Alok Industries, a Mumbai-based integrated textile player, is witnessing sales growth even though a slowing demand for textile products in western countries has hit many domestic exporters hard. To meet the growing demand, the company is now even outsourcing its production to small manufacturers, which are close to shutting down their business.
The company achieved over 40 per cent growth in sales to touch Rs 1,241 crore in the first half of the current financial year. Even though the demand is shrinking, the company expects to achieve a similar growth in sales in the second half too. During the first six months of the current financial year, the company recorded an export growth of 18 per cent and domestic sales growth of 60 per cent over the corresponding period of 2007-08.
“Global retailers like Wal-Mart and Target are squeezing their supplier base to make sourcing cost-effective,” said Sunil Khandelwal, chief financial officer, Alok Industries. “We see a healthy situation in exports as well as in domestic markets,” he said, adding that the company has an order book of Rs 750 crore for the next four to five months.
Alok Industries, which started expanding capacity about three years ago, hopes to complete its four-phase expansion by the end of this financial year. Still, it is looking at outsourcing to meet the growing demand of global retailers.
“Now, orders are of such a magnitude that we are having a pilot-project of outsourcing our production to a Tirupur-based unit with a capacity of 2,000 garments a day,” said Khandelwal.
In FY08, the company’s export sales crossed Rs 1,000 crore from Rs 100 crore in FY04. Exports contribute around 60 per cent to the company’s total sales. With all its capacities on stream, the company expects to achieve sales worth Rs 4,000 crore a year.
Alok has cautiously started diversifying into the retail sector and set up around 49 stores under the brand name H&A. It plans to reach around 200 outlets in the next two years. The company is also in the process of roping in private equity (PE) investments to its retail business. “Since our retail division is not large, PE funding will be of a small size,” said Khandelwal.
As on September 30, 2008, the total debt of Alok Industries stood at Rs 5,916 crore, including a Rs 3,000-crore loan under the Technological Upgrade Fund Scheme (TUFS). Other loans are in the form of Rupee Term Loans, External Commercial Borrowings (ECBs) and Foreign Currency Convertible Bonds (FCCBs).
The company has an eight-year repayment period. In the next two years, it will be repaying about Rs 600 crore.
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