Account receivable

management
Introduction:
Financial management is the managerial activity, which is concerned with
the planning and controlling of the firm's financial resources. As a separate activity
or discipline, it or recent origin. It was a branch of economics till 1890. Till today,
it has no unique body of its knowledge of its own, and draws heavily on economics
for its theoretical concepts. Financial management, has an academic discipline has
undergone fundamental changes in its scope and coverage. In the early years of its
evolution it was treated synonymously with the raising of funds.
The subject of financial management is of immense to academicians and
practicing managers. It is of great interest to academicians because the subject is
sail developing, and there are still certain areas where controversies exit for which
no unanimous solution have been reached yet practicing managers are interested in
this subject because among the most crucial decisions of the firm are those which
related to finance and an understanding of the theory of financial management
provides them with conceptual and analytical insights to make those decisions
skillfully.

Meaning and definition of financial management

Financial management is an organizational axctivity that is concered with
the management of financial resources. In common parlance is described as
providing amonetary at the they are required. But financial management covers the
mobilization and effective utilization of funds.
Definitions
Financial management is defined as that business activity which is
concered with the acquisition and conservation of capital funds in meeting the
financial needs and overall objectives of business enterprises.
- WHEELER
Business financial can be broadly defined as the activity concered with the
planning, raising, controlling and administrating the funds used in the business.
- GUTHMANN AND DOUGALL
fionancial management is concered with the effective use of an important
economic resources, namely capital funds.
- SOLOMON
financial management is an area of financia decision making harmonizing
individual motives and enterprises goals.
- WESTON & BRIGHAN
Financial management is concered with the effective use of an economic
resource namely capital fund.

Definition: Accounts receivable is short-term amounts due from buyers to a seller

who have purchased goods or services from the seller on credit. Accounts
receivable is listed as a current asset on the seller's balance sheet.
The total amount of accounts receivable allowed to an individual customer is
typically limited by a credit limit, which is set by the seller's credit department,
based on the finances of the buyer and its past payment history with the seller.
Credit limits may be reduced during difficult financial conditions when the seller
cannot afford to incur excessive bad debt losses.
Accounts receivable are commonly paired with the allowance for doubtful
accounts (a contra account), in which is stored a reserve for bad debts. The
combined balances in the accounts receivable and allowance accounts represent the
net carrying value of accounts receivable.
The seller may use its accounts receivable as collateral for a loan, or sell them off
to a factor in exchange for immediate cash.
Accounts receivable may be further subdivided into trade receivables and non trade
receivables, where trade receivables are from a company's normal business
partners, and non trade receivables are all other receivables, such as amounts due
from employees.

INTRODUCTION TO THE STUDY

A sale of credit is an evitable necessity in the business world of today. No business
can exist without selling the units in credit. The basic difference between the credit
sales and cash sales is the time gap in the receipt of cash.
Management of trade credit is commonly known as Management of Receivables.
Receivables are one of the three primary components of working capital, the other
being inventory and cash, the other being inventory and cash. Receivables occupy
second important place after inventories and thereby constitute a substantial
portion of current assets in several firms. The capital invested in receivables is
almost of the same amount as that invested in cash and inventories. Receivables
thus, form about one third of current assets in India. Trade credit is an important
market tool. As, it acts like a bridge for mobilization of goods from production to
distribution stages in the field of marketing. Receivables provide protection to
sales from competitions. It acts no less than a magnet in attracting potential
customers to buy the product at terms and conditions favorable to them as well as
to the firm. Receivables management demands due consideration not financial
executive not only because cost and risk are associated with this investment but
also for the reason that each rupee can contribute to firm's net worth.

PROBLEM STATEMENT:
The main problem of the study is that the company faces the difficulties of
receiving payments from their customers. To determine the reason for the delay in
receiving payments from the debtors. To check whether their customers are paying
the amount correctly from the actual date of receipt within the payment due date.
To find out the number of days delay in receiving payment. Ratio is determined to
indicate payment period, collection period, return on owner equity. It throws light
on financial strength of the company and whether the trend over the years is
favorable or not. In this study, ratios are used for credit analysis. From the given
secondary data, trend analysis of sales and debtors for 3 years is to be determined
for knowing the impact of receivable in financial liquidity.

NEED & SCOPE OF THE STUDY

Measurement is another component within account receivable management.
Traditional ratios, such as turnover will measure how many times you were able to
convert receivables over into cash.Measurements may need to be modified to
account for wide fluctuations within the sales cycle. The use of weights can help
ensure comparable measurements.
The following are the scope:
1. Fostering credit awareness
2. Understanding the need for a credit policy
3. Understanding financial statements
4. Applying financial analysis of financial statements
5. Allowing too much credit, or not managing the credit policy carefully
enough, could result in irrecoverable debts. This represents a loss of income
to the company, affecting both profitability and cash flow. So credit
management has to be done.
6. To reduce administrative cost and enhance office productivity

7. To manage your sales process more effectively by measuring trends and

analyzing performance
8. How the managed calculations to fit your business needs
OBJECTIVE OF THE STUDY
Primary objective:
The objective of the receivables management is to promote sales and profits. Also
it focuses on how to augment money to meet the companys working capital
requirements.
Secondary Objective:
i) To examine the receivables management practices followed by the company
ii) To determine the relationship of receivables and sales
iii) To Compare Actual Date of Receipt from customers with the Payment Due
Date.
iv) To find out the reasons for the delay in getting the Payment
v) To find out the impact in the working capital of the company

vi) To offer suggestion to improve the receivables position.

RESEARCH METHODOLGY
The data that has been collected from various sources and presented in the form of
materialistic

information

is

known

as research

methodology.

Research

methodology is a systematic way to solve any research problem. It may be

understood as a science of studying how research is done scientifically.
RESEARCH DESIGN
This research study adopts an Empirical research methodology. Such
research is often conducted to answer a specific question or to test a hypothesis.
Any conclusions drawn are based upon hard evidence gathered from information
collected from real life experiences or observations. This helps to understand and
respond to dynamics of situations. This research is widely used in stock market
research, analysis of financial statement, and other socio-science related
researches.
DATA COLLECTION METHOD

Data collection methods are an integral part of research design. Problems

researched with the use of appropriate methods greatly enhance the value of the
research
In this study, the data are collected from the secondary sources. Secondary data
are indispensable for most organizational research. Such data can be internal or
external to the organization and accessed through the internet or perusal of
recorded or published information.
Secondary data can be used, among other things, for forecasting sales by
considering models based on past sales figures, and through extrapolation.
There are several sources of secondary data, including books and periodicals,
government publications of economic indicators, census data, statistical abstracts,
databases, the media, annual reports of companies, etc. Also included in secondary
sources are schedules maintained for or by key personnel in organizations, the desk
calendar of executives, and speeches delivered by them. Much of such internal
data, though, could be proprietary and not accessible to all.
The advantage of seeking secondary data sources is savings in time and costs of
acquiring information. Hence it is important to refer to sources that offer current
and up-to-date information.

INDUSTRY PROFILE
Introduction
In recent years, several economic forces have been at works
that have changed the structure of the economy. Factors such as
globalization

and

trade

liberalization,

among

others,

have

intensified competition resulting in the reallocation of resources

among sectors in Canada.
This paper highlights some of the key changes that have
taken place in the Primary Textile Industry. It concentrates on the
evolution and importance of this industry within an overall
changing

economic

and

manufacturing

environment

using

Statistics Canadas data base, CANSIM, data from International

Trade Division and results of the Annual Survey of Manufactures
(ASM) along with current findings of the 1998 and 1999 Monthly
Survey of Manufacturing.

