Let us start with the Growth Trend that Alok Industries has embarked since its inception.
Alok was incorporated on 12th March 1986 as Private Limited Company. It started its operations by setting up of manufacturing facilities for Texturising at Silvassa. Thereafter the company undertook a series of expansion programs and today it is one of the biggest textile manufacturers of the country, having its operations across the entire textile value chain from Spinning, Weaving and Knitting to Garmenting and Made Ups. The expansion process started with a batch processing plant at Navi Mumbai in 1995-96 gradually leading to the spinning, weaving, knitting, POY, texturizing and garment & made up plants at Silvassa and the continuous processing (for wide and apparel width fabrics), yarn dyeing and terry towel plants at Vapi. The company’s blue-chip clientele comprises of renowned importers, brands, retailers, garment exporters in India and converter countries and domestic agents. The company in FY 2008 recorded a turnover of about 2,170 crores (exports of Rs. 1,036.89 crores) and an operating PAT of Rs. 167.73 crores.
How does Alok nurture the Spirit of Indian Textile while scaling up to Global Size?
The company commenced operations with a small texturising plant at Silvassa. Today it is amongst the largest textile manufacturers in the country. The operations of the company are spread across the entire textile value chain from Spinning, Weaving and Knitting to Garmenting and Made Ups. The main objective of the company is to provide quality textile goods at international prices to its customers and exceed their expectations. The current capacities of the company are as under and will provide a glimpse of the global size of operations:
|Division||Units||Capacities as on December 2008||Capacities Under Implementation||Total Capacities Post March 2009|
|Spinning Open end||Tons/Annum||2,000||11,520||13,520|
|Spinning Ring Frame||Tons/Annum||31,300||13,680||44,980|
|Wider Width Weaving||Mn Meters||46.00||24.00||70.00|
|Wider Width Processing||Mn Meters||82.50||-||82.50|
|Made Up||Mn Sets||10.00||3.75||13.75|
|Terry Towels - Processing||Tons/Annum||6,700.00||-||6,700.00|
|Normal Width Weaving||Mn Meters||63.92||18.58||82.50|
|Normal Width Processing||Mn Meters||105.00||-||105.00|
|Knit - Processing||Tons/Annum||18,200||49,000||67,200|
Alok is one of the largest players in India's home textiles. What makes it so? In your view what is the larger picture of this sector in domestic and global terms with respect to market size, potential and trends?
In 2003, the company ventured into the value added segment of Home Textiles i.e. Bed Sheets, Fitted sheets, Pillow covers, Quilt covers, and Duvet covers etc. mainly for exports. Alok strategically moved into this segment to capture the value addition and add to the margins and also due to the fact that there were hardly any organized players in this space. Alok has installed modern wider width Air jet / Rapier shuttle less weaving looms at Silvassa and state of the art continuous wide width processing plant at Vapi along with yarn dyeing facilities. The company has also set up made-up stitching units at Silvassa and Vapi.
Due to its product quality, competitiveness and timely delivery, Alok added within a short period of time, large global retailers, brands and importers to its customer portfolio. Within a relatively short time frame, Alok has emerged as amongst the top manufacturers and exporters of home textiles in the country. The Company has been awarded Trophies in the last four years by TEXPROCIL for export of made-ups in the manufacturer exporter category.
The company has also tied up with AISLE 5, LLC a New York headquartered company to manufacture and distribute Bathing, Sleeping, Dining and Home Décor textile products specifically: sheets, pillow cases, blankets, duvets, robes, bathmats, towels, table linens, decorative pillows through supermarket retail stores in the United States and Canada. As a first step, Aisle 5 has already tied up with 190 stores in the USA through a major supermarket chain and the shipments from the company have commenced.
Looking to the future high growth areas, especially in the areas of high value added luxury bed linen and home textile products from organic cotton, the company has undertaken further expansion of its wider width processing, weaving, made ups and the company is also setting up Terry Towel unit to further capitalize on this emerging opportunity. The present capacity and capacities post expansion of home textiles division and the sales for FY 2008 vis-a-visa FY 2007 is as under:
|Product||Units||Present Capacity||Capacity Addition in Phase III||Capacity Addition in Phase IV||Capacity Post Expansion||Expected Date of Completion|
|Sheeting Fabrics||Mn Mtrs||82.50||-||-||82.50||Phase IV operational by March 2009|
|(Sheet Sets)||Mn Sets||(10.0)||-||(3.75)||(13.75)|
The market for home textile products has been growing at a rapid pace over the last few years. The present world trade in Made Ups is about US $ 16 billion, out of which India’s share is about 12%. This is the fastest growing and most buoyant sector of the Indian Textile Industry. Indian Home textiles have an international appeal because of their designs and patterns. Traditionally this sector has largely been catered by Hand looms and power looms but looking to the opportunities under quota free regime, new composite mills based on modern techniques are coming up to cater to export requirements.
