Welspun India

“Dare to commit” is a belief well entrenched into Welspun’s DNA. It drives every aspect of our business -­‐ from leading innovative technologies, to developing path-­‐breaking products, to fostering sustainability.

Business Scenario

As you are all aware, India has emerged as a significant player in the textiles sector, and is currently ranked as the second largest exporter of textile products behind China. As I mentioned in my last year’s address, certain structural changes are taking place in the industry, which are helping India improve its competitiveness and market share in the global arena. We are thus seeing more and more clients increase their sourcing pie of textile and apparel from India. In home textiles, the India advantage has been even more prominent and I believe, things are only going to get better in the coming years for the industry.

At Welspun, we continue to be a supplier of choice for our clients as evidenced by our growing market share. Over the last few years, we undertook significant initiatives to fortify our stronghold by fostering innovation, enhancing skill development and increasing our backward integration. We maintained our leadership position in home textiles being ranked as the No:1 supplier to the US for the 3rd consecutive year. In our estimate, every sixth towel and every tenth bed sheet sold in the US, comes from Welspun. Our towel and sheet capacities are running at full throttle which is reflected in the financial results as well. Financial year 2015 was undoubtedly our best year, with revenue, operating EBITDA and profit after tax at all-­‐time highs`. We declared a dividend policy, among the first in the textile industry, where we would distribute a quarter of our profits as dividends to our esteemed shareholders.

Going forward, we will sustain our agility to capitalize on evolving opportunities, improve our business & market competitiveness, continue to build a sustainable and progressive community, and enhance value to all our stakeholders. In the coming years, we will focus our attention on further growth by targeting the lesser penetrated markets such as Europe, East Asia and Latin America. We also aim to

increase the share of branded sales in our overall sales. On the international front, we are in the process of expansion of “Christy” into newer geographies such as China and the Middle East. As regards India, we have launched a major marketing campaign for our domestic brand “Spaces” with Ms. Parineeti Chopra as the brand ambassador. We remain very excited about the domestic market opportunity – our branded sales in India has been growing at around 40% CAGR over the last two years. Another key focus area will be increasing the share of innovative products in our overall portfolio. In this direction we have launched a well-­‐targeted marketing campaign in US to promote Hygrocotton®, our own patented technology, directly to end-­‐ consumers. This is the first ever such campaign in textiles in the last 15 years, and we believe that it will give a further boost to our reputation as a highly innovative company. We are focusing on leveraging underpenetrated channels such as hospitality and e-­‐commerce to drive further growth. We also remain committed to attract the best talent, empower them and develop them into our future business leaders.

Building A Responsible Business

At Welspun, building a responsible business is the essence of our core values. It defines and guides the way we conduct business, and has proven to be a differentiating element in our success story.

Community Development

Our social mission is enshrined within the ‘3Es’ -­‐ Empowerment, Education and Environment & Health. To date, we have helped empower over 200 underprivileged women by providing skills training and career opportunities. By providing school infrastructure and learning opportunities, we have kindled hope and optimism for over 3,000 children.

Some of our initiatives in Environment & Health include, setting up of RO plants around our facilities, conducting health camps, providing mobile health vans, constructing sanitation facilities, tree planting and biodiversity drives, to name a few.

Sustainability

R&D and innovation are key facets of our growth strategy and sustainability orientation. Ongoing efforts are underway to rationalize

production activities, maintain energy efficiency and reduce ecological impact. We also focus on creating a superior workspace for our employees. We continually monitor the quantum of waste generated by our operations, focus on waste reduction and evaluate its possible reuse as alternate materials. Through implementation of measures such as recycling, wastewater recovery, rainwater harvesting and ensuring optimal use of water in our operations, we consciously reduce the quantity of fresh water that we consume. Innovation spans our value chain. In FY15, we introduced ‘eco smart rugs’ and ‘recycled polyester’ products, as well as other items produced with minimal consumption of water and energy, as part of our ‘Bath, Bed and Rugs’ product lines.

Swachh Welspun Abhiyan Inspired by PM Narendra Modi’s Swachh Bharat Abhiyaan, Welspun launched Swachh Welspun Abhiyan on 2nd of October 2014. This initiative outlines a comprehensive blueprint for a coordinated approach to waste minimization, cleanliness targets, and reducing adverse environmental impact, which eventually impacts the delicate ecological balance.

