Interview with Mr Tarun Chawla

The Company’s facilities enable it to span various aspects of the textile production and value chain from producing cotton yarn and denim fabric to designing and manufacturing denim apparel for domestic and global customers in different market segments and carrying out high-end finishing services. The Company’s operations / facilities situated in strategic locations provides it platform to cater to leading international denim brands both denim fabric and garments.

Company’s operations are located in India, Jordan and Italy. Facility in Jordan is a garment manufacturing unit catering to the leading brands and has an advantage of duty free access to US whereas Italy facility is a denim garment finishing facility catering to the niche brands.

The Company’s installed capacity is 20 million meters per annum for denim fabric and 8.5 million pieces of denim garments comprising of 4.5 million pieces per annum in India and 4 million pieces per annum in Jordan. Italy facility has high-end finishing capacity for 2.5 million pieces per annum.

Malwa is an ISO 9001:2000 for denim fabric production activities guaranteeing quality control norms. The Company has also received ISO 14001:2004 for environmental standards. Malwa’s garment unit in India is also WRAP Certified.

The Company has internally developed fabric made of wool dyed in Indigo, fabric to which the International Wool Secretariat has assigned a special “IndiGO Wool” mark. The company has already done International filling of process patent for “IndiGO Wool”

India’s production of denim fabric has doubled over the last five years, from 250 million square meters to almost 500 million meters today, and is expected to go up to 600 million meters over the next two years.

Denim is now associated as fashion product where constant efforts are being made by denim fabric manufacturer and garment manufacturer with specialized laundries to provide constant fashion input in the jeans. It is expected as with increased GDP growth and its impact on disposable income in India, demand for branded and fashionable product will increase. As per one of the studies demand growth for jeans in future will be primarily coming from Asia more specifically India and China. Further, with increased interest of European Brands to enter in retailing like Diesel, VF, Ms Sixty etc., the demand for upper and high end jeans is expected to increase which will be ultimately manufactured and finished in India only.

Indian denim export to US is low but slightly up in EU. However, exports to major denim processing markets like Turkey, Egypt or Cambodia surged showing India is effectively gaining share in countries where garment conversion is increasing competing with China. India’s exports of cotton denim fabrics reached US $95.05 million during the first three quarters of fiscal year 2006-07 (April-December), as against exports of US $91.06 million for the whole of 2005. Exports to neighboring Bangladesh-one of the key market were sharply down during 2006.

India’s production of denim fabric has doubled over the last five years, from 250 million square meters to almost 500 million meters today, and is expected to go up to 600 million meters over the next two years.

While fabric makers are finding the situation difficult due to increased supply in domestic market and pressure on margin in exports also due to rupee appreciation and increased cotton prices, jean makers are benefited with abundance of fabrics and depressed prices.

On the export front, India’s exports during this year are expected to be much higher at US $120 million, doubling from US $60 million during the last financial year. However Ruppe appreciation and increased cotton prices has substantially effected the margin. Competition in the global market particularly from Pakistan and India is however putting pressure on Indian exports. India’s exports of cotton denim fabrics reached US $95.05 million during the first three quarters of fiscal year 2006-07 (April-December), as against exports of US $91.06 million for the whole of 2005-06. India’s export to its main market Bangladesh has fallen and the share of Bangladesh has decreased from 40 percent to 26 percent. However exports to Turkey, Egypt and Cambodia have increased substantially.

India’s export trends reveal that its denim fabric is moving into the conversion centres, and also into countries that have preferential and free trade agreements with the US and EU. Thus, India exported denim worth US $280,000 to Jordan for the first time in the last few years. However, India’s denim exports to the US have been sporadic, with almost negligible US imports from India during the first few months of 2007.

As denim prices continue to fall, denim makers in India have shifted to production and exports of high value fabrics.

According to National Manufacturing Competitiveness Commission (NMCC), it is estimated that India’s share in global clothing and textile trade can be increased from US $51 billion to US $110 billion by 2012.

India’s textile export has grown at around 11-12 percent during last two years. However the growth is expected to be effected by 12 percent Rupee appreciation. Bangladesh and Pakistan are already giving tough competition to India and with Rupee appreciation vis-a-vis their currency depreciation will further erode our competitiveness. Bangladesh textile export has already touched $8.90 billion out of which 80 percent constitute garment exports. At this pace of growth Bangladesh will overtake India in garment export. Bangladesh average wage cost $30 has bolster its competitiveness.

The Government must focus on textiles and provide the right support in terms of financial packages and infrastructure which is much needed now particularly to leverage the appreciation in rupee. To keep the pace of exports and to enable the Indian garment rather textile Industry as a whole; the government must intervene to check appreciation of rupee or in larger interest of economy alternatively incentives textile product exporters to accommodate the squeezed margins on exports. Our port charges are higher than ocean freight to Europe. Transaction cost is very high for export.

Malwa Industries Limited is strategically replicating Turkish model with Asian cost. We are moving from basic to niche fabric and garments with value addition. Turkish mills are able to sell fabric and Jeans to Europe because of the fashion, value and service and being very near to Europe (logistics). This is what Malwa strategically inching towards achieving.

Business Model: Malwa is developing a value-added growth story that focuses on 3 different customer segments, each denoting a differing value proposition in terms of product quality, fashion and lead time. Malwa's 3 target customer segments are (a) Basic (b) Premium and (c) Super Premium. We are fully vertically integrated and hence offer this combination.

Supply Chain Model: Malwa is able to deliver a full packaged (a) from India (b) from Jordan and (c) from Italy. Such a combination of multi-locational delivery capability offers us a unique selling proposition to capture and retain global customers.

Technology & Back-End: Malwa has invested in most sophisticated manufacturing equipment in the world at its plants which are comparable with most European plants. Such technology is extremely modular and provides a significantly better finish to the product with high quality levels.