Narasimhulu CR COLLEGE Funds Flow 021

MBA PROGRAMME Y.S.R. SPINNING MILLS (PVT. ) LTD.
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INTRODUCTION
Financial management is the managerial activity, which is concerned with
the planning and controlling of the firms financial resources. As a separate activity
or discipline, it or recent origin. It was a branch of economics till 189. !ill today,
it has no uni"ue body of its #nowledge 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.
!he sub$ect of financial management is of immense to academicians and
practicing managers. It is of great interest to academicians because the sub$ect is
still developing, and there are still certain areas where controversies e%it for which
no unanimous solution have been reached yet practicing managers are interested in
this sub$ect 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 ma#e those decisions
s#illfully
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MBA PROGRAMME Y.S.R. SPINNING MILLS (PVT. ) LTD.,
EVOLUTION OF FINANCIAL MANAGEMENT&
Financial management emerged as a distinct field of study at turn of the '
th
century. Its evolution may be divided into boar phase( the traditional phase, the
transaction phase and the modern phase. !he traditional phase lasted for about four
decades.
THE FEATURES ARE:
!he focus was mainly on certain episodic events li#e formation, issuance of
capital merger, reorgani)ation and li"uidation of the firm.
!he approach was mainly descriptive and intuitional.
It was viewed mainly from the point of view the ban#ers lenders and outside
interests.
TRADITIONAL APPROACH:
!he traditional period began around *s and continued till +s. It was similar to
that of traditional phase greater importance was placed on the day to day problem
faced by the finance manager in the areas of funds analysis, planning and control.
MODREN APPROACH:
!he modern period began in the mid 19+s and has witnessed an accelerated
pace of development with the infusion of ideas from economic theory and
application of "uantitative methods of analysis. !he central concerned of financial
management is considered to be a rational matching of funds to their uses. ,o as to
ma%imi)e the wealth of current shareholders. !he approach of financial
management has become more analytical and "uantitative.
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FUNDS FLOW STATEMENTS:
-A statement prospective or retrospective, setting out the sources and
applications of the fund of an enterprise. !he purpose of statement is indicate
clearly the re"uirement of funds and how they are proposed to be raised and the
efficient utili)ation and application of the scheme.
(I.C.W.A in its glossar o! "anag#"#nt A$$o%nting&
-A statement summari)ing the significant financial changes which have
occurred between the beginning and the end of companys accounting period..
-Analysis of changes in structure is the domain of funds flow statement. /y
e%amining the changes in /alance sheet items between sheet dates, one may
determine the sources of the funds and the ways in which these funds were used
during this limited time period.
(Gor'on an' s(illing La)&
-A statement is prepared in summary from to indicate changes 0and trends if
prepared regularly1 occurring in terms of financial condition between two different
balance sheet..
(*orston+ S"t( an' ,ro)n(
-!he funds flow statement describes the sources from which additional funds
derived and the uses to which these funds were put..
Ro,#rt N. Ant(on
CONCEPT OF FUNDS:
-Funds are the economic values that changes hands in business transactions
or that e%ist in the business..
!he e%planation of the precise concept of 3Fund is essential for giving a
proper construction of reference and focus of understanding for the entire e%ercise
involved in Funds flow analysis. !he term 3funds has a variety of meanings. At
one e%treme, to many the word 3funds is synonymous with cash. !o those funds
statement is nothing but an enumeration of the net effects of various #inds of
business events of cash. !his e%plains the trend towards the preparation and
presentation of cash flow statements in published annual reports of accounts. A
record of cash receipts and disbursements while valuable in its own way
undoubtedly a form of funds statement is probably very narrow in its import.
4n the other e%treme Funds refer to economic values e%pressed in money
measurements that are sub$ect to firms $urisdiction( the reservoir of these values is
described in the list of assets to which funds stands committed and the source of
these values is detailed in the list of liabilities from where the funds are derived.
!his is #nown as 3all financial resources of funds. whereas both these concept of
funds constitute the e%tremes, the most acceptable view is the one relating to net
wor#ing capital. !he term wor#ing capital is particularly appropriate e%pression for
showing the wealth of an enterprise, which is continuously revolving through the
stages more desired by the customer 0inventories1 and by the firm 0cost1. !he
interviewing stage 0receivables1 identifies the current relationship between the firm
and its customers. !he magnitude of the investment in wor#ing capital is an
important decision of managerial strategy.
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!he concept funds as wor#ing capital had gained such wide acceptance as to
ma#e some people believe that the title 3change in wor#ing capital is preferable to
one which employs the term 3funds such as 3sources and application of funds. It
is of course true that during the cycle of business operations the current assets are
constantly circulating through the cash accounts but many transactions have a
delayed effect upon cash. !he purchase of merchandise shows as part of cost of
goods sold may represent an increase in accounts payable rather than an immediate
cash outlay. In the same way, e%press may be reflected in current liability, such as
accrued e%penses, rather than immediately in cash. 5owever, increases in current
debt have the same effect on net current assets on wor#ing capital as decrease in
cash. 6onse"uently save for cash e%ceptions as depreciation, the current income
and e%penses are best through of as changing wor#ing capital rather than cash. !his
reasoning leads to visuali)ing of balance sheet changes, including the income, as
wor#ing capital changes rather than movement of funds.
Apart from the fact that the use of word 3wor#ing capital helps in deciding
the content of funds statement, it acts as the basis for determining inclusion or
e%clusion of a financial event because any e%ternal transaction, which increase 3net
wor#ing capital is, by definition, a 3source of funds an any such transaction
resulting in the decrease of the 3net wor#ing capital is, for the same reason, an
3application of funds. !o illustrate, accounting to this of bonus shares would not
find its place in the funds statement because it does not involve any net wor#ing
capital account is either its debit or credit aspect, while dividend paid in cash, it
involves a reduction of 3net wor#ing capital therefore, a part of funds flow
statement, indirectly, this means that internal transaction( transfers and
amorti)ation( do not form part of funds statement.
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CONCEPT OF FLOW:
!he 3flow of funds refers to transfer of economic values one asset to
another, from one e"uity to another, from an asset to e"uity or vice versa or
combination of any of these. According to wor#ing capital concepts of funds, the
3flow of funds refers to any movement of funds described in terms of the flow in
and out of the wor#ing capital area. !his occurs when changes occurring in
noncurrent assets 0e.g., fi%ed assets, functions assets, long term liabilities, internal
reserves, etc1 are set off by corresponding changes in current accounts 0current
assets and current liabilities1 and vice versa, e.g. when a cash purchase of
machinery is effected, debentures are redeemed by payment in cash, creditors are
paid by raising long term loan, cash dividend is distributed among shareholders or
permutations and combinations of any of these.
Funds Flow ,tatement is an attempt to report the flow of funds between the
various assets and e"uity items during an accounting period. !hus it provides a
missing lin# in the compliment of final account statement. It demonstrates the
manner in which periods activities call upon and generates the financial resources
of the business unit and the resultant ebb and flow of these resources through the
temporary the reservoir of firms assets. In this process, it highlights the changes in
the financial structure of an underta#ing. !he statement shows the movement of
funds or wor#ing capital in the given period of time, normally between two
financial years. !he movement of li"uid assets between two dates is #nown by this
statement. Inflow and outflow of finds different forms are #nown from this
analysis. Increase or decrease in funds as ad$usted by depreciation, ta%es, profit or
losses, dividends will also be #nown.
FLOW OF FUNDS:
At the end of the accounting period normally every business concern
prepares two statements i. e. the income statement and balance sheet. !hese
statements do not provide necessary information to the interested parties li#e
investors, debenture holders, creditors, government and wor#ers. !he profit and
loss account contains a summary of e%penses incurred and the revenue reali)ed in
the accounting period. It does not highlight the changes in the financial position of
a business. !he balance sheet gives a static view of the resources have been put at
certain period of time. It does not disclose the different points of time. It does not
lend itself to detailed analysis relating to increase or decrease of wor#ing capital.
5ence, another statement has to be prepared to show the changes in the assets and
liabilities from the end of one accounting period to another. !his statement is called
-Funds Flow ,tatement..
Funds flow statement mainly discloses information concerning financing
and investing activities of a business concern and the conse"uent changes in its
financial position for a period. !his statement helps the owners and creditors to
$udge the financial management with respect to its ability in generating the funds
from various sources and effectively utili)ing them for various productive uses
without effecting device to analysis the changes in the financial condition of a
business enterprise between two accounting dates.