History of Textile:
The history of textile is almost as old as that of human
civilization and as time moves on the history of textile has further
enriched itself. In the 6th and 7th century BC, the oldest recorded
indication of using fiber comes with the invention of flax and wool
fabric at the excavation of Swiss lake inhabitants. In India the
culture of silk was introduced in 400AD, while spinning of cotton
traces back to 3000BC. In China, the discovery and consequent
development of sericulture and spin silk methods got initiated at
2640 BC while in Egypt the art of spinning linen and weaving
developed in 3400 BC. The discovery of machines and their
widespread application in processing natural fibers was a direct
outcome of the industrial revolution of the 18th and 19th
centuries. The development of transportation and communication
facilities facilitated the path of transaction of localized skills and
textile art among various countries.
Textile History in India:
Indian textile enjoys a rich heritage and the origin of textiles
in India traces back to the Indus valley Civilization where people

used homespun cotton for weaving their clothes. Rig-Veda, the

earliest of the Veda contains the literary information about
textiles and it refers to weaving.
India textile industry largely depends upon the textile manufacturing and
export. It also plays a major role in the economy of the country. India earns about
27% of its total foreign exchange through textile exports. Further, the textile
industry of India also contributes nearly 14% of the total industrial production of
the country. It also contributes around 3% to the GDP of the country. India textile
industry is also the largest in the country in terms of employment generation. India
textile industry currently generates employment to more than 35 million people.
Indian textile industry can be divided into several segments, some of which can be
listed as below:
Cotton Textiles
Silk Textiles
Woolen Textiles
Readymade Garments
Hand-crafted Textiles

Jute and Coir

Influences of changes shaping the industry:

We will touch upon some of the more significant changes
that have and are shaping the Indian

textile industry.

Changes in Emphasis:
There has been a distinct and positive shift from quality to
quality. Earlier Indian textiles were considered cheap and of low
quality. The industry was at that time driven by large volumes,
which were of paramount importance. The best quality was
produced in Europe and Japan. Since then, India has come a long
way, emerging as a manufacturer of high quality yarns and
fabrics. The leading mills such as Raymonds, Read & Taylor,
Aravind mills etc. Improved their quality standards prevailing into
the world.
Implementation of New Equipment:
The textile industry has also become a high technology. The
textile industry has also become a high technology industry. No
body earlier could have concerned that the industry would require
top of the line technical skills. Present day textile machinery is

fully computerized and needs totally new skills to effectively

manage it.
New Marketing Trend:
On the marketing side, there has been a total change , with
almost all players in the industry extending their reach to
international markets. The impact of these trends on the textile
industry is profound. Increasingly any company cannot sustain
itself only on local market demand or only the exports. One has to
look at the global markets in totality.

Competition:
This compulsion to access and compete in international
markets has been perhaps one of the saving graces for the
industry. Clearly the ability and necessity of meeting global
competition head on, has forced the industry to upgrade its
technology, product quality, cost structure and marketing skills.
Decentralized sectors:

Another visible change relates to the scale of operations.

Earlier textile mills were generally reasonably large size becomes
a non-constraining factor with the advent of power loom sector,
which enabled small weavers to make and market their own
fabrics in direct competition with large mills.
Technocrats:
Another shift in the industry is regarding entrepreneurship.
Technocrats have been able to become possible to have small size
spinning, weaving and processing mills. All this was earlier the
domain, solely of large businesses.

Labor-intensive industry:
The textile industry being labor intensive is slowly migrating
from high cost countries, such as the United states, Europe,
Japan, Australia, Taiwan and Korea. All these countries were at
one time leading textile manufacturers.

The India Textile Industry:

The India textile industry is one of the leading in the world.
Currently it is estimated to be around US$ 52 billion and is also
projected to be around US$ 115 billion by the year 2012. The
current domestic market of textile in India is expected to be
increased to US$ 60 billion by 2012 from the current US$ 34.6
billion. The textile export of the country was around US$ 19.14
billion in 2006-07, which saw a stiff rise to reach US$ 22.13200708. The share of exports is also expected to increase from 4% to
7% within 2012.
Strengths:
Vast textile production capacity
Large pool of skilled and cheap work force
Entrepreneurial skills
Efficient multi-fiber raw material manufacturing capacity
Large domestic market
Enormous export potential
Very low import content

 Flexible textile manufacturing systems.

Weaknesses:
Increased global competition in the post 2005 trade regime
under WTO
Imports of cheap textiles from other Asian neighbors
Use of outdated manufacturing technology
Poor supply chain management
Huge unorganized and decentralized sector
High production cost with respect to other Asian competitors
Percentage Vision of India 2010 for Textiles
Textile economy to grow to $85billion by 2010
Creation of 12 million new jobs in textile sector.
To increase Indias share in world trade to six per cent by
2010.
Achieve export value of $40 billion by 2010.
Modernization and consolidation for creating a globally
competitive industry.
Indian Textile Policy:

For the growth and development of the Indian Textile Industry and
to make it
More vibrant, the Government of India passed the National Textile Policy in
2000,
Which had the following objectives:
To produce and provide good quality cloth in affordable price
to fulfill
different needs of customers.
To increase the share of India in Global Textile Market;
To increase the contribution for employment and economic
growth of country.
All sub-groups show notable increases in exports
The Primary Textile Industry produces a wide variety of threads,
filaments and fabrics and is composed of the following sub-groups in order of their
size, the first two accounting for three-quarters of the industry in terms of the value
of shipments:
Spun Yarn and Woven Cloth (other than wool) (SIC 1829)
Man-made Fiber and Filament Yarn (SIC 1811)
Broad Knitted Fabric (SIC 1831)

 Wool Yarn and Woven Cloth (SIC 1821)

Spun Yarn and Woven Cloth (other than wool)
This industry specializes in the manufacture of various kinds of fabric,
from yarns other than wool. It is the largest sector in the Primary Textile Industry
and accounted for 42% of the total in 1988 and 1997. Although the total value of
shipments increased 18% from $1.3 billion in 1988 to $1.6 billion in 1997,
domestic shipment of these items has progressively declined over the study period.
On the other hand, both imports and exports have sky-rocketed. Exports comprised
of 11% of the value of total shipments in 1988, climbing to 40% in 1997. At the
same time, the Canadian market, consisting of domestic shipments plus imports,
has increased from $2.3 billion to $2.7 billion. The market is being satisfied
increasingly with more imports. The share of imports in the Canadian market
increased, from 47% in 1988 to 64% in 1997.
Man-made Fiber and Filament Yarn
Man-made Fiber and Filament Yarn industry processes and
combines fibers and filaments to produce various types of thread. It is the second
largest sub-sector accounting for 33% of total shipments of primary textiles. The
Canadian market for such products has grown somewhat, from $1.1 million in
1988 to 1.3 million in 1997. However 71% of this market was satisfied with

