IMPACT OF R&D ON FINANCIAL PERFORMANCE IN TEXTILE INDUSTRY Under the Guidance of Dr. R. Saradhamani Associate Professor Department of Management Studies SNS College of Engineering Coimbatore – INDIA P. Rajendran Associate Professor Department of Management Studies SNS College of Engineering Coimbatore – INDIA

CONTENTS Introduction Overview of Indian Textile Industry Indian Textiles – Forecast Value Chain Strength & Weakness Research Problem Need & Purpose of The Study Objectives Hypotheses Research Design Tools Of Analysis Variables Data Analysis Findings Conclusion Publications 2 P. Rajendran - R&D vs Performance in Textiles

DISCLAIMER The research work is in the 80% completion rate, a few key factors and its outcomes are in the process of testing. With the outcomes of the pilot study this presentation is made. This report contains the partial figures and findings as on date. 3 P. Rajendran - R&D vs Performance in Textiles

INTRODUCTION R&D stands for Research and Development. Organisation for Economic Cooperation and Development (OECD) defines it as ‘creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications’. R&D has become essential in the corporate world as the requirement for new product design and development has increased with reducing product life cycles. Firms willing to relinquish current profits to enhance future performance by investing in R&D are expected to be more competitive in the long run. Law of Diminishing Marginal Utility, Product Life Cycle and NPD are processed with continuous R&D only. 4 P. Rajendran - R&D vs Performance in Textiles

OVERVIEW OF INDIAN TEXTILE INDUSTRY Leading Textile Industries in the world. Next to Agriculture Predominantly unorganized. Largest in the world with 27% Foreign Exchange through Textile Exports Contributes 14% of the total foreign exchange. Contributes around 4% to GDP of the Country. Direct Employment to 3.9 ± 4 million people. Global share 4% to increase 8% to reach US$80b by P. Rajendran - R&D vs Performance in Textiles

INDIAN TEXTILES - FORECAST 6 P. Rajendran - R&D vs Performance in Textiles

INDIAN TEXTILES - FORECAST 7 P. Rajendran - R&D vs Performance in Textiles INDIAN TEXTILES - FORECAST

VALUE CHAIN 8 P. Rajendran - R&D vs Performance in Textiles

STRENGTH & WEAKNESS 9 P. Rajendran - R&D vs Performance in Textiles

RESEARCH PROBLEM 10 P. Rajendran - R&D vs Performance in Textiles Meeting shorter PLC is not possible without R&D. Most of the manufacturing sector invest reasonable portion on their revenue. R&D investment of Revenue-making Textile sector is found negligible. Proposing to study the impact of R&D investment on– – Continuous pattern – Intermittent – Regular Basis.

NEED & PURPOSE OF THE STUDY Largest in the world with 27% Foreign Exchange through Textile Exports Contributes 14% of the total foreign exchange. Contributes around 4% to GDP of the Country. Direct Employment to 3.9 ± 4 million people. Global share 4% to increase 8% to reach US$80b by Poor Technology Low Investment on Research and Development compared to other Sectors. 11 P. Rajendran - R&D vs Performance in Textiles

OBJECTIVES 1.To study whether companies invest in R&D on a regular Basis/pattern. 2.To Examine the Trend of R&D and non-R&D Textile Firms. 3.To evaluate the Impact of R&D on the Operating Performance. 4.To analyse the Impact of R&D on the Financial Performance. 5.To arrive necessary/suitable measures and recommendations for the benefit of Textile Sector. 12 P. Rajendran - R&D vs Performance in Textiles

HYPOTHESES 1.Firms with no investment on R&D gained increased Growth and Performance. 2.Firms with limited investment on R&D gained increased Growth and Performance. 3.Firms with large investment on R&D gained increased Growth and Performance. 13 P. Rajendran - R&D vs Performance in Textiles

RESEARCH DESIGN No. Companies / Textile Units : No. of Companies with Data on CMIE for the Period: 1995 – Purposive sampling. Companies invested > Rs Lakhs. Segment-wise: Processing to Garmenting. No. of Companies Selected: – Source: CMIE-Prowess, Ministry of Textiles. 14 P. Rajendran - R&D vs Performance in Textiles

TOOLS OF ANALYSIS Descriptive Statistics – Mean, Standard Deviation, Correlation and Regression Tobin’s Q (Chung and Pruitt, 1994, p. 70) – Proposed a simplified formula for approximating Tobin’s Q that requires only publicly available financial and accounting information. – Approximate Q defined as follows can explain at least 96.6% of the variability of Tobin’s Q. Approximate Q = (MVE+PS+DEBT)/TA MVE = product of share price and common stock shares outstanding, PS = liquidating value of outstanding preferred stocks, DEBT = value of the firm’s short-term liabilities net of its short-term assets, plus the book value of the firm’s long-term debt, and TA = total assets of the firm. 15 P. Rajendran - R&D vs Performance in Textiles

TOOLS OF ANALYSIS R&D Intensity – ratio of R&D expenditures to the total assets Return on Investment – = Net Profit/Average Total Assets Return on Capital Employed – = EBIT / Average total Capital Employed R&D Efficiency – = patents received/R&D expenses (Rs.) R&D Effectiveness – Grant patents per R&D expenditure (Individual Projects) P. Rajendran - R&D vs Performance in Textiles 16

VARIABLES Independent Variable – R&D Investment Dependent Variables – Total Capital – Total Assets – Sales – Total Income – Net Income – Total Expenditures – EPS 17 P. Rajendran - R&D vs Performance in Textiles

DATA ANALYSIS* Tobin’s Q value  Mean =  SD =  Correlation  R&D / TA = 0.49  R&D/Sales = 0.32  R&D/Net Profit = 0.39 *Partial Analysis 18 P. Rajendran - R&D vs Performance in Textiles

FINDINGS The mean R&D investment of the industry is very less (less than 1%) whereas the developing and developed countries spend on R&D is above 5% of the Sales. Correlation, R&D Intensity, R&D Efficiency are found insignificant (i.e) less correlated or negatively correlated. 19 P. Rajendran - R&D vs Performance in Textiles

CONCLUSION Despite the industry grows in the positive trend with the negligible R&D Expenditure, the Ministry of Textiles may focus on low-cost superior quality textile products since India is the destination of cheaper cost with superior Quality. The existing firms should plan in the long-run to enjoy the benefit of market opportunity by realizing the nearest competitors China whose R&D of the Textile industry is 5.4% average. 20 P. Rajendran - R&D vs Performance in Textiles

PUBLICATIONS P. Rajendran, Dr. E. Venugopal and Dr. R. Saradhamani, A Study Segments - Children: The Growing Market Segments - An Empirical Study, SNS Journal of Marketing, Volume – II 2011, pp: ISSN: 0975 – P.Rajendran, R & D Strategy: Effectiveness on firm's growth-Asian Journal of Product Development, ISSN , Vol IV Issue I, Jan P.Rajendran,Investing in R & D harvesting profits, International journal of innovation research, ISSN ,Vol XI, Issue IV, November P.Rajendran,Research and Development( R & D), Synthesizing Profitability and Productivity, International EM Journal of Pollution Research - Annexure II, ISSN No , Vol 33,Issue 1, P. Rajendran & Dr. R. Saradhamani, Effects of R & D Metrics on Firm’s Profitability of Indian Textile-cum-chemical-based Companies : A Review, Int. J. Chem. Sci. Annexure II : 13(1), 2015, 73-79, ISSN x. 21 P. Rajendran - R&D vs Performance in Textiles

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