It is mandatory on the part of business concerns to prepare a funds flow
statement in addition to income statement and balance sheet.8
!he funds flow statement helps in the analysis of the financial operations of
the business, to #now causes for changes in the assets and liabilities. It serves as an
instrument for proper allocation of resources.
!his is an important tool in the hands of the management for decision ma#ing
as well as for future planning and policy. !he word 3Fund has been defined in
number of ways.
1. In the narrow sense 3Fund means cash only. ,o that a funds flow statement
is nothing than a cash account. ,uch cash account or statement enumerates
not effect of the receipts and payments of cash.
'. In the broader sense 3funds refers to money values in whatever form it may
e%ist. It means all financial resources, used in business whether in the form
of men, material, money, machinery and other elements.
2. In the popular sense 3funds means wor#ing capital i.e. the e%cess of current
assets over current liabilities. !here are two concepts of wor#ing capital vi).
gross wor#ing capital and net wor#ing capital. !he concept of gross wor#ing
capital refers to the firms investment in the current assets while net wor#ing
capital means e%cess of current assets over current liabilities. In actual sense,
the wor#ing capital means the funds available for conducting the day(to(day
operations of an enterprise.
!he term flow means movement and it includes both 3inflow and 3outflow.
Flow of funds means transfer of economic values from one asset of e"uity to
another. Flow of funds ta#es place when any transaction brings a change in the
amount of funds available. :hen the fund is used in the sense of wor#ing capital,
funds flow will mean inflow and outflow of wor#ing capital. :hen the transaction
results in the increase of wor#ing capital it is said to be inflow of funds and when it
results in the decrease of wor#ing capital. It is said to be an outflow or application
of funds. Funds flow statement is otherwise #nown as
1. ,tatement of source or application of funds.
'. ,tatement of source and use of funds.
2. ,tatement of financial changes in position.
*. :here(got and where( gone statement.
!he flow of funds occurs when a transaction changes on the one hand a non(
current account and on the other a current account and vice versa.
PREPARATION OF FUNDS FLOW STATEMENT:
Funds flow statement is a method by which we can study the changes in the
financial position of a business concern between two balance sheet dates. 5ence,
this statement is prepared by comparing two balance sheets and with some other
additional information. /roadly spea#ing, the preparation of funds flow statement
consists of two parts.
1. ,chedule of changes in wor#ing capital.
'. ,tatement of sources application of funds.
SCHEDULE OF CHANGES IN WOR-ING CAPITAL:
!he schedule of changes in wor#ing capital is prepared to show the changes
in the wor#ing capital between two balance sheet dates. It is prepared with the help
of current assets and current liabilities ta#en from two successive balance sheets.
!he change in the amount of any current asset or liability in the current
balance sheet as compared to the of the asset or liability in the current balance
sheet as compared to that of the previous balance sheet either results in increase or
decrease in wor#ing capital. !he difference is recorded in the individual current
asset and current liability column.
In case a current asset in the current period is more than in the previous
period, the effect is an increase in wor#ing capital and it is recorded in the decrease
column or vice versa. !he total increase and the total decrease are compared and
the difference shows the net increase or net decrease in the wor#ing capital which
helps for the preparation of funds flow statement.
The following crude rules may be followed:
1. An increase in current asset increases the wor#ing capital.
'. A decrease in current liability increases the wor#ing capital.
2. An increase in the current liability decreases the wor#ing capital.
*. ;ecrease in the current asset will decrease the wor#ing capital.
A P#r!or"a s$(#'%l# o! $(ang#s in )or.ing $a/ital:
PARTICULARS PREVIOUS
*EAR
CURRENT
*EAR
WOR-ING CAPITAL
INCREASE DECREASE
CURRENT ASSETS:
6ash in hand
6ash at ban#
/<=
;ebtors
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
,toc#
!emporary Invst.
>repaid e%penses
4utstanding incomes
Total $%rr#nt ass#ts0A1
CURRENT LIA2ILITIES&
/ills payable
,undry creditors
4utstanding e%penses
/an# overdraft
,hort term advances
>roposed for !a%ation
>roposed dividend
>rovision for ta%ation
Total $%rr#nt lia,iliti#s021&
Wor.ing $a/ital 0A&21
Increase<decrease of wor#ing
capital
XXX
XXX
XXX
XXX
3333
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
3333
3333
????
XXX
XXX
XXX
XXX
3333
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
3333
3333
???? ???? ????
FUNDS FROM OPERATIONS:
It is the only internal source of funds. ,ome ad$ustments are to be made in
calculating funds from operations to the net profit.
Cal$%lation o! !%n's !ro" o/#rations:
A''itions:
;epreciation on fi%ed assets
>reliminary e%penses or good will etc. written off&
6ontribution to debenture redemption fund, transfer to general reserves they are&
;educting from the net profit.
>rovision for ta%ation and proposed dividend.
!hese payments already deducted.
Loss on sal# o! !i4#' ass#ts:
D#'%$t:
>rofit on sale of fi%ed assets
>rofit on revaluation of fi%ed assets
@on(operating income such as dividend received or accrued rent. !hese items
increase fund but they are non(operating income. !hey will be shown under
separate heads as 3source of funds.
Int#r/r#ting t(# FFS:
/ased on this decrease in assets treated as a source, when an asset account
increases, it uses of funds. !he funds flow statement helps, is it properly using
funds are not.
FFS on a $as( ,asis:
1. 6lassifying net b<s changes that are seen between two points in time in to
changes that increase<decrease cash.
'. 6lassifying from the income statement the factors that increase and decrease
cash.
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2. 6onsolidating this information into a source and uses of funds format.
So%r$#s o! !%n's t(at in$r#as# $as( ar#:
1. A net decrease in any asset other than cash or fi%ed assets.
'. A gross decrease in fi%ed assets.
2. A net increase in any liability.
*. ,ale of e"uity.
+. Funds from operations.
Us#s o! !%n's in$l%'#&
1. Increase in any asset.
'. @et decrease in any liability
2. >urchase of stoc#
*. 6ash dividends.
FUNDS FLOW STATEMENT PREPARATION:
After preparing the schedule of changes in wor#ing capital, the statement of
sources and applications is prepared. !his statement is prepared with the help of
the remaining items of the balance sheets, i.e. all non(current assets, liabilities and
with the help of additional 3information. !his statement indicates the various
sources and uses of funds. !he difference between the total of sources and that of
uses of e%plains the net change in the net wor#ing capital as shown by the schedule
of changes in wor#ing capital.
S/#$i"#n o! A$$o%nt !or" !%n's !lo) stat#"#nt:
So%r$# A//li$ation
1.Funds from operations
'.Issue of share capital
2.Issue of debentures
*. =aising of loans
+. sale of fi%ed assets
7.sale of investments
9. @on(trading dividends
8. ;ecrease in wor#ing
capital
1.Funds lost in operations
'.=edemption of preference
shares
2.=edemption of debentures
*. =epayment of long term
loans
+. purchase of fi%ed assets
7. purchase of long term
investment
9.;rawings
8. >ayment of ta%es
9. payment of dividends
1 @et increases in :or#ing
capital.
O25ECTIVES OF FINANCIAL MANAGEMENT:
!he ob$ectives or goals or financial management are(
0a1 >rofit ma%imi)ation,
0b1 :ealth ma%imi)ation.
061 Pro!it "a4i"i7ation:
Aa%imi)ation of profits is generally regarded as the main ob$ective of a
business enterprise. Bach company collects its finance by way of issue of shares to
the public. Investors in shares purchase these shares in the hope of getting medium
profits from the company as dividend It is possible only when the company8s goal
is to earn ma%imum profits out of its available resources.
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081 Goal o! W#alt( Ma4i"i7ation:
Fre"uently, Aa%imi)ation of profits is regarded the proper ob$ective of the
firm but it is not as inclusive a goal as that of ma%imi)ing it value to its
shareholders. Calue is represented by the mar#et price of the ordinary share of the
company over the long run which is certainly a reflection of company8s investment
and financing decisions.
!o organi)e 6o(operatives of mil# producers at village and district levels.
!o provide essential inputs to enhance mil# production, feed and fodder
production, cross breeding programs, and veterinary aid.
!o initiate development programs to provide effective leadership and
management s#ills to mil# producers to help them manage their own 6o(
operatives.
!o develop infrastructure for processing of mil# and manufacturing dairy
products.
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!o enable mar#eting of "uality mil# and mil# products.
!o fulfill the needs of mil# and mil# products of consumers within the ,tate.
!o develop new products and pac#aging lines in tune with the changing
scenario of consumer needs.
!o integrate dairy development with rural development efforts and provide
greater employment to the poor in rural areas.
IMPORTANCE OF FINANCIAL MANAGEMENT&
!he importance of financial management cannot be defined in every
organi)ation, where finance or money is involved sound financial management is
indispensable.
Finance is the life blood of an organi)ation. Bvery business unit needs
money to ma#e more money. /ut money will get more money only if it
managed properly.
In the words of 6ollins broo#s, -/ad production management and bad
sales management have slain in hundreds but faulty finance has in
thousands..
Financial management helps a firm in monitoring the effective
employment of funds in fi%ed assets.
Financial management helps a firm in optimi)ing the output from a given
input if funds 0i.e. a given amount of money1.
Financial management helps in profit panning, capital, budgeting,
controlling inventories and account receivables.
Financial management is important even for non(production organi)ation.
It helps the non(profit ma#ing organi)ation to control the costs and use the
funds at their disposal in the most useful manner.
As we #now that, a basic limitation of traditional financial statements
comprising the balance sheet and profit and loss account is that they are not give
all the information regarding the financial operations of the firm. @evertheless,
they provide some e%tremely useful information to the e%tent the balance sheet
mirrors the financial position on a particular date in terms of the structure of assets,
liabilities and owners e"uity, and so on and the profit and loss account shows the
results of the operations during a certain period of time in the terms of revenues
obtained and the cost incurred during the year.
!hus, the financial statements provide a summari)ed view of financial
position and operations of the firm thereforeD much can be learnt about a firm from
a careful e%amination of its financial statements as invaluable document reports.
!he analysis of financial management is, thus an important aid financial analysis.
61 Us#!%l in '#$ision "a.ing to t(# "anag#"#nt:
!his statement helps to the manager in deciding the ma#e(up of
capitali)ation. Ese of funds for new fi%ed assets, wor#ing capital, dividend and
repayment of debt are made for each of several future years. !he funds flow
statement reveals clearly the causes for the financial difficulties of the company.
81 Us#!%l as a $ontrol '#9i$#&
It serve as a control device in that the statement compared with the
budgeted figures will show to what e%tent the funds were put to use according
to plan. !his enables the finance manager to find out deviation from the planned
course of action and ta#e remedial steps.
:1 Us#!%l to t(# #4t#rnal /arti#s:
!he funds statement provides an insight into the financial operations of a
business enterprise to the e%ternal parties so that they can ta#e right decision for
their wealth.
;1 D#t#$tion o! i",alan$# an' a//ro/riat# a$tion:
!hese Analyses spanning several years might reveal growth in inventories
which is out of proportion with the growth of other assets and sales.
<1 Di9isional /#r!or"an$# a//raisal:
:hen a company has a number of divisions, individual funds
statements will enable top management to appraise the performance of each
division.
=1 E9al%ation o! t(# !ir">s !inan$ing&
An analysis of the ma$or sources of funds in the past reveals what
proportion of the firms growth was financed internally and what portion
e%ternally. A funds flow analysis will also tell us whether short(term liabilities
have been used to finance fi%ed assets and permanent portion of wor#ing
capital, in which case, at least in the future, the mi% of short(term and long(
term finance has to be strictly watched over.
?1 Planning o! !%t%r# !inan$ing:
An analysis of a FF, for the future will reveal the firms total
prospective need for funds when these needs will arise and how these are to be
financial depending on whether the need is for fi%ed assets, fluctuating
component of wor#ing capital etc. thus, FFA is very important analytical tool
in the hands of the finance manager in developing information to be used in
financial decision(ma#ing.
LIMITATIONS OF FUNDS FLOW STATEMENT:
!he funds flow statement has a number of usesD however, it has certain limitations
also which are listed as under.
11 !his statement is not a substitute to income statement and balance sheet.
It gives an additional information regarding changes in wor#ing capital.
'1 It can not reveal continuous changes
21 It is not an original statement, but rearranged statement.
*1 It is historic in nature and a pro$ected funds flow statement cannot be
prepared with much accuracy.
+1 !ransactions between current assets and transactions between non(current
assets are completely ignored while preparing the statement.
71 ;ue to shortage of time overall analysis of the company becomes
difficult.
91 !he company due to some statuary re"uirements so it becomes difficult
to get the overall information of the company.
81 ,ince we are new to the company refused to provide its financial
information.
!he study is limited to a period of five years for analy)ing the data.
NEED OF THE STUD*
!he main need of study is to analysis the financial information of the company.
!o find out the li"uidity or short term solvency of the company.
!o allow relationship among various aspects is such a way that it allows
conclusion about the performance, strength and wea#ness of the company.
!o #now the short term surveying ability of the company.
!o #now how finance wor#s in the typical organi)ation structure.
!o #now wor#ing capital covers all the current account of a firm.
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METHODOLOG* OF THE STUD*
Aethodology is a systematic process of collecting information in order to analy)e
and verifies a phenomenon. !he collection of data is two principle sources. !hey
are discussed as
I. >rimary data
II. ,econdary data
PRIMAR* DATA:
>rimary data are those which are collected afresh and for the first time, and thus
happen to be original in character.
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!he primary data is collected by discussions with the !%n$tional "anag#rs, o!!i$#rs,
sta!! and ot(#r "#",#rs of the organi)ation.
SECONDAR* DATA:
,econdary data are those which have been already collected by some else and which
have been already passed through the statistical process.
!he secondary data is obtained from ann%al r#/ort and !%n's !lo) stat#"#nt that is
,alan$# s(##t and /ro!it an' loss a$$o%nt, and from the t#4t ,oo.s of financial
management.
5ere the pro$ect is done on secondary data.
SCOPE OF THE STUD*
An e%tensive study is done on the financial transactions financial
information of the company.
!he study covers the historical financial information of the company and
finds growth of the company.
!he study covers all the transaction of the company and the funds flow
statement.
!he company covers the measurement of profitability of the firm and the
operating efficiency and relationship among different financial aspects.
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INDUSTR* PROFILE
T#4til# In'%str:
!he te%tile industry occupies a uni"ue place in our 6ountry .4ne
of the earliest to come into e%istence in India, it accounts or 1*F of the total
Industrial production, contributes to nearly 2F of the total e%ports and is the
second largest employment generator after agriculture.
India contributes to about '+F share in the world trade of cotton
yarn. India, the worlds third(largest producer of cotton and the second( Gargest
producer of cotton yarns and te%tiles, is poised to play an increasingly important
role in global cotton and te%tile mar#ets as a result of domestic and multilateral
policy reform.
Indian te%tile industry contributes about '' F to the world
spindle age and about 7F to the world rotor capacity installed .India has second
highest spindle age in the world after 6hina with an installed capacity of 28.7
million spindles. Indian te%tile industry has the highest loom age 0including
handlooms1 in the world and contributes about 71F of the world loom age. It
contributes about 1'F to the world production of te%tile fibers and yarns. India is
one of the largest consumers of cotton in the world, ran#ing second ne%t to 6hina
in production of cotton yarn and fabrics and first in installed spinning and weaving
capacity.
!e%tile industry is providing one of the most basic needs of people and the
holds importanceD maintaining sustained growth for improving "uality of life. It
has a uni"ue position as a self(reliant industry, from the production of raw
materials to the delivery of finished products, with substantial value(addition at
each stage of processingD it is a ma$or 6ontribution to the country8s economy.
Its vast potential for creation of employment opportunities in the
agricultural, industrial, organi)ed and decentrali)ed sectors H rural and urban
areas, particularly for women and the disadvantaged is @oteworthy.
Although the development of te%tile sector was earlier ta#ing place in
terms of general policies, in recognition of the importance of this sector, for the
first time a separate >olicy ,tatement was made in 198+ in regard to development
of te%tile sector. !he te%tile policy of ' aims at achieving the target of te%tile
and apparel e%ports of E, I + billion by '1 of which the share of garments will
be E, I '+ billion. !he main mar#ets for Indian te%tiles and apparels are E,A,
EAB, EJ, Kermany, France, Italy, =ussia, 6anada, /angladesh, and Lapan.
!he main ob$ective of the te%tile policy ' is to provide cloth of
'* S.C.R.ENGINEERING COLLEGE.
acceptable "uality at reasonable prices for the vast Aa$ority of the >opulation of
the country, to increasingly contribute to the provision of sustainable employment
and the economic growth of the nationD and to compete with confidence for an
increasing share of the global mar#et vast pool of s#illed manpowerD
entrepreneurshipD fle%ibility in production processD and long e%perience with
E,<BE 0Buropean Enion1.
At the same time, there are constraints relating to fragmented industry,
constraints of processing, "uality of cotton, concerns over power cost, labour
reforms and other infrastructural constraints and bottlenec#s. B.g., cost of power
was =s.8 per garment in India whereas in 6hina it was only =s.' per garment.
Further, for the benefit of e%porters, there should be a state(owned cargo
shipping mechanism. ,everal initiatives have already been ta#en by the
government to overcome some of these concerns including rationali)ation of fiscal
dutiesD technology up gradation through the !echnology Ep gradation Fund
,cheme 0!EF,1D setting up of Apparel >ar#sD and liberali)ation of restrictive
regulatory practices.
C%rr#nt s$#nario:
;eveloping countries with both te%tile and clothing capacity may be able to
prosper in the new competitive environment after the te%tile "uota regime of
"uantitative import restrictions under the multi(fiber arrangement 0AFA1 came to
an end on 1st Lanuary, '+ under the :orld !rade 4rgani)ation 0:!41
Agreement on !e%tiles and 6lothing.
!he mood in the Indian te%tile industry given the phase out of the "uota
regime of the multi(fiber arrangement 0AFA1 is upbeat with new statement lowing
'+ S.C.R.ENGINEERING COLLEGE.
in and increased orders for the industry as a result of which capacities are fully
boo#ed up to April '+. As a result of various initiatives ta#en by the government,
there has been new investment of =s.+, crores in the te%tile industry in the
last five years. @ine te%tile ma$ors invested =s.', 7 crores and plan to invest
another =s.7, * crores. Further, India8s cotton production increased by +9F over
the last five yearsD and 2 million additional spindles and 2, shuttles(less looms
were installed. !he industry e%pects investment of =s.1, *, crores in this
sector in the post(AFA phase. A Cision '1 for te%tiles formulated by the
government after intensive interaction with the industry and B%port >romotion
6ouncils to capitali)e on the upbeat mood aims to increase India8s share in
world8s te%tile trade from the current *F to 8F by '1 and to achieve e%port
value of E, I + billion by '1 Cision '1 for te%tiles envisages growth in
Indian te%tile economy from the current E, I 29 billion to I 8+ billion by '1D
reaction of 1' million new $obs in the te%tile sectorD and moderni)ation and
consolidation for creating a globally competitive te%tile industry.
!here will be opportunities as well as challenges for the Indian te%tile
industry in the post(AFA era. /ut India has natural advantages which can be
capitali)ed on strong raw material base ( cotton, man(made fibers, $ute, sil#D large
production capacity 0spinning ( '1F of world capacity and weaving ( 22F of
world capacity but of low technology1D
In9#st"#nt in In'ian T#4til# In'%str:
!he scenario of investment in the Indian te%tile industry started to change
after the inception of the special -!e%tile >ac#age. during the '2('* budgets.
!he recommendations made in the budget included the reforms that are re"uired to
be made in the fiscal policy of the Indian te%tile Industry for attracting investment
in this industry. !he policy matters associated with restructuring of debt for
financial viability of this industrial sector are also being addressed in this budget. A
fund was set up in accordance with the recommendations of the aforesaid budget
with an initial principal amount of =s.2 crores. !his fund was meant for
restructuring of the te%tile sector.
Fa$tors r#s/onsi,l# !or )ooing t(# in9#stors in In'ian t#4til# in'%str:
1. !he si)e of the te%tile along with apparel mar#et in India is "uite big.
'. >erformance of this industry has been consistent right from the start of the
new millennium.
