turnover Ratio 1.88 1.51 1.80 1.74 1.64
Current Asset Turnover Ratio 2.03 1.69 1.72 1.42 1.52
Working Capital Turnover Ratio 4.35 4.18 3.76 2.25 2.52

Graph:

Chart Title
5.00
4.50 4.35
4.18
4.00 3.76
3.50
3.00
2.52
2.50 2.25
2.00 1.882.03 1.801.72 1.74
1.69 1.641.52
1.51 1.42
1.50 1.31 1.22
0.98 1.11 0.98 0.99
1.00 0.80 0.88 0.78 0.79
0.50
0.00
2015 2016 2017 2018 2019

Total Asset Turnover Ratio Invested Capital Turnover Ratio Fixed Asset Turnover Ratio
Current Asset Turnover Ratio Working Capital Turnover Ratio

Cash Conversion Cycle:

PARTICULARS 2015 2016 2017 2018 2019
Days Inventory (days) 92.27 117.00 97.17 127.79 134.18
Debtor Collection Days 43.06 47.26 40.66 42.90 41.28
Days Cash 11.58 21.57 3.37 5.04 2.82
Creditors Payment Period 21.41 23.37 29.62 30.81 32.11
Cash Conversion Cycle Days 125.50 162.46 111.59 144.91 146.16

Analysis:
a. There is a constant decrease in WCT due to Company’s almost
constant revenue but continuous increase in inventories (CL).
b. Company acquired 450 crores more PPE in 2018-19 due to which
its Fixed asset turnover ratio decreased.
c. Company’s cash conversion days are high due to low inventory
turnover ratio as company has stockpiled its inventory. Also,
company has high debtor’s collection days in comparison to
Creditors payment days. This implies that company’s has capital
hold in market.
3. Profitability Ratios:
PARTICULARS 2015 2016 2017 2018 2019
Operating Profit
10.75% 15.19% 21.41% 13.35% 16.37%
Margin
Net Profit Margin 6.41% 10.39% 15.10% 9.19% 10.43%
Return on Equity 12.09% 15.21% 22.67% 11.70% 12.98%
Return on Invested
14.11% 16.88% 26.03% 13.12% 16.25%
Capital
Return on Total
10.48% 12.15% 18.79% 10.44% 12.89%
Assets

Graph:

Profit Margins
25.00%
21.41%
20.00%
15.19% 15.10% 16.37%
15.00%
13.35%
10.00% 10.75% 10.39% 9.19% 10.43%
6.41%
5.00%
0.00%
2015 2016 2017 2018 2019

Operating Profit Margin Net Profit Margin

Chart Title
30.00%
26.03%
25.00% 22.67%
20.00% 18.79%
16.88% 16.25%
14.11% 15.21%
15.00% 12.09% 12.15% 13.12% 12.89% 12.98%
11.70%
10.48% 10.44%
10.00%

5.00%

0.00%
2015 2016 2017 2018 2019

Return on Total Assets Return on Invested Capital Return on Equity

Analysis:
a. Company saw an increase in sales till 2017 due to increase in
sales from last year and negative change in inventories
expenses and also sold on of its unit at 300 crores thus earning
profit that lead to high profit margins
 b. There is a decrease in profit margins in 2018 because of GST
implementation.
c. Similar trend is visible in ROE, ROIC and ROA due to NPM and
OPM trend.

4. Liquidity Ratios
PARTICULARS 2015 2016 2017 2018 2019
Current Ratio 1.87 1.68 1.84 2.7 2.51
Quick Ratio 0.91 0.77 1 1.36 1.11
Cash Ratio 0.1 0.13 0.02 0.04 0.02

Graph:
3.00
2.70
2.50 2.51

2.00
1.87 1.84
1.68
1.50
1.36
1.11
1.00 0.91 1.00
0.77
0.50

0.10 0.13
0.00 0.02 0.04 0.02
2015 2016 2017 2018 2019

Current Ratio Quick Ratio Cash Ratio

Analysis:
a. There is a sudden increase in Current ratio and Quick ratio in
2018. This is because of increase in Company’s inventory due to
GST implementation and decrease in Current borrowings.
b. Due to demonetisation in November 2016, company’s cash and
cash equivalents reduced drastically, therefore decreasing its cash
ratio from 0.13 to 0.02.
 5. Solvency Ratios

PARTICULARS 2015 2016 2017 2018 2019

Debt Ratio/ Debt
0.59 0.57 0.50 0.42 0.40
Capitalisation Ratio
Equity Ratio/Equity
0.41 0.43 0.50 0.58 0.60
Capitalisation Ratio
Interest Coverage Ratio 5.98 10.27 10.96 7.28 9.72

Graph:

Solvency Ratios
0.70
0.60 0.58 0.60
0.59 0.57
0.50 0.50
0.43 0.50
0.41
0.40 0.42 0.40
0.30
0.20
0.10
0.00
2015 2016 2017 2018 2019

Debt Ratio/ Debt Capitalisation Ratio Equity Ratio/Equity Capitalisation Ratio

Interest Coverage Ratio

12.00 10.96
10.27 9.72
10.00
8.00 7.28
5.98
6.00
4.00
2.00
0.00
2015 2016 2017 2018 2019

Interest Coverage Ratio

Analysis:
a. There is a significant decrease in Company’s Debt ratio and
increase in Equity ratio over the years as company is constantly
increasing its Equity by earning profits and not taking extra loans
thus maintaining its debt.
b. Interest Coverage ratio is fluctuating because of varying EBIT.