Investment Is The Only Way For Entrepreneurs To Grow Their Business

Rendezvous

Investment Is The Only Way For Entrepreneurs To Grow Their Business – Pradip Roy

In a tête-à-tête with Textile Excellence, Mr. Pradip Roy, Head – Textile Machinery Division, Universal MEP Projects & Engineering Services Ltd (UMPESL) – a 100% wholly owned subsidiary of Voltas Ltd speaks about India’s current investment scenario, status of the textile industry and how successful players have invested. He is an industry expert with over three decades of experience and closely working with India’s textile entrepreneurs on their capex plans and technology adoption.

How is the current investment scenario in Indian textile industry?

I would say, we have already passed the bottom phase. We are above the bottom now and scenarios are improving.

Cotton sector has shown improvement and the industry is doing good now. Challenges are there in non-cotton segment. Different factors are playing in the non-cotton sector. Both cheaper fabrics and garments import to India are creating a bit of challenges. Otherwise, those who wish to stay in textile business, I repeat, those who want to grow in textiles, they are doing good.

Bed and bath is another segment which is doing very good. Manufacturers who are making sheeting, terry towels, etc. are not facing problem. Yes, there are some challenges in the dyed synthetic fabrics, which is seasonal anyway. Melange yarn sector had also faced challenges due to the weakness in the downstream process, however the same is recovering very fast now.

If we look at the investment scenario, we observe that discussions are on and plans are getting finalised. Starting from spinning to processing, there are investments happening to build capacity. On the apparel / garment side, there is a need for multi-fold investments.

Why our exports are stagnant for past few years, even declining?

We don't have many largescale producers of apparel. We can count the number of big producers on the fingers and that number has to grow if we wish to increase our export. Value added merchandise export can improve the export figures significantly.

But as a country, we are very weak in apparel sector. There may be a lot of reasons for this but that has to be sorted out in a planned way. My apprehension is that we are not doing much on the apparel sector.

We have strong spinning sector for yarn, expanding knitting, weaving and processing sectors. We are doing garmenting and apparel to some extent. The biggest issue here is, barring a few, most of our industry is decentralised. We don't have many integrated mega players who can handle order size of million pieces or more.

If we look at textile and clothing exports, India is lagging far behind Bangladesh today. India’s strong domestic market provides huge support to the industry, however, even it has a long way to go to touch Bangladesh’s export figure. So the potential is huge and the headroom available to India is large. One day, we have to cross Bangladesh, Vietnam, etc.

We need to have FTAs with the major export markets to have level playing field. For example, if we have the FTA with EU, you would see flood gates open up for Indian textile and clothing exports.

State wise, we have different textile or industrial policies in the country. Which are the regions in India now doing better in terms of investment?

In terms of capital investment in textile sector, western India is doing better which includes states like Rajasthan, Madhya Pradesh, Gujarat and Maharashtra. These are the four states doing good in terms of investment while we see some fluctuations in Southern / Northern states. I would say, they are cautious and in wait-and-watch mode before taking investment plans forward.

It is pleasing to know about new investments amid negative sentiments in the market. Can we expect investments in textile sector to grow from now on?

Industry is now taking delivery of the pending orders, which they had placed on hold. By the time these orders are delivered and commissioned, the textile market would get better. Every segment, be it spinning, knitting or wet processing machine suppliers, each machine maker is busy now.

Industry is putting lot of investments for modernisation as it is the need of the hour to reduce their operational cost and to improve their quality.

The challenges we see are in the accessories segment. Because the textile industry’s capacity utilisation levels were less, the consumption of spare parts and consumables were also down. We also experienced a decline of about 7% to 8% in this segment.

Capital machine market is cyclic. We have seen many up and down cycles in textile machinery business. This sector has experienced a down cycle and move up again. Even our user industry‘s margins have been thin. But if you talk to them, everybody has a plan on the board to expand capacity or trying to diversify. Again, I repeat, those who are serious and wish to remain in textile business, are doing good.

We notice that most of the Indian textile companies are comfortable expanding horizontally, rather than going for vertical integration to value-added product manufacturing. Your comments?

It is true if we look at most of the investment in textile. One of the prime reason is to achieve economy of scale in the product segment they are operating. Also, the expertise and knowledge of the business, product, technology and market are available in-house which is a prime criterion in making investment decisions. However, several entrepreneurs have opted for investment in forward or backward integration to stay competitive in the business.

Coming back to investment scenario, we see that Gujarat is leading in textile sector investment, is not it?

Gujarat has a strong base of textile industry and has abundant availability of synthetic, man-made and natural fibre raw materials like polyester, viscose and cotton. Today, polyester and cotton constitute over 80% of total fibre consumption in the country.

So, Gujarat has the advantage of raw materials and is competitive in terms of its availability. Thus, investment in textile sector in the western region, as I have mentioned earlier, would always be there. Also, the region hosts some of the large textile players who wish to grow their business. The path to growth is investment. In textile sector, every crore of investment increases the annual turnover by similar amount. So, investment is the only way forward for the entrepreneurs to grow their business.

On the other hand, raw material for the mills in Southern India would always have the added cost of logistics as the fibres are mostly produced in the far away states. Again, the finished product markets are well scattered across the country which adds to the logistics cost further.

However, the advantage in Southern India is that the region has a well-developed ecosystem for the entire value chain of textile and apparel manufacturing. The textile export hubs like Tiruppur, Erode, Karur, Bengaluru are located in southern India and integrated with the supply chain. Thus, the cost of operation is lesser in Southern India which is obviously a big advantage.

I am optimistic about investment in the textile sector. The upward cycle would arrive and we have signs of it already.

The path to growth is investment. In textile sector, every crore of investment increases the annual turnover by similar amount. So, investment is the only way forward for the entrepreneurs to grow their business.

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