Mafatlal Denim to invest Rs 110 cr to up capacity

Mafatlal Denim, owned by the Arvind Mafatlal Group (AMG), has decided to double its denim production capacity from the current 10 million metric tonne per annum to 20 million metric tonne with an investment of around Rs 110 crore.

Talking to Business Standard, Rajiv Dayal, CEO of Mafatlal Denim, said, "Earlier the company was known as Mafatlal Burlington Industries, a 50:50 joint venture of Mafatlal Industries and US-based Burlington Industries. But after AMG bought Burlington's stake a few months back we decided to double our production capacity."

The group is planning to invest around Rs 110 crore for the expansion project at the same facility based in Navsari and production is likely to start by April 2007, he added.

There will be a second phase of expansion in which the company will focus on global markets. "For the second phase, we already have our own distribution channel across the world," said Dayal.

Dayal said, "The company has already arranged funds for the expansion, wherein we will use internal accruals and term loans for raising the Rs 110 crore."

"We will not only produce denim fabric, which is open-end basic denim, but will also focus on value-added products such as ring denim, stretch denim, denim in different colours and so on which are highly in demand in the European market," Dayal added.

At present the company exports 50 per cent of its products, while the remaining 50 per cent is sold in the domestic market. "After the expansion, the ratio of export will remain same. However, export volume will be doubled from 5 million metre tonne to 10 million metre tonne per annum," Dayal said.

He said the company will produce fabric for international brands such as Levis, Marks & Spencer and Pepe among others. "The global market for denim is growing at the rate of 5 per cent on an average," he added.

Dayal said, "In the domestic market, the prices of basic denim are under great pressure owing to over production. Therefore, we will focus on value-added denim products for the mid and upper segment which will cater to the need of the upcoming retail chains across the country."

He further added that with new retail chains coming up, denim prices are also expected to climb very soon.

Dayal added, "Once the expansion is complete, the company is also planning to focus on a garmenting unit in Gujarat. We are evaluating the SEZs in Surat for our garment unit which will be logistically near to our production facility."