imports in 1997 compared to 34% in 1988. Meanwhile, exports of these products

have more than tripled.
Broad Knitted Fabric
The second smallest sub-sector in the Primary Textile Industry,
engaged in knitting apparel fabrics, has experienced an increase in its share of the
value of shipments from 15% in 1988 to 17% in 1997. The share of imports in the
Canadian market has increased from 21% in 1988 to 52% in 1997. At the same
time exports jumped from 2% in 1988 of the value of total shipments to 36% in
1997.
Wool Yarn and Woven Cloth:
Wool Yarn and Woven Cloth, the smallest sub-sector, consists of
establishments that specialize in the manufacture of wool yarn and fabrics from
such yarn as well as felts for papermaking. Even though exports of these products
have increased from 13% to 44% of the value of shipments, its share fell from 12%
in 1988 to 8% in 1997 of total shipments. Demand for imported products is higher
than those produced domestically.
Textiles Sectors in India:
The Man-Made Fiber / Yarn and Power loom Sector:
This

part

of

industry

includes

fiber

and

filament

yarn

manufacturing units. The Power looms sector is decentralized and

plays a vital role in Indian Textiles Industry. It produces large

Variety of cloths to fulfill different needs of the market. It is the
largest Manufacturer of fabric and produces a wide variety of
cloth. The sectors contribute around 62% of the total cloth
production in the country and provide sample employment
opportunities to 4.86 million people.
The Cotton Sector:
Cotton is one of the major sources of employment and
contributes in export in promising manner. This sector provides
huge employment opportunities to around 50 million people
related activities like Cultivation, Trade, and Processing. Indias
Cotton sector is second largest producer of cotton products in the
world.
The Handloom Sector:
The handloom sector plays a very important role in the
countrys economy. It is the second largest sector in terms of
employment, next only to agriculture. This sector accounts for
about 13% of the total cloth produced in the country.

The Woolen Sector:

The Woolen Textile sector is an Organized and
Decentralized Sector. The major part of the industry is rural
based. India is the7th largest producer of wool, and has 1.8%
share in total world production. The share of apparel grade is 5%,
carpet grade is 85%, and coarse grade is 10% of the total
production of raw wool. The Industry is highly dependent on
import of raw wool material, due to inadequate production.
The Jute Sector:
Jute Sector plays very important role in Indian Textile
Industry. Jute is called Golden fiber and after cotton it is the
cheapest fiber available. Indian Jute Industry is the largest
producer of raw jute and jute products in the world. India is the
second largest exporter of jute goods in world.
The Sericulture and Silk Sector:
The Silk industry has a unique position in India, And plays
important role in Textile Industry and Export. India is the 2nd
largest Producer of silk in world and contributes 18% of the total

world raw silk Production. In India Silk is available with varieties

such as, Mulberry, Eri, Tasar, and Muga. Sericulture plays vital role
in cottage industry in the country. It is the most labor-intensive
sector that combines both Agriculture and Industry.
The Handicraft Sector:
The Indian handicrafts industry is highly labor intensive,
cottage based and decentralized industry. It plays a significant &
important role in the countrys economy. It provides employment
to a vast segment of craft persons in rural & semi urban areas
and generates substantial foreign exchange.
Cotton:
Cotton is a soft, staple fiber that grows around the
seeds of the cotton plant. It is a natural fiber harvested from the
cotton plant. The fiber most often is spun into yarn or thread and
used to make a soft, breathable textile, which is the most widely
used natural-fiber cloth in clothing today.

Processing of Cotton in India

In India the raw cotton, also called as Kapas is
processed in a multi-stage process described as below. The
Products of processing are
Production of Yarn.
Cottonseed Oil.
Cottonseed Meal
I. Production of Yarn
Kapas to lint:
Kapas (also known as raw cotton or seed cotton) is unginned cotton or the
white fibrous substance covering the seed that is obtained from the cotton plant.
The first step in the process is, the cotton is vacuumed into tubes that carry it to a
dryer to reduce moisture and improve the fiber quality. Then it runs through
cleaning equipment to remove leaf trash, sticks and other foreign matter. In ginning
a roller gin is used to grab the fiber. The raw fiber, now called lint.
Lint to bale:
The lint makes its way through another series of pipes to a press where it is
compressed into bales (lint packaged for market). After baling, the cotton lint is
hauled to either storage yards, textile mills, or shipped to foreign countries.
NOTE:

The cottonseed is delivered to a seed storage area from where it is loaded

into trucks and transported to a cottonseed oil mill.

Bale to lap:
Here the bales are broken down and a worker feeds the cotton into a
machine called a "breaker" which gets rid of some of the dirt. From here the cotton
goes to a "sketcher". (Operated by a worker also called a sketcher). This machine
cleans the cotton of any remaining dirt and separates the fibers. The cotton emerges
in the form of thin "blanket" called the "lap".
Lap to carding:
Carding is the process of pulling the fibers into parallel alignment to form
a thin web. High speed electronic equipment with wire toothed rollers perform this
task. The web of fibers is eventually condensed into a continuous, untwisted, ropelike strand called a sliver.
Silver to roving:
The silver is then sent to combing machine. Here, the fibers shorter
than half-inch and impurities are removed from the cotton. The sliver is drawn out
to a thinner strand and given a slight twist to improve strength, then wound on
bobbins. These Process is called Roving.

Roving to yarn (SPINNING):

Spinning is the last process in yarn manufacturing. Spinning draws out the
short fibers from the mass of cotton and twists them together into a long. Spinning
machines have a metal spike called a spindle which the thread winds around.

II. Production of Cotton Seed Oil

Processing of cottonseed in modern mills involves a number of steps. They
are as follows:
The first step is its entry into the shaker room where,
through a number of screens and air equipment, twigs,
leaves and other trash are removed.
The cleaned seed is then sent to gin stands where the linters
are removed from the seed (delinted). The linters of the
highest grade, referred to as first-cut linters are used in
manufacturing non-chemical products, such as medical
supplies, twine, and candle wicks. The second-cut linters
removed in further delinking steps, are incorporated in

chemical products, found in various foods, toiletries, film,

and paper.
The delimited seeds now go to the huller.

The huller

removes the tough seed coat with a series of knives and

shakers. The knives cut the hulls (tough outer shell of the
seed) to loosen them from the kernels (the inside meat of
the seed, rich in oil) and shakers separate the hulls and
kernels.
The kernels are now ready for oil extraction. They pass
through flaking rollers made of heavy cast iron, spinning at
high speeds. This presses the meats into thin flakes. These
flakes then travel to a cooker where they are cooked at 170
degrees F to reduce their moisture levels.
The prepared meats are conveyed to the extractor and
washed with hexane (organic solvent that dissolves out the
oil) removing up to 98% of the oil.
Crude cottonseed oil requires further processing before it
may be used for food.

The first step in this process is

refining. With the scientific use of heat, sodium hydroxide

and a centrifuge equipment used to separate substances

through spinning action), the dark color
Crude oil is transformed into a transparent, yellow oil. This clear
oil may then be bleached with special bleaching clay to produce
transparent, amber color oil.
The refined cottonseed oil has several advantages other than edible oils. It
contains mere advantage over other edible oils. It contains a large percentage of
Poly Unsaturated Fatty Acids (PUFA) which maintain cholesterol in the blood at a
healthy level.
The quality of cotton oil depends on the weather prevailing during the time
that cotton stands in the fields after coming to maturity. Hence quality of oil varies
from place to place and season to season. The quality of oil is high in dry seasons
and low when the seed is exposed to wet weather in the fields or handled or stored
with high moisture. Further cotton seed cooking oil has a long span of life due to
the presence of vitamin E.

