Textile sector in Coimbatore sees investment boom

Companies mull expansion, going public

The end of quota regime has ushered in an investment boom in the textile sector in Coimbatore region. The textile sector in Coimbatore, Erode and Salem districts has witnessed more orders and more investments during the last couple of years.

As a result, a number of firms have scaled up their production capacity, and others are planning expansion.

After the phasing out of quotas in January 2005, the textile units in these districts experienced a steady increase in the demand and hundreds of manufacturing facilities have sprung up across the region. A number of garment and made-up units have been set up, apart from a few spinning units. In the spinning segment, nearly one million spindles were added during the last one year.

Speaking to Business Standard, S V Arumugam, chairman, Southern India Mills' Association (SIMA), and managing director of Bannari Amman Spinning Mills Limited (BASML), said that investments to the tune of around Rs 3,000 crore were estimated to have been made in the region during the last one to two years.

A rough estimate shows that investments worth Rs 750 crore to Rs 1,000 crore have been made in the post-spinning segments, and about Rs 2,000 crore in the spinning sector.

As a result, many textile units from the region are making a beeline to enter the capital market taking a cue from the BASML which went public in November 2005. Spinning mills such as Royal Classic group and Gangotri Textiles and ready-made units such as S P Apparels are mulling listing on the bourses.

In a bid to increase its weaving and processing facility at the SIPCOT industrial complex at Perundurai, Erode district, Gangotri Textiles Limited, which owns the menswear brand 'Tibre', has chalked out an investment plan of about Rs 350 crore.

To part-finance this project, the company is planning to enter the capital market by the end of the current fiscal, sources say. Apart from the Bombay Stock Exchange, where its shares are already traded, the company is likely to opt for listing its shares on the National Stock Exchange also.

Similarly, Tirupur-based Rs 225 crore Royal Classic group, which owns the brand Classic Polo, plans to go public by April 2007. Earlier, R Sivaram, executive director of Royal Classic Mills, told Business Standard that the money raised from the issue would be used for expansion and increasing the number of spindles.

It plans to increase the spinning capacity of its mills from the present 16,000 to 25,000 spindles with an investment of Rs 23 crore by the end of the current fiscal. However, he felt that it was too early to comment on the amount of money that would be raised through the issue.

S P Apparels, the knitwear manufacturing and exporting company in Avinashi near Coimbatore, is also weighing the options in accessing the capital market through an initial public offering. This will be used to fund its expansion plans to venture into woven garmenting.

Its capacity expansion plan includes setting up a 25,000-spindle spinning unit, which will ensure supply of quality yarn.

At present, the one-and-a-half-decade-old company is focussed on knitted garment exports to European garment labels with an annual export of around 300 million pieces. Industry hands say that if S P Apparels hits the capital market, it would be the first knitwear company to go public from the region.

A remarkable impact of this growth in the textile sector is the subsequent employment generation. With all the expansion and backward and forward integration facilities undertaken by the companies, at least 50,000 new jobs have been created during the last one year.