We ‘Dare to Commit’

Friends, as we celebrate a very successful 2014-­‐15, we remain aware that we still have a long way to go and we therefore remain committed to our journey of being one of the most preferred home textile companies in the world. Last but not the least, I take this opportunity to express my sincere gratitude to our Board of Directors, our Management, our dedicated employees and our esteemed customers & suppliers, bankers and investors, for their unrelenting dedication, support and commitment to Welspun.

Sincerely, Best Regards,

Balkrishan Goenka

Vardhman Textiles

THE WAY TO LEADERSHIP IS THROUGH EXCELLENCE, NOT RANK AND SIZE.

This improved performance resulted on the back of a favourable external environment and a prudent cotton procurement strategy.

On the external front, two factors lifted the level of the water for the entire industry: the Chinese policy of high cotton prices resulted in their fabric manufacturers engaging in significant yarn imports, which benefited yarn exporters across the world. Besides, the weak rupee enhanced margins for the Indian textile industry.

On the internal front, we procured quality cotton at favourable rates. Besides, the additional capacity (120,684 spindles and 230 looms) that we commissioned in 2013-­‐14 contributed to our growth.

What gives me deep satisfaction is that Vardhman rose from being the eighth most admired Indian Textile Company to the second position according to Fortune India, the most significant jump by any Indian textile company.

The year that will be Even as we encountered a record year, I must caution shareholders against expecting another peak performance in 2014-­‐15. The global yarn business will largely depend on China’s cotton policy as the country is the largest cotton producing and consuming nation, sitting on more than 60% of the global cotton reserves, and the largest global yarn producer.

The Chinese Government recently announced a reversal in its policy of supporting cotton farming. Instead of buying cotton at a higher price, the government will provide subsidies in specific areas. This may have the effect of reducing price of cotton sold by farmers in the domestic market. Reasonably, therefore, the expectation is that in the new season (2014-­‐15) Chinese prices will converge closer to international levels. This will tend to increase China’s cotton yarn productions, and may

therefore have an adverse influence on exporters, which will include Indian spinners.

Looking ahead, with the rising labour cost in China and an appreciating currency, China may become a potential importer of yarns and fabrics.

Following an economic recovery in the US and Europe, one expects increased consumer spend to drive robust textiles demand. With the Chinese textile policy being unpredictable, the textile-­‐consuming world is looking at India as the next best supply source. The result is that India has emerged as the second largest textile exporter, strengthening its apparel export ranking from eighth in 2012 to sixth in 2013.

Vardhman is attractively placed to build on its existing scale. More than 38.35% of its revenues are derived from yarn and fabric exports to 58 countries; exports grew at a CAGR of 12% in the three years leading to 2013-­‐14; these exports have been largely secured through longterm relationships; a majority of these relationships are collaborative in terms of product development and customization.

Our outlook

Overall, while our topline growth could extend in 2014-­‐15 following capacity augmentation achieved in the previous year, margins are likely to moderate on account of volatility in the yarn space leading to a fall in the bottom line.

Long-­‐term road map

At Vardhman, we have drawn out a strategic blueprint to reinforce our sustainability in a cyclical sector.

One of our principal initiatives in this regard was an enhanced focus on the fabrics business for some good reasons: the space is less volatile, marginsaccretive, less commoditised and offer opportunities to organisations which can build soft knowledge. The share of India’s organised sector in fabric manufacture is less than 10% and may increase as quality considerations outweigh, in line with growing organised retailing and steadily increasing market share of brands.

Vardhman enjoys a head start in this space -­‐ a two-­‐decade fabric manufacturing experience, enduring customer relationships, diverse portfolio and access to quality yarn from captive units. Over the near term, we expect to strengthen our fabric business through enhanced investments in R&D, resources and competencies, the launch of collections to enhance global visibility, positioning our quality fabrics in niche markets like Japan and engaging in collaborative product development with customers.
The
big plan Over the next five years, we expect to grow revenues from about US$1 billion to US$1.5 billion without compromising our Balance Sheet integrity. We are not obsessed with incremental capacity creation; we are passionate about excellence. We believe that the way to leadership is through excellence, not rank or size.

