Denim major Vishal Fabrics to double exports this fiscal, add capacity

Ahmedabad-based Vishal Fabrics, which is among the largest manufacturers of denim, is adding capacities and targeting to more than double its exports as part of its bid to cash in on the China-plus-one strategy that most global companies have adopted and become the third-largest player by FY25.

Vishal Fabrics is the flagship of the diversified Chiripal Group and commenced operations in 1985 and is the fifth-largest manufacturer of premium denim fabrics with an annual capacity of 80 million meters (mm), which will go up to 100 mm this year upon completion of the ongoing expansion of adding two more dyeing lines at a capex of Rs 30 crore.

The domestic denim manufacturing segment is led by Arvind Mills which has an installed capacity of 160 mm, followed by Jindal Worldwide (140 mm), Chiripal Group entity Nandan Denim (110 mm) and Vishal Fabrics which has 80 mm of dyeing capacity and 105 mm of processing capacity.

Vishal is only into cotton denim unlike the industry leaders which offer cotton and non-cotton fabrics.

Domestic manufacturers control 15 per cent of the USD 8-billion global denim market, and Vishal has been focusing on the domestic market only so far where annual demand growth is at 6-7 per cent while global growth of only 4-5 per cent.

After the Western world has adopted the China-plus-one strategy to secure their supplies/sourcing routes instead of depending solely on China following the Covid-driven supply disruptions, we've been getting a lot of enquiries.

Till FY20 our export share was under 5, which went up to around 8 per cent in FY22, we hope to take this to 15-20 per cent this fiscal. All these years we were only focusing on the domestic market, Brijmohan Chiripal, managing director and a founding family member, told PTI.

Accordingly, we're adding both dyeing and processing capacities so that we don't miss out on the rising demand from overseas markets, he said but ruled out any forward integration given the tight market condition.

While last year we began shipping to Southeast Asia, in FY22 we began shipping to Latin America and this year we will be focusing on making a mark in the European markets, and hopefully double the export share of our income to a fifth of the total, Chiripal said.

Chiripal said the larger plan behind the capacity addition is to become the third-largest player with an annual capacity of 140-160 million meters over the next three years.

Vishal had closed FY20 with revenue of close to Rs 1,300 crore and earned a net income of Rs 30 crore. Topline declined over 25 per cent in FY21 to Rs 967 crore nearly halving net income to Rs 18 crore as the plants were shut due to the pandemic, and Vinay Thadani, chief financial officer, said, demand is near the pre-pandemic level and hopes to better close FY22 with Rs 1,120 crore in topline and Rs 50 crore in bottomline (books are still to be closed, he added).

Our target is to become a Rs 1,500-crore company in sales by FY25, with Rs 85 crore of net income, and clock FY23 with Rs 1,300 crore of revenue and Rs 65 crore of net income, Thandani said.