Textile firms weave expansion strategy

Sangam, one of the largest polyester viscose fibre manufacturers in India, is more than doubling its production capacity by adding 97,000 spindles.

The company is buying 62,000 spindles from Lakshmi Machine Works (LMW). For the rest 35,000 spindles, Sangam has been forced to reach out to China as LMW cannot deliver the machines on time.

Krishna Knitwear Technology, an integrated textile player, has recently imported 5,000 spindles. It plans to increase its capacity by 1.5 lakh in phases.

"We are studying the performance of these spindles. If everything goes well, we might import more from China," said Sanjay Tayal, chairman, Krishna Knitwear.

For a change, the Chinese textile industry is helping its Indian counterparts increase capacity to meet the rising global demand. In the Rs 7,000 crore Indian textile machinery market, the demand is almost one and a half times the supply and the domestic market can cater to only about 28 per of the market.

Traditionally, German and Japanese machines dominated the scene. Now, China seems to be replacing them with cheaper machines and faster delivery schedule. Moreover, the transportation costs to import machines from China too are less.

LMW's order book is full for the next three years. "The order inflow for textile machinery has increased substantially after January 2005," said R Rajendran, its chief financial officer. Keizo Hara, president, Kirloskar Toyota Textile Machinery, feels that imports from China can only grow.

Apart from faster delivery, the Chinese machines are competitive with regard to domestic ones in terms of pricing. They are cheaper than the German and Japanese machines, which are three times more expensive than the domestic ones.

The delivery period for the Chinese machines is just six months. In contrast, one needs to wait up to three years for the domestic machines.

"LMW is creating capacity to cut short the delivery period in due course of time," says Rajendran.

Kirloskar Toyota too is undertaking a drive to raise productivity in April. However, no one denies the fact that Chinese machines are set to capture a large chunk of the Indian textile machinery market.

According to the Cotton Textiles Export Promotion Council and Southern India Mills' Association, the quality of Chinese machines is "satisfactory". A delegation from the two bodies went to China in November to evaluate the machines.

Till about five years back, there was not much demand for Indian textile machinery. In fact, many players had to down shutters as they could not cope with the high costs.

However, the government's technology upgradation fund scheme which gives a rebate on investment to textile players and the abolition of the quota system have increased the demand for these machines.

LMW, the country's only fully-integrated spinning machine maker, has a capacity of about one million spindles per year. The next big player is Kirloskar Toyota with a three lakh per annum capacity.