Alok Industries, a maker of home textiles, apparel fabric, garments and polyester yarns, has diversified into realty and retail. The company is gearing up to take on the challenges in various new segments after reporting a 48 per cent drop in the first-quarter profit, mainly because of volatile foreign exchange rates. Managing Director Dilip Jiwrajka speaks to Chandan Kishore Kant about the hurdles it is facing and strategies to tackle challenges posed by the slowing economy.
Institutional ready-made garments have become your focus area. How promising is this sector?
The usage of uniforms is on the rise in retail and corporate set ups. Our institutional fabric offtake is nearly one million metres in the domestic market and we export 0.75 million metres in a month. Now, we will not only supply fabric but also supply ready made garments in this segment.
Why did you put off plans to bring the Peacock Alley brand to India?
Since Peacock Alley is a retail brand, the prohibitive rental rates discouraged us. We decided to wait for two years for lease rates to cool down before taking a call on it. Rentals in prime locations were too exhorbitant to give us profits even in the next five years. We may or may not bring Peacock Alley to in India.
When will you spin off your retail business?
The resolution has already been taken up in our board meeting to make it a 100 per cent subsidiary. We will hive off the unit by October, which will enable us to bring better focus to it. People already have been put on jobs. They are raising funds to open up to 500 outlets in the next two years, At present, we have 26 stores. We hope to achieve a topline of Rs 500 crore once our target of 500 outlets is met.
Will you list the retail entity?
No plans as yet to list this company.
You recently shut down some of your retail outlets in Pune...
The strategy of shop location shake up is very common in the retail business. When you buy a property, sometimes you buy a wrong location or you pay higher rentals and later fail to realise revenues. In this case, we were not the only company to down the shutters as another four-five shops were closed primarily due to high rentals. If the shop rentals exceed a certain point, churning is necessary.
Any acquisition plans?
We have taken over a company in Czech Republic and have a fairly good stake in a UK-based retail firm. Once these investments reach higher efficiency levels, we will think of new ventures.
What are your projections for FY09 and FY10?
I think we will maintain our growth rate of 35 per cent in the next two years. Margins are intact. All projects are in final stages of completion. Our sales will go up once they go on stream.
