Consolidation for garment companies?
\nEconomic Times, India<\/p>\n
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BANGALORE: This will go down as the mother of all deals in India\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s garment industry. Although the size of the deal (Rs 682.1 crore, assuming the entire 20% open offer goes through) is not large, it is a watershed event, nonetheless.<\/p>\n
The buyout of Gokaldas Exports by Blackstone comes close on the heels of the $38-million buyout of Leela Scottish Lace\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s garment business by Bombay Rayon Fashions.<\/p>\n
So, is the industry readying for a wave of consolidation? Scale is clearly one factor. \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cWe believe the industry has enormous potential. Close to $50 billion of orders would flow in from high-cost centres to low-cost centres like India and China and we believe that players like Gokaldas Exports are well-positioned,\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d says Mr Akhil Gupta, CMD of Blackstone Advisory India.<\/p>\n
The industry also appears to be veering around this view. \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cFor our scale of exports ($8.2 billion), there has to be consolidation, we have one too many companies,\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d says an analyst. Global competition is another factor. Take the case of Bangladesh which has export earnings of about $6 billion and is seen to give India a run for marketshare.<\/p>\n
At last count, there were over 50 companies, though most of them have revenues between Rs 50-100 crore and don\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2t have the scale or size to be globally competitive. There is bound to be another wave of consolidation with small players expected to sell out.<\/p>\n
Analysts say that buyers in the US and Europe are looking at dealing with a handful of players. Garment exports to US have dropped by 10% over the last 12 months in value terms and the Indian industry has not made much headway in Europe. Further, with the rupee appreciating and businesses operating on single digit margins, the industry is facing very challenging times.<\/p>\n
On the other hand, the Indian garment industry also did not really scale up its operations and even a large player like Gokaldas Exports did not venture too far. Further, the industry was stymied a bit by the tight labour laws and was seeking reforms.<\/p>\n
Analysts also say that with the opening of the economy, newer opportunities are available seeing the possible migration of \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cinvestments\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d into these sectors. \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cIf sell-out happens, it could also indicate that current promoters may not be too willing to commit more investments,\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d says a Mumbai-based exporter.<\/p>\n
That the industry would have to face the winds of competition got well established when the world moved into a \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cquota-free\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d era effective January 1, 2005. Recently, the ride has become bumpier, with the rupee appreciating over 9% during the first quarter (Q1) ended June 30, 2014 with Gokaldas Exports itself reporting a 22.13% year-on-year drop in net profit.<\/p>\n
But the industry has a word of praise for the Hinduja brothers \u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u20ac\u009d clearly the pioneers in the \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201coutsourcing\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d business, something about which India is extremely proud of. \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cAll of us have been entrepreneurs and have built these enterprises. The apparel exports business is the creation of our hard-work, effort and vision,\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d says Mr Sudhir Dhingra, CMD of Delhi-based Orient Craft.<\/p>\n","protected":false},"excerpt":{"rendered":"
Consolidation for garment companies? Economic Times, India BANGALORE: This will go down as the mother of all deals in India\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s garment industry. Although the size of the deal (Rs 682.1 crore, assuming the entire 20% open offer goes through) is not large, it is a watershed event, nonetheless. The buyout of Gokaldas Exports by Blackstone […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"yoast_head":"\n