AN ANALYSIS OF FINANCIAL FEASIBILITY OF

LAKSHMI MILLS IN COIMBATORE

M.Nirmala1, Remya Cheriyan2
1
Associate Professor, 2M.phil Scholar, PG and Research Department of Commerce
Hindusthan College of arts and Science, Coimbatore, Tamil Nadu (India)

ABSTRACT
Textile industry is one of the fast upgrading innovative one, which produce variety of innovative products. In
this paper here present contributes to current knowledge of Textile product of lakshmi mills in Coimbatore
Tamilnadu and appraise the growth of that mill. And also produce the analysis of the long term solvency
position. The purpose of the study is to analyze the short term financial feasibility of the industry. This study was
based on the idea to promote creative and original textile designs by using a source of inspiration. This industry
produces many kinds of products. This study marks the significance of a source of inspiration in textile
designing.

Keyword: Textile, Innovative Product, Lakshmi Mills, Coimbatore and Financial Feasibility

I. INTRODUCTION

Textile is a broad term referring to any material that can be made in to fabrics by any method of construction
such as weaving or interlacing, felting and knitting. Textiles play an important role in our life. Everyone in the
world is surrounded by textiles. The textile industry is a functional area in which an understanding of design
and its management is required to be successful [1]. Textile design plays a critical role in creating innovative
products for various end-user. The Indian textile industry has a significant presence in the economy as well as in
the international textile economy. Its contribution to the Indian economy is manifested in terms of its
contribution to the industrial production, employment generation and foreign exchange earnings. It contributes
14 percent of industrial production, 9 percent of excise collections, and 18 percent of employment in the
industrial sector, nearly 20 percent to the country‟s total export earning and 3 percent to the Gross Domestic
Product. In human history, past and present can never ignore the importance of textile in a civilization decisively
affecting its destinies, effectively changing its social scenario. India has been well known for her textile goods
since very ancient times. The traditional textile industry of India was virtually decayed during the colonial
regime. However, the modern textile industry took birth in India in the early nineteenth century when the first
textile mill in the country was established at fort gloster near Calcutta in 1818. The cotton textile industry,
however, made its real beginning in Bombay, in 1850s. The first cotton textile mill of Bombay was established
in 1854 by a Paris cotton merchant then engaged in overseas and internal trade. Indeed, the vast majority of the
early mills were the handiwork of Paris merchants engaged in yarn and cloth trade at home and Chinese and
African markets. The first cotton mill in Ahmadabad, which was eventually to emerge as a rival centre to

337 | P a g e
Bombay, was established in 1861. The spread of the textile industry to Ahmadabad was largely due to the
Gujarati trading class [2].
The cotton textile industry made rapid progress in the second half of the nineteenth century and by the end of
the century there were 178 cotton textile mills; but during the year 1900 the cotton textile industry was in bad
state due to the great famine and a number of mills of Bombay and Ahmadabad were to be closed down for long
periods. The two world wars and the Swadeshi movement provided great stimulus to the Indian cotton textile
industry. However, during the period 1922 to 1937 the industry was in doldrums and during this period a
number of the Bombay mills changed hands. The Second World War, during which textile import from Japan
completely stopped, however, brought about an unprecedented growth of this industry. The number of mills
increased from 178 with 4.05 lakh looms in 1901 to 249 mills with 13.35 lakh looms in 1921 and further to 396
mills with over 20 lakh looms in 1941. By 1945 there were 417 mills employing 5.10 lakh workers. The cotton
textile industry is rightly described as a Swadeshi industry because it was developed with indigenous
entrepreneurship and capital and in the pre-independence era the Swadeshi movement stimulated demand for
Indian textile in the country. The partition of the country at the time of independence affected the cotton textile
industry also. The Indian union got 409 out of the 423 textiles mills of the undivided India. 14 mills and 22 per
cent of the land under cotton cultivation went to Pakistan. Some mills were closed down for some time. For a
number of years since independence, Indian mills had to import cotton from Pakistan and other countries. After
independence, the cotton textile industry made rapid strides under the Plans. Between 1951 and 1982 the total
number of spindles doubled from 11 million to 22 million. It increased further to well over 26 million by 1989-
90. This study was carried out to determine the importance of source of inspiration in creating textile designs, to
develop creative and innovative designs with the help of source of inspiration for textile designing. The financial
performance is an integral part of any business concern. It can be analyzed with the help of profit earned as well
as the other factors which are responsible for such performance. The profits vary from one financial year to
another financial year. The success or failure is determined by applying various tools. Hence to know the
financial performance of Coimbatore Lakshmi Mills.