III. Production of Cottonseed Meal/Cake/Kapaskhalli

Kapaskhalli (cottonseed extraction/meal) is a by product of
the cottonseed industry.

 Cottonseed is a by-product of the cotton plant, which is

primarily grown for its fiber. Although cotton has been grown
for its fiber for several thousand years, the use of cottonseed
on a commercial scale is of relatively recent origin.
Cottonseed was a raw agricultural product, which was once
largely wasted. Now it is being converted into food for
people; feed for livestock; fertilizer and mulch for plants;
fiber for furniture padding; and cellulose for a wide range of
products from explosives to computer chip boards.
The figure showing the products obtained from processing the raw
cotton:
Diagram 2.1

Cotton

varieties in India:

Bengal Delhi mainly produced in the states of Punjab,

Haryana, Rajasthan.

 Jayadhar mainly produced in the state of Karnataka.

Bunny (or) Brahma is mainly produced in the states of
Maharashtra, Madhya Pradesh, Andhra Pradesh, Karnataka.
Suvin is another variety produced in the state of Tamil Nadu.
H-4 (or) MECH1 is mainly produced in the states of
Maharashtra, Madhya Pradesh, and Andhra Pradesh.

Cotton market:
A declining trend of cotton's share in textiles fibers since the 1970s
compare to the chemical textiles (branched off oil) was stated- in 1960 the part of
cotton was of 68.3% against 21,8% for chemical textiles and at the opposite the
percentages were respectively of 39,7% and 57,7% in 2002. Cotton remains
nevertheless by far the most important natural fiber of the 20th century (see
"uses"). In a development context, cotton is crucially important for income and
employment provided in its production and processing. Much of the growth of
cotton production since the end of the Second World War (WWII) was due to
improved yield (output per hectare more than multiplied by four quadrupled
between 1945/46 and 2006/07, from 0.2 tons per hectare (t/ha) to 0.8 tons per
hectare, according to the International Cotton Advisory Committee - ICAC), rather

than to expanded area (cultivated land increased by only 35% over the 1945/462006/07 period, expanding from 22.3 million hectares to 34.8 millions).

In 2007, cotton was grown in 90 countries. In 2006/07, the four main

producing countries were China, India, the USA and Pakistan and accounted for
approximately three quarters of world output. If we added Uzbekistan and Brazil,
six countries would account for 83% of world cotton production. This
concentration in cotton production, which appears to increase for several years, has
to be put into perspective by considering the impact of domestic policy reforms in
the largest cotton producing countries, as well as climatic and sanitary
contingencies. For example, global output increased by 30% between the seasons
1983/84 and 1984/85, rising to 19.2 million tones up from 14.5 million tones. Most
of the growth came from China, where increases in production (Chinese
production edged upward from 4.6 million tones in 1983/84 to 6.3 million tones in
the 1984/85 season) were prompted by incentive measures taken by the
Government. To stimulate production growth, the Government used price
incentives (price adjustment increased from 15% to 50% according to the main
commodities) and above-quota premiums in cotton procurement (in China farmers
were assigned quotas for delivering cotton at administered prices). Additional
policy measures were taken to stimulate cotton production in the 1993/4 season,

including loans at preferential rates and advance payments to cotton producers

before planting.

The combined effect of these policy reforms was quite

remarkable. Cotton production increased by 3.7 million Tones in the 1992/93

seasons to 4.34 million Tones in 1993/94 (a 16.1% increase). The increase in
production remained around the trend in the 1995/96 season, as the Government
announced that it would increase cotton procurement price by 25%.
Cotton consumption:
Since the beginning of the 1940s, world cotton consumption has
increased at an average annual growth rate of about 2% (roughly the same as
production). Growth in the demand for cotton was comparatively higher in the
1950s and 1980s, with an average growth rate of 4,6% a year during the 1950s and
3% in the 1980s. Developing countries have absorbed much of global cotton output
since the end of WWII. Their share in global consumption has become even more
significant since the beginning of 2000s. Developing countries accounted for
approximately 78% of global cotton consumption between 1981and 1999; since
2000 their ratio has been above 80%; according to projections based on ICAC
figures, in 2010 they would absorb almost 94% of global cotton output.

Cotton consumption has shifted to developing countries mainly

as a reflection of rising wage levels in developed countries. In the textile sector,

labor accounts for about 1/6 of production costs. This means that raising labor
costs eroded the competitive edge of developed countries, and contributed to the
shifting of cotton processing to low-cost economies (most notably Asia and the
Maghreb, but also Africa). Following specialization, certain countries were able to
forge new patterns of comparative advantages out of competitive differences in
quality.
The main cotton producing economies also account for a large part of
consumption. According to ICAC data, China, the United States, India, and
Pakistan as a whole have accounted for approximately more than 55% of global
cotton consumption over the period 1980 to 2008. Their overall consumption has
risen considerably in volume (see figure below). For example, consumption
multiplied by 3 in China and by more than 3 in India. Pakistan has had the largest
increase in volume (which multiplied by 6 between 1980 and 2008) in order to
respond to export-driven demand for textiles.
Role of cotton consumption in Indian economy:
Over the years, country has achieved significant
quantitative increase in cotton production. Till 1970s, country
used to import massive quantities of cotton in the range of 8.00
to 9.00 lakh bales per annum.
launched

special

schemes

like

However, after Government

intensive

cotton

production

programmers Cotton consumption (million tones), by main

countries1980/81-2012/13

through

successive

five-year

plans,

that

cotton

production

received the necessary impetus through increase in area and

sowing of Hybrid varieties around mid 70s.
Since then country has become self-sufficient in cotton
production barring few years in the late 90s and early 20s when
large quantities of cotton had to be imported due to lower crop
production and increasing cotton requirements of the domestic
textile industry.

Cotton production areas in India:

India is an important grower of cotton on a global scale. It
ranks third in global cotton production after the United States and
China; with 9.50 million hectares grown each year, India accounts
for approximately 21% of the world's total cotton area and 13% of
global cotton production. The Cotton producing areas in India are
spread throughout the country. But the major cotton producing
states which account for more than 95% of the area under and
output are:

Punjab.
Haryana.
Rajasthan.
Maharashtra.
Gujarat.
Madhya Pradesh.
Andhra Pradesh.
Tamil Nadu.
Karnataka.

Of the nine cotton producing States in India, average yields

are highest in Punjab where most of the cotton area is irrigated.

But the yields of cotton in India are low, with an average

yield of 503 kg/ha compared to the world average of 734 kg/ha.
The problem is also compounded by higher production costs and
poor quality in terms of varieties purity and trash content.
However the Cotton plays an important role in the National
economy providing large employment in the farm, marketing and
processing sectors. Cotton textiles along with other textiles also
contribute about 1/3rd of the Indian exports.

Contribution of Cotton industry for Textile Industry

Cotton is the most important raw material for India's Rs.
1,50,000 crores textile industry, which accounts for nearly 20% of
the total national industrial production.
The cotton Industry is the backbone of our textile industry,
accounting for 70% of total fiber consumption in textile sector. It
also accounts for more than 30% of exports, making it India's
largest net foreign exchange industry. India earns foreign

exchange to the tune of $10-12 billion annually from exports of

cotton yarn, thread, fabrics, apparel and made-ups.
Steps taken by cotton producers in India:
Now-a-days the Indian Cotton producers are continuously
working to up-grade the quality and increase the cotton
production to cope up with the increased global demand for
cotton textiles and to meet the needs of the 39 million spindles
capacity

of

the

domestic

textile

industry

which

presently

consumes about 12-14 million bales annually.

