November 2006

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Alok Industries LimitedCorporate Presentation

• November 2006

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Contents
Emergence of a New Sourcing Scenario
Retailer and Supplier Trends
Alok Industries Striking a Balance
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Contents
Emergence of a New Sourcing Scenario
Retailer and Supplier Trends
Alok Industries Striking a Balance
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The 1st Year Of Post Quota Era

• Ushered in a number of changes at demand as well
  as supply end
• While imports by US and EU increased, prices in
  both the major markets declined by 3-5
• China, India and Other South Asian countries were
  the main winners while Caribbean Basin Initiative
  (CBI) , Sub-Saharan Africa (SSA), Mexico were the
  main losers in post quota era

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At Trade Level, US Imports Increased By 7 To US
89 Billion
US Textile and Apparel Imports
7
US 89 Bn
US 83 Bn
US 77 Bn
US Million
South Asia includes Pakistan. Bangladesh, Sri
Lanka, Nepal and Bhutan
Source OTEXA, Technopak analysis
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China India Were The Major Gainers While SSA,
CBI Mexico Were The Main Losers
China 54
India 27
CBI Mexico (6)
SSA (16)
Change in Exports by Value (04 Vs 05)
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EU Imports Increased By 1 To Reach US 188
Billion
EU Textile and Apparel Imports
1
US 188 Bn
US 185 Bn
US 180 Bn
US Million
South Asia includes Pakistan. Bangladesh, Sri
Lanka, Nepal and Bhutan
Source Eurostat, Technopak analysis
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China India Were The Major Gainers In EU Also
Turkey 3
China 41
India 17
ASEAN (18)
Change in Exports by Value (04 Vs 05)
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Prices Declined In US As Well As EU.
Change in Prices in EU Market (04 Vs 05)
Change in Prices in US Market (04 Vs 05)
Source Technopak Analysis
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Indian Textiles Apparel Exports Grew By 26
India Textile and Apparel Exports (2004 vs 05)
17 Billion
26
13.5 Billion
US Billion
Source Ministry of Textiles, India
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Indian Exports Increased To All Major Markets
Growth Rate of Indian Exports by Value (2004 vs
05)
Source Technopak Analysis
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.And In All Major Categories
Growth Rate of Indian Exports by Category to US
Source Otexa Trade Data
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Growth for the US market has been higher than
China

• During the period Jan/ Sep 2006, as compared to
  Jan/ Sep 2005, Indias exports of textiles and
  apparel to the US have grown more than that of
  Pakistan and China (by volume) .
• The growth in volume terms has been as follows
• India 16.75
• Pakistan 14.93.
• China 5.71

Source Texprocil
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Future Looks Extremely Bright For India As Well
As South Asia
Country wise share in US Apparel Imports - 2010
South Asia includes Pakistan. Bangladesh, Sri
Lanka, Nepal Bhutan
Source Technopak Analysis
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Future Looks Extremely Bright For India As Well
As South Asia
Country wise share in EU Apparel Imports - 2010
South Asia includes Pakistan. Bangladesh, Sri
Lanka, Nepal and Bhutan
Source Technopak Analysis
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India Is Set To Become The Second Largest Textile
Base In The World
Indian Exports are expected to reach US 40 Bn by
2010
6.2
6
650
580
5
480
5
4
Indias Share in World Trade
US Bn
3.5
3
2
1
Indias Share in World Trade
Source Technopak Analysis
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Contents
Emergence of a New Sourcing Scenario
Retailer and Supplier Trends
Alok Industries Striking a Balance
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Emergence Of A New Scenario Key Trends

• Retail consolidation is increasing the power of
  retailers.
• Changing consumer demographics, spending patterns
  preferences have made Retailers / Brands
  innovate harder to differentiate from
  competition.
• These changes at retail end are leading to
  changes in competencies required from leading
  suppliers globally.

