Alok Industries outlines strategies for increasing operating margins

27 Jan '09

5 min read

The global economies and that of all big and small companies have turned topsy turvy in the last few months. The fallout of the financial crisis has unfolded a tsunami like crisis which was unimaginable, even just a few months ago. The mantra of the hour, for each and every company, however big or small is surviving through this crisis which has reached unprecedented proportions.

fibre2fashion.com spoke exclusively to Mr Dilip Jiwrajka, Managing Director, Alok Industries Ltd, to bring to our readers a correct picture of the turmoil and the current domestic market situation. In less than two decades, Alok has grown to become a diversified manufacturer of world-class home textiles, apparel fabrics, garments and polyester yarns selling directly to manufacturers, exporters, importers, retailers and brands the world over. With the sales turnover of around Rs.21.74 billion in FY 2007-08, Alok is amongst the fastest growing vertically integrated textile companies in India.

We started off by asking Mr Jiwrajka, the impact of the crisis on the off take of polyester and cotton. He replied at length by saying, “According to CRISIL Research, domestic apparel sales (man made) are expected to rise at a CAGR of 9.1% (in value terms) and in non-clothing at CAGR of 19.9% (in value terms) till 2011-12. Demand for polyester will be driven by sarees and ladies dress materials. A large part of the Indian population still wears affordable non-cotton clothes because of its high tenacity and strength.”

He added by saying, “The company has manufacturing facility for manufacturing texturised yarn with backward integration into Partially Oriented Yarn (POY) which is the raw material. The company is further integrating the polyester facility by setting up continuous polymerization plant which will not only reduce the cost of raw material i.e. POY but also facilitate in manufacturing value added products like Catonic Yarn, Full Dull Yarn and other colored yarns. The demand for polyester is good and we see good growth potential for polyester in the domestic market.

On the current market trends of cotton, he continued, “India's cotton production has systematically increased over the last several years from a low level of 158 lakh bales in 1997-98 to an estimated 325 lakh bales in the year 2008-09, more than double in a decade. Due to global deceleration in the textile and apparel sectors, the demand for cotton has declined. However, in line with the previous year's global demand and remunerative prices, the government has declared high Minimum Support Price (MSP) for cotton for the year 2008-09 season. This has led to price variation between domestic and imported cotton."

Speaking on how Alok Industries tackled the situation, he said, “We had contracted the cotton at Rs.18,000 per candy, the price of which has gone up to as high as Rs. 28,000 per candy. Alok has benefitted from the price volatility in two ways. Our raw material cost was comparatively cheaper thereby yielding higher margins and secondly we also sold part of the cotton stock at higher levels. Presently, the cotton is being quoted at Rs. 21700/- per candy and is likely to go up to Rs. 22000/- per candy and then stabilize.”

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