labels: industry - general, textiles, economy - general, interviews
Visaka Industries expands in a quota-free world news
25 April 2005

Dr G Vivekananda promoter and managing director of yarn manufacturing and asbestos roofing company Visaka Industries completed his medicine from Osmania Medical College and was all set to fly abroad but his father requested him to stay back.

As he says, "I completed my medical studies in 1985 and was all prepared to go abroad when my father asked me to stay back and start an asbestos manufacturing unit," he says. Now he says when he looks at the company he has built he has no regrets.

Visaka put up an asbestos roofing plant in 1985 as it had a license in hand¸which in those days was the most important prelude to starting any business. Thus began Visaka Industries with Vivekananda at the helm as managing director.

In 1992, the company diversified into textiles with a Rs30-crore investment in Nagpur. Today the company manufactures yarns using twinair-jet spinning technology from Murata, Japan, with 28 MTS machines equivalent to 50,000 ring spindles. It currently produces about 7,000 metric tonnes of yarn per year of which it exports 2,000 tonnes.

The company has asbestos plants located in Andhra Pradesh, Tamil Nadu, and Midnapore in West Bengal and has a marketing tie-up with a Pune-based company. It is now looking further to spread its base across the country and has already embarked on a plan to set up a new unit in Rai Bareli, Uttar Pradesh investing Rs25 crore for the plant.

With the removal of textile quota restrictions from 1st January 2005, Visaka's focus has turned to ready made garments business. The company is setting up a garment manufacturing unit in Chennai at the Mahindra Special Economic Zone with an investment of Rs55 crore.

Apart from this it is setting up a weaving unit at Nagpur at a further investment of Rs53 crore and a Rs93-crore cotton yarn unit near Mumbai.

Vivekanand expects his company's turnover to touch Rs300 crore by the end of the next fiscal instead of Rs200 crore, projected earlier. For the first nine months of the fiscal, the company made a net profit (after tax) of Rs 9.6 crore on a turnover of Rs 153.97 crore.

In an interview with domain-b, Dr Vivekanand talks about opportunities for Indian manufacturers in in a quota-free world and India's future as a global textiles supplier. Interviewed by Mohini Bhatnagar.

How is India's textile industry currently positioned?
Dr G Vivekananda India's current share is about 4 per cent of the global trade in garments, and with the lifting of the quotas, which is forecast to rise to 15 per cent or approximately $50 billion in the next four years.

There are some 28-million spindles in India. Of these 22 million produce good quality yarn. In fabrics India produces 42-billion metres and the fabrics industry has been growing at the rate of 6-7 per cent in the last five years. There is tremendous capacity coming up in the weaving sector also.

However, in the garments sector there are mainly small units and there is not enough data to show the number of actively producing units in this sector.

How does India compare with China in the sector?
China is far ahead of India in this area. They have huge economies of scale. Actually you don't find many units with less than 100, 000 spindles while the large companies have about one million spindles.

In comparison, most of the large units in India have 25,000 to 50, 000 spindles. This huge capacity enables Chinese units to be far more competitive. Secondly, they have fewer regulatory and statutory compliance to fulfill. For instance, Chinese plants run on 12-hour shifts while in India we cannot exceed eight-hour shifts and have to pay overtime which pushes up costs.

Then we face issues like child labour. You may be aware of the problems that US multinational, Nike, got into at its Chinese plant where it was alleged to be employing children.

We feel that over time these compliance issues will work in our favor, as international buyers verify these aspects before placing orders. International buyers tend to insist on good S-H-E practices - safety, health, and environment issues - which we are carefully building up.

Moreover, the situation is not static; recent reports tend to suggest that Chinese labour has begun asking for minimum wages and some signs of unrest has already been detected.

All said and done, it is true China is far ahead of India and will continue to stay ahead. It is also true that International buyers want at least two sources of reliable supply of material and garments. We believe that India will be a good alternative as far as supply of garments is concerned.

What chance do Indian exporters have against the Chinese in world markets?
We stand a fair chance. I feel that Indian garments technicians, tailors, designers are superior to the Chinese who are increasingly getting into commoditisation. Value-addition is our only hope if we want to stay at par with China.

Recent reports say China's share in global trade has risen while India's has fallen below the quota levels. How do you view this?
China has been dumping material in European countries since it had excess stocks. In recent times, European nations have also expressed concern about excessive Chinese imports. I would prefer to wait and look at the scenario after one or two years. The quotas have just been removed and in another six months international buyers will decide on their suppliers and finalise their orders

The encouraging thing is that garment and fabric exporters in India are currently overbooked and have more orders than they can fulfill. Inspite of this they are getting more orders. In the future smaller guys will definitely get out of the market.

What are your company's plans for the future?
We have expanded our textile-spinning unit and are setting up a garment-manufacturing unit at the 'Mahindra special economic zone.' Our Chennai unit, which will have 1,000 machines has been set up at an investment of Rs55 crore. The unit will produce five million pieces of T-shorts and trousers annually for the European market.

We have acquired the land and work has started on the units. The advantages of setting up this unit are that it is close to Chennai port, skilled labourers are available and we can get quality fabrics from the Tirupur-Coimbatore belt.

The finished material, apart from exports, will also be sold in the domestic market. We are in talks with branded garment manufacturers for sale under their respective brand names in the country.

We are also setting up a textile-weaving unit near Pune, at an investment of Rs50 crore. There is demand from customers in Europe manufacturing home textiles and supplying to US market. In the post-WTO regime, the demand for home textiles is expected to rise.

This unit is, expected to be operational by June 2006, and will churn out five million metres of textiles per annum, which will be shipped out from Mumbai's JNPT for exports.

How will you fund your expansion plans?
We will partly fund it from a development loan available for textile units and partly through preferential allotment.

What are you banking on for your growth in the domestic and global market?
We are banking on our systems and quality of products. When we started manufacturing yarn, the market was crowded with a number of small units. In the textile industry where work carries on through word of mouth we set up reliable systems and focused on the quality of our yarn. In the first year we sold at Re 1 lower than our competitors.

In the second year we sold at par with them and from the third year onwards our prices were higher than others' yet our buyers still prefer to source from us. We attribute our success to the systems such as adherence to paperwork and records. Even now a lot of work in the textile industry gets done verbally without adequate paperwork. We don't work that way and our buyers and suppliers appreciate that.

Now we are in a position to charge interest on delayed payments and we get it. Unbelievable in this industry.

Where do you intend to focus in the future?
Visaka currently realises 60 per cent of its revenues from its asbestos roofing business and 40 per cent from textiles and yarns. This ratio will be reversed in the next two years. Right now we have a 50, 000-spindle unit, which manufactures and blends polyester yarn. We manufacture the rest.

 search domain-b
Visaka Industries expands in a quota-free world