Ashima hopes to sew up backward linkages

Ahmedabad-based Ashima Ltd is contemplating a unique method to meet the demands of the post-quota regime that comes into effect by the end of next week.

The company is entering into business partnerships with spinners and weavers. With this, Ashima hopes to have adequate capacities to address the surge in demand in the post-quota regime.

"Ashima has been catering to the top garment brands in the world for the last many years. Hence, we are fully geared up to meet the increased demands that may arise in the quota-free regime. We do not have any resource constraints for expanding capacities," Nitin Parekh, executive director, Group Ashima, said on Thursday.

The company would concentrate on its core competitive strengths in the manufacture of high-end finished fabrics. However, Ashima plans to add to its revenues by adding value at each level of the value chain.

"Our supply chain management is such that we add value to our end product by tying up with intermediate product manufacturers. This does not involve any monetary investment, but sharing expertise in product design to the lower rungs of the value chain. This is helpful as we are able to access quality inputs for our products," said B Ravi, vice-president, corporate finance, and company secretary, Ashima Group.

The company has a combination of textile products on offer including denims, yarn-dyed and piece-dyed shirtings, leg wear and knits apart from its own brands like Icon and Logo. The company supplies to brands such as Levis, Marks and Spencer, Perry Ellis, Polo Ralph Lauren, Gap, PVH, Banana Republic, and Dockers.

Direct exports constitute 50 per cent of denims produced and 30 per cent of shirtings. The company exports to about 45 countries in the world.

In the domestic market, Ashima's customers include Parx, Park Avenue, all brands of Madura Garments, Killer Easies, and Blackberries. "We have been supplying to all these big names for many years now. We thus are rightly placed to be able to pick up any advantage that may be thrown up by them. It should be noted that to supply to these brands, a proven capability for a long period is needed as they do not buy from any company across-the-counter," said Ravi.

"A long-term set up is needed and only companies with high standards, quality testing facilities, requisite designing capabilities and those which manufacture top-end products "" all of which Ashima possesses - would be able to serve the international brands," he explained.

"The low-end product will find their own levels and only established players would be able to tap the right markets. There are no new entrants in the market as of now, especially in the global markets, and established players should dominate," Ravi added.

Ashima is utilising over 95 per cent of its denim and yarn-dyed shirting capacity at present. It expects the capacity to be fully utilised in the next few months.

The market for leg wear and piece dyed shirtings is expected to improve post 2005. Ashima is present in the premium segment and has capabilities to address all markets.

The strategy of increasing the value in the entire chain is expected to increase the margins and though the turnover is not expected to increase significantly in quantity terms, (present turnover in about Rs 440 crore per annum and is expected to be in the vicinity of Rs 450 crore), the profitability would increase due to better margins and increased value addition.

The company is also in the process of a major financial restructuring to reduce the interest and financial costs. The same coupled with the on going operational restructuring is expected to improve bottomline of the company.