Vinay Thadani, CFO and COO, Vishal Fabrics Ltd

21 Mar 2022 , 08:20 AM

In an interaction with Mamta Maity, indiainfoline.com, Mr. Vinay Thadani- Chief Financial Officer and Chief Operating Officer said “now our export team is planning to add 12 countries from the southern region & are working on Latin America and European countries.”

How do you see the denim industry evolving in India and globally? How do you see the China Plus One strategy playing out for the textile industry?

In India, the denim industry is already changing in a variety of ways. Because of its high standards, low costs, and a big pool of skilled workers, denim companies all over the world are looking to India as a rising denim export market. Rising disposable incomes, Westernization of work culture, and the resulting increase in the attraction of denim jeans are driving the denim sector in India. The denim boom is being driven by the middle and working classes.

What is Domestic v/s Exports share in our Revenue?

For this Fiscal Domestic: Exports share will be 90:10. However, we are gradually increasing our footprints to other geographies. For upcoming years, we are targeting the share as 80:20.

You have exposure to the export market. Which countries are your prime buyers and how is the market faring now post-pandemic?

Pre covid Vishal fabrics was focused on the domestic segment. However, now slowly we are focusing more on the export front. Vishal Fabrics has exposure primarily in the US and European markets as they make up for a large consumer base. Consumers in the US and Europe tend to change wardrobes with changes in fashion trends.

Post the pandemic, there has been a significant impact on the business environment. However, resting on our strategic abilities, we continue to grow and improve our profitability and performance. Now our export team is planning to add 12 countries from the southern region & are working on Latin America and European countries.

What is your view on Rising raw material prices? Have we passed on the cost to consumers?

Globally there has been an increase in the input cost. Similarly at Vishal Fabrics as well we have seen a huge surge in the raw material prices. However, on the back of good demand, we were able to pass on the price rise to the customers. The company was able to achieve top-line growth of 94% in 9MFY22 due to higher capacity utilization across factory units. The price realization has increased by 25% in the last 12 months.

What is our Capacity utilization currently?

There is a sequential increase in the Capacity utilization level during Q3FY22. Currently, the company is operating with 86% utilization in Dholi Unit and 80% in Narol Unit

What is our Future Capacity expansion plan?

We are planning to add 25% capacity in the denim unit with additional 2 denim lines. One Denim line will be commercialized in the current financial year and the second line will commence in the Q1 of next fiscal year.

How are we funding the new Capex?

The new capex will largely include the integration cost of ~Rs30 crores which will be funded by internal accruals.

What are your growth drivers?

We are focussing on increasing our capacity utilization, adding new geographies in our export portfolio, and increasing our capacities by 25% to achieve top-line growth.

Have we reduced any debt during 9MFY22? And target for debt reduction in the upcoming period?

The Company’s consistent efforts towards debt reduction have helped to strengthen the balance sheet position. We target to reduce long-term debt of Rs40 Crores by March 2022 out of which Rs30 Crores has been reduced in 9MFY22.

What is the outlook on cotton prices and how much cotton inventory we are having?

We do not procure cotton as our raw material. Cotton Yarn is being procured as raw material and the inventory carrying cycle is of 15 days and the surge in the prices of cotton yarn is passed on to the finished goods.

Tell us about your sustainability initiatives and goals. How have you achieved sustainability as a denim manufacturer, as it is a process famous for water pollution and consumption?

The proportion of reusing and recycling among our denim verticals like Vishal Fabrics is 5-10%, and we are in the process of replacing outdated machinery with modern equipment to reduce waste. For sampling and research, we employ a go-green washing machine, which uses water spray technology to save water each year. As an alternative to synthetic dyes, eco-friendly dyes are used. We also have a large green cover around both the plant and the industrial park. Further, we are planning to install the solar plant in order to replace the traditional sources of energy with green energy.