Interviews
Analytical View: Growing FDIs in India
25 Aug '10
6 min read
In Mr Gadkari's outlook, the major challenges that Indian textile sector needs to assume for attracting the investments are (i) Graduation from Low cost-low value producer to High value-high volume supplier (ii) Moving up the value chain through Branding – Creating own local brands as well as acquisition of existing Brands for application to Indian markets (iii) Technology up-gradation and (iv) Seizing the opportunities in Technical Textiles.
He further clarified- “The Investor Community today would be ready to bet on the Textile companies which are poised for exploiting the fabric / apparel demand of exploding middle class and those who have potential as well as capability to quickly move up the value chain in terms of quality fabric/apparels and high returns on investments through Branding. The investors are willing to fund the acquisitions of even middle level brands overseas for their extension to fast growing Indian markets in urban, semi-urban areas as well as for agri-based rural clusters with large purchasing power. The investors however are guided by their assessment of the quality and experience of the management to take up these challenges.”
Besides, Mr Gadkari also highlighted another area where Investor community is keen for funding- segment of Technical Textiles. He estimates that the fastest growing areas among technical textiles are the products for agriculture, medicine, automobiles, aviation and sportswear, and this sector has large untapped potential and the units with requisite technical tie-ups have ability to attract large investments. “The sector is fits the bill for today's investor community which looks at rapid growth of top-line, high return on investment and high valuation multiples at secondary equity markets,” he accentuated.
On his turn, Mr Nayan Parikh, CEO, Nayan Parikh & Consultants, expressed- “The outlook for textile industry in India is quite optimistic. I expect that Indian textile industry would continue to grow at a moderate rate. “
Ascribing reasons to his opinion, Mr Parikh told that the Cotton yarn prices have continued falling in August in India for second consecutive month, which has created a positive hope among spinning mills' owners and exporters, and also, with the increase in demand for garments from developed markets, the demand of cotton yarn is increasing. He also notices the operating profit margins of most large spinning mills to be improved due to higher sales volumes.
In the fag end of our talk, Mr Parikh informed- “Moreover, the Ministry of Textiles proposes to allocate US$ 785.2 million for the modernization of the textile industry. As of now, our exports of garments are showing marginal increase and non-apparel textiles are registering reasonable growth. However, to what extent India can sustain the rebound in exports will depend significantly on the economic developments in West Europe and the US.”
He further clarified- “The Investor Community today would be ready to bet on the Textile companies which are poised for exploiting the fabric / apparel demand of exploding middle class and those who have potential as well as capability to quickly move up the value chain in terms of quality fabric/apparels and high returns on investments through Branding. The investors are willing to fund the acquisitions of even middle level brands overseas for their extension to fast growing Indian markets in urban, semi-urban areas as well as for agri-based rural clusters with large purchasing power. The investors however are guided by their assessment of the quality and experience of the management to take up these challenges.”
Besides, Mr Gadkari also highlighted another area where Investor community is keen for funding- segment of Technical Textiles. He estimates that the fastest growing areas among technical textiles are the products for agriculture, medicine, automobiles, aviation and sportswear, and this sector has large untapped potential and the units with requisite technical tie-ups have ability to attract large investments. “The sector is fits the bill for today's investor community which looks at rapid growth of top-line, high return on investment and high valuation multiples at secondary equity markets,” he accentuated.
On his turn, Mr Nayan Parikh, CEO, Nayan Parikh & Consultants, expressed- “The outlook for textile industry in India is quite optimistic. I expect that Indian textile industry would continue to grow at a moderate rate. “
Ascribing reasons to his opinion, Mr Parikh told that the Cotton yarn prices have continued falling in August in India for second consecutive month, which has created a positive hope among spinning mills' owners and exporters, and also, with the increase in demand for garments from developed markets, the demand of cotton yarn is increasing. He also notices the operating profit margins of most large spinning mills to be improved due to higher sales volumes.
In the fag end of our talk, Mr Parikh informed- “Moreover, the Ministry of Textiles proposes to allocate US$ 785.2 million for the modernization of the textile industry. As of now, our exports of garments are showing marginal increase and non-apparel textiles are registering reasonable growth. However, to what extent India can sustain the rebound in exports will depend significantly on the economic developments in West Europe and the US.”
Fibre2fashion News Desk - India
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