II. LITERATURE REVIEW

A literature review is a body of text that aims to review the critical points of current knowledge on particular
topic. Most often associated with science-oriented literature such as thesis, the literature review usually precedes
a research proposal, methodology and result section. Its ultimate goal is to bring out the reader up to update with
current literature on a topic and forms the basis for another goal such as justification for further research areas.
From Desai (1997) in his study [3], “Assessment of Liquidity – Inter Firm Comparison”. He made an attempt to
study the comparison of a few cotton mills of Ahmadabad. He analyzed the liquidity performance, profitability
and the turnover of working capital. He had classified the selected firms into three group based on the size. It is
observed that the liquidity and profitability of the firms are not influenced by its size.
In Mansur A Mulla (2002) in his study [4], “The financial health of Shri Venkatesh Co-operative textile mills
ltd”. He found that the textile mill under the study was just on the edge of financial collapse. The financial
position is not in the healthy zone during that period of study. The current assets have been declined due to the
negative profitability performance, whereas the current liabilities have been increased due to the poor liquidity

338 | P a g e
performance of the mill. He concluded that the company has faced the problem of overtrading owing to the
inadequate level of working capital and it should concentrate on the working capital to improve the financial
performance.
Aruna.R (2003) in her study [5], “A study on financial performance of Sri Bhavani textile process private
limited”. She analysed the balance sheet and profit and loss account of the company. She found that the overall
financial position was moderate. She concluded that the company should try to improve it long-term solvency
by converting inventories into cash and increase the shareholders fund for getting better result.
Reserve Bank of India (2003) had examined the financial performance [6] of private corporate business sector
from textiles, engineering, chemicals, cement, electricity generation and supply, construction, information
technology and diversified groups during the first two quarterly period of 2002-2003 based on abridged
financial results of companies published in the financial database, news dailies and from the major stock
exchange of India. It was observed that textiles, engineering, cement, information technology and diversified
industries have recorded a high growth in sales in the second quarterly period.
Rakesh R (2005), in his study [7], “A study on financial performance of vijayeswari textile limited”, from the
year 2001 – 2005. The study was conducted to analyse the profitability position, financial position, and also to
find the efficiency in asset utilization and fund utilization. He found that the company‟s profitability and activity
position is satisfactory whereas the liquidity position is not satisfactory due to improper management
Chellasamy.P and Sumathi.N (2007) in their study [8], “Growth and financial performance of selected textile
companies in Coimbatore district”. The study period covered from the year 1995-2006. He examined the growth
and trend of selected textile companies. In the selected textile companies, Gangotri textile limited performance
was satisfactory and the remaining companies taken for study performance were moderate. So these companies
should aim, not only to earn high profit but also to run the business with social obligation and maximum
utilization of ideal resources properly.
From the author Sunita Sukhija (2010) in her study [9], “A study of leverage and profitability position of
selected textile companies” from the year 2005 – 2010. She analyzed the leverage positions of Textile
Industries in India and to examine the impact of leverage on EPS of selected Textile Companies. The study
reveals that overall leverage of Lakshmi Mills Co. Ltd is maximum indicating higher profits and also ensuring
that any small change will lead to more reflection. The mean value of EPS for Raymond Ltd. is high as
compared to the other five companies. Visaka Industries Ltd shows an average performance during the study
period. She concluded that the companies could reframe their optimum capital structure and capacity utilization
for further profitability in future.
A.S.Shiralashetti (2011) in his study [10], “Performance appraisal of the Gadag co-operative Cotton Textile Mill
Ltd, Hulkoti- A Case Study”. He had discussed about the trends in capital employed, net worth of the firm, the
trends in sales, cost of goods sold, gross profit/loss and net profit/loss during the study period. The results were
found that the overall performance of the Gadag Co-operative Cotton Textiles Mill Ltd was poor from the
period 2002-2003 and 2008-2009 due to high expenses.
From Mohammad Morshedur Rahman (2011) in his study [11], “Working Capital Management and
Profitability: A Study on Textiles Industry” from the year 2005 – 2008. He found from the study that the
working capital management of textile industry is inefficient. So he concluded that the poor management of