2. Availability of the s#illed labor in India is comparatively cheap in relation to
the same in other parts of the world.
*. !he policies related to the Foreign ;irect Investment in India are
comparatively lenient and are transparent in nature among all the developing
countries.
+. !here is no limit on foreign direct investment in the te%tile industry and
hence 1F direct investment can be done by the foreign capitalists in the
Indian te%tile industry.
7. Foreign Investments done in the Indian !e%tile Industry through the
automatic route offers a hassle(free way of investing. !hese investments are
not re"uired to be approved by the government or the ape% ban# of India,
=/I. !he foreign investors are only re"uired to ma#e a notification to the
regional office of the ape% ban# only after receiving the receipt of the
remittance. !his notification is re"uired to be done within thirty days from
the date of receiving remittance.
9. !he ministry concerned with the development of te%tile Industry in India has
formed a special cell for attracting F;I in this sector.
O,@#$ti9#s o! t(is s/#$ial $#ll !or )ooing FDI ar#:
1. !his cell helps the willing foreign companies to find out viable partners
meant for floating a $oint venture company in order to produce te%tile
products.
'. F;I special cell acts as the mediator between the foreign investor and the
different organi)ations for setting up the te%tile industry. !he speciali)ed
helps that are given by this cell involve advisory support along with
assistance.
2. At the time of operation of the te%tile industry set by the foreign investor
certain problems may crop up. !hese problems are sorted out by the F;I
cell.
*. F;I cell monitors as well as maintains the data related with the total
production of the te%tile sector. !hey also collect the stratified data of
production by both domestic industry as well as the industry set up by the
foreign investor. It has been found out that the percentage share of the te%tile
industry in the total foreign investment done was 1.'F.A ma$or
development has occurred in the te%tile industry when /lac#stone, an
investment management company of E,A has bought +.1F sta#e of the
domestic apparel manufacturing company called Ko#aldas B%ports. !he deal
was sealed at the price of =s '9+ per share. After the completion of the sta#e
transfer the promoters of the Ko#aldas B%ports, the 5indu$as, were left with
a share amounting to 'F.
+. As a part of domestic te%tile sector e%pansion, the companies of Indian
origin are also not far behind in ma#ing investments. Arvind Aills Gimited
is e%panding its production as well as capacity base through the construction
of two new industrial set ups in /angalore and Ahmadabad. Another te%tile
company of India name super >inning mills is also ac"uiring two sic# units
of Aadurai for enhancing their production capacity for meeting the needs
generated by the E,A mar#et. :orld largest terry towel producing company
called :els pun India Gtd. Is setting up a te%tiles plant in the state of Ku$arat
at the initial capital of E, '' millionM
. GROWTH OF INDIAN TE3TILE INDUSTR*:
Krowth along with the investment of an industry depends heavily on the
economic health of the country. Indian economy grew rapidly during the fiscal year
'9('8 posting a growth rate of 9.*F p.a. @ot only this, India has been
performing significantly in the last three years where its average yearly rate of
growth has been estimated to be 8F. !he fruits of economic growth have tric#led
down to people of the state which can be evidenced from the rising per capital
income of India. ,tatistics reveal that during ''('8 0up to Aarch '81 the per
capital income of India has increased by 7' F and has reached the level of =s
'+,998 or E,I +81.29 per annum.
4ne of the most beneficial classes of this economic growth saga has been
the middle income section of the society. !he total strength of this class in absolute
terms has been found out to be '17 million which is e%pected to rise to 2+1 million
by '1. !he ma$or demand that is being generated is by a new class of people
from the booming I!(/>4 sector who are still at their prime age and are outwardly
fashion savvy. !his has generated huge demand for fashionable dresses which has
conse"uently led to the emergence of some world class Indian designers with their
latest fashion apparels.
>ropensity of consumption 0after e%cluding all spending on essential
items li#e housing, health, education, etc.1 by the average Indian people has
increased at the rate of +F to a total amount of E,I '19 billion in the year '+.
At this time, the organi)ed retail sector has been able to tap a mar#et of around
E,I 8.' billion which is pro$ected to increase to E,I '+ billion by '1.
!e%tile industry is one of the ma$or contributors to the total output of the act
growing Indian industrial sector which is at present revolving around *F. !e%tile
sector8s contribution to K;> of India is also significant which currently amounts to
*F. It has been found out that Indian te%tile industry s one of the ma$or sources of
foreign e%change earnings for India and contributes around 17(19F.From the
above discussion it is "uite clear to us that the mar#et si)e of India is growing at a
very high pace. !hat is why the foreign investors are floc#ing to India for
investment purposes in order to get hold of a chun# of this e%panding pie. :ith
increasing demand for the products of Indian !e%tile Industry, new players are
$umping in the league to get a slice of the profitable pie and the already e%isting
te%tile mills are raising their capacity for increasing their supply. 5ence, the
e%pansion process of the domestic industry is also not far behind. !hus, it can be
said that the whole Indian economy is on a growing trend which has its obvious
impact on every possible sector including the Indian Industry. Indian !e%tile
Industry is going through a ma$or change in its outloo# after the e%piry of Aulti(
Fiber Agreement.
Aulti Fiber Agreement was introduced in the year 199* as a short term
measure directed towards providing a limited time period to the developed
countries for ad$usting their te%tile industries in accordance with that of the
developing countries. !he te%tile industries are characteri)ed by their labor
intensive nature of commodity production. Availability of surplus labor is abundant
in the developing countries. !hese countries have comparative advantage in the
production of te%tile related products and hence are able to supply goods at a very
low price. !he basic idea behind this policy was to eradicate all sorts of "uota
system from the apparel and te%tile industry all over the world so that a level
playing field could be established.
@ow, this era after AFA is being loo#ed upon by the e%perts as a means
through which the Indian te%tile and apparel industry is going to grow a much
faster pace and would conse"uently be able to leave a mar# on the whole world.
Integration of this Indian industry with that of the whole world started from the last
period of 198s. Ep to '9('8 where the final financial year represents the
pro$ected figure. !he figure above shows total produce of Indian !e%tile Industry in
fabric sector along with the produce in all the sub sectors under it. !his highlights
the fact that the total production of fabricated products by the Indian !e%tile
Industry between the period '*('+ and '7('9 increased at a moderate
rate from *1992 million s"uare meters to *+298 million s"uare meters. /ut after
the AFA period 0i.e. after 1.1.'91, the same has increased from *+298 million
s". mts to +*'7 million s". mts between the period '7('9 and '8('9.
5ence it is evident that the percentage increase in the fabric te%tile product during
the period '7('9and '8('9 has seen a rise of around 17.29F whereas it
was only 9.+F during '*('+ and '7('9.
National T#4til# Poli$:
1. !he @ational !e%tile >olicy was formulated #eeping in mind the following
ob$ectives&
'. ;evelopment of the te%tile sector in India in order to nurture and maintain its
position in the global arena as the leading and e%porter of clothing.
2. Aaintenance of a leading position in the domestic mar#et by doing away
with import penetration.
*. In$ecting competitive spirit by the liberali)ation of stringent controls.
+. Bncouraging Foreign ;irect Investment as well as research and development
in this sector.
7. ,tressing on the diversification of production and its up gradation ta#ing into
consideration the environmental concerns.
9. ;evelopment of a firm multi(fiber base along with the s#ill of the weavers
and the craftsmen.
S%$( goals ar# s#t to "##t t(# !ollo)ing targ#ts:
1. !he si)e of te%tile and apparel e%ports must reach a level of E, + billion by
the year '1.
'. !he !echnology up gradation Fund ,cheme should be implemented in a
strict manner.
2. !he garments industry should be removed from the list of the small scale
industry sector.
*. !he handloom industry should be boosted and encouraged to enter into
foreign ventures so as to compete globally. !he @ational !e%tile >olicy has
also formulated rules pertaining to certain specific sectors. ,ome of the most
important items in the agenda happen to be the availability and productivity
along with the "uality of the raw materials. ,pecial care is also ta#en to curb
the fluctuating price of raw materials. ,teps have also been ta#en to raise
sil# to the international standard preamble.
+. !o comprehend the purpose of te%tile industry that is to provide one the most
basic needs of the people and promote its sustained growth to improve the
"uality of life.
7. !o ac#nowledge te%tile industry as a self(reliant industry, from producing
raw materials to delivery of finished productsD and its ma$or contribution to
the economy of the country.
9. !o understand its immense potentiality for creating employment
opportunities in significant sectors li#e agriculture, industry, organi)ed
sector, decentrali)ed sector, urban areas and rural areas, specifically for
women and deprived. =ecogni)e the !e%tile >olicy of 198+, which boosted
the annual growth rate of cloth production by 9.12F, e%port of te%tile by
12.2'F and per capita availability of fabrics by 2.7F.
8. !o analy)e the issues and problems of te%tile industry and the guidelines
provided by the e%pert committee set up for this specific purpose.
9. !o give a different specification to the ob$ectives and thrust areas of te%tile
industry.
1.!o produce good "uality cloth for fulfilling the demands of the people with
reasonable prices.
11. !o maintain a competitive global mar#et.
T(r%st ar#as:
Go9#rn"#nt o! In'ia is tring to /ro"ot# t#4til# in'%str , gi9ing #"/(asis
on s#9#ral ar#as o! t#4til#+ )(i$( ar# as ,#lo)&
1. Innovative mar#eting strategies
'. ;iversification of product
2. Bnhancement of te%tile oriented technology
*. Nuality awareness
+. Intensifying raw materials
7. Krowth of productivity
9. Increase in e%ports
8. Financing arrangements
9. 6reating employment opportunities
1.5uman =esource ;evelopment
Kovernment of India has set some targets to intensify and promote te%tile industry.
!o materiali)e these targets, efforts are being made, which are as follows&
1. !e%tile and apparel e%ports will reach the E, I + billion mar# by '1
'. All manufacturing segments of te%tile industry will come under !EF,
0!echnology Ep gradation Fund ,cheme1
2. Increase the "uality and productivity of cotton. !he target is to increase +F
productivity and maintain the "uality to international standards.
*. Bstablish the !echnology Aission on $ute with an ob$ective to increase
cotton productivity of the country.
+. Bncourage private organi)ation to provide financial support for the te%tile
industry
7. >romote private sectors for establishing a world class te%tile industry
9. Bncourage handloom industry for producing value added items
8. Bncourage private sectors to set up a world class te%tile industry comprising
various te%tile processing units in different parts of India
9. =egenerate functions of the !=A 0!e%tile =esearch Associations1 to stress on
research wor#s government policy on cotton and manmade fiber.
1.4ne of the principal targets of the government policy is to enhance the
"uality and production of cotton and man(made fiber. Ainistry of
Agriculture, Ainistry of !e%tiles, cotton growing states is primarily
responsible for implementing this target.
Ot(#r t(r%st ar#as:
In!or"ation t#$(nolog:
>lays a significant role behind the development of te%tile industry in
India. I! 0Information !echnology1 can promote to establish a sound commercial
networ# for the te%tile industry to prosper.
H%"an R#so%r$# D#9#lo/"#nt:
Bffective utili)ation of human resource can strengthen this te%tile
industry to a large e%tent. Kovernment of India has adopted some effective policies
to properly utili)e the manpower of the country in favor of the te%tile industry.
Finan$ing arrang#"#nt:
Kovernment of India is also trying to encourage talented Indian
designers and technologists to wor# for Indian te%tile industry and accordingly
government is setting up venture capital fund in collaboration with financial
establishments.
A$ts:
,ome of the ma$or acts relating to te%tile industry include
a1 6entral ,il# /oard Act, 19*8
b1 !he !e%tiles 6ommittee Act, 1972
c1 !he 5andlooms Act, 198+
d1 6otton 6ontrol 4rder, 1987
!he !e%tile Enderta#ings Act, 199+ Kovernment of India is earnestly trying
to provide all the relevant facilities for the te%tile industry to utili)e its full
potential and achieve the target. !he te%tile industry is presently e%periencing
an average annual growth rate of 9(1F and is e%pected to grow at a rate of
17F in value, which will eventually reach the target of E, I 11+ billion by
'1'. !he clothing and apparel sector are e%pected to grow at a rate of '1 Ft in
value terms.
Cotton:
6otton is a soft, staple fiber that grows around the seeds of the cotton plant.
It is a natural fiber harvested from the cotton plant. !he fiber most often is spun
into yarn or thread and used to ma#e a soft, breathable te%tile, which is the most
widely, used natural(fiber cloth in clothing today.
Pro$#ssing o! Cotton in In'ia:
In India the raw cotton, also called as Japa is processed in a multi(stage
process described as below. !he >roducts of processing are
I. Oarn.
II. 6ottonseed 4il.
III. 6ottonseed Aeal.
I. Pro'%$tion o! *arn:
6. -a/a to lint& Japa 0also #nown as raw cotton or seed cotton1 is unpinned
cotton or the white fibrous substance covering the seed that is obtained from
the cotton plant. !he 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 "uality.
!hen it runs through cleaning e"uipment to remove leaf trash, stic#s and
other foreign matter. In ginning a roller gin is used to grab the fiber. !he raw
fiber, now called lint.
8. Lint to ,al#& !he lint ma#es its way through another series of pipes to a
press where it is compressed into bales 0lint pac#aged for mar#et1. After
baling, the cotton lint is hauled to either storage yards, te%tile mills, or
shipped to foreign countries.
:. @ote& !he cotton seed is delivered to a seed storage area from where it is
loaded into truc#s and transported to a cottonseed oil mill.
;. 2al# to la/& 5ere the bales are bro#en down and a wor#er feeds the cotton
into a machine called a Pbrea#erP which gets rid of some of the dirt. From
here the cotton goes to a PscutcherP. 04perated by a wor#er also called a
scutcher1. !his machine cleans the cotton of any remaining dirt and
separates the fibers. !he cotton emerges in the form of thin Pblan#etP called
the PlapP.
<. La/ to Car'ing: 6arding is the process of pulling the fibers into parallel
alignment to form a thin web. 5igh speed electronic e"uipment with wire
toothed rollers performs this tas#. !he web of fibers is eventually condensed
into a continuous, untwisted, rope(li#e strand called a sliver.
=. Sil9#r to Ro9ing& !he silver is then sent to combing machine. 5ere, the
fibers shorter than half(inch and impurities are removed from the cotton. !he
sliver is drawn out to a thinner strand and given a slight twist to improve
strength, and then wound on bobbins. !his >rocess is called =oving.
* S.C.R.ENGINEERING COLLEGE.
?. Ro9ing to *arn: 0,>I@@I@K1& ,pinning is the last process in yarn
manufacturing. ,pinning draws out the short fibers from the mass of cotton
and twists them together into a long. ,pinning machines have a metal spi#e
called a spindle which the thread winds around.
II. Pro'%$tion o! Cotton S##' Oil:
>rocessing of cottonseed in modern mills involves a number of steps. !hey are as
follows&
6. !he first step is its entry into the sha#er room where, through a number of
screens and air e"uipment, twigs, leaves and other trash are removed.
8. !he cleaned seed is then sent to gin stands where the linters are removed
from the seed 0delimited1. !he 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 wic#s. !he second(cut linters removed
*1 S.C.R.ENGINEERING COLLEGE.
in further delimiting steps, are incorporated in chemical products, found in
various foods, toiletries, film, and paper.
:. !he delimited seeds now go to the huller. !he huller removes the tough seed
coat with a series of #nives and sha#ers. !he #nives cut the hulls 0tough
outer shell of the seed1 to loosen them from the #ernels 0the inside meat of
the seed, rich in oil1 and sha#ers separate the hulls and #ernels.
;. !he #ernels are now ready for oil e%traction. !hey pass through fla#ing
rollers made of heavy cast iron, spinning at high speeds. !his presses the
meats into thin fla#es. !hese fla#es then travel to a coo#er where they are
coo#ed at 19 degrees F to reduce their moisture levels. !he prepared meats
are conveyed to the e%tractor and washed with he%ane 0organic solvent that
dissolves out the oil1 removing up to 98F of the oil.
<. 6rude cottonseed oil re"uires further processing before it may be used for
food. !he first step in this process is refining. :ith the scientific use of
heat, sodium hydro%ide and a centrifuge 0e"uipment used to separate
substances through spinning action1, the dar# colored crude oil is
transformed into a transparent, yellow oil. !his clear oil may then be
bleached with special bleaching clay to produce transparent, amber colored
oil.
III. Pro'%$tion o! Cottons##' M#alACa.#A-a/as.(alli
Japas#halli 0cottonseed e%traction<meal1 is a byproduct of the cottonseed
industry.
6ottonseed is a by(product of the cotton plant, which is primarily grown for
its fiber. Although cotton has been grown for its fiber for several thousand
*' S.C.R.ENGINEERING COLLEGE.
years, the use of cottonseed on a commercial scale is of relatively recent
origin.
Rol# o! Cotton In'%str in In'ian E$ono":
4ver the years, country has achieved significant "uantitative increase in cotton
production. !ill 199s, country used to import massive "uantities of cotton in the
range of 8. to 9. la#shs bales per annum. 5owever, after Kovernment
launched special schemes li#e intensive cotton production programmers through
successive five(year plans that cotton production received the necessary impetus
through increase in area and sowing of 5ybrid varieties around mid 9s. ,ince then
country has become self(sufficient in cotton production barring few years in the
late 9s and early 's when large "uantities of cotton had to be imported due to
lower crop production and increasing cotton re"uirements of the domestic te%tile
industry.
Cotton /ro'%$tion Ar#as in In'ia:
India is an important grower of cotton on a global scale. It ran#s third
in global cotton production after the Enited ,tates and 6hinaD with 9.+ million
hectares grown each year, India accounts for appro%imately '1F of the world8s
total cotton area and 12F of global cotton production. !he 6otton producing areas
in India are spread throughout the country. /ut the ma$or cotton producing states
which account for more than 9+F of the area under and output are&
1. >un$ab.
'. 5aryana.
2. =a$asthan.
*. Aaharashtra.
+. Ku$arat.
7. Aadhya >radesh.
9. Andhra >radesh.
8. !amil @adu.
9. Jarnata#a.
4f the nine cotton producing ,tates in India, average yields are highest in
>un$ab where most of the cotton area is irrigated /ut the yields of cotton in India
are low, with an average yield of +2 #g<ha compared to the world average of 92*
#g<ha. !he problem is also compounded by higher production costs and poor
"uality in terms of varietals purity and trash content.
5owever the 6otton plays an important role in the @ational economy providing
large employment in the farm, mar#eting and processing sectors. 6otton te%tiles
along with other te%tiles also contribute about 1<2rd of the Indian e%ports.
St#/s ta.#n , t(# Cotton Pro'%$#rs in In'ia:
@ow(a(days the Indian 6otton producers are continuously wor#ing to
up(grade the "uality and increase the cotton production to cope up with the
increased global demand for cotton te%tiles and to meet the needs of the 29 million
spindles capacity of the domestic te%tile industry which presently consumes about
1'(1* million bales annually.
In India, cotton yields increased significantly in the 198s and
through the first half of 198s but since 1997 there is no increase in yield. In the
past, the increase in cost of production of cotton was partially offset by increase in
yield but now with stagnant yield the cost of production is raising. /esides low
yield, Indian cotton also suffers from inconsistent "uality in terms of length,
microware and strength.
** S.C.R.ENGINEERING COLLEGE.
Poli$ o! Go9#rn"#nt o! In'ia to)ar's Cotton In'%str
!he 6otton production policies in India historically have been
oriented toward promoting and supporting the te%tile industry.
!he Kovernment of India announces a minimum support price for
each variety of seed cotton 0#apas1 based on recommendations from the
6ommission for Agricultural 6osts and >rices. !he Kovernment of India is also
providing subsidies to the production inputs of the cotton in the areas of fertili)er,
power, etcQ
Mar.#ts !or In'ian Cotton:
!he three ma$or groups in the cotton mar#et are
>rivate traders,
,tate(level cooperatives,
!he 6otton 6orporation of India Gimited.
4f these three groups, private traders handle more than 9 percent of
cottonseed and lint, followed by cooperatives and the 66I.
!he 6otton 6orporation of India Gtd. for the year '8(9 had
purchased 7.2 la#hs "uintals of #apas e"uivalent to 11.99 la#hs bales valuing
=s.1'18.9 crores in Andhra >radesh, Aaharashtra, Aadhya >radesh, 4rissa and
Jarnata#a. /eside these the 6orporation had also carried out commercial
operations and purchased '.91 la#hs bales valuing =s.'8+.8' crores in the year
*+ S.C.R.ENGINEERING COLLEGE.
'8(9 as compared to around 1. la#hs bales valuing =s.18.81 crores during
the previous year 0i.e. for the year '7(91.
E4/orts o! Cotton:
!he main mar#et for Indian cotton e%port is 6hina. !he other mar#ets
also include !aiwan, !hailand and !ur#ey. In Luly '1, the union government
removed all curbs on cotton e%ports. As a result of these, now the e%porters are not
re"uired to obtain any certificate from the !e%tile 6ommissioner on the
registration, allocation, "uality and "uantity of e%port. India e%ported around '+
per cent cotton during '8(9 and it is estimated nearly 7' per cent e%ported to
6hina.

