Chairman
Dear Shareholders,
Your Company was promoted by my father Shri N. Damotharan and his elder brother late
Shri V.N. Ramachandran. It was their vision which enabled the Company to commence its
production of cotton yarn in the year 1964. Completing 50 years is an important milestone
in the history of any organisation. Besides the satisfaction, it also affords an excellent
opportunity, not only to look back dispassionately on the growth and progress of the
Company, but also to chart out a road map for the future.
The license era and liberalisation in 1990s
The structure of the Indian Economy has been transformed beyond recognition compared to
1960s. When your company was incorporated in 1962, the Indian economy was going through
one of its toughest periods with the Chinese war taking its toll on the country's
resources and the Third five year plan postponed temporarily. The License era restricted
industrial production of most commodities and industrial products. In particular the
textile industry was subjected to production, distribution and price controls. In an era
of shortages, supply was always lower than demand and marketing was unheard of especially
in the spinning industry. The term 'allotment of yarn' coined in the 60s and 70s signified
this trend.
After the decontrol of the Spinning Industry in 1980, the Company expanded steadily by
setting up units in Andhra and Kerala besides starting Meridian Industries in Tamil Nadu
in the year 1994. The economic liberalisation of the 1990s opened up opportunities for
growth. It also invited competition and the need for improving efficiency and cost
controls. Merging Meridian with your Company in the year 2006 enabled optimisation of
resources and economies of scale.
Forward Integration
In the year 2000, the Company set up a yarn dyed fabric division in Tamil Nadu. Though
liberalisation dismantled the license system, the fragmented nature of the textile
industry did not undergo any significant change. Even today, more than 90% of the fabrics
produced in the country are from small and fragmented power loom and hand loom sectors. In
this scenario, the cost structure of the division was not competitive. Hence the company
took a decision to exit the fabric business in 2012.
Technical Textiles - Value added niche products
In the year 2011, we decided to de risk our operations by moving away from traditional
commodity products like yarn and fabrics. The Company has set up a new Technical textiles
unit in the Special Economic Zone in Hassan, Karnataka for the manufacture of niche
products in the hygiene field for export. Commercial production was started in June 2013.
We are confident that this unit will contribute significantly to the revenues and profits
of the Company in the years to come.
Bonus Issue
Even though 2011-12 was a difficult year with abnormal cotton prices and low yarn
prices, 2012-13 was a reasonably good year with the corrective measures taken by the
company to improve our efficiency and cost control. The last two years has seen sluggish
growth in the Indian economy. However, one hopes that we are at the bottom of the economic
cycle and the only way forward is to be positive. With the technical textiles unit showing
promise and the spinning sector reviving, we are looking ahead with confidence and hope to
restore our growth, which was the hallmark of the Company during the 1980s and 1990s.
Therefore on the occasion of completion of 50 years, your company has proposed issue of
bonus shares in the ratio of 1 share for every 2 shares held, subject to the
approval of the shareholders in the forthcoming AGM in September 2013.
I would like to thank all of you for the continued support and patronage.
Best Regards.
| D. SarathChandran |
14th August 2013 |