In India, cotton yields increased significantly in the 1980s
and through the first half of 1980s but since 1996 there is no
increase in yield. In the past, the increase in cost of production of
cotton was partially offset by increase in yield but now with
stagnant yield the cost of production is rising. Besides low yield,
Indian cotton also suffers from inconsistent quality in terms of
length, micron ire and strength.
Policy of Government of India towards Cotton Industry

The Cotton production policies in India historically have been

oriented toward promoting and supporting the textile industry.
The Government Of India announces a minimum support price for
each variety of seed cotton (kapas) based on recommendations
from the Commission for Agricultural Costs and Prices. The
Government Of India is also providing subsidies to the production
inputs of the cotton in the areas of fertilizer, power, etc
Exports of cotton:
The main market for Indian cotton export is China. The other
markets also include Taiwan, Thailand and Turkey. In July 2001,
the union government removed all curbs on cotton exports. As a
result of these, now the exporters are not required to obtain any
certificate from the Textile Commissioner on the registration,
allocation, quality and quantity of export. India exported around
25 per cent cotton during 2008-09 and it is estimated nearly 62
per cent exported to China.
During the year 2008-09 the prices of Indian cotton in
early part of the season being lower than the international prices,
had been attractive to foreign buyers and there was good demand

for Indian cotton, especially S-6, H-4 and Bunny, which had
resulted in sustained cotton exports, which are estimated at 55.00
lakhs bales.
The Cotton Advisory Board estimated an 18-20 percent
increase in cotton exports to 65 lakhs bales for Oct 2009- Sep
2010, as against its Aug 2009 estimate of 58 lakhs bales. India
second largest exporter of cotton behind the us. India exports
reached 1481000 tons in 2009-10.
Imports of cotton:
Despite good domestic crops, India is importing cotton
because of quality problems or low world prices particularly for
processing into exportable products like yarns and fabrics. India
imported just 721,000 bales of cotton in 2004-05. The imports
rose to 1,217,000 lakh bales in 2005-06, 4,700,000 lakh bales in
2006-07 and the anticipated imports for the year2007-08 are
550,000 lakh bales.
For the year 2007-08 the cotton imports into the country had
once again remained limited mainly to Extra Long staple cottons,
like as previous year, which were in short supply at around 6 lakh

bales inclusive of import of around 2 lakh bales of long staple

varieties contracted by mills during April-May 2009.
Role of cottonseed oil in Indian economy:
The global production of cottonseed oil in the recent years
has been at aroun0d 4-4.5 million tons. Around 2 lakhs tons are
traded globally every year.

The major seed producers, viz.,

China, India, United States, Pakistan are the major producers of

oil. United States (60000 tons) is the major exporter of cottonseed
oil, while Canada is the major importer.
Cottonseed is a traditional oilseed of India. In India the
average production of cotton oil is around 4 lakhs tons a year. It is
estimated that, if scientific processing is carried out the oil
production can be increased by another 4 lakhs tons.
In India, the oil recovery from cottonseed is around 11%.
Gujarat is the major consumer of cottonseed oil in the country. It
is also used for the manufacture of vanaspati. The price of
cottonseed oil is generally dependent on the price behavior of
other domestically produced oils, more particularly groundnut oil.

India used to import around 30000 tons of crude cottonseed

oil, before palm and soy oil became the only imports of the
country. Currently, the country does not import cottonseed oil.
Role of cottonseed meal in Indian economy:
India produces around 2 million tons of cottonseed meal a
year. However, in India mainly decorticated meal is largely
produced. Several associations are promoting the production of
decorticated cake in India and the production of this is expected
to increase in the country.
India used to be a major exporter of cottonseed extraction
around two decades ago. However, the demand for other oil
meals like soymilk, has lowered the cottonseed demand globally.
In addition, the low availability of decorticated meal in India has
also been a major reason for the fall in exports.
The

major

importers

of

Indian

cottonseed

meal

(undecorticated) used to be Thailand. India in 2003-04 exported

only 50 tons of decorticated cottonseed meal. In 2004-05, too
there have been no significant exports. India does not import
cottonseed meal.

The organizations dealing with the promotion of cotton

industry in India:
The organizations that try to promote the quantity and
quality of Cotton in India are:

The Cotton corporation of India Ltd.,

Cotton Advisory Board.,
Cotton Association of India.
Central Institute of Cotton Research.

The Cotton Corporation of India Limited

The Cotton Corporation of India Ltd. was established on 31st
July 1970 as a Government Company registered under the
Companies Act 1956.

In the initial period of setting up, as an

Agency in Public Sector, Corporation was charged with the

responsibility of equitable distribution of cotton among the
different constituents of the industry and to serve as a vehicle for
the canalization of imports of cotton.
With the changing cotton scenario, the role and functions of
the Corporation were also reviewed and revised from time to
time.

As per the Policy directives from the Ministry of Textiles,

Government of India in 1985, the Corporation is nominated as the

Nodal Agency of Government of India, for undertaking Price

Support Operations, whenever the prices of kapas (seed cotton)
touch the support level.
The Cotton Corporation of India Ltd. Operations cover all the
cotton growing states in the country comprising of:
Punjab, Haryana and Rajasthan in Northern Zone.
Gujarat, Maharashtra and Madhya Pradesh in Central Zone.
Andhra Pradesh, Karnataka & Tamil Nadu in Southern Zone.
II. Cotton Advisory Board
The Cotton Advisory Board is a representative body of
Government/

Growers/

Industries/

Traders.

It

advises

the

Government generally on matters pertaining to production,

consumption and marketing of cotton, and also provides a forum
for liaison among the cotton textile mill industry, the cotton
growers, the cotton trade and the Government. It functions under
the Chairmanship of Textile Commissioner with Deputy Textile
Commissioner as a Member Secretary.
III. The Cotton Association of India

The Cotton Association of India also called as the Bombay

Cotton Contract Act declared the East India Cotton Association
(EICA) as the statutory body on 28th December 1922. Its purpose
is to Provide and maintain suitable buildings or rooms or a Cotton
Exchange in the city of Bombay or elsewhere in India.
Provide forms of contracts and regulate the marketing, etc.
of the contracts.
Fix and adopt standards or classifications of cotton.
Adjust by arbitration or otherwise controversies between
persons engaged in the cotton trade.
Acquire,

preserve

or

disseminate

useful

information

connected with the cotton interests.

