US firm sourcing fabric from India

Global retail majors are not just shopping for ready-mades in India. US chain store and catalogue merchant JC Penney Inc has initiated talks with at least seven Indian companies for sourcing fabrics. However, the retailer has not planned any investment in these companies.

During his visit to India earlier this month, Peter McGrath, the company's chief of sourcing, started negotiations with Vardhaman, Arvind Mills, Ashima, Mafatlal, KG Denim, JCT and Nahar Industries for sourcing fabrics.

"While we do not propose to invest in these companies, we are trying to develop a long-term relationship by ensuring fabric offtake from them annually," a source close to the negotiations said.

In the past, the $38 billion US retailer had placed small orders with firms such as Arvind Mills but there had not been any sustained supply from Indian textile companies.

"We do not see a spurt in sourcing from India this year and are likely to keep our orders at $100-120 million. For the next year, the plan has not been finalised but it can easily increase to $600-700 million. The trends will be visible towards the end of 2004, when orders for the next summer are placed," a source associated with JC Penney's India's operations said. Sources, however, said the size of the orders had not been finalised.

They added that Indian fabric manufacturers were not as competitive as those in other countries and the US major wanted Indian companies to ramp up their capacities.

They further said infrastructure problems for exports also needed to be addressed and talks had been initiated with the government to iron out deficiencies at ports.

JC Penney has simultaneously started talks with players like Gokuldas, Shahi, LC Carlisle, SG Apparel to source bottoms, sleepwear and knitwear such as T-shirts once export quotas on all items are lifted from January 1, 2005.

Sourcing centre

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• US retailing major JC Penney has started negotiations with Vardhaman, Arvind Mills, Ashima, Mafatlal, KG Denim, JCT and Nahar Industries for sourcing fabric
• In the past, the $38 billion US retailer had placed small orders with firms such as Arvind Mills but there had not been any continuous supply from Indian firms
• JC Penney is likely to keep the orders for this year at $100-120 million. For the next year, the orders can easily increase to $600-700 million
• JC Penney has also started talks with players like Gokuldas, Shahi, LC Carlisle, SG Apparel for sourcing bottoms, sleepwear and knitwear