Consumption sluggish due to fall in Indian economy in last 2 years
The slowdown in the Indian economy in last two years has affected the textiles industry. However, Sutlej Textiles saw a stable, sustainable growth despite the challenging macro-environmental factors. Dilip Ghorawat, whole-time director and CFO of Sutlej Textiles shares industry insights and the company’s growth plan with Fibre2Fashion.com
What has been the growth rate in the yarns and home textiles sectors?
There is no specific break-up for the yarns sector. The break-up is into textiles and apparel. The domestic textiles and apparel industry is expected to reach approximately $100 billion by 2017 and $141 billion by 2021, up from $67 billion in 2014. The total cloth production in India is expected to grow to $112 billion sq metres by FY17 from $64.3 billion sq metres in FY15. For yarns per se, the exact numbers are not there.
In case of the home textiles sector, the global home textiles industry is valued at $45 billion, out of which India’s share is 11 per cent. The Indian home textiles industry is expected to grow at a CAGR of 8.3 per cent from $4.7 billion in 2014 to $8.2 billion in 2021.
What value additions do you make to your yarns?
Sutlej Textiles is a one-stop shop for all kinds of spun yarn. The company is also the largest manufacturer of dyed yarn in the country. Besides, the company is the largest manufacturer of cotton mélange and cotton blended yarn. Our total capacity for dyed yarn is 340,000 spindles, and for cotton mélange is 106,000 spindles. This is a valued added product. The company has developed many types of yarn, which will improve its profitability in the long run.
What are the latest innovations from your stable?
The company has invested approximately Rs 90 crore in FY16 towards technology upgradation and de-bottlenecking. This will help the company to introduce a new variety of yarns in the coming years. The company always looks for value added niche yarn, and this is the reason there is sustainability in the profitability of the company for the last five years. The company is also having a thrust on exports. The company's exports forms about 26 per cent of its revenue at present, in spite of a challenging global market. This signifies the importance of the value added dyed yarns being manufactured by the company.
We will be introducing some club yarns. Further, the company is doing an expansion of Rs 270 crore at Bhawanimandi, Kota for the manufacture of cotton blended and cotton mélange yarn. The capacity will go up from 106,000 spindles to 141,000 spindles, which the company hopes to commercialise by 2017.
Further, the company is also into manufacture of home textiles, which contributes around 5 per cent of its total revenue. The company is doing an expansion of Rs 88 crore, ramping up the production from 2 million metres to 9.6 million metres. The company is exporting 25 per cent of its home textiles to the Middle-East, Mexico and will start the US in the next six months.
The company has hired designers and is spending on the marketing team for further support to the textile sectors on the whole.
Please share some export figures from India on yarns and home textiles.
As I said, yarns’ figure as such is difficult. But I can only say that the Indian textiles industry contributes approximately 5 per cent to India’s GDP and 14 per cent to industrial production in the country. The textiles industry is the largest contributor to India’s exports. And it is approximately 11 per cent of the total Indian exports. The industry’s export earnings were $40 billion in 2014-15. It is currently estimated to be around $108 billion, and it is expected to reach $223 billion by 2021.
What macro-economic factors affected the global textiles industry and its growth last fiscal?
The slowdown in emerging economies has been attributed to free falling commodity prices, rebalancing in China, plummeting oil prices, and challenging macro-economic factors. In the coming years, growth in developing countries will depend on improvement in the economic conditions of countries like Russia, Latin American economies, growth in China itself, and also other emerging economies.
Which are your best markets – domestic and international?
Currently, out of the total exports of the company, 26 per cent comprises exports to around 55 countries. This includes European countries, the US, Turkey, Mexico, and Middle-East countries. This year, we have added Japan, and the remaining 75 per cent is sold within the country. The domestic market forms a majority of our clientele. Our major customers are corporate clients to whom we supply through the market in Ludhiana, Bhilwara, Mumbai, Ahmedabad, Delhi, Tirupur. Our customers are big industries like Page Industries, Raymond, Grasim, Siyaram, Donear, Shivalik Prints and other leading manufacturers of textiles.
What expansion plans lay ahead?
The company is implementing an expansion programme of Rs 270 crore project at Bhawanimandi to manufacture spindles of cotton mélange dyed yarns, which will commence operations in 2017. The home textiles' expansion from 2 million metres to 9.6 million metres at a cost of Rs 88 crore at Vapi, Gujarat will happen in phases. The production will commence in March 2017.
How were the Indian manufacturers and exporters affected?
In view of falling commodity prices, the sales were flat and due to the drop in the Indian economy in last two years, the consumption or uptake was very sluggish. And the international scenario has resulted in the weakening of demand in the Indian textiles industry too.
What governmental measures can help in solving these problems?
The government has given a thrust in the budget to rural economies. There is 100 per cent FDI in textiles. The government has also introduced A TUFS, Made in India and a scheme for an integrated textiles park, which we feel should support the Indian textiles industry going forward. The government has also introduced export incentives like MEIS, Interest Sub-vention, etc which will give a further thrust to exports in the textiles sector. Additionally, interest subvention on polyester viscose yarn, which is exported on a daily basis, should be reintroduced. Today in China, there are 30-40 incentives on yarns, and India could also consider such incentives.
Second, in some countries like Turkey, there is an anti-dumping duty. We are requesting the associations there to support the exporters of yarns by removing such anti-dumping duties. The government is proactive, and we hope that at the appropriate time, this will help us to further improve the conditions of spinning mills in India.
What is the budget allocated to R&D?
The company has modern, state-of-the-art quality testing equipment like Uster, etc. The company has spent around Rs 20-25 crore in R&D at all its plants. The company further plans to spend Rs 10 crore in R&D, developing mélange developmental centres. The company will always try to produce value added niche yarn at its laboratory, and then introduce it into the market. It will always try to facilitate the sustainability of its profitability going forward.
