Indo Rama Synthetics (India) Ltd. Analyst Meet Quarter 2 & H1 2006-07 Results and The opportunities...

Indo Rama Synthetics (India) Ltd.

Analyst Meet

Quarter 2 & H1 2006-07 Resultsand

The opportunities ahead

Mumbai18 October, 2006

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2

Agenda

1. Crude & Raw Material

2. Comparative Fibre scenario & Polyester

3. Factors influencing the performance of

Indo Rama and the way forward

4. Indo Rama’s Expansion Project

5. Indo Rama Performance

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3

Crude & Raw Material

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4

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60

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PTA

Crude Oil

Behaviour of PTA & Crude Oil Prices

16% fall in PTA prices since September : showing signs of better margins, way ahead

Falling crude price pushes down Paraxylene prices resulting in softening PTA Prices

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5

Improved PTA availabilityWorld Asia

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6

MEG Supply-Demand Scenario

DEMAND

SUPPLY

Projected demand increase1.09 million tonnes MEG

MEG capacity net increase +1.5 to 1.9 million tonnes

Supply to exceed demand in 2006

MEG Capacity increase till date in 2006: 1.445 million Tonnes

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Polyester tolling margins at historical low

All time low Polyester margins due to high raw material prices and unfavourable supply-demand scenario

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Comparative Fibre Scenario

& Polyester

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9

Cotton Wool Synthetics CellulosicTotal (in Mn tonne)

Per Capita ( in kg)

2005 36% 2% 57% 5% 64 9.9

2002 38% 2% 55% 5% 56 9.0

2000 38% 3% 54% 5% 53 8.7

1990 48% 5% 40% 8% 41 7.7

1980 46% 5% 37% 12% 30 6.6

1970 54% 8% 22% 16% 22 5.9

1960 68% 10% 5% 18% 15 4.9

Global Fibre consumption trend

The only fibre showing positive growth in share of consumption is Man Made fibre

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10

Availability of cotton has decreased

85

90

95

100

105

110

115

120

125

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Production

Consumption

Million

s o

f 480

lb

.bale

s

World Cotton production & consumption

Gap in Supply Demand results in high Cotton prices

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20102005

20102005

Textiles: USD 14 Billion

Cotton: USD 12 Billion

Manmade: USD 2 Billion









Exports

Domestic

Ministry of Textiles and CMAI Study

* Polyester constitutes 79% of Man Made Fibers in India

Advantage Textiles is Advantage PolyesterAdvantage Textiles is Advantage Polyester


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Promising Outlook

1. Global trade in textile & clothing to touch $ 700 – 800 bn by 2010 from existing $ 460 bn

2. India’s export to grow from $ 15 bn to $ 50 bn in 2010

Even considering only a 15% share of the incremental global opportunity of over $ 300 bn

Share in global textile trade to grow from about 4% today to 6% by 2010

3. With GDP growth of 6-8%, domestic per capita consumption expected to rise from 4.7 Kg. (World : 9.9 Kg.) to 6-7 Kg. by 2010

Factors Influencing Polyester Growth

1. Competitive Prices of Polyester to that of Cotton due to

softening of PTA & MEG Prices

2. Abundant availability of PTA & MEG

3. Cotton fiber Supply Demand gap widening, good quality

cotton availability is increasingly becoming critical

4. Textile Industry a Priority sector for GOI, Major investment

in place

across Spinning, Texturizing, Weaving, Processing and

Garmenting

Industry

5. Large Scale Expansions in Downstream Industry

6. Addition of 2.4 Mn Spindles per annum in Spinning

industry

7. Estimated 300 Texturizing machines being added by 2008

end

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In Short…

Favourable business environment to drive growth…

Polyester Industry Performance

(4) Robust growth in downstream industry

(1) Softening

PTA / MEG prices

(2) Tariff rationalization

(3) Cotton prices on upswing

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Factors influencing the

performance of

Indo Rama and the path

ahead…

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Negative factors For the period April to Sept 2006 :

1. Steep increase in crude oil prices

2. Tight availability of Raw materials

3. Increase in Raw material prices

4. Sharp rise in Furnace oil prices Lead to big

jump in power & fuel cost

5. Cheap availability of cotton

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Positive factors

1. Reduction in excise duty of Raw Materials

• Duty on PTA reduced to 8% from 16%

• Duty on MEG reduced to 12% from 16%

2. Reduction in excise duty of Finished Goods

• Duty on Polyester FG reduced to 8% from 16%

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Against this back drop IndoRama is well positioned to take the advantage of favourable factors for Polyester and its anticipated robust demand