;uring the year '8(9 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 ,(7, 5(* and
/unny, which had resulted in sustained cotton e%ports, which are estimated at
++. la#hs bales !he 6otton Advisory /oard estimated an 18(' percent increase
in cotton e%ports to 7+ la#hs bales for 4ct '9( ,ep '1, as against its Aug '9
estimate of +8 la#hs bales.
I"/orts o! Cotton:
;espite good domestic crops, India is importing cotton because of
"uality problems or low world prices particularly for processing into e%portable
products li#e yarns and fabrics.
India imported $ust 9'1, bales of cotton in '*(+. !he imports
rose to 1,'19, la#hs bales in '+(7, *,9, la#hs bales in '7(9 and the
anticipated imports for the year '9(8 are ++, la#hs bales.
For the year '9(8 the cotton imports into the country had once
again remained limited mainly to B%tra Gong staple cottons, li#e as previous year,
which were in short supply at around 7 la#hs bales inclusive of import of around '
la#hs bales of long staple varieties contracted by mills during April(Aay '9.
F%t%r# C(all#ng#s !or t(# In'ian Cotton In'%str
!he challenges that are going to face by the cotton producers in India
for the season '9(1 are&
R%/## a//r#$iation:
!he increase in the value of the rupee gives only smaller import
orders to the cotton producers.
C(#a/#r I"/orts:
!he appreciated rupee value ma#es the cotton imports cheaper
when compared to past. ,o this aspect is also re"uired to consider by the cotton
producers.
Lo) B%alit
!he Nuality of cotton is also far from satisfactory considering the
presence of a large number of contaminants. ,o the cotton producers are also
re"uired to ta#e care in this aspect.
COMPAN* PROFILE
INTRODUCTION
Oarram ,ridhar =eddy spinning mills is a !echnocrat pro$ect set up by people
who were in employment earlier unli#e capitalists, who can mobili)e vast
resources. !he technocrats have been involved fully in the standards of living the
wor#ing force in the nearby villages. O.,.= spinning mills has been situated at
Kanapavarm village, @adendla Aandal, in Kuntur ;istrict, Andhra >radesh having
8.+ acres of area including the wor#man residing colony and premises. !his unit
has been started with the assistance of ,./.I., nationali)ed ban#s and other
financial institutions. !his area as declared as industrial area and government of
Andhra >radesh has a reliable subsidy to those who have installed industries in this
district.
!he company in setting up spinning mills with an E@ stalled capacity of 9
spindles. !he pro$ect has been financed by the ,./.I with participation in "uality
share capital and is also financed by the 6entral Financial Institution ,./.I., !he
cost of the pro$ect was around 2.+ crores and the turn over or the company is
around 9 crores. !his factory will go a long way to improve the living conditions of
the poor and wea#er sections of the Kanapavarm and surrounding villages. !he
industry is a labour oriented and has been set up purely within advice of providing
employment to more than 9+ wor# men directly and indirectly. As a matter of
fact, both women and men from nearby villages have been engages at the $ob and
are getting trained. !here are more than wor#ers employed per day. !his unit also
went as other organi)ations to achieve its modern developments in new
technological development and automatic system and seedling la#e son the same.
O.,.= ,pinning Aills Gtd is a well established spinning mill in the
southern Indian state of Andhra >radesh. !he mill was founded in 1982 by Ar.
,ridhar =eddy, a technocrat with a wide range of e%perience in cotton gaining mill
from a modest ', spindles, the spindle capacity today has increased to '+,.
!he ,adasivpet unit accounts for *, spindles while the Kanapavarm plant
accounts for the remaining ', spindles. In the course of time the company has
gained not only an I,4 91 certification but also the status of an e%port house. In
the year '*('+ the company had registered a turnover of =,.1+ crores.