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Retailer Consolidation Has Forced
Lord Taylor Meier Frank Strawbridge Foleys Fi
lenes Famous Barr Kaufmanns Hechts The Jones
Store Davids Bridal L.S. Ayers After
Hours Priscilla of Boston
Buyers Consolidate
2002
2005
Bloomingdales The Bon Marche Burdone Goldsmiths
Lazarus Macys East Macys West Rcihs Federated
Direct
Consolidation at retail is on one hand increasing
the power of buyers and on the other hand is
forcing suppliers to grow larger
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Vendor Rationalization And Consolidation
Building Partnership with top vendors
To
From

• Strategic, long-term relationships
• Consolidated vendor base
• Commitment to large order volumes
• Greater operational efficiency

• Transactional relationships
• Many vendors
• Fragmented sourcing

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Meaning Lesser Vendors, More Volumes

• Benefits of vendor consolidation
• Higher volumes yield better service levels, lower
  costs, and improved control of quality.
• Fewer points of contact yield greater economy of
  scale
• Better partnerships to share risk
• Increased information sharing yields shorter lead
  times

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Changing Consumer Proposition
Assortment
Apparel Home Textiles Retailers Re-defining
Their Position
X
Solutions/ Fashion
Price
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In Apparel
Assortment
Growth in Apparel Sales 2005
3-4
Fashion
Price
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As Well As In Home Textiles
Assortment
Growth in Home Textiles Sales 2005
3-5
Price
Solutions/ Fashion
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.Has Forced A Number Of Retailers To Change
Strategy From Price
Assortment
Exsto
Solutions/ Fashion
Price
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.And Move Towards Fashion
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Thus, Changing The Way They Work With Suppliers

• More closer relation with fewer large suppliers
  rather than working with many small suppliers
• Very large volume runs at one end, smaller orders
  at the other end.
• Requirement of Speed and Flexibility
• Sharper sourcing price points
• Without compromising quality and reliability
• Shorter lead times for replenishment
• Requirement to provide Complete Solutions.
• Focus on vertical integration value added
  services.

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Areas Of Leadership

• Cost/Price. . . . . . . . . . . . .
  . . . . . . . . . . . . . . . .
  
• Creativity. . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . .
• Innovation. . . . . . . . . . . . .
  . . . . . . . . . . . . . . . .
• Fashion Content. . . . . . . . . . . .
  . . . . . . . . . . . . . .
• Performance / Function. . . . . . . . .
  . . . . . . . . . . . . .
• Speed. . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . .
• Flexibility. . . . . . . . . . . . .
  . . . . . . . . . . . . . . . .
• Quality. . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . .
  
• Reliability. . . . . . . . . . . . .
  . . . . . . . . . . . . . . . .
• Consistency. . . . . . . . . . . . .
  . . . . . . . . . . . . . . .
• Logistics. . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . .
• Services. . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . .

Successful Companies would need leadership in at
least 3 areas
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The Requirement Striking a Balance
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Contents
Emergence of a New Sourcing Scenario
Retailer and Supplier Trends
Alok Industries Striking a Balance
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Alok Industries Spearheading A New Generation In
The Indian Textile Industry

• One of the largest and the fastest growing
  vertically integrated Indian textile companies.
• Strategically located in one of the fastest
  growing textile and apparel bases...India.
• Manufacturing the highest growth categories.
• Aggressive scaling up yet increasing flexibility
  Making the elephant dance.
• Integrating forward and backward to increase
  profitability Moving towards full package supply.

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Alok Is One Of Indias Largest And Fastest
Growing Textile Companies
Partnerships
Solutions
Alok has grown at a CAGR of 35 over the last 7
years
Flexibility

• Sales of Rs 1,420 Crores and PAT of Rs 109.2
  Crores
• Is one of the largest home textile mfgr and
  exporters out of India.
• Has also ventured into apparel manufacturing and
  toweling

Rs Crore
Turnover Comparison of Major Indian Textile Cos
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With Presence Across The Value Chain
Partnerships
Solutions
Flexibility

• Is vertically integrated from spinning to CMT and
  Retail (through partnerships). Has one of the
  largest and most modern weaving and processing
  facilities.
• Helps maintain control over quality, lead times
  and prices.

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Is Moving Towards Becoming A Full Package
Supplier
Partnerships
Solutions

• In the last few years Alok has aggressively
  increased package exports of home
  textiles.
• The company is now looking at doing the same in
  apparel.