It is through this enduring investment in excellence that we expect to sustain our superior returns over the long-­‐term

Warm regards,

Shri Paul Oswal

A fellow shareholder

RSWM

It gives me pleasure to report 2013-­‐ 14 as our best performance in five years, a number of challenges notwithstanding.

The performance was underscored by all-­‐round growth – topline grew by 16.72%, while EBIDTA and net profit accelerated faster at 17.40% and 45.57% respectively. We improved business profitability (ROCE jumped to 14.99%) and strengthened liquidity (net cash from operations increased by 40.55%).

Clearly, the achievement of the year was profitable growth, indicating that our Company did not grow revenues at the expense of margins. On the contrary, the year’s performance represented a validation of our enduring business model woven around efficiency, range, quality and austerity.

What makes our performance special is that during the last four years (FY10-­‐ FY13), the national production of manmade fibres and filaments reported a marginal contraction of around 2%, spun yarn production recorded average growth at 5.50%, while fabric production increased at an average of 1.40%, emphasising the point that we did not just report growth during the reported period, but outperformed our sector in a significant way.

The result is that we strengthened our Balance Sheet to make profitability a sustainable reality. We moderated our debt and improved our gearing from 2.17 to 1.53; we invested `83 crore in assets, seeking to enhance product quality. This meant that when realisations declined (as they could in a cyclical business) we were able to more than make up with increased output.

Industry outlook

The outlook for the textiles industry appears optimistic for some interesting reasons.

There is an increasing steadiness related to cotton availability and price stability, strengthening the fortunes of the textile industry. Global cotton stock levels touched an all-­‐time high of ~80% of the annual

consumption (estimated closing stock as on July 2013 was ~109.6 million bales), which is estimated to increase to 120.8 million bales by July 2014 and equivalent to ~ 86% of the estimated global cotton consumption for the international cotton year ending July 2014. As a result, global cotton prices are expected to remain rangebound. Correspondingly, the Indian cotton scenario is expected to be favourable; cotton-­‐sowing area in CY14 matched CY 13 levels, good monsoons strengthened productivity (kg/hectare) and the country braced for a record cotton output. As a result, we foresee that raw material availability will be abundant, making it possible for downstream users to plan for financial predictability.

Concurrently, we see market opportunities coming on track. Europe is expected to report a positive GDP growth in CY 2014 and US GDP growth is expected to expand from 1.3% in CY 2013 to 2.2% in CY 2014. Besides, the easing of geo-­‐political issues in the Middle East and strong economic progress in Latin America will catalyse opportunities. This increased demand will provide a significant impetus to textile exports from India.

The demand for textiles from within India is also expected to increase for the following reasons:

• A dynamic government is expected to drive national growth, which in turn could increase earnings, disposable incomes and consumption

• India adds about 14 million individuals annually to its work force, which is expected to sustain incremental textile demand

• Increased availability of aspirationinducing fabrics and garments in TierII and Tier-­‐III towns is driving demand

Government support

The Indian government intends to enhance the competitiveness of the Indian textile industry through a number of initiatives. • TUFS for the textile sector was extended to the 12th Five Year Plan with an investment target of US$2.9 billion

• The Government intended to set up a US$15.79 million venture capital fund to provide equity support to textile sector start-­‐ups

• The Government permitted 100% FDI in the sector through the automatic route and planned to spend US$9.1 billion on textiles (against US$4 billion in the 11th Plan)

• Various state governments announced investment-­‐inducing policies to enhance India’s global competitive advantage

The result is that credible estimates foresee the Indian textile industry to grow from US$89 billion presently to US$220 billion by 2020.

Man-­‐made yarn prospects

The spinning industry is largely built around cotton fibre. The overall dependence of Indian yarn manufacturers stood at ~72% towards cotton against a global average of ~ 33%. Besides, India’s per capita polyester fibre consumption was 2.45 kg against a global average of 5.85 kg. However, India’s share of manmade fibre consumption could trend towards the global average for some good reasons: China emerged as one of the most important destinations of Indian cotton yarn as imports into that country continued to be duty-­‐free vis-­‐à-­‐vis a peak raw cotton import duty of 40%. On the other hand, reduced R-­‐
TUFS
incentives for the country’s spinning sector could stagger new capacities and investments.

RSWM’s initiatives

RSWM reinforced its competitive advantage through various initiatives.

