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Dressing for a date

Nandini Lakshman | July 17, 2004

It was a sweeping break with the past. Last October industrialist Ajay Piramal decided it was time to up sticks and relocate the 100-year-old Morarjee Mills from its high-cost Mumbai premises to Buti Bori in Nagpur.

Now Piramal hopes that the Rs 180-crore (Rs 1.8 billion) Morarjee Mills will become a nimble, niche player in the textile industry. It's investing Rs 60 crore (Rs 600 million) and will soon start making womenswear and furnishing fabrics.

The Rs 2,000-crore (Rs 20 billion) Ahmedabad-based Arvind Mills has slightly different plans for the future. It has already carved out its own place in the market, as one of the world's largest producer of denims. Now, it wants to dress differently and its new wardrobe will be filled with products like shirts, knitted garments and gaberdine trousers.

Or, cross the country, to Bhilwara where Rajasthan Spinning & Weaving Mills, the Rs 483.37 crore (Rs 4.83 billion) Bhilwara Group flagship is on a modernisation spree.

Plans include extending its Mayur suiting fabric into high margin value added readymades. Similarly, the S Kumar's suiting brand Reid & Taylor is also expanding its dress options to offer 'total wardrobe solutions for men's fashion".

It's time for a style-check in India's oldest industry. Now, India's textile barons -- at least the faster-moving ones -- are gearing to face a new world of competition when the new WTO rules come into effect next March.

One prediction is safe: after March the textile industry will never be the same again. The new rules break down the world of quotas and other regulations that have dominated the textile industry for the last 30 or 40 years. Now foreign companies will be able to sell in India and Indian companies will be able to enter developed markets.

So Indian companies are getting ready to face the new challenges head-on. They are foraying into new segments, expanding capacity, enhancing exports, and in some cases even acquiring companies and forging new alliances.

Says Arvind Mills' managing director, Sanjay Lalbhai, "It is a great opportunity to sell garments." Adds Riju Jhunjhunwala, joint managing director, Rajasthan Spinning & Weaving Mills, "All textile companies are gearing up for the demand that is likely to explode once the barriers crumble."

Today, India's $30 billion textile fabric involves spinning, weaving, processing, garmenting and retailing. The domestic market is worth around $16 billion and then there are exports of about $14 billion.

But those figures could be poised to zoom vertically. By the end of this decade, according to retail consultant KSA Technopak, exports could touch $30 billion with the domestic industry pegged at $25 billion.

Textile experts say, that both India and China are strategically placed to leverage the impending opportunities. Says a textile analyst, "China may be as cost competitive in labour as us but we have the largest cotton growing acreage and falling capital costs which puts us ahead."

The scope is in both fabric and made ups. India's global market share in textiles is a mere 4 per cent compared to China's 21 per cent and Pakistan's 6 per cent. In garments, China is way ahead at 33 per cent with Mexico at 13 per cent and India trailing at a paltry 3 per cent.

That's why, almost every textile company in the country is walking up the value aisle. From just spinning yarns and fabric, garments are the way to go. No wonder in the last one year, according to the Centre for Monitoring Indian Economy, the sector saw a 35 per cent surge in investments from Rs 5,605 crore (Rs 56.05 billion) to Rs 8,623 crore (Rs 86.23 billion) this year.

Take a look at how the Rs 355-crore (Rs 3.55 billion) GTN Textiles is changing its product mix. Till now it was mainly into cotton yarn and garments accounted for only Rs 5 crore (Rs 50 million). But B K Patodia, vice chairman & managing director, says, that he wants to scale up garment making five-fold in the next three years.

Currently GTN is outsourcing production but it plans to set up a 100-machine garment plant in Tirupur, which will churn out 50,000 garments per month. "We will outsource the extra demand," says Patodia.

"Garmenting is the way to go," says Lalbhai of Arvind, suppliers to GAP, Lee, Levi's, Marks & Spencer and Tommy Hilfiger. He says, that while he earlier shipped his fabric to garment makers in other countries, he would now do all this in-house. "We will be a one-stop shop from fibre to garments."

And the benefit? "Not only is the cost of garmenting cheaper here, it reduces response time," says Lalbhai. He claims, that India's garmenting costs per minute are Rs 2 compared to Sri Lanka's Rs 2.5 and Korea and Taiwan's Rs 6 to Rs 7.

As a result, annual capacities are being upped to produce 85 million pairs of jeans and 5,000 tonnes of knits. There will also be a 5 per cent to 10 per cent increase in the capacities of both gaberdine and shirting. "The vertical expansion will help us a lot," adds Lalbhai. Hoping to double turnover to Rs 4,000 crore (Rs 40 billion) by 2010.

It's a similar story at Rs 374-crore (Rs 3.74 billion) terrytowel maker Welspun India, which wants to wrap consumers in a range of bed and bath products. With 95 per cent of produce exported, vice chairman and managing director B K Goenka says, that his thrust is to expand capacity. With a capital expenditure of Rs 500 crore (Rs 5 billion) over the next three years, he plans to double towel capacities to 25,000 tonne.

Besides that, a new sheeting plant with a 100,000 metres per day capacity will come up in Kutch. "We want to create a niche in the home textiles market," says Goenka, who expects his turnover to touch Rs 750 crore (Rs 7.5 billion) by 2006.

The new world order is making some companies change long-held plans. Only a few years ago, there were rumours that Morarjee Mills would exit the textile industry.

Certainly, textiles haven't been a focus area because the company's Rs 300-crore (Rs 3 billion) turnover five years ago has halved currently. But it is slowly trying to put its textile tapestry together. It is now talking of entering garments, both in women and children wear.

There are also plans to revive its earlier home furnishings venture -- Morarjee Castiglioni. Even as output has shrunk from 8 million metres per month five years ago to the current 2 million, Pramod K Gothi, managing director, Morarjee Mills says it's worthwhile. "We are now playing a value game rather than a volume game by concentrating on high-end fabrics like voiles and satin."

Other companies too are gearing up. Last year, Rajasthan Spinning &Weaving hired consulting firm Accenture to put processes in place to shrink lead times.

Today, for yarn, lead times are down from 45 days to 30 days, and to 45 days from 60 days for fabric. Jhunjhunwala is also scouring for good process houses in Rajasthan. "Processing is the thing today," he adds.

Acquisitions are big on the agenda for many players. In fact, a leading cash-rich suiting maker in Mumbai, for instance, is believed to have set aside more than Rs 500 crore (Rs 5 billion) to shop for companies in China and Taiwan.

Even so, there are challenges galore. Chirag Shah, analyst at SSKI Securities says, "China with its proven cost-competitiveness, large-scale plants and superior infrastructure, is better placed to manage growth, especially as retailers expect shorter lead times."

Also, there will be stiff challenges from powerful foreign companies eyeing India. Some like Sara Lee have already announced its garment plans and several European manufacturers are waiting for the starter's gun. Already, Italian player Carrera has said it will invest Rs 500 crore (Rs 5 billion) to set up manufacturing facilities here.

But all is not lost. As another analyst says, "India stands a better chance. As it clearly enjoys the benefit of a smaller base." Exploiting that is going to be a big challenge.

Additional reporting: Rakesh P Sharma

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