339 | P a g e
working capital is one of the important causes for poor performance or poor profitability position of the selected
textiles under the study period. The liquidity position of the selected textiles is not satisfactory due to poor
turnover of Current Assets, Inventory, Debtors and Cash Balances. The collection of receivables is not good due
to inefficient credit and collection policy. The textiles should be cautious in formulating working capital policy.
Marimuthu.K.N (2012) in his study [12], “Financial performance of textile industry on listed companies of
TamilNadu”. He analyzed the structure of income statement, balance sheet and working capital from the year
2001-2011. He concluded among the five companies these two companies i.e. KPR mill ltd and Rajapalayam
mills ltd financial position was good.
Palani A and Yasodha P (2012) in their study [13], “A study on working capital management in loyal textile
mills limited, Chennai”, from the year 2006 – 2011. They says Working capital is very important for any
organization to meet its day to day expenses and to meet short term due obligations. An efficient management of
working capital is necessary for smooth functioning of the organization and also for maintaining its profitability.
They found that the company is efficiently maintaining its working capital. And they had concluded that the
company is credit worthy which is proved by credit score model.
From the view of Vimal kumar.J.V (2012) in his research paper [14], “Financial performance of Trichur Co-
operative spinning mill limited”, during the period 2005-2010. He analysed the structure of balance sheet and
income statement of Trichur co-operative spinning mill. He found that the company does not have any
accumulated losses during the study period. So the financial position of the firm is satisfactory and the
performance of the firm is good. In order to improve its trading activity by generating more sales and also need
to have a control over the expenses.
From Dhandapani.M.A and Ganesh Babu.M.P (2013) in their research paper [15], “Financial performance of
cotton mills- A special case in Andhra Pradesh” form the year 2001 - 2010. To achieve the objectives he
analysed the liquidity position, profitability position, and the effectiveness of asset utilization in pioneer
spinning and weaving mills ltd. They had concluded that the firm has maintained very good liquidity position.
Current ratio and quick ratio are more than the standard. Therefore it is advised to deposit idle cash in
marketable securities. The profitability position also good except in 2007-08 and utilsed fixed assets and current
assets effectively. The efficiency ratios like stock turnover ratio, debtors turnover ratio and fixed assets turnover
ratio are also static during the study period. Therefore, the firm must try to improve the performance by making
various forms of internal reconstruction like alteration of share capital, reduction of share capital, writing off
lost assets. The firm should also follow strategies like right person in right job to improve the productivity and
overall financial performance.
From the view of Indhumathi.C and Palanivelu.P (2013) in their research paper [16], “A study on financial
performance of selected textile companies in India” from the year 2001 to 2010. They made an attempt to know
the profitability and financial position of selected textile companies. They found that the overall financial
performance of selected textile companies was not stable. It fluctuates. To strengthen the financial position, long
term funds have to be used to finance. The companies should try to use properly their operating assets and
minimize their non-operating expenses.
Pratibha Jain and Kshitija Chaugule (2014) in their study [17], “Working capital structure and liquidity analysis
of Indian textiles industry” from the year 2009 – 2013. The study revealed that all of the current assets and

