Interview with Mr Rajendra Hinduja

Business at Gokaldas presently is quite smooth. Though both European and US market have been subdued, there seems to be some volume pick up, well, not that they went on old levels but at least better than previous year. By next week i.e. end of financial year we will cross turnover of 1100 Crores. And order booked for next two quarters are 500 Crores.

Not actually, I see industry in both US and Europe are still struggling, consumer buying is also still struggling. And to come back to old volume it may take more than a year. The economies there are quite subdued; the unemployment level is quite high; and consumer spending is very low. As a result, demand is subdued and in turn, to grab hand to mouth share too, it has to be cheaper prices. Thus, the profitability is under crunch. There are recessionary upshots on every sector and phase.

Right now the main concern is to get back our businesses in which we had been performing well earlier before these hard times. Previously, India as whole has been doing business around 10.4 bn dollars. In year 2009 -10, we already had reached 7-8%. Year 2010-11 is going to be a hard nut to crack. It means we are not yet achieving the old level.

The first aim should be getting to that old level, making ourselves more price competitive. Now price competitive word is not easily said and done; on one hand we have 17% inflation, on other raw materials-cotton prices are going high, thirdly, buyers are giving prices very low. So it has become very difficult situation. It has become a dry throat walk for every exporter as to how to perform. There needs to be profitability in orders for competitive run. Otherwise, no company could continue to run for a long. It has become a dilemma for garment exporters. Currency is appreciating. Say, as in case of Euro, which has gone down 60 to 40 Rs, as against 70 Rs recent some weeks ago. Dollar is around 45-40 Rs and trend is that it is going to be 45 -50 if there is good demand. Having said that this is the state where- a) rupee appreciation b) cotton prices shooting up c) inflation catching up so that wages are also very high, and d) prices offered by customers are low side, so all these are making it very difficult task to perform. As a result, major orders are captured by Bangladesh, Cambodia, Vietnam and China. So we are losing out.

I feel by year 2010-11 it will be quite a difficult year. And because our economies depend on Europe and US as 75% of export is to them, unless the situation is good there, we cannot pick up in performance. But right now with above discussed points, as well as government also having not done much in recent budget- not increased the drawback duties, not removed the compliances that they gave us; we see 2010-11 a tough year.

Well, it is very apparent that value for money – cheaper goods would be moving, rather than medium and high fashion garment. In fact high fashion expensive garment are going down in volume. Medium and cheaper items are catching on. Every body wants to save and spend less, and also buy value for money goods at cheaper prices. This means low-cost countries have better chances.

Well, even they are part of same economy there. So even they are trying to bring down their prices or buy very comparatively, that is, if you are giving them in their budget they go for it. If not, they move to low cost offering countries.

Indian Retail scene is also not so great and encouraging. Prices are better of course in India in comparison to overseas, but here the demand is not so exciting in volume so that it can be opted for exports. Here orders are seasonal. Liquidity is also biggest challenge in domestic market, as funds are not been found. Every body seeks credit, and wants to do business on others’ money, wherein it is difficult to guarantee the credit return. Hence that call is very difficult call to be trusted.

I don’t think there would be any big automation further to what it is prevailing, unless there is dramatic revolution in technologies. For that, again, I don’t find any chances of it, at least not in India.

Right now, strategic plans are to catch on better business. Especially, catching better prices. Finding clients who can afford to pay more rather than going like retailers as Walmart.