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Mr Akhil Jindal, President, Welspun Group

India Infoline News Service | Mumbai |

The textile sector is on a high growth trajectory and the companies operating in this sector are likely to see high growth opportunities ahead..

Welspun India (WIL) is the flagship company of the Rs20bn Welspun group. It is the largest producer of terry towels in Asia and amongst the top four terry towel producer in the world. The company exports its products to around 34 countries with exports contributing to 90% of its revenues. The company won the ?Best Global Vendor? award from Walmart in 2002 for its terry towel business. The company has also received the ?Vendor of the Year? in 2002 from Wal-Mart and Shopko stores Inc. and the ?Operational Excellence Award? by JC Penny in 2003.

Mr Akhil Jindal, President, Welspun Group, is an Engineering Graduate and a Post Graduate in Finance & Strategic Management from Indian Institute of Management - Bangalore. He holds with him over 10 years of rich work experience in diverse aspects of infrastructure and high growth industries. Mr. Jindal has concluded a large FCCB placement, Cross border Acquisition and Financial closure of projects exceeding over $ 500 million.

Speaking with Toral Munshi and Chinmay Desai of India Infoline, Mr. Akhil Jindal said that the textile sector is on a high growth trajectory and the companies operating in this sector are likely to see high growth opportunities ahead..

What are the implications of the end of MFA on the textile industry in general?

In 1974 the quota restrictions were introduced by the developed nations in order to protect their domestic industry from competition from the other countries. With the abolition of quotas there is certainly an opportunity, but there is also an element of hype in it. Players who are well prepared in terms of ability to offer quality, capacity, better price and sticking to delivery schedule will gain. The biggest threat is going to come from China, but buyers would like to de-risk their over dependence on China by sourcing from other countries like India, Bangladesh and Pakistan etc, with India being the most preferred destination for middle to top end of the products.

What is our competitive position vis-?-vis the Chinese? Q1 2005 statistics show a jump in their growth figures.

Though China?s growth has been tremendous, the Indian exporters are still cautious and are taking steps cautiously. We can see that China has already started dumping their products in the US and European markets, which can be seen by the massive increase in their growth numbers. As a result of this US & EU are already planning to impose restrictions on Chinese imports. This is what so as to avoid any such anti surge mechanism the Indian manufacturers are gradually increasing their exports. They see the abolition of quotas as a long-term opportunity and believe that eventually the US and European companies will have to outsource almost their entire requirement and Indian companies will definitely benefit from the same.

Do you see any pricing pressure post quotas? Terry Towel exports from India has declined, while there is a huge jump in China?s exports during Jan-Mar 2005?

Pricing pressure is minimum on the company. The current situation is such that the company is booked for almost 70-75% of its terry Towel capacity and around 20-25% of its bed linen capacity, which is still in its trial stage. In any case WIL is already geared to meet pricing pressure by improving sales of high end products to branded and designer retail stores.

The increase in China?s share has been on account of exports of low priced towels,. China has captured the share of countries like Turkey and Brazil. The amount of India?s exports has more or less remained stable. The volume drop in India?s share in the Terry Towel business is minimal because Indian companies like Welspun, cater to the medium and higher priced markets.

Which are the other Indian companies that have a strong hold in the global market? Which are the other countries with whom you compete with?

Welspun India is the 4th largest terry towel manufacturers and the largest in Asia.. In India there are a couple of players such as Abhishek industries, Sharda Terry etc in the Terry Towel business. As far as other countries are concerned, companies in Turkey Pakistan and Brazil have made good progress and offer competition to our products.

Who are your major customers in the international market?

Our major customers include Wal-Mart, K-Mart, Linen-N-Things, Shopko, JC Penny, Sheridan, Tesco, Calvin Klein ,Tommy Hilfiger, Welspun USA etc.

Who are the other major players in the international markets?

The other major players in the international markets are - Springs Industries Inc - USA, Christy - UK, Vossen - Germany, Jalla - France, Zucchi - Italy, JMA - Portugal, Teka - Brazil, Shandong - China, Seven Star - Thailand.

How fast is the global market for terry towels growing?

Terry towel demand has been growing by around 3% in countries like the US. However the trading growth is much higher at around 21%, due to rising imports.

What is India?s position in the bed linen market?

India is the third largest producer and exporter of bed linen in the world after China & Pakistan. India accounts for nearly 24% of the world bed linen market.

Why have you decided to enter into the Bed linen market? Who are your competitors in the domestic market in this segment?

Welspun?s bed linen capacity has been set up for production of 35mn meters p.a. This facility has been set up with the company planning to adopt a horizontal growth strategy. This new facility will be operational by mid April. The company initially expects 35% capacity utilization in its bed linen business and going forward it is expected to grow to 60%. The other major manufacturers of bed linen in India are Bombay Dyeing and Alok Industries.

What is the nature of your agreement with Tommy Hilfiger?

The company has entered into a licensing agreement with Tommy Hilfiger. Welspun has the right to market its products under the brand name of Tommy Hilfiger, We pay a fixed license fee to Tommy Hilfiger.

What is the expansion plans for your domestic retail foray ?Spaces?? What is the expected revenue per store?

The company has already opened 6 stores in different location of which three are located in Mumbai. By the end of FY06 the company plans to open 40 stores. The stores opened so far are more of branding exercise to create awareness and to bring in the footfalls. Welspun is trying to promote their brand with the Theme "Fashion, Hygiene & Co-ordination Purchase". As it is seen in Indian households, that there is no co-ordination or match between the colour of the walls and the bed coverings etc. The company is trying to promote this concept by word of mouth and later depending on opening of more stores we will go for mass communication or advertising media.

It is too early to gauge the revenue stream. But looking at the performance of these stores the company expects to do good business in this segment.

Why have you decided to merge Glofame?

The merger shall enable WIL to become a fully integrated textile player - from yarn to Finished made up home textile products. The merger shall result in an annual cost saving of approximately USD1.1mn and effectively extinguish illiquid investment of Welspun India Limited and contingent liabilities. The company has decided to merge its fully owned subsidiary Glofame Cotspin to address corporate governance issues and for providing more transparency in its operations. The merger will result in faster process times because the company is planning to source around 80-85% of its requirement from Glofame with expansion of its facility at Anjar from the current 60-65%.

What is the outlook for growth and margins?

We have a orderbook of about Rs5bn. We expect to utilize 95% of existing facility and 55-60% of new capacity this year in the terry towel business. The bed linen business will commence in April and we expect about 60% utilization. We would be able to maintain our margins at current levels.

A message for your stakeholders?

Our message to stakeholders is exemplified in our following vision statement. We wish to share our vision with our shareholders

We aim to...

Emerge as a global leader
Preferred by every home
Serve... with passion
Grow... @speed
Innovate... with quality
Excel... with ethics

Delighting all stakeholders...
We are... WELSPUN

 

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