Kanoria Chemicals & Industries re-enters textile business

In talks with garment firms to sell denim from its Ethiopian plant

Nearly two decades after exiting the textiles business, Kanoria Chemicals & Industries Ltd has made a re-entry. It is in talks with H&M, Peter Van Heusen, Velocity, Raymonds and Arvind to sell denim from its plant in Ethiopia. The company has made an investment of about $50 million in the African country to take advantage from duty-free exports to the US and the European Union. The plant is the first denim manufacturing unit in the eastern Africa.

Chairman and Managing Director Rajya Vardhan Kanoria told Business Standard, “The company is also in talks with the Ethopian government for supporting cooperative contract farming of cotton.”

The plant has an annual capacity of 12 million metres. The company requires 5,000-7,500 tonnes of cotton yearly. Currently, it is importing cotton from the US, India, Pakistan and Sudan. Under trade agreements with African countries, garment exports to the US and the EU do not attract import duty, which is 14 per cent.

Kanoria said their Ethiopian venture had 20 per cent equity participation from private equity player Fung Capital. Indian Export-Import bank has provided a $21-million loan for the plant.

The denim plant is located in Bishoftu town of Oromia region. It would make fine-quality denim fabric and create direct employment opportunities for about 500 people, and an expected indirect employment to around 20,000, primarily in the garment sector, said Kanoria. The company acquired 15 hectares there.

The Kanoria group is diversified and has a presence in manufacturing organic chemicals in India, electronic auto components in Europe and renewable power in India. The group is also among the largest chemical marketing and distribution companies in the world.

The company expects to generate annual foreign exchange earnings of $25 million from the unit. Kanoria said it had created a presence in Africa by promoting Kanoria Africa Textiles. “We see a huge market in Africa. The idea behind setting up the unit is not just getting into textile but into Africa.”

He said cheap hydropower is one of the advantages that Ethopia had over India. The company has invested in its own 132-kilovolt substation and seven km-long power transmission line to the plant.