IV. Central Institute of Cotton Research
With a view to develop a Centre of excellence for carrying
out long term research on fundamental problems limiting cotton
production the Indian Council of Agricultural Research has
established the Central Institute for Cotton Research at Nagpur in
April, 1976. CICR was simultaneously established at Coimbatore
to cater to the needs of southern cotton zone. CICR was

established at Sirsa in the year 1985, to cater to the needs of

northern irrigated cotton zone. All the three research farms are
well equipped with tractors and other farm implements and
efforts are underway to initiate further further developmental
work in all the farms.
The Vision of the CICR is to improve production and quality
of Indian Cotton with reduced cost to make cotton production cost
effective and competitive in the national and global market. The
Mission of CICR is to develop economically viable and eco-friendly
production and protection technologies for enhancing quality
cotton production by 2-3% every year on a sustainable basis for
The Vision of the CICR is to improve production and quality of
Indian Cotton with reduced cost to make cotton production cost
effective and competitive in the national and global market. The
Mission of CICR is to develop economically viable and eco-friendly
production and protection technologies for enhancing quality
cotton production by 2-3% every year on a sustainable basis for
the next twelve years (till 2020)
The current scenario of cotton industry

The cotton production in the country has been increasing

continuously since last three years and the same has further gone
up by around 11% during cotton season 2008-09 at a record level
of 270 lakh bales as against 244 lakh bales during 2009-10.
Gujarat has turned into a largest cotton producing State with a
record production-level of 93 lakh bales constituting around 34%
of the countrys total production. It is clear that cotton production
over the last 10 years has increased more than 89% from 156
bales in 1999 to 295 bales in 2009-10.The area under cotton
cultivation during 2008-09 has also gone up by around 6% at
91.58 lakh hectares as against 86.77 lakh hectares during 200708.
With wide usage of hybrid seeds throughout the country
as well as changed mindset of cotton farmers for adoption of
better and improved farm practices, the average productivity of
cotton has crossed 503 kgs per hectare as against 478 kgs during
the previous year. The prices of Indian cotton in early part of the
season being lower than the international prices, had been
attractive to foreign buyers and there was good demand for
Indian cotton.

Due to expectation of bumper crop, the mill

demand in the beginning of the season was subdued which put
pressure on the cotton prices right from the beginning of the
season and has resulted into fall in cotton prices between October
2008 & January 2009. Cotton prices reached its peak level by endMarch 2009 and there was some correction in cotton prices in
April and May 2009. However, on the whole, cotton prices
remained better by almost Rs.3000 per quintal in almost all
varieties as compared to previous year.
Future of cotton industry in India:
Considering the continual capital investments in the textile
industry, the Govt. of India may extend the Technology Up
gradation Fund Scheme (TUFS) by the end of the 11th Five Year
Plan (till 2012-2013), in order to support the industry. Indian
textile industry is massively investing to meet the targeted output
of $85bn by the end of 2011, aiming exports of $50bn.
The global demand for apparel and woven textiles is likely to grow by 25
percent by year 2011 to over 35mn tons, and Asia will be responsible for 85
percent output of this growth. The woven products output will also rise in Central

and Southern American countries, however, at a reasonable speed. On the other

hand, in major developed countries, the output of woven products will remain
stable. Weaving process is conducted to make fabrics for a broad range of clothing
assortment, including shirts, jeans, sportswear, skirts, dresses, protective clothing
etc., and also used in non-apparel uses like technical, automotive, medical etc., It
is been forecasted that the woven textile and apparel markets will sustain their
growth from current till 2011.
The imports of apparel and textiles will rise from developed economies like
the USA and the western countries of Europe and Japan, along with some newly
emerged economies, such as South Korea and Taiwan. Certainly, import growth
has been witnessed vertical rise in the previous year.
Apparel is the most preferred and important of all the other applications.
Woven fabrics are widely used in apparel assortments, including innerwear,
outerwear, nightwear and underwear, as well as in specialized apparels like
protective clothing and sportswear. Home textile also contributes considerably in
woven fabric in products assortments like curtains, furnishing fabrics, carpets,
tablecloths etc.
Special kind of woven fabrics are utilized in medical as well as industrial
applications. The medical applications include adhesives, dressing bandages,
plasters etc.

Where as, an industrial application includes;

Geotextile - interior upholstery, trim, airbags and seat belts and lyre fabrics.
Sailcloth - tent and fabrics used architectures, transportation and tarpaulins.
And many more applications
The Indian Industry foresees huge demand for industrial woven products for
medical and automotive applications. Demand for woven fabrics is anticipated to
be rise vertically in the sector of home textiles.
Anticipating massive growth in medical and automobile sectors, these
sectors assures substantial demand for non-woven facilities in India. Albeit, home
textiles also will lure higher demand, there are specific demands for home textile
facilities also.
The 7th Five Year Plan has huge consideration on agricultural growth that
also includes cotton textile industry, resulting a prosperous future forecast for the
textile industry in India. Indian cotton yarn manufacturers should rush forward for
joint ventures and integrated plans for establishing processing and weaving
facilities in home textiles and technical textiles in order to meet export target of
$50bn, and a total textile production of $85bn by 2009-2010.
Future challenges for cotton industry
The challenges that are going to face by the cotton
producers in India for the season 2009-10 are:

Rupee appreciation
The increase in the value of the rupee gives only smaller
import orders to the cotton producers.
Cheaper Imports
The appreciated rupee value makes the cotton imports
cheaper when compared to past. So this aspect is also required to
consider by the cotton producers.
Low quality
The Quality of cotton is also far from satisfactory considering
the presence of a large number of contaminants. So the cotton
producers are also required to take care in this a

COMPANY PROFILE

BAVANAM

TEXTILES Group with its diverse interests in

core areas is surging ahead with drive and determination. With all
the companies superbly integrated in one single campus, the group
harnesses

an

entrepreneurial

spirit,

state-of-art technology

and financial strengths to emerge as an industrial force to reckon

wit.
BAVANAM TEXTILES GROUP is driven by a passion be the
best in al the areas it operates. Backed by a high density of
advanced technology and sophisticated manufacturing facilities, its
only natural that the group is leaf fogging for an outstanding future.
The total group turnover is around 300 crores per annum.
About the company:

 The founder of BAVANAM TEXTILES who has drawn its future

planned growth. A Man whose spirit of Dynamism has helped
the group to achieve manifold growth.

Thanks to his

pioneering vision, the groups operation grew and market

extended. Today BAVANAM TEXTILES is a multi-activity group
with a Rs.300crores turnover, comprising 6 divisions with
diverse interest in..
Cotton
Spinning
Textile
A tradition of enterprise:
Bavanam Textiles limited to promoted Sri. K.Srinivas and has
family members Smt. K. Geetha (D/o. Srinivasarao) and Sri. K.
Bhaskar (S/o Srnivasarao)are other directors.
The company has an existing textile plant with 125784
spindles at Martur in Andhra Pradesh. They propose to add an
other 49776 spindles at their existing plant.
bavanam Textiles Private Limited has mandated SBICAP to
carry out the financial appraisal of their proposed expansion plans

at a project cost of Rs.25, 559,47lakhs to be funded in a debit

equity ratio of 3:1.
Sri Kandimalla Srinivasa Rao left in pursuit of a dream. With
just two bags of grain, he ventured to cultivate 100 acres of land.
And with the tell- tale sprite gleaming in his eyes. His value
oriented strategy and adventurous sprit bore fruit consistently. His
farmland grew and from a model farmer he evolved into a dynamitic
entrepreneur. He proved that success starts with a proactive
attitude. A vigorous confidence that one can effectively integrate
ideas with enterprise. Sadinenis first trip to RUSSIA gave him the
power of conviction to stride boldly into the industrial environment
and valiantly into the future.
The birth of a dream
Sri Kandimalla Srinivasa Rao set up a cotton-ginning mill
in 1984. The operations grew rapidly to lay solid foundations for
giant surging ahead in diverse environments. To the group, the
future is rich in possibilities. A future where the best of minds and
men will work. And will have the most resources to draw upon. Its

vision of the future where change will be embraced as the very basis
of opportunity and endeavor.
The managing Director of AMARAVATHI TEXTILES (P) LTD.
Relentless pursuit

of perfection is the hallmark of this young and

dynamic B.Tech Textiles Graduate.

