Gokaldas Exports will go in for social responsibility audit

Taking on Chinese competition; aims for more global orders

Gokaldas Exports, the Bangalore-based apparel manufacturer-exporter, plans to invest substantially in social responsibility audits to ensure the following imperatives "" minimum wages, no excessive overtime and no use child labour. The audit has become essential to tackle the Chinese exporters and to be competitive in the global sourcing market.

"Certification from such audits have helped us secure further orders, especially from the large global retail chains and brands sensitive to the issues," said Rajendra J Hinduja, executive director, Gokaldas Exports.

Addressing a press conference here on Monday to announce the company's initial public offer. Hinduja noted that the group is part of the Global Alliance Program funded by buyers.

The Fair Labour Association of the US government does an audit for fair labour practices regularly. American companies outsourcing orders have to certify issues of social responsibility in their balance sheets.

"China fails to meet the standards on equitable work culture, maximum working hours and adequate leave," he said.

Gokaldas Exports has started complying with these norms and two factories have been certified and quality management measures are being introduced and monitored.

Indian companies have to invest in such social initiatives along with modernising their units to gain a foothold in the global trade. Currently, India exports $6 billion worth of apparel. India's share in US sourcing before abolition of quota was 4 per cent and post-quota it is likely to touch 15 per cent.

For China it was 16 per cent before quota abolition and post-quota it is likely to be 48 per cent. In case of EU the share of India before quota abolition was 6 per cent and post quota it is likely to touch 9 per cent. From China it was 18 per cent and is likely to be 29 per cent.

The company is entering the capital market with a public issue of 31.25 lakh equity shares of Rs 10 each in the price band of Rs 375 to Rs 425 per equity share.

It is to be determined through the 100 per cent book building route. The issue opens for subscription on March 30 and closes on April 6. The company clocked sales of Rs 536 crore in FY 2004 and Rs 373 crore in six months of FY 2005.

Companies globally are shrinking their base and consolidating to a few vendors. "During the quota regime, companies bought from multiple vendors. But now with quotas off, companies are indicating that they plan to source from single or a few vendors," said Hinduja.

After US and EU, Japan is the biggest market for apparel. "Currently China has a dominant position in the market. To gain entry, Gokaldas plans to piggyback on the major brands it currently supplies," he said.

The company plans to set up four factories, modernise the existing units in Bangalore and repay working capital loans worth Rs 150 crore. The company plans to raise the amount through an initial public offer (IPO).

One factory in Chennai's export zone and three in Bangalore will be set up to cater to the global giants, said Hinduja.

"We also have a plan to modernise the existing units, numbering 43 in Bangalore and repay working capital loans availed by the company in the last few years," he added.