The Hindu Business Line : Eastern Silk takes the route to China

Eastern Silk Industries Ltd (ESIL), a leading manufacturer and exporter of silk goods, has completed all formalities to set up a joint venture silk yarn spinning unit at Quanshi province in Central China, entailing an investment of over $5 million.

The proposed joint venture, which is its maiden project on the foreign soil, will have two more promoters, one from Hong Kong and the other from China. The company may either invest directly or through one of its subsidiaries. The production is expected to begin within a few months.

Announcing this here, Mr S.S. Shah, Chairman and Managing Director of ESIL, told newspersons that his company would have a buyback arrangement to obtain the China venture's entire yarn production for its weaving operations in India.

Mr Shah said that the company had two weaving and processing plants in Karnataka and a twisting plant at Falta export processing zone in West Bengal, with a total production capacity of about 300 tonnes of silk fabric.

ESIL consumes about 900 tonnes of raw silk per annum, of which about 500 tonnes are imported from the open market in China. The remaining 400 tonnes are sourced from within the country.

The company now needs high quality yarn to produce quality fabric for its overseas buyers. Since the quality of imported raw material varies, an initiative has been taken to set up a joint venture, thereby, ensuring it to get at least certain percentage of high quality silk yarn from China. The venture will supply about 100 tonnes of yarn per annum to ESIL.

The product mix of the proposed venture will include Dupion yarn, filature/mulberry raw silk and twisted yarn.

All these yarns are used for the manufacturer of premium fashion fabrics and home furnishings. Mr Shah said that the venture was expected to help bring down not only the cost of production but also would ensure quality of finished goods.

Incidentally, ESIL exports 40 per cent of its total production to the US and about 54 per cent to Europe and the CIS countries.

It recently clinched sizable business at the recently concluded Decosit Fair in Brussels.

This is expected to open up trade channels with the European buyers and give a shot in the arm to the company's export thrust. Though it exports about 90 per cent of its total output, it has set a turnover target of about Rs 400 crore by 2005-06.

ESIL, which ended the fiscal ended March 2004 with a turnover about Rs 273 crore posting a net profit of about Rs 19 crore, has approved a scheme of amalgamation under which Eastern Jingying Ltd and Stella Silks Ltd would be merged with it.