Indian hosiery producer Lux Industries plans greenfield expansion

The Kolkata-headquartered company has already identified a land parcel measuring the construction area of around 4,60,000 sq ft, of which ~20-30 per cent will be used for manufacturing unit and balance for warehousing, storage and finishing facilities.

The company has three major facilities in Kolkata, Tiruppur and Ludhiana, which are capable of producing more garments than the installed capacity due to the improved efficiency and flexible manufacturing capabilities. The company is also working towards more flexibility in terms of capacity with enhanced mechanical tools and scientific way of working according to the market demand.

Currently, the company is running at full production capacity; however, it also has 3^rd-party long term contract to enhance the production capacity.

Lux Industries generates sufficient internal accruals to finance its capital expenditure and hence any external funding would not be required, the company said in a media release. "Our profits take care of our capital expenditures. With this investment, the company is expecting to get an incremental sale of around ₹400 crore," the release added.

Currently the company has around +1 million sq ft area, of which around 30 per cent is being used for manufacturing process like knitting, cutting, and the rest is used as warehousing, storage and finishing facility. Due to improved operating efficiency and flexible manufacturing approach, the total stock movement in FY20 was around 200 million pieces translating to a utilisation of around 100 per cent across all the major facilities in Kolkata, Tiruppur and Ludhiana.

The company continues to operate at full capacity, which necessitated the investment in greenfield expansion of manufacturing as well as warehousing and storage facilities.

“Despite the advent of COVID-19, our performance continues to remain strong, and we continue to see robust demand. To support this robust demand, we have decided to invest ₹110 crore in a greenfield expansion to be completed in next 12-18 months. Our flexible manufacturing approach has made us more agile in responding to strong demand estimation. The new investment will further augment our ability to act swiftly and improve our market share in existing segments as well as new segments like kids and women innerwear,” said Lux Industries chairman Ashok Kumar Todi.

“The new capex of ₹110 crore will have an asset turnover of around 4 times thereby generating additional revenue of around ₹400 crore. The flexible manufacturing approach has helped us to improve our operating as well as return matrix and the new capex will strengthen it further. As on December 31, 2020, we had a cash balance of ₹140 crore, which will be sufficient to fund the capex fully. We expect to maintain our net cash status positive even after completing the capex backed by our strong operating cashflow and focus on reducing working capital further,” said Lux Industries managing director Pradip Todi.

Fibre2Fashion News Desk (RKS)