!he company is well established in the mar#eting of cotton and synthetic blended
yarns and has also made a foray in the direction of fabric and garment e%ports.
6ompanys immediate future plans are focused on growth in the area yarn
manufacturing with a pro$ected capacity e%pansion in spindled by '', spindles
ta#ing the total spindle to 8', spindles. /lueprints are also being drawn up for a
garment manufacturing unit. !he company has gained not only I,4 91
certification but also the status of an e%port house.
:e have achieved a great height of success due to the hard wor# of the
chairman and A=. O.,=I@ICA,EGE =B;;O, the managing director have a
highly s#illed team of employees, who carries loads of e%perience have a strong
infrastructural base, which is well e"uipped with the advise. :e always endeavor
to provide the best of are fabrics to our customer chec# the "uality content of the
fabric.
:e are engaged in the manufacturing of wide range of fine cotton
fabrics have a remar#able characteristic of providing smoothness and we are
rec#oned as one of the leading cotton fabric is used by big companies for
production of various types of also become one of the foremost organic cotton yarn
supplier in India. !he grown without the use of any harmful pesticides and
chemicals and the increase in its "uality.
@ame of the 6B4 Ar. O. ,ridhar =eddy
>rimary /usiness !ype Aanufacturer
Bstablishment Oear 1999
@4. 4f Bmployees 2
Aar#et 6over 6hina
Annual ,ale 2. crores
+ S.C.R.ENGINEERING COLLEGE.
>roducts we offer 6otton Oarn H Fabric
CHAIRMAN>S DES-
Ar. Oerram ,ridhar =eddy ,tarted his business as cotton commission native place
idupulapadu, in#ollu manadalam, >ra#asam district, Andhra >radesh planned
forward integration of Kinner in 1982. 5e started a firm company in 1989.
,upplied cotton blasR to various spinning mills in !a >radesh.
It was in the year 1999 he established a spinning mill at Kanapavarm
capacity of *+ spindles. 5is hard wor#, innovative thoughts and strategy made
O.,.= ,pinning and weaving mills >vt. Gtd., turn in to one of the 1 F cotton
yarns to may domestic and e%ported oriented weaving mills country.
VISION
The company has vision to excel in all feld of textile industry
produce basis.
We will be intensely customer focused and will ofer products
provide the best values for our customers.
MISSION
!o manufacture a high "uality yarn thereby with standing competitiveness.
;eveloping a long team relationship with our customers and suppliers.
!o use latest technological strategies during production there by for
approach.
!o provide a safe, fulfilling and rewarding wor# environment.
,ervicing and supporting the comities in the us operate.
F%n$tions o! H#a' o! D#/art"#nts in *.S.R S/inning Mills Lt':
+1 S.C.R.ENGINEERING COLLEGE.
!he following are functions of the 5eads of ;epartments that are mostly relevant
to the >ro$ect.
F%n$tions o! Finan$# Manag#r:
1. 1. 5e loo#s after day(to(day accounting and financial operations in the
Accounts ;epartments.
'. 5e is closely associated in completion of statutory audit of !he 6ompany
under 6ompanies Act 19+7 and also in connection with the annual !a% Audit
under Income(ta% Act.
2. 5e is independently responsible for submitting wor#ing capital renewal
application to /an#s and also furnishers re"uired information under
Nuarterly Information ,ystem.
*. Further, he provides information to /oard Aeeting relating to >rofit and
Goss Account, /alance ,heet, !urnover particulars and En(audited results
etc., for each "uarter.
+. Apart from the above he loo#s after sales ta% matters of the company and
attends before ,ales !a% ;epartments for completion of Assessments.
F%n$tions o! Mar.#ting Manag#r:
1 5e coordinates with production department, "uality control H dispatch
section for planning of the production, supply of right product and at the
right time to the customers.
' 5e continuously e%plores new mar#ets or customers.
2 In order to promote the producers of the organi)ation regular customer
contacts are maintained.
+' S.C.R.ENGINEERING COLLEGE.
* In view of the limited growth of the industry, maintaining the mar#et
situation in order to retain the customers.
+ 5e #eeps an eye on the competitors strategies by analy)ing the mar#et
situation in order to retain the customers.
7 Aonitoring the overall performance of sales organi)ation is also one of the
functions.
F%n$tions o! Pro'%$tion Manag#r:
1 5e is in charge of the >roduction ;epartment.
' 5e prepares re"uirements of raw materials as per the indents given by the
Aar#eting ;epartment.
2 5e ta#es total responsibility from the stage of processing raw material to the
stage of pac#ing of finished products.
* 5is efforts include minimi)ing the labor cost, inventory, wastage in order to
achieve high productivity.
+ 5is responsibility includes advising the Aanagement with respect to
capacity utili)ation and further re"uirements.
A$$o%nting Poli$i#s o! *.S.R S/inning Mills Lt':
G#n#ral
!o >repare financial statements in accordance with applicable with
applicable accounting standards in India.
!he financial statements have also been prepared in accordance with
relevant presentational re"uirements of the companies act, 19+7.
R#9#n%#s
It is the corporate policy to state turnover, which represents invoiced value
of goods sold net of ta%es, insurance and freights.
!he company is following mercantile system of accounting i.e.,
revenues<e%penses are recogni)ed as and when they are earned< incurred.
In9#ntori#s
In our opinion and to the best of our information and according to
e%planations given to us, they said accounts read with the significant accounting
policies, the Inventories are valued as follows&
=aw materials, ,tores H ,pares and materials in transit have been valued at
the lower of cost or net reali)able value.
,aleable ,toc# of scrap is valued at estimated net reali)able value.
6ost of inventories is generally assigned by using the first in first out method.
Fi4#' Ass#ts
Fi%ed Assets are stated at cost < original value according to the accounting
standard(1.
B%penditure incurred for construction of new plant was capitali)ed.
6ost of fi%ed assets comprises of its purchase price and other costs directly
attributable to bringing the asset to its wor#ing condition for its intended use li#e
site preparation, initial delivery and handling charges, installation cost such as for
+* S.C.R.ENGINEERING COLLEGE.
special foundation and professional fees paid to architects and engineers..
D#/r#$iation
;epreciation on fi%ed assets is provided on ,GA method at rates and in the
manner prescribed by the schedule ?CI of the companies act, 19+7 0as amended1
and according to the accounting standard S7 issued by I6A I
Prior /#rio' it#"s
Insurance on plant and machinery and building was posted to building
accounting i.e. capitali)ed. !he insurance e%penditure =s.'**'1<(. :rongly
capitali)ed during the financial year '*(+ was written bac# and claimed as
revenue e%penditure.
S/#$%lation 2%sin#ss
Goss on foreign business 0Goss in euro sales1 =s.+, 2*,+7'<( was claimed as
revenue e%penditure.
Conting#n$i#s
,./.I. G6 Goan =,. '89'287<( sanction for the purchase of machinery from
,chlafhorst >vt. Gtd.
!he liabilities will arise when the machinery received.
Ta4#s on In$o"#
6urrent ta% is determined as per the provisions of Income !a% Act, 1971 in
++ S.C.R.ENGINEERING COLLEGE.
respect of ta%able income for the year. ;eferred ta% liability is recogni)ed. ,ub$ect
to the consideration of prudent on timing differences, being the difference between
ta%able incomes and accounting income that originate in one period and is capable
of reversal in one of more subse"uent periods.
;eferred ta% assets arising on account of brought forward losses and
unabsorbed depreciation as per Income !a% laws are recogni)ed only when there is
virtual certainty supported by convincing evidence that such assets will be reali)ed.
;eferred ta% assets arising on other temporary differences are recogni)ed only if
there is a reasonable certainty of reali)ation.
Di9i'#n's
>rovision is made in the Accounts for the ;ividends payable by the
company as recommended by the /oard of ;irectors, pending approval of the
,hareholders at the Annual Keneral Aeeting, !a% on distributable >rofits is
provided for in the year to which such distributable >rofits relate.
In!or"ation R#lat#' to *.S.R S/inning Mills Lt':
1 !he company has maintained proper records showing full particulars,
including "uantitative details H situation of fi%ed assets is performed by the
management in accordance with a rotational plan, which is intended.
' !he management has conducted physical verification of inventory at
reasonable intervals during the yearD the procedures of physical verification
of inventory followed by the management are reasonable H ade"uate.
2 !here are ade"uate internal control procedures commensurate with the si)e
of the company and the nature of its business, for the purchase of inventory
H financial accounts and for sale of goods.
* !he company has accepted 7* la#hs as deposits from the public.
+ !he company has an internal audit system, commensurate with the si)e of
the company and the nature of the business.
7 !he company has no accumulated losses at the end of financial year and it
has not incurred any cash losses in the current H immediately preceding
financial year.
9 !he company is not a chit fund or a nidhi<mutual benefit fund<society.
!herefore the provisions of clause *0%iii1 of the companies 0auditors report1
order, '2 are not applicable to the company.
8 !he company is not dealing in or trading in shares, securities, debentures
and other investments. Accordingly the provisions of clause *0%iv1 of the
companies 0auditors report1 order, '2 are not applicable to the company.
9 !he central government has not prescribed maintenance of cost records by
the company under section '9011 0d1 of the act.
1 According to the records of the company, the company is regular in
depositing undisputed statutory dues including withholding of ta%es,
provident fund, employees state insurance, income ta%, vat, wealth ta%,
custom duty, H other statutory dues with the appropriate authorities.
11 !he company has not given any guarantee for loans ta#en by others from
ban# or financial institutions.
1' !he term loans were applied for the purpose for which the loans were
obtained ( no term loans for the company.
12 !he company did not have any outstanding debentures during the year S
company is not having debentures.
PRODUCTION
INTRODUCTION
!he !e%tiles ,pinning ,ynthetic and blended industry is highly fragmented and
in addition to the established player there are many unorgani)ed players that
operate in the industry. !he capacities are interchangeable for spinning natural
fiber and manmade fiber, so definitive comparable information on competitors
operating in natural fibers and manmade fibers is not publicly available. Also >,A
operates in a customer order mar#et segment and produces variety of yarn based on
the re"uirement of customers and the standardi)ations are strictly not comparable
because of the uni"ue nature of the products, the counts and the fineness of the
yarn and the machinery used.
MANUFACTURING PROCESS:
=aw material(6otton
Cotton
!here is no problem in the availability of the re"uisite "uantity of raw material and
the company is having regular supplier with long standing relationship for meeting
is re"uirements. !he re"uirements of the raw material are estimated according to
the orders in hand and predicted mar#et demand. Also it is not possible to estimate
the annual "uantitative re"uirement of raw material.
COTTON FA2RICS
:e are happy to ac"uaint ourselves as one of the salient cotton fabric India. 4ur
cotton fabrics include organic cotton fabric and white cotton and good "uality yarn
for ma#ing the fabric. 4ur fabric provides immediate users. It gives soothing effect
to the body and will be the right choice in summers. 4ut cotton fabrics. Are light in
weight in comparison to its three fabric is easily washable and its significant
feature its durability. :e easy to provide good "uality cotton fabric on time and
that too at moderate private
COTTON *ARN
:e provide the best "uality cotton yarn that includes organic cotton blended yarn.
6otton yarn is produced from genuine "uality fiber, which seed hair of the cotton
lent. 4ut cotton yarn is used to manufacture get fabrics. !he significant feature of
out cotton yarn is its high tensile strength "uality. 4ut cotton yarn is used by
various industries for manufacturer garments. :e are widely #nown as one of the
prominent cotton yarn supplier.
COTTON *ARN MAUFACTUING PROCESS:
!he manufacturing of Oarn needs seven steps of processing
MI3ING:
!he different lots i.e., of cotton will be laid and ta#en to the department according
to the duality re"uired. !he material will be passed through the missing bale opener
two to three times for homogeneity of the mi%.
2LOW ROOM:
!he above mi% will be passed through various openers and cleaners for complete
opening and cleaning and finally passed through the scutcher where a uniform
sheet of materials is wound to a rod to feed for further process.
SPINNING:
!he above material on simple% bobbins will be fed to the ring frame where the
roving will be drafted to the re"uired count and will be twisted as per the twist
re"uired to the yarn, by mean of ring and ring travelers and spindles. !he yarn
wills he wound on to the plastic tube uniformly for better cone winding in latter
stages without wastage.
CON WINDING 0SINGLE1.AUTO CONE WINDING:
!he above yarn will be wound to a plastic or paper cone uniformly appro%imately
1.+ #ilograms each and the plastic cops will be released for further circulations.
!he cones will be labeled and collected count wise and some thic# and thin places
also will be cut by the electronic yarn cleaners in the machine for better "uality of
the yarn.
CHEESE WINDING:
!he two single yarns in the form of cones will be fed to the machine through a stop
motion unit and the two single yarn parallel ends will be wound uniformly into
wooden or plastic cheeses.
DOU2LING
!he above cheeses will be fed to the doubling and the two single ends will be
twisted together as per the re"uirements.
CARDING:
!he lap sheet will be fed through feed roller, lic#er in cylinder and doffer where
the material will be fully opened to the e%tent of individual fiber and the material
will be collected into the cans in the cans in the form of silver. ,ome unusable
waste is also eliminated in this process.
COM2ING:
6ombing is an additional process in the manufacture of cotton yarn for
improvement of "uality. In this process short fibers are removed, there by the
"uality of the yarn is improved substantially in terms of net content, yam strength,
luster etc.,
DRAWING:
!he above card silver of 8 ends will be fed to the machine and an average silver of
the above 8 silvers will be delivered by the machine. Again the 8 brea#ers slivers
will be fed to the finisher draw frame. !his process of doubling will result in a
uniform sliver out of 8T8 silvers. !he perfect paralleli)ation of fiber will also ta#e
place while processing through this machine for better spinning.
SIMPLE3:
!he above draw frame material in cans will be fed to this machine and the uniform
roving will be drawn through this machine which will be wound to the plastic
simple% bobbins by the machine after giving re"uired twist to the roving to with
stand for the stress in further process.
SPINNING DIVISION
O.,.= ,pinning and :eaving Aills >vt .Gtd. has installed state of art capacity to
produce wide range of cotton yarns. 4ur machinery lines e"uipment sourced from
the best vendors. 6urrently the company produces 8.+ tons of 1F cotton yarn
per day '++1* spindles and 1+ rotors.
WEAVING DIVISION
O.,.= ,pinning :eaving Aills >vt.Gtd has installed 8 nos >I6AA :eaving
Aachines to produce Krey fabric.
CUALIT*
Nuality if integral to everything at O.,.=. we adopt holistic "uality assure
integrated system which covers the entire production process. All lot giving to
mi%ing we believe "uality is a continual process. :ith a focus clearly a deliver and
services, we integrate to constantly innovate and e%cel. As a assured to top notch
"uality that is consistent across our product rage.
=I@K ,>E@ OA=@, + !4@,
4>B@ B@; ,>I@@I@K ' !4@,
=I@K ;4E/GI@K 1.+ !4@,
PRODUCTION CAPACIT*
VALUE
/y a clear comprehension of the mar#et dynamics and the assimilator technology
we assure the highest "uality standards are met at all times.
PRODUCTS
:e offer an e%clusive collection of white cotton fabrics of all si)es. 4ur made up
of pure cotton. :e also deal with the manufacturing and cotton yarn. :e provide
organic cotton yarn in all shades. :e use procedure for producing our organic
cotton yarn. /elow listed are the two after our manufacture processes.
SPINNING DIVISION
4ur ma$or counts range from '*s to 8s both carded and combed cotton these
counts we have the setup of doubling of yarns in ring doubling yarn.
WEAVING DIVISION
:e are having Air $et weaving machines, which we can produce all types per buyer
re"uirements. >resently we are producing ' of *s grey fabric and available
this fabric in finished form also. ,pinning is the process of creating yarn from
various raw fiber materials. ,everal fibers are twisted together to bind them into a
strong, long yarn. 6haracteristics of the yarn vary based on the material used, fiber
length and alignment, "uantity of fiber used and degree of twist. !he earliest
spinning probably involved simply twisting the fibers in the hand. Gater the use of
a stic# to help twist the fiber was introduced.
;rop spinning involves the use of stic# with a whorl or weight to stabili)e
the spinning of the stic# the spindle is spun, and hangs supported by the yarn as
more fiber is introduced. !his introduced fiber pic#s up the twist and becomes
yarn. Gater the spinning wheel was developed which allowed a continuous and
faster yarn production. ,pinning wheels are either foot or hand powered. Aodern
powered spinning, originally done by water or steam power but now done by
electricity, is vastly faster than hand(spinning. 5obby spinners spin their own yarn
in order to control specific yarn "ualities and produce yarn not commercially
available. !hey also may spin for self(sufficiency, sense of accomplishment or
sense of connection to history and the land. And, of course, for the meditative
"ualities of spinning.

