We plan to focus on maximum capacity utilisation post restart
Located in the heart of cotton growing belt of India, Gimatex is a completely integrated textile facility with ginning, spinning, weaving & processing units under its fold. Anurag Mohota, Director, Gimatex Industries, speaks to Fibre2Fashion about the downturn brought about in the textile industry by the COVID-19 situation and what companies should do to come out of the same.
Amidst COVID-19, factories have reported cancellation of orders from brands/retailers. How do you view the current situation?
Yes, we have also faced rampant cancellations from all sides. The situation is extremely grim and puts the entire textile industry under tremendous pressure. Mills are now carrying unsold finished stocks which they had made against orders, and now have no definite customer or timeline to liquidate these inventories, leading to a huge loss on the value front (as all these will now be sold as surplus or deep discounts) and a very heavy working capital blockage, leading to potentially extreme financial crunch in near future. Payments from the customers have completely stopped, as everyone is grappling to make ends meet. Firstly, they have to pay the people dependent on them and then if any funds are left out, keep them in hand for future.
Besides, there are raw material stocks, in-process stocks and outstandings, each of which have an uncertain future. Given the current situation, there is no guarantee of which customer’s finances will be managed, and which of the outstanding receivables will actually be received after re-opening the business. If even 20 per cent of the customers do not pay back in time, the problem of working capital will simply multiply.
All of the fixed costs like interest on term loans, working capital, salary, wages, etc are being expected to be borne by the mills in full and the only relief given is a very small moratorium on payment of these interests, for which the banks are not fully co-operating. The textile industry has already been operating on very thin margins due to the intense competition from domestic as well as international textile players. Even without this Covid-19 shutdown situation, lots of mills were already shutting shop due to lack of margins. I am not sure how many mills can come out of such a shock, and this pandemic may lead to lot of players shutting down, people who were already on the edge. If even few of the mills do not restart operations, it will lead to a heavy job loss situation.
Another problem that will be faced by mills will be related to availability of human resource. Lot of skilled operators have gone back to their natives and would resist coming back to work. In such a situation, post lockdown, it will take time for mills to come back to full production with proper efficiency, and this as well will lead to loss of potential profit from operations. Further, most mills are shutting down for a long duration for the first time, and what kind of challenges will be faced in restarting machines smoothly, is something that cannot be answered now.
All in all, it is an extremely tough and grim situation that the textile industry faces now.
What are your suggestions/inputs to fashion brands/retailers on tackling this issue?
I would like to make the below suggestions to the fashion brands/retailers during this time:
a. Innovate to bring back buying in the market as this will be single most important factor to revive the industry
b. Reduce fixed costs wherever possible, and try to be asset light for the long term
c. Re-work on the rentals in big cities and focus on reducing the turnaround times
Besides, they have huge teams themselves to get the necessary ideas to tackle the current situation who will be in a better position to give suggestions or provide solutions.
What steps are you taking to tackle order cancellations?
Since we are an integrated textile player, we plan to focus on maximum capacity utilisation post restart after lockdown by manufacturing basic products across the chain, and each division helping upstream division by giving maximum orders. We plan to approach customers with the idea of giving them integrated solutions rather than segmented solutions.
Not much thought has been given to how we would tackle this problem as it can be done only when we have more clarity of the market forces and the timing of re-starting the operations. Looking at the current situation, the lockdown is likely to extend further, and re-starting of operations will be delayed, as there will be no market/customers for the products being manufactured. (PC)
Published on: 13/04/2020
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