The demand for home textile in developed countries is much higher as compared to the developing countries. For e.g. 60% of the USA’s per capita consumption of 450 meters p.a. is home textiles as against 30% apparel and 10% technical textiles. The extent of consumption of home textiles can be determined by the fact that total home textile consumption in USA is estimated to be around USD 21 billion. Presently a large portion of USA and EU markets, the largest markets for home textiles, is being catered to by their domestic manufacturers. However, leading Europe and US companies are increasingly out-locating Made Up manufacturing for cost benefit and environmental reasons. A lot of US companies are contemplating / have been closing down plants (like Pillowtex) and hence there is a shift in the manufacturing base. Countries with a strong legacy in textiles, dependable raw material base and cheap labour like China, India, and Pakistan etc are expected to benefit considerably from the above shift in manufacturing base.
What standpoint would you like to make on current textile industry in India vis-à-vis worldwide?
The Indian Textile and Apparel Industry occupy a significant position in the Global Textile Trade. It is the 3rd largest producer of raw cotton, 2nd largest producer of cotton yarn, largest producer of jute, 2nd largest producer of silk and cellulose fibre yarn and 5th largest producer of synthetic fibre / yarn. The total market size of the Indian Textile industry is approximately $52 billion, with total exports of textile and clothing of about US$ 17.11 billion in 2005-06. India accounts for 4.30% of the World Trade in Textile and clothing and is ranked 5th largest supplier. India is one of the few countries that have a presence across the entire value chain of the textiles and clothing business starting from raw material (fibre), spinning, weaving/knitting, processing to highest value added products –garments and made ups.
The Textile industry is crucial to the Indian economy in terms of contribution to GDP and employment. It contributes about 4% to the GDP, accounts for over 14% of total industrial production and contributes around 15% of gross exports. The sector is the 2nd largest employment provider after the agriculture sector, employing over 88 mn people directly and in allied sector.
The Indian textile industry comprises three sectors: the mill sector, the power loom sector and the handloom sector. In 2006-07 (P), the organised sector of India’s textile industry comprised about 1,808 textile mills, of which around 1,608 were spinning mills and some 200 were composite mills with spinning as well as weaving facilities with a spindlage capacity of over 40 million, which is second only to China globally. There are also approximately 1,236 small scale spinning units, 204 exclusive weaving units and approximately 440,000 power loom units. The total number of installed spindles is around 395,000 spindles and there is an open end spinning capacity equivalent to 600,000 rotors. The number of looms installed in the organised sector is about 0.88 lacs, power loom sector 19.90 lacs and handloom sector 38.91 lacs. The total number of processing units in all sectors is about 12,600 comprising of 210 composite mills, 2100 independent process houses and the rest being hand-processing units.
The above statistics merely highlight the tremendous importance of the textile industry, not only to the Indian economy but for the global textile market as well. In the post-quota regime, global buyers would now increasingly look to buy from fewer countries and vendors and India and Indian textile producers can look forward to fantastic opportunities in the coming years. The limitations could be obsolete technology, inadequate size, quality culture and competitive pricing. These can be circumvented with modernization of equipment, expansion of capacities and imbibing the new age culture by availing of various quality certifications.
Few months back, rupee appreciation had been causing eminent players to be on pins and needles but Alok Industries successfully kept uptrend in its profit margins and growth rate. What business strategies and corporate traits made this possible?
Alok is a fully vertically integrated textile company. It has incorporated state of the art technology in its operations provides it with a distinct upper edge vis-à-vis its competitors. The company’s operations being spread across the entire value chain, each of its operating arm is an independent profit center and this spread of margins across its facilities enables competitive pricing.
The company has the largest installation of spindles for cotton yarn out of a single location in the country, which in turn takes care of the raw material requirements in the weaving division. The processing facilities installed are of latest technology and are capable of manufacturing varied qualities of fabrics in a range of finishes. The company has also ventured into specialized finishes like aroma finish, fire retardant finish, anti bacterial finish, water repellent finish etc. The latest foray into the lucrative work wear segment has also widened the customer base of the company apart from enhancing the top and the bottom lines.
