LSCM FIELD PROJECT

Company: T.T. Limited

19th August, 2015

Group A04
Ayush Bohra (0087/51)
Devanshi Kesaria (0122/51)
Puneet Aggarwal (0280/51)
Sammyak Jain (0315/51)
Shavir Bansal (0337/51)
Vaibhav Kalani (0385/51)
Mayank Verma (4021/21)

LSCM || Group A04

TT LIMITED: Company Overview

Flagship company of 60 years old T.T. Group, founded by Dr. Rikhab Chand
Jain
A fully integrated textiles company and a self-contained textile producer and
garment manufacturer
The company was awarded Top 100 SME of India Award for two consecutive
years 2013 and 2014
T.T. Limited covers the entire spectrum of textile sector: cotton, yarn, fabric,
garments and accessories.

Products:

Market:
65+
countries
LSCM || Group A04

Manufacturing Capabilities:

1 ginning factory
5 spinning factories
2 knitting factories
25+ franchise production units

55% of overall revenues come from export of Yarn;

Garments form 38% of domestic revenues

Break-down of Revenues, FY
14-15
Exports
(~424 Cr)

Sale of
Products
(~666 Cr)
Total Revenue
(~680 Cr)

Domestic
(~242 Cr)
Others
(~14 Cr)

Cotton

~18 Cr

Yarn

~376 Cr

Fabric

~11 Cr

Garments

~1 Cr

Others*

~18 Cr

Cotton

~23 Cr

Yarn

~75 Cr

Fabric

~48 Cr

Garments

~92 Cr

Others*

~4 Cr
* Others
include AgroCommodities
and Wind
Power

LSCM || Group A04

80% production
for Garments
is outsourced
Yarn is the
largest source
of revenues,
therefore we
will focus only
on this
business-line

Industry Analysis
Industry Contribution

Domestic Textile Industry

11% to industrial
production

14 % to
manufacturing
sector

Allied activities 54.85 million

Textile
Industry
Direct
Employment - 45
million

LSCM || Group A04

US$ bn

150
100
50
0

67

100

141

Exports in Textile Industry

4% to GDP of
India

12% of total
export earnings

Growth of Textile Industry

100

80
60
US$ bn
40

65

82

40

20
0

2013-14

2016-17 2020-2021

Industry Analysis
Value Chain:

Area of Focus

Process

Raw
Material

Output

Cotton,
Jute, Silk,
Wool

Ginning
Fiber

Spinning
Yarn

Weaving

Processing

Garment/
Apparel
Production

Fabric

Processed
Fabric

Final
garment/
Apparel

India claims to be 2nd largest manufacturer as well as provider of cotton yarn and textiles in the world
- 25% share in cotton yarn industry across the globe
- 12% of worlds production of cotton yarn and textiles

Industry
Highlights

India enjoys a significant lead in terms of labour cost per hour over developed countries like US and
newly industrialised economies like Hong Kong, China, etc.
- average wage cost in China stood at US$450 per month in 2012 vs US$200 per month in India
The fundamental strength of this industry flows from its strong production base of wide range of
fibres / yarns from natural fibres like cotton, jute, silk and wool to synthetic /man-made fibres
India is rich in traditional workers adept at value-adding tasks, which could give Indian companies
significant margin advantage

LSCM || Group A04

Growth Drivers
Rising per capita income, favorable demographics and a shift in preference for branded
products is expected to boost demand

Robust direct cotton yarn exports coupled with stable domestic apparel demand to drive
cotton yarn demand

Pointed and favorable policies instituted by the government will give the industry a fillip

Increase in consumerism and disposable income has resulted in retail sectors rapid
growth, with many global players entering Indian market
The centers of excellence focused on testing and evaluation as well as resource centers and
training facilities have been set up

Changing lifestyles and increasing demand for quality products are set to fuel the need for
apparel

LSCM || Group A04

Porters 5 forces
Threat of New Entrants
100 per cent FDI (automatic
route) is allowed in the Indian
textile sector
A few large suppliers are
focusing on forward integration
Capital requirements to
establish a regional or a national
level operation are high
Bargaining Power of Suppliers
High availability of cotton along
with low cost of labour
Significant presence of small
suppliers has reduced the
bargaining power

Substitute Products
Threat of new
entrantsMODERATE

Threat of
substitutesHIGH

Low cost substitute products

from countries like Pakistan and
Bangladesh
Threat from unorganised sector

Competitive Rivalry
-MODERATE
Bargaining Power of Customers

Power of
suppliers-LOW

Power of
customersMODERATE

Major clothing brands have

better bargaining power over
textile manufacturers, as the
product differentiation is low and
number of players are high and
fragmented

Competitive Rivalry
Intense competition between established brands and private label Brands
Industry is highly fragmented with organised sector contributing only 31 per cent in 2011
LSCM || Group A04