India Polyester Staple installed capacity to go up from 0.699 Mn Tonnes to 1.20 Mn Tonnes by 2007

India PFY installed capacity to increase form 1.52 Mn Tonnes to an estimated 1.98 Mn Tonnes by 2007

Market Estimates

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Way forward1. Reduced production cost :

Commissioning of new polyester plant Economies of scale and advanced technology

Reduction in raw material cost due to improved PTA & MEG supply domestically as well as internationally

Reduction in power & fuel cost due to reduced FO prices and commissioning of CPP

2. Increased demand of Polyester : Less availability of quality cotton due to increasing

demand Domestic Polyester consumption showing rapid growth Huge export potential after Quota free regime

3. Thus both top line & bottom line are expected to show healthy increase in future quarters to come

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Marketing Strategy

1. We will widen our customer base through competitive pricing and value added services

2. Additional Sales Volumes through Export Focus

3. Enlargement of Product basket by producing niche products to serve premium markets both Domestically as well as Internationally

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Advantage Indo Rama India

1. Economies of scale, size and efficiencies adding sustainability to competitive edge

2. Low cost of conversion : raw material to finished good

3. Long term relationships and business contracts with key raw material suppliers

4. Environmental friendly - Sustainable development through sustainable environment

5. Customer driven enterprise with absolute importance on customer satisfaction

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Performance Update

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Financial Highlights - IRSL

Particulars Q2 2006-07

Q2 2005-06

Gross Turnover 421.38 519.39

Less : Excise Duty on Sales 28.35 62.65

Net Turnover 393.03 456.74

Other Income 6.28 21.47

Total Income 399.31 478.21

(Increase) / Decrease in Stock- in-Trade

(95.05) 24.12

Movement in Excise Duty on Stocks 7.70 (3.63)

Raw - materials 367.83 314.94

Staff Cost 9.08 8.03

Other Expenditure 65.95 59.56

Total Expenditure 355.51 403.02

Rs. Crores

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Financial Highlights - IRSLRs. Crores

Particulars Q2 2006-07

Q2 2005-06

EBDITA 43.80 75.19

Interest 5.47 7.57

EBDT 38.33 67.62

Depreciation 24.93 24.56

Profit Before Tax (PBT) 13.40 43.06

Provision for Taxation--FBT-Deferred Tax Charge / (Credit)

0.20 4.47

0.20 9.19

Profit after Tax (PAT) 8.73 33.67

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ParticularsH1 2006-07

H1 2005-06

Gross Turnover 927.10 1,091.75

Less : Excise Duty on Sales 65.69 136.16

Net Turnover 861.41 955.59

Other Income 8.38 36.22

Total Income 869.79 991.81

(Increase) / Decrease in Stock- in-Trade (99.50) 171.85

Movement in Excise Duty on Stocks 8.26 (31.20)

Raw - materials 725.81 608.19

Staff Cost 19.04 16.04

Other Expenditure 137.84 110.10

Total Expenditure 791.45 874.98

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ParticularsH1 2006-07

H1 2005-06

EBDITA 78.34 116.83

Interest 12.48 15.34

EBDT 65.86 101.49

Depreciation 49.72 48.81

Profit Before Tax (PBT)16.14 52.68

Provision for Taxation-Reversal of excess MAT in earlier year-FBT-Deferred Tax

(0.52)0.4

5.35

-

0.48.58

Profit after Tax (PAT) 10.91 43.70

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1.4%

11.6%

7.4%

3.6%2.8%1.9% 1.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 H1:2006-07

Interest Cost as % of Sales

Interest Cost have remained at low levels

Indo Rama’s Expansion Project

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Polyester Capacity Expansion – Existing V/s Planned

378

282

400

400

778

682

0

200

400

600

800

1000

1200

1400

1600

(in

MT

/da

y)

Existing Cap. Expansion Cap. Total Cap.

PSF PFY

660 800

1460

POY plant has been commissioned and the PSF plant to be commissioned in December 06.

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Benefits from Capacity Expansion

1. Manufacturing & scale of economies strengthened by

the doubling of capacity

2. Reduction in Power cost :

Power production cost from CPP is 38% lower

Optimum utilization of energy efficient common utilities

3. Right timing of plant expansion with robust demand

of Polyester from 2007 coupled with long term

softening of raw material prices

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Birds eye view of plant

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PSF-Spinning

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House Open for Questions

Indo Rama Synthetics (India) Ltd. Analyst Meet Quarter 2 & H1 2006-07 Results and The opportunities...

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