,pinning is the process of creating yarn form various raw fiber materials. ,everal
fibers are twisted together to bind them into a strong, long yarn. 6haracteristics of
the yarn vary based on the material used, fiber length and alignment, "uantity of
fiber used and degree of twist. !he earliest spinning probably involved simply
twisting the fibers in the hand. Gater the use of stic# to help twist the fiber was
introduced. ;rop spinning involves the use of a stic# with a whorl or weight to
stabili)e the spinning of the stic#. !he spindle is pun, and hangs supported by the
yarn as more fiber is introduced. !his introduced fiber pic#s up the twist and
becomes yarn. :eaving is the systematic interlacing of two or more sets of
elements usually, but not necessarily at right angles, to form a coherent structure.
@o one #nows when or where the weaving process actually began, but as far bac#
as there are relics of civili)ed life, it is thought that weaving was a part of
developing civili)ations. /ecause of the perishable nature of te%tile goods,
information found about the beginning stages of weaving is s#etchy, and tracing
the development of te%tiles is a difficult tas# and a tremendous challenge. ;ue to
nature ha)ards of erosion, climatic conditions, insects, and fire, few e%amples of
early woven fabrics survived. !herefore, much of what is written about primitive
weaving is based on speculation. !here are, however, certain circumstances under
which remnants of fabrics have survived arid regions, bog lands, sealed tombs, and
e%tremely cold areas. /ecause of these artifacts, we are fortunate to have some
e%amples of early te%tiles and weaving tools.
!he everyday needs of our prehistoric ancestors probably led them to
create ob$ects using fiber as medium. It is thought that ancient humans instinctively
used weaving as an aid in their "uest for basic needs of food, shelter, and clothing.
It is not unli#ely that people might have reali)ed the possibilities of the woven
structure after observing spider webs, birds nests, or the construction of beavers
dam. !hese findings probably led to the interlacing of twigs or vines, and resulted
in netting which surely assisted humans in catching fish and trapping game. In
addition, by using twining or braiding techni"ues, it is li#ely that primitive people
learned to ma#e mats to cover floors of huts, which helped insulate against
dampness or cold. Bventually, people used weaving s#ills to ma#e coverings for
shelter, so they would be somewhat protect from harsh weather and or from
predators. !he use of natural dyes on reeds or the combination of varying si)es and
colors of weaving elements to create patterns, was li#ely an attempt to e%press
individualism and an aesthetic sensibility. 5uman beings naturally have a strong
compulsion to be creative, and our records show that this trait was prevalent in our
ancestors lives thousands of years ago. =esearch indicates that cultures on every
continent devised crude looms and methods of ma#ing webs, and further study tells
that us there was great similarity in the looms constructed and in the weaving
produced.
MACHINES FOR MA-ING THREAD AND *ARN
Aa#ing thread and yarn is as old as clothing amide of fibers. 4riginally fibers
were twisted together by hand, but some bright soul in the dim past discovered that
a weighted stic# could be pun and if fibers were attached to tit they would twist
into thread or yarn. !his device is called a drop spindle. !he twist, by the way, is
what holds the short fibers 0from U to 2 inches long1 together so they stic# firmly
to one another and do not come apart. At the demonstrations of this craft by
members of croft, you will see tow historically accurate methods of spinning.
!he spinner holds a mass of teased and fluffed fibers in one hand, and with
the other hand gives the spindle a spin with a flic# of the thumb and fingers to set it
spinning. !he fibers have been initially twisted into string one end and that end is
attached to the spindle. !he spinner then slowly feeds the handful of fibers through
her fingers in a process called drafting which forms a consistent set of fibers. As
the spindle spins these fibers tightly wrap around one another to form the thread.
!hen when the spindle and starts again. It is both tedious and smoothing. !he
original spinning wheel came from china and India, the earliest clear illustration of
this wheel comes from /aghdad. !he great wheel was merely a large spoo#ed
wheel with a belt that drove a thin shaft which twisted the fibers, and around which
the thread was wound by hand after it had been twisted. >artly because this
innovation greatly improved the efficiency of spinners and weaver there was
significant resistance to its use for commercial fabric. In the wool industry in
particular, merchants felt that the wheel produced inferior yarn. Bven with the use
of the great wheel, the chronic imbalance between spinners output and weavers
needs led to further innovation. About 1*8, craftsmen developed a E shaped
device which was driven which driven by the wheel, but which had tow driven
pulley, one for the spindle and the other for the flyer which spun around the spindle
at a faster rate than the spindle. !his was a dramatic technical innovation as
historian Gynn :hite says. !he drafting principle was the same on the new wheel
as on both predecessors. :ith the flyer, however, the spinner almost doubled her
output because the flow of wor# was uninterrupted, as she no longer needed to stop
and ta#e up her thread.
SPINNING AND SPINNING WHEELS
Aa#ing thread and yarn is as old as clothing made of fibers.
4riginally fibers were twisted together by hand, but some bright soul in the dim
past discovered that a weighted stic# could be spun and if fibers were attached to it
they would twist into thread or yarn. !his device is called a drop spindle. !he twist,
by the way, is what holds the short fibers together so they stic# firmly to one
another and do not come apart. At the demonstrations of this craft by members of
6=4F!, you will see two historically accurate methods of spinning. !he drop
spindle and the spinning wheel. !he spinner holds a mass of teased and fluffed
fibers in one hand, and with the other hand gives the spindle a spin with a flic# of
the thumb and fingers to set it spinning. !he fibers have been initially twisted into
string at one end and that end is attached to the spindles. !he spinner then slowly
feeds the handful of fibers through her fingers in process called -drafting, which
forms a consistent set of fibers. As the spindle spins these fibers tightly wrap
around one another to form the thread. !he when the spindle reaches the floor
since it drops as the fibers are fed through the fingers the spinner raises it and
wraps the string around the shaft of the spindle and starts again. It is both tedious
and soothing in medieval and renaissance Burope, spinners were almost always
women. /y the time weavers had treadle looms, five spinners could not #eep up
with the needs of one weave. !his was problem the solution to the problem was the
spinning wheel. !he original spinning wheel came from china and India. !he
earliest clear illustration of this wheel comes from /aghdad and is dated 1'29. !he
great wheel was merely a large spoo#ed wheel with a belt that drove a thin shaft
which twisted the fibers, and around which the thread
:as wound by hand after it had been twisted. >artly because this innovation
greatly improved the efficiency of spinners and weaves there was significant
resistance to its use for commercial fabric. In the wool industry in particulate,
merchants felt that the wheel produced inferior yarn. In 1'8, the drapers guild
banned its use. :eft thread did not need to be as strong as warp thread so eventual,
the wheel was accepted for that use. Bven with use of the great wheel, the chronic
imbalance between spinners output and weavers needs led to further innovation.
About 1*8, craftsmen developed a E shaped device which was driven by the
wheel, but which had tow driven pulleys, one for the spindle and the other for the
flyer which spun around the spindle at a faster rate than the spindle. !his was a
dramatic technical innovation. As the historian Gynn white says, it is the first
instance of belt transmission of power and a notably early e%ample of
!he flywheel principle it focused attention upon the problem of producing and
controlling various rates of speed in different moving parts of the same machine.
!he drafting principle was the same on the new wheel as on both predecessors.
:ith the flyer, however, the spinner almost doubled her output because the flow of
wor# was uninterrupted, as she no longer needed to stop and ta#e up her thread.
/ecause of the efficiencies of the flyer spinning wheel and the hori)ontal treadle
loom, there was an increase of ten(fold in the "uantity of cloth produced between
11+ 6B and 1+. !his increase resulted in a decline in prices, wider availability
and an increase, however modest, in the standard of living for te%tile wor#ers. It
further had the effect of moving cotton fabric out of the realm of lu%ury cloth and
into the homes and onto the bodies of the growing middle class.
AWARDS AND RECOGNITIONS
Ar. Oerram ,ridhar =eddy started his business as cotton commission native place
idupulapadu, in#ollu Aanadalam, >ra#asam district, Andhra >radesh >lanned
forward integration of Kinner in 1982. 5e started a firm company in 1989,
supplied cotton bales to various spinning mills in Andhra >radesh.
!he company has been awarded several times by the state government in
', '1 the company received the /est Enion award.
Again in 1998 the company received the award for the /est Aanagement.
!he company was privileged to donate 1+ acres of land to missionary to run
a school for the underprivileged.
,everal classrooms have been constructed to give children from nearby areas
proper environment for education. /us shelters too have been constructed to
protect villagers form the sweltering Andhra hear.
Bvery year, health camps are conducted for the benefit of all the surrounding
villages.
SWOT ANAL*SIS
Str#ngt(s
Abundant =aw Aaterial availability that helps industry to control costs and
reduces the lead(time across the operation.
Availability of Gow 6ost and ,#illed Aanpower provides competitive
advantage to industry.
Availability of large varieties of cotton fiber and has a fast growing synthetic
fiber industry.
India has great advantage in ,pinning ,ector and has a presence in all
process of operation and value chain.
Industry has large and diversified segments that provide wide variety of
products.
Industry has Aanufacturing Fle%ibility that helps to increase the
productivity.
Kood brand e"uity.
Aany persons are wor#ing here. !his shows commitment of employees
towards of the organi)ation.
W#a.n#ss#s:&
Industry is highly dependent on 6otton.
Gower >roductivity in various segments.
Gac# of !echnological ;evelopment that affect the productivity and other
activities in whole value chain.
Enfavorable labor Gaws.
Gac# of !rade Aembership, which restrict to tap other potential mar#et.
Gac#ing to generate Bconomies of ,cale.
O//ort%niti#s:&
Krowth rate of ;omestic !e%tile Industry is 7(8F per annum.
Garge, >otential ;omestic and International Aar#et.
>roduct development and ;iversification to cater global needs.
Blimination of Nuota =estriction leads to greater Aar#et ;evelopment.
Aar#et is gradually shifting towards /randed =eadymade Karment.
Increased ;isposable Income and >urchasing >ower of Indian 6ustomer
open @ew Aar#et ;evelopment.
Bmerging =etail Industry and Aalls provide huge opportunities for the
Apparel, 5andicraft and other segments of the industry.
T(r#ats:&
6ontinuous Nuality Improvement is need of the hour as there are different
demand patterns all over the world.
Keographical ;isadvantages.
!o balance the demand and supply.
!o ma#e balance between price and "uality.
Increase in minimum wage rates
International labor and Bnvironmental Gaws.
SCHEDULE OF CHANGES IN WOR-ING CAPITAL FOR THE *EAR
8DD<&8DD=
Parti$%lars
Pr#9io%s
#ar 8DD;&
D<
C%rr#nt
#ar 8DD<&
D=
Wor.ing $a/ital
In$r#as#
Rs.
D#$r#as#
Rs.
A1 6urrent assets&