His rich and professionals experience in the spinning line enabled
BAVANAM Textiles Spinning Division to scale new heights. His enterprising
zeal and cautious planning have been the pivotal points in driving the group
towards trailblazing progress. Mr. Kandimalla Srinivasa Rao is committed to labor
welfare and his visionary leadership has earned him a wealth of respect among the
employees of BAVANAM. Astute professionals by habit, he is forever aiming
higher. He is widely acknowledged as the man who has fostered a can do culture
which starts at top and filters down to every employee at BAVANAM TEXTILES.
He is powered by just one belief..
Success is a matter of excellence, and not chance.
Vision:
To achieve excellence in all sectors of textiles industry
from fiber to finished product, constantly to be at the fore front of

our industry and to generate highest possible value for stake

holders.
Mission:
To manufacture international quality yarn and fabric, with
highest level of competitiveness on all parameters.
To effectively harms and integrate all available technology
across various elements of textile chain.
To cater to product innovation by mastering value added
areas like processing and finishing.
Objectives:
To create more jobs with minimum investments
To be competitive in internal as well as external markets.
To maximize export earning with minimum imported inputs.
To reduce the income gap between top and bottom
categories of employees.

Growth and development:

BAVANAM Textiles Private Limited has obtained the registration

from the textile commissioner for setting up 25,056 spindles unit
vide Regd. No. As/3/97/(97) 83 dated 23.08.83. They have
established 12576vspindle capacity spinning unit and started
commercial operations from number 1985 and from the year it
has posted increasing performance and developed considerable
net worth over the years. The capacity unitization for all years
reaches more than 95%.
The following detailers are increase in spindle capacity:
Year

Spindle

Increase in

Capacity

Spindles

1984-85

12576

-----

1993-94

19296

6720

1998-99

20568

1272

1999-03

22720

2152

2003-04

27368

4648

2004-05

33056

5688

2005-06

35720

2664

2006-07

41736

6016

2007-08

51528

9792

2008-09

67560

16032

2009-10

85560

18000

2010-11

106512

20952

2011-12

15782

25982

Product profile:
The company process to manufacture the following at
their proposed textile plant.
S.no

Product

Installed
capacity

60s Compact

1985

80s CD Compact

770

40s C Compact

580

100s Compact

790

77s C Compact

3014

772s C Compact

3014

100s C Compact

913

16s (35%Double yarn)

4259

40s C Compact

1340

10

2/80s C Compact

1340

11

24s

1511

Technical consultation:
The company has appointed the following technical consultant for the project.

S.No

Consultant

Role in project

1.

Mott McDonald India

Preparation of spinning mill

Private limited (MM)

feasibility study

The company has sufficient in house experience in terms of procurement and

commissioning. The company would be using this experience for the project and
hence has not appointed any EPC contractor.
Choice of plant, machinery and technology:
The major machines in the project are being supplied by Rieter, A
Swigwerland based company, which along with its subsidiaries has more than 50%
share of the world company, which along with its subsidiaries has more than 50%
share of world spinning industry market and is Rieter of the spinning industry.
Session, which is supplying the compact conversion system, is a subsidiary of
Rieter. Lakshmi Machine Ltd. The other major machinery supplier is the leading
spinning machinery supplier in the Indian market.
Manufacturing process:

BAVANAM textiles private limited plans to expand the existing spinning

facility by converting some existing spinning equipments to compact spinning and
there by manufacturing compact yarn which is a value-added product. The
proposed configuration of the project is indicated in the figure given below.
1795 MT Cotton Lint

3443 Cotton Lint

conversion
1436
MT Yarn(95%
yarn Compact
2341 MT Additional6099
Open
end
spinning
Capacity auditions
Yarn
capacity
MT value added yarn
(1080
(17.376 spindles)
spindles)

6378 Cotton lint

4298 MT
Compact
Spinning(32
.402Capacity.
spindles)

utilization )
Spinning:
The proposed spinning mill will be equipped with the latest generation
machinery from blow room winding along with necessary lap testing facilities.
The product would be tested right from cotton stage up to final cone to
ensure reliability of process and to maintain quality standards. The yarn being
produced would be aimed at shuttle less weaving clientele both India and abroad.

The figure below indicates the spinning process being adopted by the
company depending upon the type of the yarn manufactured some of the
operations will be modified.

Blow room

Carding

Drawing

Lap formatting

Combing
Auto leveler
drawing
Roving
Spinning with
compact spinning
conversion facility

Cone Winding

Packing

Blowing and blending in the blow room:

Cotton received from different sources in the bale from is fed into the hopper
blender and beaters where is opened and beaten to convert it in to blended cotton in
loose form.
Carding:
Cording converts the sheet of cotton a parallel sliver, removing more of the
trash and some lint in this step the sheet is converted into a loose fibrous rope,
there by elongating the cotton fiber about 100 times. The output is called a sliver.
Combing:
Output lap formed is fed to comber machine to remove the short fiber
depending up on the quality requirements.
Drawing post-combing stage:
Combed slivers received from comber are fed to drawing machine for the
important of uniformity and parallelization of fibers.

Roving:
This sliver is taken in a speed frame where the fiber is further extended
by covering it into a thin stand- like rove, increasing leant of the cotton by 10-12
times this rove is wrapped around bobbins and taken to the next stage.
Ring spinning:
The rove on bobbins is taken to the ring frame for spinning. A fine sliver of
fibers is spread down words from a roving bobbin through a drafting zone, which
drafts out the stand of fibers to the correct thickness.
Compact spinning:
In this process the fibers are compacted in the front drafting zone with the
additional of additional front top roller, mesh apron, suction tube,etc.
Winding through auto-coners:
The yarn is required to be packed in behavior packages in a wound form.
Packaging is done on winding machine.
Yarn conditioning:
The auto-coned yarn then undergoes vacuum steaming. This
conditioning enhance the twist, stability and improves the yarn quality.

Packing:
Each individual cone of yarn undergoes U.V.Ray check, physical
verification for any fault before it is put into the individual polythene bags.
In the case of Amaravathi Textiles Pvt.Ltd, the proposed spinning mills will be
equipped with the latest generation machinery from blow room to winding along
with necessary lab testing facilities.
Market position:
The project requires about 28.921 MT of cotton lint annually at full
capacity utilization. it is noted that the required cotton can be sourced from the
various ginning mills in Guntur District. Guntur is very big market for cotton trade
and can supply the required quality of cotton to manufacture required count of
cotton yarn.

Yarn

Consumption

Remarks

Norm (MT/MT)
60s

1.47

Out of the projects preview

24s

1.25

New production

77s

1.47

New production with compact conversion

80s

1.47

Compact conversion only.

40s

1.47

Compact conversion only.

100s

1.47

Compact conversion only.

77s

1.47

Compact conversion only.

10s

1.25

Yarn doubling

16s

1.25

Yarn doubling

77s

1.47

Elitwist yarn

40s C

1.47

New production with compact conversion

2/80s C

1.47

New production with compact conversion

The company has been in the cotton trade for the last 30 years.
Consequently, they have a report with a large number of cotton farmers and traders
of the Guntur and other areas. So we can procure quality cotton at lower prices
from these areas than somebody, say, operating from Punjab.

