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Gangotri Textiles Limited, Coimbatore-based manufacturer of "TIBRE" brand of trousers and other textile products, proposes a follow on issue to raise funds aggregating Rs550mn to part finance its Rs3.51bn investment plan, covering expansion?cum-integration of facilities in spinning, weaving, processing, garmenting and installation of windmills. Incorporated as a Private Limited company in 1989, Gangotri Textiles was converted into a Public Limited company on 26.10.1992. The company first tapped the capital markets in 1994 when its public issue for Rs21mn got over subscribed. In ?99 the company launched "Tibre" trousers at Bangalore. The existing equity shares of the company are listed on the stock exchanges at Chennai, Coimbatore, Kolkata as well as the Bombay Stock Exchange (BSE). Recently the company?s shares also got listed on the National Stock Exchange.
Manoj Kumar Tibrewal, Managing Director, Gangotri Textiles starting trading in cotton waste way back in 1975. In 1989, he promoted Gangotri Textiles along with RK Tibrewal and Mohanlal Tibrewal. He was instrumental in identifying new growth opportunities for the company and played a key role in getting the company listed.
Anil Mascarenhas of India Infoline visited the company?s plants in Coimbatore and spoke with the top management. Mr. Tibrewal says, "If goods are exported to European markets, margins are higher than domestic market to the extent of 10 ? 15%."
Most people speak of a boom in the textile sector. What are some of the weak links?
The textile industry is at a very exciting stage of transformation and growth. Post quota removal, India has to catch up with the world. A lot of investment is taking place across all segments. Still, the weak link remains weaving, processing and garmenting. The new trends being witnessed are that garments and specially branded garments are growing at a faster rate with more and more large retail chains and malls coming in. The quality of offering to consumers has improved drastically and this trend will also continue to accelerate.
You claim an operational efficiency, which has helped you ride the downturn without much problems. What edge will the expansion give you?
To begin with, we operate in three main segments among textiles viz; home textiles (through open ended yarn and ring spun yarn), knitting (hosiery yarn) and garments (Tibre brand trousers). The fact remains that despite our efficiencies, we face intense competition from not just large and integrated players but also smaller producers of yarn. This expansion will help us consolidate our position in the markets and at the same time bring an improvement in margins. The expansion will help us have a presence across the textile value chain. With our two decade old experience, we already possess the inherent strengths of an established customer base and marketing and distribution network.
Give us some more details about your expansion.
We plan to expand and forward integrate by setting up a ring spinning unit of 19,200 spindles to produce 2/30s polyester cotton yarn and another unit of 31,200 spindles to produce 2/40s polyester cotton yarn. We also plan to enhance our weaving and processing plant with an average capacity of 51,000 meters per day of suiting and shirting fabric. Among the things to watch out for in the near term includes a state of art high end garment unit with a capacity of 3000 pieces per day for men and women apparels.
While the weaving facility at the SIPCOT industrial complex, Perundurai, and three windmills would be commissioned before the end of the year, the new spinning units would go on stream in ?07.
How much is being funded through the FPO? How have you raised the remaining resources?
The entire requirement of the funds for the expansion project is proposed to be funded through rupee term loans from banks and financial institutions and from the proceeds of the Public Issue.
We are raising Rs550mn through FPO. We have already arranged Rs2.76bn through Bank loans and Rs230mn through internal accruals & subsidies.
What is your current capacity?
We have an installed capacity of 5,904 rotors
How are you taking care of your power needs?
We have installed and commissioned two wind mills of aggregate capacity of 3.30 MW in FY05 at Anthiyur and Kongalnagaram in Coimbatore District in Tamil Nadu.
Two years ago, we set up a furnace oil based power generation plant of 2 MW capacity at Udumalpet adjacent to the ring spinning plant. The power generated from the power plant caters to the entire requirement of the ring-spinning unit.
What are the new launches you are planning?
