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Chairman’s Letter Outlook: Managing Director Key Management Team Perspective: Executive Director Himatsingka Linens Giuseppe Bellora SpA Divatex Inc. Atmosphere Financial Report Financial Highlights
Chairman’s Letter N. Vaghul – Chairman
The slowdown of the US economy has impacted Indian exports as it continues to be the largest buyer of India’s merchandise. This downturn has, however, been restricted to a few segments of the US economy, like capital equipment, as consumer spending has not shown any dramatic decline. Seeking to correct cost anomalies, the US and EU zones are pursuing better margins for products being sourced by them. Herein lies the opportunity for your Company to maximize its manufacturing efficiency vis-à-vis other global players. Notwithstanding the impact of the US recession, the good performance of many Indian corporates has attracted strong FII inflows into the country resulting in the rupee strengthening against the dollar over the last six months. The rupee has continued its upward march and even though it has depreciated somewhat due to the sub-prime crisis in the US, general expectation is that, over the medium to longterm, it will appreciate further. This will definitely put dollarbased revenues under pressure and force exporters to look at options to combat this unexpected trend. Your Company is exploring avenues of cost reduction and selective price increases to partly offset the impact of the strong rupee
and sustain realization at prior year levels. Its design strength and presence in the niche segment will definitely see it overcome currency volatility. The commissioning of the state-of-the-art bed linen project at Hassan SEZ was impacted by delays attributable to the receipt of approval from regulatory authorities. A significant part of the commissioning has been completed since then and trial production has commenced. The initial customer response to trial production has been heartening and your Company expects to formally begin commercial production in the third quarter of 2007-08. In line with the strategy outlined during the GDR issue, your Company has successfully embarked on global acquisitions. The acquisition of a 70% stake in Giuseppe Bellora SpA, Italy marked the first major investment of your Company overseas. Bellora offers a strong foothold in the brand conscious European markets besides a retail presence across niche outlets. The recent acquisition of an 80% stake in Divatex Home Fashions Inc., New York, in July 2007, has given your Company much needed distribution strength in US markets and made it a truly global player.
Atmosphere, the first luxury home textiles brand in India has grown from strength to strength, last year reporting a growth of over 50%. Continuous efforts of the design team at providing interesting variants of products from its rich archives have paid dividends. The first overseas store of the retail foray has become operational in Dubai, in May 2007, with stores in Singapore and Hong Kong to follow shortly. This expansion across Middle and South East Asia will result in higher growth and mark the first steps towards making Atmosphere a global brand. I congratulate the team and am confident that the coming years will see considerable growth leading to significantly enhanced shareholder value. N. Vaghul Chairman
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Outlook Dinesh Himatsingka – Managing Director
Dear Shareholders, 2006-07 has been a milestone year for our Company. Not only did we witness growth across all our business segments, profit increased handsomely as well. Even in an uncomfortable currency environment, our consolidated revenue grew by 38.5% to Rs. 244.58 crores and PBT increased 35.4% to Rs. 69.99 crores. Though our profit at net levels rose by 26.3% to Rs. 61.43 crores, it was aided, however, by a substantial increase in our ‘other income’. At the same time, profitability was also impacted by a steep increase in raw silk prices and cost of other inputs. I believe, we have always been a Company that has walked the talk. Last year I wrote to you about growth initiatives we had undertaken. This year, I am pleased to announce their realization. Himatsingka is today, a vertically integrated and rapidly expanding home textiles Company with a market penetration strategy that combines mass retailing depth with high-end brand presence. Our newly established world-class, bed linen manufacturing facility in Hassan SEZ is operational and undergoing trial production. I am very happy to let you know that product quality remains up to Himatsingka’s high standards and is drawing the
“We will continue to invest in manufacturing capabilities in India and strengthen our distribution networks through strategic acquisitions overseas.�
attention of key customers overseas. The plant is likely to commence commercial production by September this year.
continuing to innovate to stay ahead of that change. Dynamic strategy will make future years better still and make this quality of performance sustainable.