Key players/ Market Shares

The spinning industry is dominated by medium and large units

There are1834 cotton/man-made fiber textile mills (non-Small Scale) in the country
A few of the large spinning mills with their capacity are:

Company
Vardhaman Group
Nahar Group
Bannari Amman Spinning Mills
Limited
Sangam Group
Malwa Cotton Spinning Mills
Sambandam Spinning Mills Ltd
TT Limited

Capacity

Market Cap (Rs. Cr)

11,00,000 Spindles
4,24,000 Spindles
2,20,000 Spindles

6,055.84
94.91
342.66

1,93,920 Spindles
1,40,000 Spindles
1,10,000 Spindles
1,00,000 Spindles

913.79
7.11
34.01
132.75

Financial Analysis

% COGS wrt. Sales

% COGS w.r.t Sales

2011

2012

2013

2014

100%

TT

76%

78%

74%

77%

60%

Vardhman

51%

56%

50%

49%

Nahar Group

49%

65%

54%

56%

80%
40%
20%
0%
2011

2012
TT

LSCM || Group A04

Vardhman

2013
Nahar Group

2014

Macroeconomic factors affecting the industry

Exchange rate In the year 2007-08, the textile exports of India suffered badly due to sharp appreciation in rupee
vis- vis the US$.
Global Stock Levels: The international cotton prices continue to remain sensitive to further changes in Chinas policy,
especially with respect to release of its cotton reserves
Crude Oil Price: Movement in the crude oil prices will also be a driver for man-made fibre prices and hence the
cotton prices
Global cotton availability: The domestic cotton yarn prices have been range bound at ~Rs. 165/Kg since November
2014 after declining sharply since August 2014. However, domestic cotton prices are expected to remain under
pressure on account of comfortable domestic and global cotton availability
Global Demand: The domestic yarn production has recovered since November 2014 after declining in the previous
two consecutive months on account of rebound in the yarn exports, mainly to China
Effect on SCM: With pick up in the export demand, the capacity utilization of the Indian spinning industry has
improved to ~98~99% levels after declining to ~93% in October 2014.
Moreover, the domestic yarn inventory levels which had increased to ~17 days in October 2014 due to decline in
exports have also reduced to ~13~14 days

Unit Procurement Cost (in Rs/Kg)

116

116

115

112

116
107

105
93

LSCM || Group A04

Mar'14

Apr'14

May'14

Jun'14

Jul'14

Aug'14

Sep'14

Oct'14

90

Nov'14

92

Dec'14

89

Jan'15

85
Feb'15

87

Mar'15

Some challenges in SCM faced in the industry

Scale
Except for spinning, all other stages face the problem of scale. Indian firms are typically smaller compared
to those abroad.
Skills
Three issues here are- Paucity of technical manpower, Low investment in training, Shortage of trained
operators.
Inventory Management
Textile products are highly volatile in nature and have short life cycles. Demand changes quickly and
market trends are highly variable.
Lead Time
Buying cycle for garments starts a year in advance generally. Demand forecasting in such a case where
demand is highly variable is an important issue.
Visibility
Fast delivery of accurate information helps improve transparency. Lack of information leads to forecasting
errors and bullwhip effect.
Logistical Challenges
Logistical infrastructure in India is highly fragmented and underdeveloped. This leads to inefficiencies in
the supply chain.
Technology
Indian companies are technologically far behind foreign counterparts. Use of automation in inspection and
material handling is low in Indian firms.
Institutional Support
Textile policy has come a long way, but labor reforms, customs clearance, credit, etc. need to be catered to.
LSCM || Group A04

Process Mapping: Production Capabilities

(Spinning)

Gajroula

Rajula

Avinashi

LSCM || Group A04

3 production locations:
a) Gajroula, U.P
Gajroula Spinning Mills
(15,120 spindles)
Gangeshwar Spinning
Mills (18,000 spindles)
b) Rajula, Gujarat
Rajula Spinning Mills
(26,112 spindles)
Gopeshwar Spinning
Mills (25,200 spindles)
c) Avinashi, Tamil Nadu
Tirupati Spinning Mills
(13,104 spindles)

Process Mapping: Raw Material Sourcing

(Gajroula)
Procurement
State

Purchase
Amount (in
Rs. lacs)

Purchase
Quantity (in
Kgs)

Unit Purchase
Price (in Rs/Kg)

Avg
Procuremen
t Days

Haryana

2,967

32,26,693

92

2.2

Maharashtra

2,102

17,72,326

119

5.1

Gujarat

2,044

22,46,505

91

4.1

Karnataka

600

5,26,062

114

4.7

A.P.