We plan to add 10 to 20 new products to existing range within the ?TIBRE? brand . This should help us gain market share in the categories we operate. Of course we will enhace our advertisement campaigns besides versatile quality additions.
What about exports?
We propose to export 30% of fabric production through export agents. The fabric would also be sold to foreign distributors who have huge warehouses for the fabrics. We also propose to sell fabrics to branded garments manufacturers. The balance would be sold domestically.
What plans do you have for Tibre brand?
We would be selling "TIBRE" brand of garments through our network of around 750 retailers spread across India. Over a period of time, we will set up distribution network in all regions of India to distribute fabric to garment exporters as well as garment manufacturers.
Earlier, you used to source most of the denim and other material from outside. Do you still buy from other manufacturers. How much is produced in house?
Recently we have found more growth in our garment division. Till our new project completes, we will continue to source the fabric from outside. Regarding garment manufacturing it is 100% in house.
What steps are you taking to improve the quality level in your garments?
We have tightened the raw material quality checking. We have introduced effective and efficient process controls method in each and every stage of production from cutting, all stages of stitching and washing. Apart from the usual finished product checking we have introduced quality audit by random sampling after the quality checking process.
What are your future plans for Tibre as a brand. Are you planning to launch any more brands?
We plan to add 10 to 20 new products to our existing range within the ?TIBRE? brand and propose to improve our market share in the various categories. This will be adequately supported by the Advertisement Campaigns and versatile quality additions.
Also we have planned for a strategic alliance for joint marketing and co-branding in Europe and Asia" with European company called ?Trailer? AG. ?The 22 Million US$ Trailers product line includes Jeans, T Shirts and fashion wear for men and women. It has 18 company owned outlets with a presence in Switzerland, Germany, Norway, Sweden and Denmark. Its products are also available in 250 multi-brand outlets in Europe. Tibre is being sold in 12 states and three union territories through 750 MBOs. It is aiming to become a national brand in the next one year and is expanding to the Northern and Eastern Markets. Tibre plan to launch men?s shirts and women?s wear as well.
You have introduced a new line in your trouser factory to improve efficiency. Could you give more details?
It is just under implementation. We will be able to give feedback only after sometime.
Do you plan any more stake sale or strategic tie-ups especially for the international markets?
At present there is no such plan. However, in future we will be looking for such possibilities.
How are the margins in exports and domestic. To what extent do they vary?
It depends on which country you export. If goods are exported to European markets, margins are higher than domestic market to the extent of 10 ? 15%. Otherwise domestic margins are better.
Brief us on how you manage your logistics?
We have a centralized warehouse located in Coimbatore. We have tied up with Logistic solution providers. In each state we have got a centralized ware house through C&F. The detailed annual marketing and production forecasting is done. Afterwards, micro level forecasting is done for the next quarter and next month sales and then required goods are dispatched there in each state so that the goods are available at right place at right time with right quantity. The to be dispatched quantity is optimized so neither there is excess nor shortfall. After dispatching the goods, it is monitored and compared with actual sales with forecast and then in the next dispatch difference is adjusted.
Which are the segments, which will be the growth drivers for the company?
Regarding growth we will not be able to commit anything at present. High value Dyed fabric and branded garments will be the growth drivers for the company.
Tell us about your dividend policy.
The shareholders have in the past been regularly rewarded with dividends. The Board of Directors on March 24, 2006 declared an Interim Equity Dividend @ 15 percent on the expanded capital arising out of the Bonus Share @ 1:1 (Dividend of 0.75 paise per share of Rs 5/- each).
Your message for Shareholders?
Here is the company with the proven track record and history and now with current new expansion plan, company?s sale will be more on profitable products like fabric and garments which are having more margin than yarn. This expansion plan is mainly funded by term loans, which has got 5% subsidy so the effective cost of borrowing will be less and the benefit of this gearing will accrue to a small equity. Hence, our company has a great future. So remain invested with us and also participate in the current FPO.
India Infoline Research Team / 14:59, May 20, 2015
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