In keeping with our strategy to capture the entire value chain in the bed linen space, we identified and acquired strategic distribution channels and a complementary brand in markets we wish to be present in. While the acquisition of Divatex, the 3rd largest bed linen distributor in the US, gives us access to a significant distribution network in the United States, the recent acquisition of an Italian luxury bed linen brand, Bellora offers us presence in the high-end European retail segment.
We approach the coming years with confidence and determination, buoyed by our continued strong performance and opportunities offered by our numerous growth drivers. The future of Himatsingka is being built on solid foundation, exceptional strategies, long-term vision, our capability to anticipate and the talent of our team. This will enable the Company to establish itself as a global leader in the home textiles space.
This year has also seen Atmosphere, our luxury retail vertical, grow impressively. Present in 11 cities across India, we have now taken Atmosphere overseas with the launch of an exclusive showroom in Dubai. The near future will see us significantly grow our pan-Asian presence through entry into several promising markets.
I would like to thank the Board of Directors, my colleagues in the Management Team and our employees for their outstanding efforts. We look forward to building greater shareholder value for you over the long-term. Dinesh Himatsingka Managing Director Himatsingka Seide Limited
Our investment in content, technology and international expansion has put us in a position to lead and we are leading. While our markets are changing fast, we are
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Himatsingka Linens A World-Class Bed Linen Manufacturing Facility
The Rs. 400 crore bed linen manufacturing facility has been successfully completed and trial production has commenced. Located at Hassan SEZ, Karnataka, the plant will have a capacity of 20 million meters per annum. Equipped with 320 wide-width airjet and rapier weaving machines, the facility has continuous dyeing and processing ranges and making-up operations capable of producing 9,000 bed sets a day. The sophisticated shop floor is designed to be flexible, catering to both, high volume businesses and luxury retail brands. This integrated, state-of-the-art production facility will enable us to effectively service the sourcing requirements of our distribution entities in Europe and the United States, besides other global clientele. With our significant investments in distribution strengths, we will be able to leverage our capacities to optimize product mix and maximize realizations.
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Continuous finishing range in the process house at the new bed linen facility, Hassan SEZ
“Our integrated manufacturing facility with best-in-class machinery and laboratories represent Himatsingka’s technological leadership in the home textiles space.” Mohan Rao, President – Group Operations, Himatsingka Seide
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From 1,000 people to a 3,000-strong team
“Bellora will significantly benefit from being part of Himatsingka given their manufacturing strengths and unique product development capabilities.” Giuseppe Bellora, CEO – Giuseppe Bellora SpA
New Bellora collection (Top Left) Lorenza Bellora, Giuseppe Bellora and Shrikant Himatsingka at the new bed linen facility, Hassan SEZ
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Making-up unit at the new bed linen facility, Hassan SEZ
“A challenging HR initiative was recruiting and training 1,200 women from rural Karnataka for our new bed linen facility. We offered them the opportunity to work in a world-class environment and the outcome has been tremendous. Today, they manage state-of-the-art technologies with meticulous efficiency.” Y. R. Wilson, Vice President – Corporate Human Resources, Himatsingka Seide
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From India-centric manufacturing to a multi-country retail presence
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“We expect to enhance our market share in the residential and institutional segments by growing our international and India presence through exclusive, signature stores.” Bharat R. Ram, Vice President – Retail, Himatsingka Wovens
Atmosphere showroom, Dubai
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From across India to a growing brand visibility in Asian markets
Atmosphere showroom, Dubai
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“Prudent financial management, sustained profitability and a strong balance sheet have been key drivers of our integration strategy and expanding global footprint.” Rajesh Kunnath, Senior Vice President – Finance & CFO, Himatsingka Seide
FINANCIAL REPORT 32
Management Discussion & Analysis 38 Risk Management 40 Corporate Governance 49 Board of Directors 50 Directors’ Report 55 Annexures to Directors’ Report 59 Certificate 60 Auditors’ Report – Standalone 61 Annexures to Auditors’ Report – Standalone Standalone Accounts 63 91 Statement regarding Subsidiary Companies 92 Auditors’ Report – Consolidated 93 Consolidated Accounts 114 Financial Highlights – Standalone
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