The Hindu Business Line : Royal Classic `not keen on FDI or tie-up'

THE Rs 225-crore Royal Classic group based in Tirupur, which owns the Classic Polo and Smash brands, plans to come out with an initial public offering (IPO) in 2008 to finance its forward integration and market expansion plans.

But the company is not interested in any FDI or to form any strategic alliance with any particular buyer, according to Mr R. Sivaram, Executive Director, Royal Classic Mills (P) Ltd.

Speaking to Business Line he said the company was engaged in garment manufacture - from the cultivation of cotton through contract farming to manufacture of yarn and production of T-Shits, shirts, trousers and inner wear.

The company's growth till now was propelled by the investments made by the promoter group and through debt. But there was a limitation for growth to happen in this pattern.

He said when "our ambition is to make a Rs 1,000 crore or Rs 2,000 crore company," the IPO route would be the preferred course to raise the necessary resources. As the company was engaged in the entire range of the garment manufacture it would remain the best managed and most profitable company in the industry `in any worst eventuality'.

Mr Sivaram said though the IPO details were yet to be firmed up, once the existing operations settle down, "for the next level of leap, we may have to go to IPO".

He said the proceeds of the IPO would be used only for expansion of capacity and to drive its future growth and not for retiring its debt. He said by the time the IPO hits the market, the existing debt burden would have come down substantially.

He said the expansion would focus on forward integration, setting up brand outlets and on marketing etc. He said at that stage (when the IPO is floated), there would be many firms with standard products but the biggest challenge would be to sell the products.

He said the company's focus was on men's life style products. The next level would be women and children's wear. It would definitely remain within the textile group.

Mr Sivaram said acquisition of `couple of more brands' that were doing well was on his radar.

The company had held discussions in this regard last year but somehow it `could not materialise'.

But as substantial investments have gone into backward integration, `we have put on hold' any brand acquisition for the next three years.

He was open to the idea of expanding his operations beyond Tirupur.

He said the company's profit in 2004-05 might be nearly 10 per cent of the turnover of around Rs 220 crore.

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