11 Inventories
19''+72'1 18992*1' 1+799791

'1 ,undry ;ebtors '*929'* '787+* 19'2+17
21 cash H ban# balance 22*7+9+2 7+929 '9*7917
*1 other current assets '87+7817 *87998*7 ''22
+1 Goans H Advances 1*9'81' 119'219 2'*992
!otal 6urrent Assets 8?;8;:E8= 8F68<=;<;
/1 6urrent liabilities&
11 6urrent Giabilities 18291*21 1297'*18* 21'2'9+2
'1 >rovisions for
ta%ation
9'+79'9 1'1897 *97'22
!otal 6urrent Giabilities 66<=;F:<F 6<6=;:6;;
@et wor#ing capital 0A(/1 1+8+9++78 1'971221
D#$r#as# in )or.ing
$a/ital
'898''+8 '898''+8
Total 6<F<E<<=F 6<F<E<<=F ===D=;E< ===D=;E<
,ource& 6ompiled from annual reports of the company
AD5USTED PROFIT G LOSS ACCOUNT FOR THE *EAR 8DD<&D=
;r. 6r.
Parti$%lars
A"o%nt
Rs.
Parti$%lars
A"o%nt
Rs.
!o ;epreciation A<c 1+*98'1
/y 4pening /alance of
=eserves and surplus A<c
12+179+'+
!o 6losing /alance of
12'927
/y Funds from
operations
1+8+2'
8:<?;FD<? 8:<?;FD<?
FUNDS FLOW STATEMENT FOR THE *EAR 8DD<&D=
So%r$#s
A"o%nt
Rs.
A//li$ations
A"o%nt
Rs.
=aising unsecured loans '2788'99 >ayment on secured loan 9*8*8992
Funds from operations 1+8+2' >urchase fi%ed assets 99*11782
,ale of investment 9278
;ecrease in wor#ing
capital
'898''+8
Increase in differed ta% '9'+89
6<;8=D;<= 6<;8=D;<=
INTERPRETATION:
It is observed from the above table that the net increase in wor#ing capital
for the year '+(7 is =s ', 89, 8','+8. !he current assents of the company are
decreased comparing with previous year results. !he current liabilities of the
company are increased comparing the previous results. !he company gains profit
from the operation to an e%tent =s 1, +, 8,+2'. @et decrease in wor#ing capital
is =s ', 89, 8','+8. !his year raising the unsecured loans and selling some
investments. !his year changes in differed ta% increased, the company paying some
funds to secured loans holders.

