The Hindu Business Line : Textile majors gear up for quota phase-out by expanding capacity

TEXTILE majors are on an overdrive to expand capacity to cash in on the export opportunity arising from the phase-out of quantitative restrictions on global trade from January 1 next year.

The country's three largest textile players - AV Birla group, Raymond and Arvind Mills - have already chalked out ambitious expansion plans to export in a big way once the quota regime is dismantled completely.

The Singhania-promoted Raymond has kicked off a Rs 200-crore expansion drive in the denim, formal wear and worsted fabric manufacturing capacities in time for the January 1 deadline.

The AV Birla group, which has Grasim and Madura Garments in its fold, has also embarked on an expansion plan for augmenting its acrylic fibre and rayon fibre business, with the aim of breaking into the top three companies in the global fibre market, industry sources said.

Arvind Mills, one of the biggest denim producers in the world, recently added 2.4-million-shirts capacity in Bangalore and has commissioned a jeans plant through its Mauritius subsidiary, the sources said.

According to experts, the business opportunities are immense for low-cost fibre and garment producers from India and China once the quotas are abolished.

"With the last release of quota trade happening on January 1, 2005, 49 per cent of the trade is going to be freed. After nearly 50 years of protection, the market will suddenly become open and quotas will not imply assured business. Market shares will have to be gained by competing internationally," a KSA Technopak study said.

According to sources, Raymond is planning to jack up its denim manufacturing capacity by 10 million metres at its Yavatmal plant in Maharashtra at a cost of over Rs 125 crore.

The company also plans to set up a suit and formal wear facility at Bangalore, which is expected to go on stream by early next year.

According to industry sources, the company is also planning to set up a worsted fabric and garment manufacturing plant in Thailand.

The AV Birla group has also drawn up plans to increase the production of acrylic fibre at its Thailand plant over the next three years.

From current capacity of 57,000 tonnes, the expansion programme entails increasing capacity to around two lakh tonnes in a couple of stages.

The group also plans to increase its rayon fibre capacity substantially and go in for production of new varieties of fibre to diversify its product portfolio.

Madura Garments, a division of Indian Rayon, is also gearing up for contract exports in a big way.

Arvind Mills, which supplies shirts to the Old Navy, GAP, Levi's and Osh Kosh brands, among others, has hiked its manufacturing capacity to 7.2 million pieces per annum with a plant in Bangalore, against a capacity of 4.8 million pieces per annum before the expansion.

The company is also looking at hiking its knitwear production capacity from the current capacity of 2.4 million pieces.

According to sources, since sales have been sluggish in the North American and European markets during the better part of last year, the company is also looking at alternative markets.