polo ralph lauren purple label Indian textile firms eye global brands

the polo towers Indian textile firms eye global brands

Companies chalked out massive expansion plans to build size and to become more competitive.

And at a time when most weavers and garment manufacturers have been in the news for raising money and expanding capacities, home textile players have been catching attention for a different reason buying foreign brands. These are the first such acquisitions by the Indian home textiles industry.

India’s largest terry towel producer and exporter and Asia’s fourth largest terry towel player, acquired 85 per cent stake in CHT Holdings, the holding company of UK’s largest and number one terry towel brand Christy, also the world’s oldest towel company.

The acquisition, announced earlier this month cost Rs 132 crore (Rs 1.32 billion). GHCL a domestic soda ash major with no major presence in textiles followed suit and announced two acquisitions in the last six months for about Rs 450 crore (Rs 4.5 billion).

After buying the third largest US home textiles player, Dan River, in December 2005, the company bought UK’s largest home textile retailer, Rosebys last month.

India’s exports to these markets are also growing at a scorching pace terry towel exports to the US grew at 26 per cent and bed sheets at 35 40 per cent in calendar year 2006.

Sunil Khandelwal, CFO, , has an answer. “Indian players have created capacities. Now it’s time to create markets,” he says.

“As we move to the higher end of the market, there is less competition. Our strategy is to attain higher market share in the branded business,” adds Rajesh Mandawewala, joint managing director, and chairman of Christy.

“Our company has become the world’s first fully integrated home textiles company that has a presence from spinning to retailing with strong brands and distribution set up,” adds Nikhil Sen, senior general manager, corporate finance and strategy, GHCL. It goes without saying that branded products fetch higher margins.

In a nutshell, these acquisitions will help the companies create a foothold in the brand conscious markets such as the US and EU, which are otherwise difficult to get into.

So far, Asian companies have gained from a surge in sales to developed markets primarily driven by shutting down of capacities in those markets.

However, since these companies are into the commodity business of manufacturing products for leading brands, expanding margins beyond a point would be difficult. But with branding and retailing, companies can hope to improve their margins substantially.

Says Sonal Shrivastav, analyst at Religare, “Indian companies are doing the right thing by moving up the value chain as the highest value addition is at the retail level. And if companies are integrated, it will boost margins.”Welspun is currently into the mid range of the terry towel market and supplies to a balanced mix of mass merchandisers, specialty and fashion stores and well established designer brands such as J C Penney, Kohl’s, Target, Nautica, Tommy Hilfiger, Polo Ralph Lauren, Umbro, Bed Bath Beyond and Macy’s.

The company at present does not have a brand of its own in the global home textiles market though it has license to market the Nautica brand in India and Tommy Hilfiger in the US and Canada.

With exports accounting for 90 per cent of the total turnover, Welspun entered the domestic retail business last year through its brand Spaces and Welspun Home Mart under the aegis of Welspun Retail Limited.

With the acquisition of the premium brand Christy, 20 per cent of the company’s consolidated sales would come from branded products by FY07.

Says Priya Ayyar of IDBI capital, “Welspun’s move is a big positive for the company especially in terms of access to the high end premium segment and the quality conscious European market.”

The company will also be able to sell Christy brands in the domestic market through its more than 50 Spaces outlets. “Our company would benefit from Christy’s strong design and development skills, distribution set up and technical know how,” says Mandawewala.
polo ralph lauren purple label Indian textile firms eye global brands