340 | P a g e
inventories formed the highest percentage, followed by loans and advances and trade receivables whereas cash
and bank balance formed very negligible part. From the analysis they found that the Bombay Dyeing reflected
good working capital structure and liquidity position while JCT had good working capital turnover. Grasim
Industry had negative working capital Turnover ratio which is not good sign for long term growth and
sustainability.
Subha R and Dr.Ramu (2014) in their study [18], “Financial performance of textile industry in Tamil Nadu with
special reference to Coimbatore” from the year 2004 - 2013. They analysed the profitability of selected textile
companies in Coimbatore. They had concluded that the financial performance of Ambika cotton mills ltd,
Bannari Amman spinning mills ltd and KG Denim ltd was good, where as it was not satisfactory for Gangotri
textile ltd and Lakshmi mills ltd due to negative profitability.

III.TEXTILE MILLS IN TAMILNADU

Textile mills and engineering industries are present around the city of Coimbatore. It is home to textile,
automotive spare parts and motor pump manufacturing units. Cities of Tirupur and Erode are the country's
largest exporters of knitwear. They are well known for textile manufacturing industries and exports to such
extent that the districts of Coimbatore, Tirupur, Karur, Erode, Namakkal and Salem. The region around
Coimbatore, Tirupur, Karur and Erode is referred to as the "Textile Valley of India" with the export from the
Tirupur Rs. 50,000 million ($1,000 million) and Karur generates around Rs. 35,500 million ($750 million) a
year in foreign exchange. 56% of India's total knitwear exports come from Tirupur & Karur make above 60% of
India's Home Textiles. Gobichettipalayam, Pollachi, Theni and Vedasandur are known for its cotton mills.
Rajapalayam is famous for its cotton market. Kanchipuram and Arani are world famous for their pure zari silk
sarees and handloom silk weaving industries. Aruppukottai, Salem, Sathiyamangalam are also famous for Art-
Silk Sarees. Andipatti, Tiruchengodu, Paramakudi, Kurinjipadi are major handloom centres. Negamam,
Cinnalapatti, Woraiyur, Pochampalli are famous for its soft cotton Saree weavings.
Textile Industry in India is a self-reliant and has great diversification. The textile industry can be broadly
classified into two categories, the organized mill sector and the unorganized decentralized sector. The organized
mill sector could be a spinning mill or a composite mill where the processing facilities are carried out less than
one roof. The decentralized sector is engaged mainly in the weaving activity, which makes it heavily dependent
on the organized sector for their yarn requirements. This decentralized sector is comprised of the three major
segments viz., power loom, handloom and hosiery. In addition to the above, there are readymade garments,
khadi as well as carpet manufacturing units in the decentralized sector. Indian textile industry largely depends
upon the textile manufacturing and export. It also plays a major role in the economy in terms of output, foreign
exchange earnings and employment in India. India earns about 27% of its total foreign exchange through textile
exports. Further, the textile industry of India contributes nearly 14% of the total industrial production of the
country. It also contributes around 3% to the GDP of the country. It generates employment opportunities for
more than 35 million people and opens up scopes for the other ancillary sectors. The Indian Textile Industry is a
vertically integrated industry which covers a large scope of activities ranging from production of its own raw
material namely, cotton, jute, silk and wool to providing to the consumers high value added products such as
fabrics and garments. India produces large varieties of synthetic and manmade fibers such as filament and spun

341 | P a g e
yarns from polyester, viscose, nylon and acrylic which are used to manufacture fabric and garments. India is
globally a significant player in the textile sector and the third largest producer of cotton and cellulose fiber/yarn,
Second largest producer of cotton yarn and silk, largest producer of jute, Fifth largest producer of synthetic
fiber/yarn. The Lakshmi Mills Company Limited is a public company domiciled in India and incorporated under
the provisions of the Companies Act, 1956. Its share is listed on two stock exchanges in India. The company is
engaged in the manufacturing of Yarn and trading in cloth and garments. The company caters to both domestic
and international markets. The study area is limited to Coimbatore district. It is the second biggest district of
southern state of Tamil Nadu. It is identified as one of the fast developing cities in India. The city of Coimbatore
is the hub of textile spinning and weaving mill. It is known as “Manchester of South India”. It also has textile
research institutes like the Central Institute for Cotton Research (CICR)- Southern Regional station, South
Indian Textiles Research Association (SITRA) and the Sardar Vallabhai Patel International School of Textiles
and Management.

