Some large textile firms are even launching their own apparel brands in the Indian market, following the examples of Raymond and Arvind Mills. Others are going a step further. Welspun is setting up a chain of home textile stores under the name "Spaces." Alok is setting up a textile and apparel retail chain branded "H&A."

Such retail strategies also present challenges. Firms planning dedicated retail chains must contend with consumer preference shifting in favor of multi-brand outlets. And attracting customers loyal to their exclusive stores won't happen overnight. "This is a long gestation business that takes capital," Tayal said. "The minimum breakeven period for a store is one year." Some firms that have ventured into retail chains are finding rising commercial real estate prices an impediment to their ability to roll out with the speed to attain critical mass.

Building a brand in an already-competitive market, thanks to the presence of international brands such as Arrow and home-grown brands such as Zodiac and Provogue, requires perseverance. "It's not easy if all you have been doing is selling fabric and yarn," Fitch Ratings' Valecha said. "This requires a different mind-set, expertise and skills sets, and the ability to take additional risks. It could take years to establish brands." The saving grace is that textile companies may have a better chance of building a brand that connects with Indian consumers than one that connects with consumers overseas.

Some Indian firms are acquiring companies in the developed world. These are either retail chains or marketing agents they have traditionally sold to. The silk yarn and fabrics maker Himatsingka Seide in October bought U.S.-based DWl Holdings for $30 million. DWl, which has the license for marketing brands including Calvin Klein, Barbara Barry and Royal Sateen, had revenues of $47 million in fiscal 2007.

In August, Alok Industries, through its wholly owned subsidiary Alok Industries International signed an exclusive license agreement with AISLE 5 of New York for its portfolio of lifestyle brands - aworld and Cotton + Clay. Under the multiyear license the company acquired the manufacturing and distribution rights of bath sleep, dining and home decor textile products sold through supermarkets in the United States and Canada. In April, Alok bought 60% of Czech firm Mileta, which has established relationships with premium customers for its high-end cotton fabrics.

Welspun bought a controlling stake in British home textile firm Christy in July 2006 to gain a wider presence in the United Kingdom. Home textiles firm GHCL in February 2007 bought New Jersey-based home textiles manufacturer and distributor Best Manufacturing Group for $35 million and in July 2006 acquired Rosebys, a British home textile retail chain, for $50 million.