The Hindu Business Line : Raymond sees scope in fabric-to-garment biz

RAYMOND Ltd, the apparel and denim major, believes that there is opportunity in garmenting and has already begun converting part of its fabric production into garments for customers to whom it supplies fabric.

The company, as a part of its future strategy, is expected to earmark 15-20 per cent of its capacity for conversion to garments, while not detracting from the volumes already being sold. The conversion of fabric into garments, or value-addition, has the potential to double or triple gross margins. Worsted textiles, denim and apparel are the company's core areas and investments are likely to be made in these segments, Mr Ajit Mantagani, President (Denim Division), Raymond, said.

The garment industry, according to him, has been held back because of the quota regime. The opportunity in garments, he said, is huge because major clothiers or garment suppliers to the US and Europe, accounting for 75 per cent of global garments and denim consumption, produce 30-35 per cent of the denim required. Therefore, the remaining production has to come from Asia.

Mr Mantagani added that customers were already looking to bypass earlier complex arrangements in the manufacture of clothes. In 2005, large customers would be on the lookout, as they already are, for manufacturers or suppliers that provide integrated operations, which include fabric production, accessories, manpower, low labour cost and technology. Keeping these factors in mind, the company decided to expand its denim manufacturing capacity and put up a 10,000-garment-per-day plant for denim garments, focusing mainly on bottomwear for men, women and children. Commercial export production is likely to start in January 2005. The Yavatmal fabric capacity will come into operation in March-April 2005.

The company's turnover is expected to be Rs 370 crore in 2005-06. Currently, domestic and export sales are on a par. Raymond is targeting a higher turnover from exports at 60 per cent in 2005-2006.

In January, the company announced a Rs 211-crore expansion plan to set up a suit and formal trouser manufacturing facility in Bangalore, a denimwear manufacturing facility in Bangalore and expand the existing facility in Yavatmal.