There has been an increased awareness of global warming in the recent past. Due to this development, there has been a boost in the demand for organic products. Many large retailers as a social responsibility towards the environment have shifted to manufacturers capable of producing organic cotton products. The company has accordingly ventured into the manufacture of these products and has contracted about 140,000 acres of land in Madhya Pradesh for growing of organic cotton. The venture into organic cotton products has will help the company to further improve margins.
As a strategic decision, the company is also venturing into manufacture of POY from out of PTA and MEG through the continuous polymerization (CP) process. This backward integration into manufacturing of POY through the CP route would considerably boost the texturising operations of the company. The company has also gradually increased its texturising capacities and is presently the second largest manufacturer of polyester texturized yarn in the country.
Alok has its margins spread across a variety of diversified operations within the textile sector. It also has the benefit of economies of scale coupled with modern technology to attract the best names in the sector for their sourcing strategies. In addition, Alok has a robust treasury team to manage the vagaries of currency and interest rate fluctuations under the expert advice and guidance of a reputed forex advisory firm that helps protect business profits.
Inflation in Indian economy has bout up again repeating history of early nineties. What is your say on attendant consequences of this issue on Indian Textile/Garment Industry?
The rebound in inflation rates across Asia has resulted in higher production costs for the apparel manufacturers and exporters. Rise in inflation was a global scenario affecting not only India but also other countries of Asia. In June 2008, the inflation was at its 13 year high of about 13.00% in India. Many countries which till date enjoyed cost advantages have lost their sheen and no longer cost effective to meet price and quality expectations of the western countries. In order to curtail cost of production many small scale garment manufacturing companies had shut down operations, thereby resulting in lay-offs for workers.
But the Government, creditably, is taking / taken various measures to control inflation, which is now below 8%. With the continuation of active steps on their part that includes, lowering of interest rates, the textile industry should receive the desired boost and growth should be stimulated.
So, how do you see Indian Retail industry performing in such a situation? What solutions has your Retail Division formulated to ensure profit margins while drawing a pool of satisfied customers?
While India's expected retail boom is yet to take off, it is a fact that the Indian retail industry clocks around $350 billion a year in sales. That figure is expected to double in the next seven years.
Looking at the shift in consumer preferences and the growth in retailing in the domestic market, the company forayed into domestic retailing under the name “H&A”. As at 31st December 2008, the company had opened 52 stores in Mumbai, Navi Mumbai, Aurangabad, Vapi, Ahmedabad, Silvassa, Amritsar, Mohali, Ludhiana, Jalandhar, Chandigargh, Lucknow, Moradabad, Bangalore, Chennai and Hyderabad. The company has also signed on another 54 stores pan India.
To leverage growth opportunities, the retail operation has been hived off into a separate company called ‘Alok Retail (India) Ltd. The separate company is expected to operate over 250 ‘H&A’ stores by the end of 2008-09.
“H&A” will continue to produce value for money ranges for menswear, womenswear, childrenwear and home textiles. H&A will leverage Alok’s manufacturing expertise and will retail the textile merchandise produced Alok. As Alok’s manufacturing capabilities are spread across the entire chain, right from spinning to garments and made ups, H&A would have the advantage on quality, price and delivery parameters. H&A is positioning itself as a value format store with impeccable quality goods at great prices and has in line therewith coined the phrase, :Spending wisely never felt so good.”
In global context, what do you foresee as resonances of Recession in US economy?
The ongoing financial crisis of 2008 is apparently the worst crisis that the US and the World have seen since the Great Depression of 1929.
US being the biggest consuming economy, any adverse impact in the US economy is bound to cause consequential ripples in economies riding on them. India’s overall exports, while being not so US-centric, would still feel the impact of the recessionary trends, especially in those sectors, which are dependent on a buoyant US economy. The textile sector to a reasonable extent depends on the condition of the US economy and thus the recession is bound to cause a dent. With major retailers in the US announcing drop in sales, they can be expected to reduce their sourcing. In case of Alok, however, we have greatly reduced our exposure to North America (from 65% three years back to almost 30% now) and instead penetrated Europe, Latin America, Middle East, Asia etc as a measure of de-risking our export strategy. Also, we find that global buyers in order to reduce costs are re-aligning their sourcing strategies and choosing fewer countries and fewer vendors, based on their size, technology and quality culture. Our company should be amongst the preferred vendors since we satisfy the above three parameters rather nicely.
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.