Textile firms tap market for expansion

Medium-size textile firms are tapping funds from all sources, including term loans and capital market, to implement their expansion and consolidation plans.

Last month, four textile companies, with turnover ranging from Rs 100-250 crore, hit the market with initial public offers (IPOs). A booming economy, coupled with growth in the textiles industry in the last three years, is spurring enterpreneurs to go in for expansion, said industry sources.

"The Indian textile industry is going through a consolidation phase. For this to happen, investments are a must. The industry is doing good and making profits. Textile firms have understood the importance of investment," said D K Nair, secretary general, Confederation of Indian Textile Industry. Earlier, it was not easy to mop up funds, as the industry was in a bad shape, he added.

Vikram Rao, director, Aditya Birla Management Corporation, said, "All textile firms have their growth plans and to fund the projects, they are keen on raising funds and IPO is one of the routes. Most of the companies are taking up forward integration plans to step up the vertical chain. Simultaneously, retail activities and increasing supply chain too are demanding investments."

The last three years have proved beneficial to the over $40 billion textile industry, which is aiming to surpass the target of $85 billion by 2010.

Fragmented status (except in spinning) of the industry was a concern and a big challenge. The industry should consolidate, which is happening now, an analyst added.

Fast-changing lifestyles and business strategies in the global and the domestic markets were pushing up demand, which could be met only by expanding the manufacturing base, said Nair. "Unless we go in for expanding our manufacturing capacities, we will not be able to keep pace with the market, where the demand is rising hugely," he added.

"We want to grow with the growing economy," said S G Vyas of Jagjanani Textiles, a Jaipur-based Rs 120 crore firm. The company recently hit the market with a Rs 20 crore IPO. Technocraft Industries, Lawreshwar Polymers and Vijayeswari Textiles have also mopped up Rs 204 crore through public issues.

"There is a lot of investment going into expansion. Firms are going in for loans as well as tapping the equity market. It is a wave and everybody wants to ride it," said Prashant Agarwal, associate vice-president, Technopak.