Since all varieties of cotton or grown in the Guntur cotton hinterland

the company has not felt the need for any specific tie-up more over, in the cotton
trade any before hand tie-ups may not be adverse to by the supplier in adverse
circumstances.

MCU-5and a number of MCU-5 variants like bunny, Brahma, Rasi, and

extra long staple variants like 708,DCH-32,suvin and someS6 variants are some of
the cotton varieties grown in AP.
Spinning division:
The BAVANAM TEXTILES SPINNING MILLS DIVISION has been a
trendsetter ever since its commissioning. Established in 1991, the plant started
commercial production of World-class yarn to the requirement of global markets as
well as indigenous markets. Conceived in a sprawling area in the midst of rich cotton
fields of GUNTUR District, the division is on its way to dizzy heights on the cotton
horizon. We are having a capacity of 60,000 spindles. The impressive performance
reflects BAVANAM TEXTILESS commitment to continue machine modernization.
The division through a concerted Endeavor assures exemplary quality by undertaking
rigid quality control measures which start right at the at the at the stage of procuring
raw material ingredients down to the last level.
All this translates into utmost customer satisfaction. The unit is enviably wellentrenched as a leading player for the highly competitive export markets ever since
1996.BAVANAMTEXTILES magnificent obsession with exports has won for it
important international markets. In fact, over 70% of the produce was exported major
European country. In recognition of its excellent quality conforming to the highest

international standards, the products of BAVANAM

have won widespread

appreciation and repeat orders. By exporting world class cotton yarn globally, the mill
is leap fogging for the further growth. The thrust on higher capacity utilization, quality
management, astute focus on niche markets, prompt delivery schedules combined with
competitive pricing have resulted in higher sales and profits.

Values:
Promptness in execution.
Transparency in Business
Integrity in Negotiation
Innovation that fuels growth
Major customers of the company:
NHDC(national handling development corporation)
UMA textiles-Calcutta
USHA traders-Amalapuram.
RAGAVA yarn Chirala
ANNAPURNA Dying-Vijayawada.
SUPER sales corporation-Mangalagiri.
Major competitors:
Siva Swathi textiles limited.

Sri Dhana lakshmi cotton mills.

Krishna Ganga textiles.
Tirumala cottons.
Jayalakshmi cotton limited.
Idupulapadu cotton mills pvt.ltd.
Vasantha spinning mills

Environmental protection and safety:

bavanam is committed to the conservation of the environment. Our manufacturing
facilities comply with stringent environmental norms and are equipped for effluent
treatment.
Count range:
We are running from 50 to 100 counts in single well as double (TFO) yarns.
We are running compact yarn with 12000 spindles (session). We will achieve 25000
spindles compact yarn shortly.
Textile division:

The Division was started in 2005. The Units equipped with modern imported
machinery. Presently we are running with 48 Brand New Looms. We have sucker
wrapping and sizing. Total plant planned for 98 Looms. In phased manner we are
expanding the Looms

capacity.

Statement of accounting general practices:

The Financial Statements are prepared on historical cost convention and in
accordance with generally accepted accounting practices.
Fixed assets:
Fixed assets are stated at historical cost less accumulated depreciation.
Investments:
Long term Investment is stated at cost and income thereon accounted for on
accrual. Provision towards decline in the value of Long Term Investments is made only
when such decline id other than temporary.
Depreciation:
Depreciation is a written off in accordance with the provisions of
schedule XIV of the companies Act 1956 as follows:

 Under straights Line Method in respect of the assets of Spinning, Power and
Textile Divisions.
Under written down valve method on the assets of all other divisions of the
company.
Inventories:
Valuation of inventories is made as follows
Raw Material and Finished goods at cost or net realizable valve whichever is
lower.
Work-in-Progress at cost inclusive of direct production overheads.

Stores and spares at cost.

Electronic power at net releasable valve.

Excise Duty liability on finished goods is accounted for as and when goods are

cleared from factory and there is no liability on closing stock of finished goods at the
year-end.
Sales:
Sales are inclusive of Excise Duty.
Taxes on income:

Current taxes are determined as per the provisions of income Tax Act
1961 in respect of taxable income for the year ended 31st march, 2003.Differed tax
liability is recognized, subject to the consideration of prudence on timing differences,
being the difference between taxable income and accounting that originate in one
period and are capable of reversal in one or more subsequent periods...

Segment reporting:
The accounting policies adopted for segment reporting are in line with the
accounting policies

of the company with the following additional policies for

segment reporting. Inter-segment Revenue has been accounted for based on the market
related prices.
Revenue and Expenses other than interest have been identified to
segments on the basis of their relationship to the operating activities of the segment.
Revenue and expense which related to the enterprise as a whole and are not allocable
to segments on a reasonable basis have been included under Unallocated head.
Retirement benefits:
The Company makes regular monthly contribution to provident fund, which are
deposited with the Government, and Group term Insurance is routed through L.I.C,

and are charged against the revenue. The company has taken Group Gradually (Cash
Accumulation) scheme with Life Insurance Corporation of India. The premium on
policy and the difference between the amounts of gratuity paid on retirement and
recovered from the Life Insurance Corporation of India debited to profit and Loss
Account. Leave encashment is accounted as and when the employees claimed and
paid.
Proposed dividend:
Provision is made in the account for the dividend payable (including of all
tax thereon) by the company as recommended by the Board of Directors, pending
approval of the shareholders at the annual General Meeting.
Impairment of assets:
At the date of each balance sheet the company evaluates internally, indications
of the impairment if any, to carrying amount of its fixed and other assets. No
impairment loss has been recognized.
Contingent liabilities:
Contingent Liabilities are not recognized in the accounts, but are disclosed
after a careful evaluation of the concerned facts and legal issues involved.
Utilities:

Requirement of water:
bavanam Textiles Pvt. Ltd has 10 bore wells in its premises yielding about 14-15
lakhs liters of water /day against a total requirement of 4-5 lakhs liters /day after
the proposed expansion including existing requirements.
Environment protection:
The company has taken the following steps towards environmental
protection. Rotary air filters are being used in the plants to prevent air pollution.
The company also intends to grow, as may trees as possible on the premises to
reduce pollution.
Quality control:
The quality control department is manned by people
with than a decade experience in quality control in spinning plants. The company
follows stringent

quality control measures at every stage of the quality control

process right from raw cotton stage through ginning blow room carding, combing,
roving, spinning and post spinning, packing and dispatch.
To aid the company in this objective of maintaining high quality assurance
levels we are /(would be) equipped with the worlds best in quality control
equipment. 90% of our lab equipment is from USTER, a company that is

synonymous with quality testing equipment word wide. The company also has
USTER equipment for cotton as well as yarn testing and these models are the
newest versions as on 2009.
SWOT ANALYSIS
Strengths:
Transparency in business.
Innovation that fuels growth.
Promptness in execution.
Integrity in negotiation.
Large domestic market.
Flexible textile manufacturing system.
Weaknesses:
Poor supply chain management.
Use of outdated manufacturing technology.
May low import content.

 Huge unorganized and decentralized sector.

Active export value of $ 40 billion by 2010.
Opportunities :
The company provide retirement benefits and also provident fund.
The total turnover of the company increment the will perused up to 2012
year.
The company have enormous export potential.
Entrepreneur skills.
Threats :
Accumulation of depreciation.
Increment of raw material and finished goods.
Development of rotary air filters for company protection.
Contingent liabilities are not recognized in the accounts.