8DD=&8DD?
Parti$%lars
Pr#9io%s
#ar 8DD<&
D=
C%rr#nt
#ar 8DD=&
D?
Wor.ing $a/ital
In$r#as#
Rs.
D#$r#as#
Rs.
A1 6urrent assets&

11 Inventories
18992*1' '29889+ +19*772

'1 ,undry ;ebtors '787+* 2+99'787 912'1*7
21 cash H ban#
balance
7+929 91+'97 191'29
*1 other current
assets
*87998*7 797*9*2 '97199
+1 Goans H
Advances
119'219 1'+'99*+ 879'7
!otal 6urrent Assets 8F68<=;<; :=<6E:?8<
11 6urrent
Giabilities
1297'*18* ''**921* 7'8'+12
'1 >rovisions for
ta%ation
1'1897 992987 '9**99*
!otal 6urrent
Giabilities
6<6=;:6;; 866<8::DD
@et wor#ing capital 0A(
/1
1'971221 1+279*'+
Increase in wor#ing
capital
'*+911+ '*+911+

Total
6<:=?D;8< 6<:=?D;8< F=FF88;< F=FF88;<
AD5USTED PROFIT G LOSS ACCOUNT FOR THE *EAR 8DD=&D?
;r. 6r.
Parti$%lars
A"o%nt
Rs.
Parti$%lars
A"o%nt
Rs.
!o ;epreciation A<c 1*+22129
12'927
1+11279+9
/y Funds from
operations
17+9+8
8E=6?DDE; 8E=6?DDE;
FUNDS FLOW STATEMENT FOR THE *EAR 8DD=&D?
So%r$#s
A"o%nt
Rs.
A//li$ations
A"o%nt
Rs.
Increase in differed ta% *+12'' >ayment on secured loan 188899*
Funds from operations 17+9+8 >urchase fi%ed assets 1'+'7798
>ayment Ensecured loan 7198712

Increase in wor#ing
capital
'*+911+

6==:<6:FD 6==:<6:FD
INTERPRETATION:
It is observed from the above table. !hat the net increase in wor#ing capital
for the year '7(9 is =s ', *, +9,11+. !he current assents of the company are
increased comparing with previous year results. !he current liabilities of the
company are decreased comparing the previous results. !he company gains profit
from the operation to an e%tent =s 17, +9, ,+8. @et increase in wor#ing capital
is =s ', *, +9,11+. !his year company is paying unsecured loans, at present time
no change in investments. And this year change in differed ta% increased and the
company pay some funds to secured loan holders.
8DD?&8DDF
Parti$%lars
Pr#9io%s
#ar 8DD=&
D?
C%rr#nt
#ar 8DD?&
DF
Wor.ing $a/ital
In$r#as#
Rs.
D#$r#as#
Rs.
A1 6urrent assets&

11 Inventories
'29889+ '2799+97'
'9*212
'1 ,undry ;ebtors 2+99'787 27'+8+91 '7+9+
21 cash H ban# balance 91+'97 1299892* 78*87+8
*1 other current assets 797*9*2 9278912' '**7189
+1 Goans H Advances 1'+'99*+ 187*119 177+7'7
!otal 6urrent Assets :=<6E:?8< :E6?F;<:F
11 6urrent Giabilities ''**921* 1+8*+'1*7 *2999178
'1 >rovisions for
ta%ation
992987 '1+8+' 1'+7+2*
!otal 6urrent Giabilities 866<8::DD 6FDD:8===
@et wor#ing capital 0A(/1 1+279*'+ '119+189'
Increase in wor#ing capital +881**9 +881**9
!otal 866?<6F?8 866?<6F?8 ?<6<?E8D ?<6<?E8D
AD5USTED PROFIT G LOSS ACCOUNT FOR THE *EAR 8DD?&DF
;r. 6r.
Parti$%lars
A"o%nt
Rs.
Parti$%lars
A"o%nt
Rs.
!o ;epreciation A<c 18'*919'7
1+11279+9
19*'1+8
/y Funds from
operations
''+++*9'9
:?==E6FF; :?==E6FF;
FUNDS FLOW STATEMENT FOR THE *EAR 8DD?&DF
So%r$#s
A"o%nt
Rs.
A//li$ations
A"o%nt
Rs.
=aise secured loans 99'9'+
>ayment on unsecured
loan
111**+1+1
Funds from operations ''+++*9'9 >urchase fi%ed assets 1+*+11989
;ecrease in differed ta% 9'2+*+

Increase in wor#ing
capital
+881**9

:8;?=86:8 :8;?=86:8
INTERPRETATION:
for the year '9(8 is =s +,8,81,**9. !he current assents of the company are
from the operation to an e%tent =s '', ++, +*,9'9. @et increase in wor#ing capital
is =s +, 8, 81,**9. !his year changes in differed ta% decreased and the company
raising some funds to secured loan holders.
8DDF&8DDE
Parti$%lars
Pr#9io%s
#ar 8DD?&
DF
C%rr#nt
#ar 8DDF&
DE
Wor.ing $a/ital
In$r#as#
Rs.
D#$r#as#
Rs.
A1 6urrent assets&

11 Inventories
'2799+97' 2'9*1'+*2
9*27981
'1 ,undry ;ebtors 27'+8+91 ''271*98 1289992
21 cash H ban# balance 1299892* 92891*71 +989'+'9
*1 other current assets 9278912' 1+1+7899 +9881+9+
+1 Goans H Advances 187*119 12977791 21'+9'
!otal 6urrent Assets :E6?F;<:F <FE8DDEDD
11 6urrent Giabilities 1+8*+'1*7 1*22797 1+91187
'1 >rovisions for
ta%ation
'1+8+' 9871* 79'997'
!otal 6urrent Giabilities 6FDD:8=== 8:;8866DD
@et wor#ing capital 0A(/1 '119+189' 2+*9998
;ecrease in wor#ing capital 1*2''99'8 1*2''99'8
!otal :<;E?EFDD :<;E?EFDD 88=;D;=;6 88=;D;=;6
AD5USTED PROFIT G LOSS ACCOUNT FOR THE *EAR 8DDF&DE
;r. 6r.
Parti$%lars
A"o%nt
Rs.
Parti$%lars
A"o%nt
Rs.
!o ;epreciation A<c '18+172'
19*'1+8
2*+9191 /y Funds from operations 29''+*+
<=;;D8?D: <=;;D8?D:
FUNDS FLOW STATEMENT FOR THE *EAR 8DDF&DE
So%r$#s
A"o%nt
Rs.
A//li$ations
A"o%nt
Rs.
=aise unsecured loans 199*9* >ayment on secured loan *9++72*2
Funds from operations 29''+*+ >urchase fi%ed assets '1+8277+
Increase in differed ta% 277'99' Increase in wor#ing capital 1*2''99'8

;DF=8DE86 ;DF=8DE86
INTERPRETATION:
for the year '8(9 is =s 1*,2','9,9'8. !he current assents of the company are
from the operation to an e%tent =s 29,',',+*+. @et increase in wor#ing capital is
=s 1*,2','9,9'8. !his year is paying unsecured loans comparing with previous
year. !his year changes in differed ta% increased, the company raising some funds
from secured loan holders.
8DDE&8D6D
Parti$%lars
Pr#9io%s
#ar 8DDF&
DE
C%rr#nt
#ar 8DDE&
6D
Wor.ing $a/ital
In$r#as#
Rs.
D#$r#as#
Rs.
A1 6urrent assets&

11 Inventories
2'9*1'+*2 2*197878 1**9*2'+
'1 ,undry ;ebtors ''271*98 82121+8 77+177
21 cash H ban# balance 92891*71 1+79+9' 8'117111
*1 other current assets 1+1+7899 '198++71 78'8789*
+1 Goans H Advances 12977791 17'187'* ''+1922
!otal 6urrent Assets <FE8DDEDD F6?DD6F8:
11 6urrent Giabilities 1*22797 1'+98''+ 192989++
'1 >rovisions for
ta%ation
9871* 1'9892'+ 292'911
!otal 6urrent Giabilities 8:;8866DD 8<:F?<8<=
@et wor#ing capital 0A(/1 2+*9998 +721'7+79
Increase in wor#ing capital '81*7979

!otal
<=:68=<=? <=:68=<=? 8;<6?E=?F 8;<6?E=?F
AD5USTED PROFIT G LOSS ACCOUNT FOR THE *EAR 8DDE&6D
;r. 6r.
Parti$%lars
A"o%nt
Rs.
Parti$%lars
A"o%nt
Rs.
!o ;epreciation A<c '+7812927
19*'1+8
*'*+9922 /y Funds from operations 29''+*+
=F6;6:D:E =F6;6:D:E
FUNDS FLOW STATEMENT FOR THE *EAR 8DDE&6D
So%r$#s
A"o%nt
Rs.
A//li$ations
A"o%nt
Rs.
=aise secured loans 191+7+772
>ayment on unsecured
loan
217*821'
Funds from operations 22++11978 >urchase fi%ed assets '9'11+127
Increase in differed ta% *82'+8* Increase in wor#ing capital '81*7979

;DF=8DE86 ;DF=8DE86
INTERPRETATION:
It is observed from the above table that the net increase in wor#ing capital for
the year '9(1 is =s ', 81, *7,979. !he current assents of the company are
from the operation to an e%tent =s 22, ++, 11,978. @et increase in wor#ing capital
is =s ',81, *7,979. !his year is paying unsecured loans comparing with previous
year. !his year changes in differed ta% increased, the company raising some funds
from secured loan holders.
FINDINGS
1. It has been observed the share capital of company is not increasing from '+
to '1.
'. !he company is having good reserves and surplus position. !hese are
increasing year to year from '+ to '1. It has been observed that reserves
increased to =s 1', '7, 18,9.
2. !he company is ta#ing loans from other sources li#e ban#s, financial institutes
etc. it observed from '+ to '1, the loan amount has deceased from =s
+8,97,2,929 to =s 7+,'*,'9,787.
*. It has been observed that the company is investing less on fi%ed assets from
'+ to '1.!he decrease is from 7,7,92,+9 to +9,9,2,9'9.
+. It has been observed that the company made investments in '+ only.
Afterwards till '1 no new investments have been made.
7. !he total increase in current assets of the company has overcome the total
increase in current liabilities in '+ to '1. 6urrent assets are increasing year
to year.
9. It has been observed that the company is raising funds from secured and
unsecured loans, sale of fi%ed assets and funds from operations and it is
spending to purchase fi%ed asset, redemption of loans and other payments.
SUGGESTIONS
1. It has been observed that the share capital of the company is not
increasing from '+ to '1. !his is obstructing the growth of the
company. 5ence I suggest the company to increase the share capital.
'. It has been observed that the companys contribution to the fi%ed
assets is gradually decreasing throughout the study. !his would be a
problem for the company procuring funds. 5ence I suggest the
company to focus on this and increase the allocation for fi%ed assets.
2. It has been observed that the company has made investments only in
'+. Afterwards there are no investments at all though all these
years. !his may affect the reputation of the company in the public.
5ence I advise the company to increase investments and improve its
image.
*. It has been observed that the increase in current assets of the company
is less than current liabilities in '+(7. !his shows that the
company has less li"uidity capacity. 5ence I suggest the company to
maintain the current ration to '&1 by increasing current assets or
reducing current liabilities.
+. It has been observed that the position of the wor#ing capital in '+(
7 has decreased. !his will have on effect on sources of funds of the
company. 5ence I advice the company improve the position of
current assets than current liabilities and control the decrease in
wor#ing capital.
7. !he company is getting favorable funds from operations in all years
of the study. !his is due to the e%cellence in operations. !his is a good
trend and it should be carefully maintained.
CONCLUSIONS
After *+ days of my sincere wor# at the O,= spinning mill and
te%tiles private ltd., is financial strength. In handling of the funds flow
statements professionalism may be encourage. !he company overall
position is satisfactory. ;uring my pro$ect wor# I had good e%perience
regarding the O,= spinning mill and te%tiles private ltd.
2I2LIOGRAPH*
REFERENCE 2OO-S:
I.A >andeyQQQQ. Financial management
>rasanna 6handra QQQQ Financial management
,.@.AaheswariQQQQQ. Financial management
=.J.,harma and KuptaQQQQ Financial management
Annual reports QQQQQQ '7 to '1
WE2SITES:
www.google.com
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MBA PROGRAMME Y.S.R. SPINNING MILLS (PVT. ) LTD.

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