Flexibility
Alok Industries- Product Mix
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Alok Is Undergoing An Aggressive Scale Up To
Reduce Costs
Phase III to commence operations from March 2008

• Post expansion Alok will be the largest Indian
  company in apparel fabrics and bed linen.

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Yet Retaining The Speed And Flexibility To Make
The Elephant Run And Dance
Partnerships
Solutions

• Reduction in Lead time
• Lead times has been reduced by about 25-30 in
  the last 3-4 yrs
• Variability of Order size
• Alok has the capability to handle order sizes
  ranging from very small to extremely large.
• Versatility of styles

Flexibility
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Alok Supplies To Largest Brands In The World
Partnerships
Solutions

• Nominated/ Preferred vendor to GAP, JC Penney,
  Marks Spencer, Liz Claiborne, Target, Wal-Mart,
  Nordstrom, Costco, Macys, Kohls, Springs etc.
• Awarded Valued Business Partner of the year 2005
  by

Flexibility
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And Has Strategic Partnerships To Forward
Integrate To Retail
Partnerships
Solutions
Flexibility

• MoU with Teviz Textil Vizela SA (Teviz), a
  European manufacturer of high end yarn dyed
  shirting.
• Strategic alliance for getting Tevizs products
  manufactured at Alok. The Portugal based Teviz
  will provide the necessary technical support and
  design inputs to Alok.

• Acquisition of majority stake in Mileta
  International, a leading Czech based manufacturer
  of high quality shirting fabrics, voiles, table
  linen, bed linen and exclusive handkerchiefs
• Acquisition will provide Alok Industries an
  inroad into the European market and strengthen
  its presence in value added segment.
• Alok Industries would also get Miletas license
  rights of Daks for handkerchiefs.

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And Has Strategic Partnerships To Forward
Integrate To Retail
Partnerships
Solutions
Flexibility

• The group also has acquired stake in UK retail
  group Hamsard, through which it will leverage its
  India operations.
• Alok also plans to venture into the sunrise
  retail industry in India and open its own stores
  to sell home textiles and apparel.

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Financial Highlights and Earnings Outlook
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Growing Profitably
Consistent dividend paying track record of 13
years
Source Alok Information
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Alok Industries Balance Sheet Analysis
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Alok Industries Half Yearly Performance
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Alok Industries Equity Capital Structure
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Earnings Outlook For The Future External Factors

• Increased Demand of Cotton products from India.
• India has carved a niche for itself in cotton
  based textiles. Demand growth will thus
  positively affect Alok and other companies in the
  cotton sector.
• Closure of home textile manufacturing units in
  the western countries.
• While substantial relocation of manufacturing
  capacities from the western countries to Asia has
  already happened in apparel, in home textiles the
  relocation has just started.
• Thus the key cotton countries i.e. India, China
  and Pakistan will be the beneficiaries. While
  China and Pakistan operate in the low to medium
  end market, India has advantage in the medium end
  segment.

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Earnings Outlook For The Future External Factors

• While on the sales side, prices are expected to
  be stable Increased cotton output and relatively
  stable demand are expected to keep cotton prices
  under control.

Indian Cotton Demand and Supply
000 Mt Tonnes
Source USDA
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Earnings Outlook For The Future Internal Factors

• Increase in topline, realisations and margins is
  expected from the following initiatives
• Shift towards full package supplies
• Increased capacities across the value chain
• Backward integration into spinning reduced
  outsourcing of key activities like weaving
• Venture into new high growth areas like
  garmenting and toweling
• Cost of power is expected to reduce significantly
  (20), with the coming up of gas based power
  plant.
• Low debt cost through TUF (3.5) and ECB(4) will
  help the company improve ROE.

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Challenges And Strategy For Future
Challenges
Opportunities

• Managing Growth
• Timely execution of large projects
• Quick Response and turnaround time
• Increasing Competition

• High Growth in Home Textiles
• Becoming nominated / preferred supplier for
  Apparel fabric
• Diversifying into new markets and product
  segments
• Indian domestic market

Strategy

• Enhancing the sales of Value added products
• Creating Economies of Scale
• Vertical Integration and
• Introducing innovative products and finishes

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Thank You !