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Restructuring in powerlooms to be corporate-driven

Powerlooms will witness emergence of corporate entities, specialisation
Reena Mital - Mumbai

With around 30-40 per cent of the 16.5 lakh powerlooms inoperational for over a year, is a shakeout in this sector imminent? According to industry analysts, a shakeout and restructuring in the powerloom sector has already begun, driven largely by the corporate entitites.

Experts foresee a number of changes in this sector - specialisation, emergence of corporate entities, forward integrations, and more closures. Speaking to Express Textile, Mr R R Gosai, joint general manager, Gherzi Eastern, a Zurich-headquartered textile consultancy firm, said, “With tremendous overcapacity in weaving, I do not foresee any major investments in this sector. But a number of larger units will increasingly lease or even take over existing and good powerloom units for production of certain lines. Managerial control will also pass into the hands of the big units. To an extent, this has been happening for quite some time, but without any managerial controls. This will change. And this will lead to modernisation, and upgradation of technology to the required levels.”

Besides this, analysts expect forward integration to catch on in this sector, which would lead to the emergence of corporate entities, but of smaller sizes. This would be in the form of units with weaving and processing facilities, or knitting and processing facilities, or existing spinning mills could take over some good powerloom units, and set up a process house, they say.

According to Mr Gosai, “We will definitely see the emergence of units similar to that of Siyaram’s, S Kumars, LNJ Bhilwara, but probably smaller in size. These and other such units started off as small players in the powerloom sector, and gradually with specialisation, and forward and backward integration, have emerged as important corporate entities in the textile industry. The integrated corporate entity will make a comeback.”

Industry sources point out that specialisation will have to take place in this sector, and players will have to move out of manufacturing everything, and identify their own niche. Specialisation and small size are already the catchword with the bigger textile units, with just about every mill today trying to cut production and size to manageable and viable levels, and moving out of commodity products, and into value-added, differentiated, specialised items. Says Mr Gosai, “One cannot have huge capacities for niche items, and cannot earn profits in commodities. So, to cut costs, commodity items can be manufactured with leased facilities, and this can happen only in weaving.”

According to Mr K A Samuel, secretary general, “Specialisation, modernisation, and organisation of this sector is extremely important for survival. To some extent, this is happening in most of the powerloom centres - Bhiwandi, Bhilwara, Surat, Ichalkaranji, etc, but is evident more in the spun sector, than the synthetic powerloom sector. The process of development is nevertheless inevitable, with younger entrepreneurs coming in, which will help in the setting up of newer and better entities. This will also lead to innovative methods of marketing, newer fabrics, newer management styles, which will help the industry survive the stiff international competition.”

According to experts, the powerloom units that fail to change, will either have to close down, or will have to operate in the lowest rung of the market. Says Mr S B Aggarwal, director, SBA Consulting, “The powerloom sector has immense potential, but this has not been tapped. With the right approach and policy support, this sector could well become the engine of growth for the textile industry.”