IV. RESULTS AND DISCUSSION

For this research I chosen the Lakshmi Mills Company, it is a major textile yarn and cloth manufacturer in
Coimbatore, India. The company was established by G.Kuppuswamy Naidu in 1910 Lakshmi Mills main gate
facing Avinashi Road in Coimbatore. It has two composite textile units in Coimbatore: Avinashi Road and
Palladam and one in Kovilpatti. The promoters of the mill were also instrumental in starting various textile
machinery companies notably LMW and medical and educational institutions. The unit in Coimbatore in
Papanaickenpalayam is also a well known famous landmark of the city. The Company was also instrumental in
promoting various sports notably Hockey, Motorsports and Horse racing. Lakshmi Mills manufactures 100%
combed cotton yarns in NE 50s to NE 120s, polyester cotton blended yarns in NE 40s to NE 100s. In addition,
the Company manufactures 100% lenzing micro modal/modal/Tencel yarns, micro modal/modal cotton blended
yarns, 100% micro Tencel yarn, Tencel/cotton blended yarn. Lakshmi Mills was established in the year 1910 by
the visionary and pioneer late G. Kuppuswamy Naidu. The history of Lakshmi Mills is in many ways the history
of the Textile Industry in Coimbatore. The Lakshmi Mills has contributed to the development of the industry in
general in Tamil Nadu and in particular in Coimbatore District by promoting self reliance, research, import
substitution, exports and technology. The Company has also demonstrated its staying power by ensuring quality
and customer satisfaction as the prime objectives. In fact, as a pioneer, Lakshmi Mills today is looked upon with
respect and reverence as a company that paved the way for the rest to follow. The Company celebrated its
Golden Jubilee, Diamond Jubilee and Platinum Jubilee and is now working through the centenary year.
After conducting the research and analyzing the collected data, it was found out that the source of inspiration is
very helpful in developing textile designs. As the source of inspiration help designers to create features of
individual designs so it plays a powerful role in the beginning of the design process and in communicating
design ideas. These developed designs determined the effect of source of inspiration and it also help in
developing creative designs for textile designing as the designs reflect the elements of the source being used to
develop it.

342 | P a g e
 Chart 1: Long –term financial efficiency
It is evident of data analysis that, at the financial year 2009-10 the long term debt equity ratio of Lakshmi Mills
Company Ltd. is 2.82 and the ratio has reduced to 0.16 by the end of the study period 2013-14. The long term
debt equity ratio of Lakshmi Mills Company Ltd. Has registered -56.22 per cent growth rate per annum. This
indicates that company‟s riskiness of repaying its debts.

Chart 2: Operating profit of the company

It is evident of data, at the beginning of the study period of 2009-10 the PBDIT ratio of Lakshmi Mills Company
is 16.23 cores and it had drastically reduced to `.1.18 cores at the fiscal year 2011-12. Followed by, the PBDIT
ratio had increased to `.25.65 cores by the end of the financial year 2013-14. The PBDIT ratio of Lakshmi Mills
Company had recorded 6.29 per cent growth rate per annum.

V. CONCLUSION

Textile design plays a critical role in creating innovative products for various end-user. This paper shows the
contribution of the current knowledge of Textile product of lakshmi mills in Coimbatore Tamilnadu. The
purpose of the study is to analyze the short term financial feasibility of the industry. We have presented the data

343 | P a g e
analysis it has been inferred from the Lakshmi Mills Ltd. However, in the year 2011-12, the financial position of
the company experienced a deceleration due to modernization programmes undertaken by availing loans and
subsequent interest burden; irregular power supply and payment of heavy fuel cost have affected the sales and
profitability of the Company during the financial year. However, improvement in productivity owing to the
modernization carried out in the manufacturing units has resulted in increase in sales in the financial 2013-14,
which is expected to continue in the future. This study was based on the idea to promote creative and original
textile designs by using a source of inspiration.

