The Hindu Business Line : Corporatising textile units

Any business traveller from the cotton city of Coimbatore taking the National Highway No.47 to the banian city (Tirupur) could hardly miss feeling the shift in climate. The cooler climes of Coimbatore gives way to humidity after passing Avinashi, the famous saivite temple town, 12-km off Tirupur on its northern fringe.

The palpable change is not confined to the climate alone. The heated up business environ in the cotton knitwear capital that has set the banian city expanding its geographical spread too is just as visible. The once forlorn Avinashi has now become the gateway of Tirupur, engulfed by the town's knitwear cluster spilling over a 25-km radius.

Tirupur knitwear industry is in for a transformation. Basking in the expanded businesses brought in by the abolition a year-and-half ago of the quantitative or the quota restrictions on export of garments and textiles from developed countries, the knitwear companies are charting a new course, namely corporatising their individual businesses through integration of operations.

What were once essentially smaller and tiny businesses have given way to sprawling structures of commercial establishments with mid- and high-end knitwear manufacturing companies scaling up their operations. The change does not stop with mere consolidation. The mid-cap knitwear companies are spending their energies on fusing financial structure, domestic market networking and product branding to remain in the reckoning.

"We are consolidating our individual centres of productions and operations into a single entity to achieve the much needed size to meet market challenges," said the promoter and Chief Executive Officer of the Rs 150-crore Prem Group Companies, Mr Duraisamy. After it upgraded itself into a medium enterprise, PGC renamed itself as PGC Industries. . According to Mr Duraisamy, the unit has decided to target the domestic market aggressively.

Direct procurement

The consolidation of knitwear companies and the process of corporatisation are becoming inevitable in today's business environment as retailers in the EU or the US increasingly prefer to source directly from producers unlike in the past. The retailers seeking to eliminate in-between layers and sourcing supplies directly from producers have resulted in creating a need to improve quality and having a closer look at cost centres, especially among the mid/high end of knitwear factories, says Mr R. Shanmugam, Managing Director of the Rs 225 crore Royal Classic Mills from Tirupur, which promotes the `Classic Polo' branded men's shirts/trousers.

Home market beckons

Tirupur knitters having partaken in the export boom for over two decades are seeing an opportunity to get into domestic retailing in a big way. The reasons for this changed attitude are simple. The sheen on exports is slowly tapering off in the wake of the Government dismantling export incentives one after the other. Export earnings are no longer getting the same tax benefits.

"No cash incentives for exports and even the duty drawback can no more be said to be of any support and only reimbursement of some of our costs," feels Mr Duraisamy of PGC group. The strength of Tirupur exporters in seeking a foothold in domestic retailing can be sharpened further from the knowledge they have gained from their export trades. "We know which product moves, and at what speed and accordingly we can gear our production machinery. We did brand promotion through our joint venture with Swiss partner Switcher. So we are also aware of the psychology of the retailers," claims Mr Navin Chander, CEO of PGC group promoted garment retailing `T-Mart'.

The number of knitwear companies in Tirupur doing high volume exports, say Rs 100-crore and beyond, is said to be less than 50. But the export units having an average trade volume below Rs 100 crore and the knitwear companies whose average business turnover hovers between Rs 20 crore and Rs 50 crore are said to be among the 100-odd serious exporters. These units account for about 80 per cent of total exports made out of Tirupur. "These are the companies that are currently investing on capacity expansion being seen in Tirupur and this mid-segment companies are trying to get into domestic market," says Mr Rajkumar, Managing Director of the Best group. The hectic pace of consolidation happening across the Tirupur knitwear manufacturers is propelled by a desire to have a strong balance sheet to facilitate their investment plans and a bulk of investments is focused towards upgrading/setting up of textile processing which qualify for higher capital subsidy under the TUFS, said Mr Natarajan, head of the Small Industries Development Bank of India, Tirupur.

More Stories on : Knitwear & Hosiery | Tamil Nadu | Textiles

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