One, the Company is investing `40 crore in 50 looms to increase fabric production from 9 lac metres per month to 16 lac metres per month. This initiative will not just expand capacity but widen capability, making it possible for the Company to enter the 100% cotton and polyester-­‐ cotton fabric ranges starting 2014-­‐15.

Two, the Company is investing `184 crore in expanding its mélange yarn capacity to enhance value-­‐addition. Three, the Company is investing `75 crore in a green fibre facility, which will replace about 25% of the polyester fibre being procured, reducing costs. I am optimistic that these initiatives will graduate the Company towards Lakshya 2016, manifested in a topline of RS. 4,500 crore.

Message to shareholders While the industry outlook appears optimistic, RSWM expects to leverage its scale, scope, technology and innovation to strengthen the volumevalue play that enhances returns for shareholders.

Warm regards,

Ravi Jhunjhunwala

KPR Mills

I am delighted to report yet another better performance of KPR. In the Financial Year 2014-­‐15, your Company earned a record Consolidated Revenue of ` 2,589 Crores and a Net profit of ` 173 Crores. The financial results reflected a strong performance. On the total turnover, exports constitutes 33% and domestic 67%. In a challenging, increasingly cost-­‐ sensitive environment, our focus on Garment, the prospective textile segment, has prompted expansion. This strategic move has significantly improved the revenue and we hope that the strong level of performance will sustain.

Cotton cost is the governing factor of the Spinning Industry. While its present stable level of prices is advantageous to the Industry, the power shortage, steep hike in power tariff and evacuation issue at Tamil Nadu have been deterrent to the competiveness of textile mills in Tamil Nadu. However, KPR with the ardent support of captive green power capacity is able to mitigate its impact considerably. Your Company’s continued success is due to the dedication, commitment and performance of our workforce, which remains its biggest asset; we continue to invest in their development.

We are glad to inform that in respect of Garment capacity expansion, the Brown Field project and Green Field Project have been successfully completed as envisaged. The Company is planning for a new Green Field expansion with a capacity of 36 Million Garments per annum in the current year. The unstinted support from the existing buyers and encouraging stimulus from new markets are driving the expansion effort. This shall lead to making KPR as one of the largest Garment Producer in the Country. Though Sugar Industry is under tremendous pressure with matchless cost of Production vis-­‐à-­‐vis sugar price and dismal margin, we are able to breakeven. In Audi Car Dealership, we continue to be the market leader at this territory and widening its sales network at Madurai, Tamil Nadu.

This year, considering strong performance, our dividend payout is ` 9 per share including ` 5 proposed as final dividend. The earnings per share of the Company increased to Rs. 46 from Rs. 37 last years.

Being a responsible Corporate, we remain focused in creation of healthy and progressive society. Our key focus areas for helping the community lie in education-­‐including vocational education, leading to sustainable livelihood, especially that of women, by empowering them to stand on their own with the financial strength besides equipping them with the skill that was once claimed to be that of manhood alone. Your Company continues its environment friendly measures including planting trees, substitution of conventional fuel with bio-­‐gas in factories, recycling of waste water apart from generation of substantial green energy, to create a better environment.

KPR is a unique Company because of its strong fundamentals and impeccable Labour force which allows us to take a long-­‐term view and strategy to grow further. Your Company has been recognized by industry, customers and media for excellence along many dimensions including overall financial performance, human resources, sustainability, investor relations, infrastructure, communications and governance. We are glad to note that the Business Magazines have ranked K.P.R. Mill Limited:

• 15th largest Textile & Garment Company in India.

• 285th place out of Top 500 Companies in Profitability Ρ • 332nd place out of Top 500 biggest Companies in India.

I want to thank each shareholder for their support and commitment to the Company that has helped to place KPR among the valuable Companies in India. I look forward to your continued support as your Company embarks on the next phase of its growth journey. I am grateful to the Board of Directors for their unwavering support and guidance. I would also like to take this opportunity to thank the entire management team for their energy and tireless work throughout the year. Leveraged raw material, strengthened and sustained better compliance practices continue to attract the Buyers and International Brands to source from India. Despite the challenges faced by the Spinning Industry, with the uptrend in demand for the Garment Segment, the Industry is expected to achieve the earmarked target in the current year.

With best wishes

K.P. Ramasamy