REFERENCES

[1]. Role of Inspiration in Creating Textile Design Bakhtawer Sabir Malik*, Naheed Azhar
[2]. Phipps, E. (2011). Looking at Textiles: A Guide to Technical Terms. California:Getty Publications.
[3]. Desai (1997) “Assessment of Liquidity – Inter Firm comparison”, Udyogpragati, Vol. II, No (. 5) pp
7-20.
[4]. Mansur A. Mullah (2002) “Use of „z‟ score analysis for evaluation of financial health of textile mills – A
case study” Abhigyan, Vol.XIX, No.4, pp 37-40.
[5]. Aruna.R (2003) “A study on financial performance of Sri Bhavani textile process private limited”
Journal of applied research, Vol.II, No.3, pp 52-65.
[6]. Reserve Bank of India (2003) “Performance of the private Corporate Business sector during the first half
of 2002-03”, Bulletin Vol.VII, No.3, March 2003, pp 84-95.
[7]. Rakesh R (2005) “A study on financial performance of vijayeswari textile limited”, International Journal
of Accounting and Financial Management Research (IJAFMR) Vol.3, No.1, March 2005 pp 11-26
[8]. Chellasamy.P and Sumathi.N (2007) . “A Study on Growth and Financial Performance of Selected
Textile Companies in Coimbatore District”, Journal of Global Economy, Vol.3, No.2, pp 1-113
[9]. Sunita Sukhija (2010). “A study of leverage and profitability position of selected textile companies”,
journal of Accounting and Finance, Vol.5, No.4, pp 55-60
[10]. Shiralashetti, A.S (2011). “Performance appraisal of the GADAG co-operative Cotton Textile Mill Ltd,
HULKOTI – A Case Study” SMART Journal of Business Management Studies, Vol.7, No.1 January-June
2011, pp 13-21
[11]. Mohammad Morshedur Rahman (2011). “Working Capital Management and Profitability: A Study on
Textiles Industry” ASA University Review, Vol.5 No.1 January–June, 2011, pp 115 - 132
[12]. Marimuthu, K.N (2012) “Financial performance of textile industry: a study on Listed companies of
TamilNadu” international journal of research in management, economics and commerce, Vol.2, No.11,
November 2012, pp365-37
[13]. Palani A and Yasodha P (2012) “A study on working capital management in loyal textile mills limited,
Chennai” SAJMMR Vol.2, No.5, May 2012, ISSN 2249-877X, pp 156- 174.
[14]. Vimal kumar.J.V (2012) “A Study on financial performance analysis of Trichur co-operative spinning
mills limited”, SRM University.
[15]. Dhandapani.M.A and Ganesh Babu.M.P (2013) “Financial Performance of Cotton Mills - A Special Case
in Andhra Pradesh” Global Research Analysis Vol.2, No.12, Dec 2013, pp 98-100

344 | P a g e
[16]. Indhumathi.C and Palanivelu.P (2013) “A Study on Financial Performance of Selected Textile
Companies in India”, Global Research Analysis Vol.2, No.7, July 2013, pp 84-86
[17]. Pratibha Jain and Kshitija Chaugule (2014) “Working capital structure and liquidity analysis of Indian
textiles industry” VSRD International Journal of Business and Management Research Vol.4, No.3,
March 2014, E-ISSN: 2231-248X, p-ISSN: 2319-2194, pp 81-84
[18]. Subha R and Dr.Ramu (2014) “Financial performance of textile industry in Tamil Nadu with special
reference to Coimbatore” International journal of scientific research Vol.3, No.4, April 2014, ISSN No
2277 – 8179, pp 1-3

345 | P a g e