559

4,93,211

113

5.7

Rajasthan

157

1,44,514

109

2.8

33% of cotton (by weight) is being procured from Maharashtra, A.P. and
Karnataka, having very high unit procurement cost as well as high average
procurement days
Unavailability of desired quality cotton in Haryana and Gujarat, at times,
forces the firm to procure cotton at high prices (through interviews of
Procurement officer)
LSCM || Group A04

Process Mapping: Raw Material Sourcing

(Rajula & Avinashi)

Procurement
State

Purchase
Amount (in
Rs. lacs)

Purchase
Quantity (in
Kgs)

Unit Purchase
Price (in Rs/Kg)

Avg
Procuremen
t Days

Gujarat

13,820

138,75,524

100

0.1

Procurement
State

Purchase
Amount (in
Rs. lacs)

Purchase
Quantity (in
Kgs)

Unit Purchase
Price (in Rs/Kg)

Avg
Procuremen
t Days

Karnataka

1,276

13,48,165

95

3.1

A.P.

209

2,22,059

94

2.1

LSCM || Group A04

Process Mapping: Raw Material Sourcing

LSCM || Group A04

Process Mapping: Yarn type-wise Production

Weight (in kgs)
6000000

RAJULA

5000000

GAJROULA

AVINASHI

4000000

3000000

2000000

1000000

32CH

30CH

34CH

40CH

24CH

32CH is the produced in the largest quantity and mostly in Rajula facility.
LSCM || Group A04

Process Mapping: Export Sales

Rs. ~376 Cr of yarn
exports
Rajula caters only to
exports
45% of exports come
from Merchant
Exports (very less
margins)

Avinashi

2%

Merchant Export

45%

Gajroula
Rajula

46%
7%

Product Wise Export Split

32CH, majorly produced

at Rajula, is the main
export product
accounting for almost Rs.
~150Cr

41%

0%

10%

20%

32CH

LSCM || Group A04

20%

30%

30CH

40%

50%

40CH

15%

60%

26CH

70%

30KH

6%4% 14%

80%

90%

Others

100%

Process Mapping: Export Sales

Country-wise Exports (in Rs. Cr.)

206
368
28

Total

China

Colombia

23

Bangladesh

20

Peru

17

Vietnam

16

Korea

15
Egypt

Exports to China account for 56% of total export sales for the firm
Relaxed import policies of China
Latin America is a preferential market for India subsidy from govt.

LSCM || Group A04

43
Others

Process Mapping: Domestic Sales

More than 95% of domestic sales is catered by Gajroula unit
Product-wise Domestic Sales split

48%

0%

10%

20%

30%
30CH

20%

40%

50%

24CH

60%
34CH

20%

70%

80%

12%

30CH yarn, majorly

produced in Gajroula unit,
is the most-selling
domestic product

90% 100%

Others

30CH and 32CH are the

fast moving products with
high inventory turnover
and having highest
demand
LSCM || Group A04

Process Mapping: Procurement-ProductionDemand

Weight (in kgs)

All Locations

Avinashi, TN

6,000,000

700,000

5,000,000

600,000
500,000

4,000,000

400,000

3,000,000

300,000

2,000,000

200,000

1,000,000
-

100,000

Apr

May

Jun

Jul

Units Sold

Aug

Sep

Oct

Units Produced

Nov

Dec

Jan

Feb

Mar

Apr

May

Units Procured

Jun

Jul

Units Sold

Gajraula, UP

Sep

Oct

Units Produced

Nov

Dec

Jan

Feb

Mar

Jan

Feb

Mar

Units Procured

Rajula, GJ

3,000,000

3,500,000

2,500,000

3,000,000
2,500,000

2,000,000

2,000,000

1,500,000

1,500,000

1,000,000

1,000,000

500,000
-

Aug

500,000

Apr

May

Jun

Jul

Units Sold

Aug

Sep

Oct

Units Produced

LSCM || Group A04

Nov

Dec

Units Procured

Jan

Feb

Mar

Apr

May

Jun

Jul

Units Sold

Aug

Sep

Oct

Units Produced

Nov

Dec

Units Procured

Key Issues and Discussion Points

High COGS as compared to industry standards:
Yarn Pricing issue (value added products by competitors)
Manufacturing efficiency (machinery at par)
Power & fuel and labour costs are major manufacturing cost drivers
Transportation costs
Make to stock vs make to order:
Inventory carrying cost
Ordering and handling cost
Last minute pricing
Demand forecasting
Supplier contracts:
Currently, no long term contracts
Daily purchase from open market low risk taking capacity
5% sensitivity on purchase price (Operating Profit: 20% - 17% - 14%)
High Financial Costs
Economies of scale
Manufacturing facilities locations
LSCM || Group A04

APPENDIX

LSCM || Group A04

Process Mapping: Raw Material Procurement

LSCM || Group A04

Reference Sheet

Group_A04
Analysis Worksheet
double click to open

LSCM || Group A04