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Chinese partner to dress up Vimal

December 10, 2014 09:51 IST

Reliance Industries forms 51:49 JV with China’s Ruyi for textile business

VimalVimal, the first brand from Reliance, founded by Dhirubhai Ambani in 1966 at Naroda in Gujarat, became a household name during the late 1970s and the early 80s, resonating as a jingle for years.

Now, the once iconic brand will have a strong Chinese connection.

Reliance Industries Ltd, India’s largest private sector company, on Tuesday said it ‘had entered into a definitive agreement for a joint venture in  business with China’s Shandong Ruyi Science and Technology Group (Ruyi).

According to the agreement, RIL will transfer its existing textile business under the Vimal brand into a newly incorporated company in which RIL will hold 51 per cent stake. The remaining 49 per cent stake will be sold to Ruyi.

While RIL said it would receive a 'cash consideration', it did not specify the amount.

For RIL, the textile business has sentimental value but little else.

The business generates only Rs 1,500 crore (Rs 15 billion) a year, or 0.3 per cent of the company’s total annual turnover of Rs 446,339 crore (Rs 4,463.39 billion).

A senior analyst with a domestic brokerage firm said with the market dynamics changing, RIL’s textile business was deteriorating.

“Going forward, we see RIL gradually reducing stake in this joint venture and giving away the management control to its partner,” he said.

According to media reports in 2012, which RIL didn’t deny at that time, the company had put its textile business on the block, though no deal was carried out due to a tepid market.

An RIL statement issued on Tuesday said the joint venture would build on the company’s existing textile business and wide distribution network in India, as well as Ruyi’s state-of-the-art technology and its global reach.

The joint venture will benefit from the strength of the Vimal and Georgia Gullini brands and it is planned some well-known global brands of Ruyi will also be introduced.

Ruyi, a leading textile company in China, with annual revenue of about $3 billion, is present across America, Europe, Japan, Australia, New Zealand and China.

It portfolio of brands includes Taylor & Lodge, Harris Tweed, Royal Ruyi China, Nogara Italy and Indios Italy.

Ruyi also operates in India under the Georgia Gullini brand, in the worsted suiting segment.

Nikhil R Meswani, RIL’s executive director, said the joint venture would help the company reposition its textile business on a high-growth path and emerge as a global textile player. Qiu Yafu, chairman, Shandong Ruyi Group, said the venture was a part of the group’s expanding global presence in the textile sector.

Originally a saree brand with the memorable tagline 'A woman expresses herself in many languages; Vimal is one of them', Vimal shifted to suiting fabrics after 1993. It earned the nickname "queen of textiles", signing famous Bollywood stars and cricketers for its ad campaigns.

Through Vimal, RIL started one of India's first textile chains and by the early 1990s, became a formidable player in suiting, shirting, sarees, dress materials and home textiles.

Later, with companies such as Siyaram's, Raymond and Reid & Taylor coming into the market, Vimal's brand value and equity began to erode. In 1996-97, Reliance closed its saree and dress materials manufacturing unit, a business that had launched the Vimal brand before suiting and shirting took over.

Till then, Reliance's Naroda plant had been weaving about 100,000 metres of sarees and dress materials a day.

By 2000-01, the company began focusing on exports. With other fabric brands already having moved up the value chain by launching ready-made garments, Vimal didn't offer much variety, unlike its peers.

Though the company tried to revive the brand twice, in 2000-01 and 2007-08, it didn't see much success.

Gradually, RIL stopped investing in the brand.

After a split between the Ambani brothers in 2005, the textile business went Mukesh Ambani's way. Now, RIL focuses on the refining and marketing, petrochemicals, exploration and production and retail businesses.

A WELL-KNIT EXIT PLAN?

1966: Dhirubhai Ambani opens Naroda plant with warp-knitting facility
1975-80: ‘Only Vimal’ brand launched, with then-reigning actresses Sridevi and Jaya Prada as brand ambassadors
1984-89: Anil Ambani takes charge of the brand. Drops ‘Only’ from brand. Opens large (5,000-10,000 sq ft) retail outlets
1994-1999: Pioneers the launch of ready-made garment brand ‘Reancy’, but market response tepid

VIMAL CLOSES SAREE UNIT, FOCUSES ON EXPORT MARKET

2001-05: Vimal revamps logo, launches new commercials in an ad campaign worth Rs 3 crore (Rs 30 million)
2005-07: After Ambani brothers split, Mukesh Ambani’s RIL invests in technical textiles
2007-10: Goes through two rounds of brand and retail revamp but loses to other brands
2012 Feb: Workers strike, demanding a 60% rise
June: RIL mandates NM Rothschild to find a buyer for textile division

BS Reporter in Mumbai
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