The company also proposes to create a unique share trading system where artisans could be the shareholders in the newly formed companies and has tied up with financial services major, ICICI Bank for this purpose.
ICICI Bank will release Rs 100 crore (Rs 1 billion) over the next five years through Fabindia's subsidiary, Artisans Micro Finance to create community-owned companies. Fabindia will guarantee 8 per cent of the amount dispersed by the bank through AFML.
With long-term plans to establish 100 companies, Fabindia Overseas intends to create 20 companies in the next year and half. Out of the 17 centres identified, it has already established nine companies in Faridabad, Jaipur, Jodhpur, Bikaner and Bhuj.
The move comes in line with the company's policy of promoting rural handicrafts in the retail market. It anticipates a huge demand, with plans to open about 200 retail stores over the next four to five years.
Fabindia maintains that its initiative on community-owned companies will provide the existing supply chain with a corporate structure and develop supplies in newer areas. Currently, the company operates a centralized purchase system based at Delhi.
Gilpreet Sokhi Singh, managing director, AMFL said, "Companies would have access to maximum investment of Rs 2 crore (Rs 20 million) each. They can also avail a term loan up to Rs 1 crore (Rs 10 million), depending upon their working capital. They would be appointing couple of directors on board, from the artisan base itself." The companies would be engaged in developing new products for all the operations such as apparels, organic foods and furniture.
AMFL is in the process of finalising a unique share-trading system that will enable the shareholders of these unlisted companies to realize higher returns.
"This will enable the artisans to buy shares in the companies," said Singh. It believes the share-trading system will help artisans to raise working capital funds, which is a major hurdle for the smaller entities.
Apart from developing the supply chain, Fabindia also intends to strengthen technological know-how and improve quality standards of the supply chain.
Singh said the company has set up a designers panel that will closely work with the artisans to create designs and products that can be marketable. Similarly persons heading the companies will have to undertake a MBA course conducted in association with International Management School, Delhi.
Currently, Fabindia is registering a 50 per cent growth driven by the garments and home textile operations. The company recently entered into the organic foods and body care products segment.
