Home > Ann Special > Story

‘New investments will be garment centric’

Super Spinning, part of the Rs 500 crore Sara Elgi group is one of the few integrated units in the country having presence in the entire value chain - cotton, yarn and garments. The company plans to strengthen its garment division with additional investments in technology says Mr Sumanth Ramamurthi, managing director, in an exclusive interview with Sudha Swaminathan. Excerpts.

The feel good factor is back in the textile sector. Do you think this will sustain?

It is difficult to say how long it will sustain but it is certainly not for a short haul. Textile stocks are on a bull run and all the sectors are picking up. Quota regime is coming to an end and I strongly believe it will open lot of opportunities for the Indian textile industry. The economy is shining and there is resilience in the domestic market too.

How was the year 2003-04?

Looking back the year was a bit difficult as the cotton prices skyrocketed. The yarn prices have also moved up simultaneously in the domestic market and the Middle East. But in the European market prices remained almost the same irrespective of the increase in raw materials.

Why did you venture into knit garments when there are other options?

Basically we wanted to move up the value chain and garment manufacturing was a viable option. It was not capital intensive as weaving and hence we decided the move into garments. Also the margins were better in garments while our margins in yarn were dwindling. We wanted to first experiment with knits before we enter into woven garments.

Is there any action plan to rev up your margins in spinning?

The export market is more lucrative than the domestic market and we are increasing our focus in the export market. We export 45 per cent of our production and we are planning to take it to 50 per cent. Our exports are to Far East, China, Korea, Arab countries and EU. In the local market the price is under pressure and hence we are trying to alter the customer profile. We are trying to expand our customer base to include more customers who will look for our value added yarn. The margins are better or almost stable in value added yarn and hence we are trying to spruce up its production. We are planning to add an additional 10,000 to our existing capacity of 8000 spindles in compact yarn. Our current capacity is 1,36,000 spindles with a production capacity of 45000 kgs of yarn. We are also into the supply of organic cotton where the margins are high. The growth is better in organic cotton but it is difficult to source the required quantity. A part of our requirement is met by importing it from Turkey and Senegal. Now we are trying to grow organic cotton under contract farming. Our other value added products include coarse spun yarn, PVI yarn, slub yarn and gassed mercerised yarn. Nearly 50 per cent of our production is value added yarn and 30-35 is traditional yarn like hanks and hosiery.

When the entire industry was struggling you were able to perform better and grow. How was it possible?

As mentioned earlier, we concentrated on value added products which have a stable market. We have put in place systems for cost control and higher productivity. Meticulously planned raw material procurement also helped us to buck the trend.

What will be your strategy for growth?

Our growth rate is consistent over the years and in the year 2004-05 we are projecting growth rate of 30 per cent, double than the last year. The growth will be garment centric. Expansion and new investments will directed towards garments than spinning. We will provide lot of importance to value addition. We will foray into wovens too by manufacturing shirts. We are expanding our garment business by setting up a third plant in Netaji Apparel Park. By the end of 2004 we will have a production capacity of 7000-8000 pieces per day. To strengthen our garment business we will go for knitting and processing. We are weighing the options. It may be a strategic tie-up with the existing players or we may go on our own.

You are outsourcing yarn?

We are outsourcing only 10 per cent of production. More than outsourcing it is like a leased arrangement. We provide all the technical expertise and guidance and cater to a part of the domestic market.

Comment about your experience in contract farming.

Our experience in the last two years was very good in terms of acquiring contamination free cotton. I would say the farmers benefited more than us. We were able to inculcate quality culture among the farmers. Last year we had 3076 acres under contract farmers. For the next sowing season we are planing 10,000 acres. Most of the area will be under Sara 2 (developed in-house). We have also developed Sara 33 and Sara 39 (super fine counts) which we are planning to patent.