‘We will rank among the top four towel makers in the world’

In an exclusive interview with Reena Mital, Mr B K Goenka, vice-chairman and managing director, Welspun, talks about the company’s plans of becoming the world’s leading terry towel producer

What is the kind of global market you envisage for your products, given that a large number of Indian companies are jumping on to the home textiles bandwagon?

Welspun, today is the fifth largest producer of towels in the world and the largest in Asia. It has a presence in over 34 countries and caters to 12 out of the top 20 retailers in the world. Vision 2010 (formulated by the government) envisages that the size of India’s textile industry would grow from the current US$ 37 billion to US$ 85 billion by 2010 and that the value of the industry’s exports would grow to US$ 50 billion by 2010 and India’s share in world textile exports will be doubled to six per cent from the current level of three per cent. India is already a favoured destination, particularly in view of the abundant availability of cotton, cheap access to funds - technology upgradation fund (TUF), traditional textile expertise, abundant and skilled labour, designer skills, etc.

The company’s growth potential in its segment of business is enormous especially in view of the financial situation of manufacturers in developed countries. While Pillowtex (once the second largest company) has already gone bankrupt, the other two companies viz. West Point Stevens and Dan River are on the verge of closure. This means that 70,000 to 80,000 tonnes of the towel market is up for grabs. This has resulted in an expanded business opportunity for major players like Welspun. Besides this, many of the top retailers have started sourcing from countries like China, India, Pakistan, etc. The company has excellent relationships with the likes of Wal-Mart, JC Penney, Shopko, Tommy Hilfiger, Calvin Klein, etc to which it has been a regular supplier. It has also tied up with “Nautica” brand and is its sole licensee for the Canada and US markets.

Welspun is accredited with the Supima registration for terry products and is a certified user of the Egyptian cotton logo. Apart from being ISO series accredited, it was also bestowed with the international supplier of the year award (2002) from Wal-Mart and Shopko Stores of the US and Operational Excellence Award (2003) from JC Penney Stores, Inc. of the US. It is also the proud recipient of awards from the GOI, govt of Gujarat and, Texprocil for Special Achievement and Outstanding Export Performances. Welspun expanded its brand across the national boundaries and created recognition across countries with its contemporary designs and quality products.

Welspun has moved into bedsheeting too, what is the strategy for this product?

Most of the companies started with one product and have become over a period of time mutli-product companies. Welspun would be largely benefited by this since for the following reasons:

• Same customers
• Same buyers
• Same raw material
• Same processing

This expansion will enable Welspun to cater to 80 per cent of the home textiles market.

What are your future plans and strategies in the domestic market?

In the domestic market, the company’s retail mission for ‘Spaces’ is to bring in the concept of fashion, hygiene and coordination in home textiles. Through this three-pronged strategy the company will cater to the needs of all consuming categories - the elite, the mid-segment and the discount freak. In the domestic market, the company has also tied up with Tommy Hilfiger for marketing its products at the top end of the market. The company plans to garner around 25-30% of the domestic home textile market in the next 2-3 years.

Welspun is also expanding its capacities....

Besides the existing towel and spinning unit at Vapi, we are also setting up a new unit at Anjar, Kutch, with the following capacities :

Terry Towels -13,000 mtpa

Cotton Spinning - 25,000 spindles

Bedsheets - 35 mn sqr.mtrs p.a.

The company has an existing capacity of 12,800 mtpa and post expansion the towel capacity would stand enhanced to 24,000 mtpa. The project cost is estimated at Rs 575 crore.

Where do you see Welspun over the next five years?

Our preferred areas in the next five years would be bed and bath linen and we expect to reach Rs 2000 crore in the home textiles segment. Post commissioning of the expansion plans we will be globally competitive becoming the third or fourth largest player in towels in the world. US is the major market for Welspun.

Will you continue to focus on the US, or increase your presence in other markets too?

Welspun accounts for a quarter of all home textile exports from India. The company exports more than 90 per cent of its towels to more than 34 countries. Internationally, the company exports more than 68 per cent of its production to the US, 23 per cent to Europe and balance to the Middle East, Australia, Mauritius.

The company has already tied up with Nautica brand to capture high end markets of Canada and US. It is strengthening its US operations through its wholly owned subsidiary Welspun USA, with 30 per cent of its business in the US being managed through its own distribution centre in New York. Continuous product development, strengthening supply chain management, innovative designs, etc are some of the measures the company has adopted for exploring export markets.

The US industry is trying hard to prevent Chinese textiles from flooding the US market. Do you expect similar moves against Indian textiles, and particularly home textiles too?

Chinese manufacturers currently hold a big sway in the US markets. This is expected to grow further. However, representations against China’s dominance are increasing day by day. American producers at various stages have alleged that China is dumping its goods in the US. The US, however, has a tool under the WTO to impose restrictions on Chinese exports to the US till the year 2008. This would to an extent reduce the Chinese risk factor. Moreover, it is understood that all the major US retailers will prefer to have 2-3 alternative countries for their sourcing requirements. China also is a net importer of cotton as compared to India which is a net exporter. Therefore in cotton textiles, India definitely stands a better chance against China. Buyers will certainly consolidate their purchasing to India, which has huge advantages in terms of a cotton growing base, cheap labour, and falling capital costs. As such, India is well placed to emerge as an extremely cost competitive player.