The Hindu Business Line : Shri Lakshmi Cotsyn to enter denim segment

IN the post-quota regime governing global trade in textiles and clothing, only the low-cost efficient producers leveraging economies of scale in operation could succeed.

A Kanpur-based company is planning foray to western markets using synthetic blends and cotton.

Incorporated in 1988, the Rs 282-crore Shri Lakshmi Cotsyn Ltd (SLCL), with two manufacturing facilities in Fathephur (Uttar Pradesh) and Sonepat (Haryana), has drawn up an ambitious Rs 264-crore investment plan to equip its production facility for entry into the denim and terry towel, bed linens and cotton rich segment.

He said that out of the turnover of Rs 282 crore the company posted during 2004-05, as much as Rs 242 crore came from domestic sale and the balance Rs 40 crore from export mostly to the UAE, Dubai and African subcontinent.

Talking to Business Line here about the new project, the Chairman-cum-Managing Director of SLCL, Dr M.P. Agarwal, said the company proposes to invest Rs 264 crore in the next couple of months.

The funds would be raised through a medley of equity capital of Rs 64 crore, internal accruals of Rs 17 crore and Rs 185 crore by way of funding from the term-lending institutions.

Even as the twin plants of the SLCL have an installed capacity of producing 18 million metres of suiting and shirting fabrics, 10 million metres of cotton fusible interlining and 1.2 million metres of embroidered, laced and printed fabrics every year, the company's total capacity after implementation of the new project would be of the order of 62.5 million metres.

He said in line with global trends, the company intends to equip its production facility with rope dyeing technology for denim and technologically superior machinery for other products to generate revenues of more than Rs 1,000 crore at optimal capacity.

The company proposes to put the project on stream before its current accounting year is over by June 2006.

He said that in the new investment project, as much as 80 per cent is earmarked for exports, particularly to the US and the European continent with the remainder 20 per cent for domestic sales.

Stating that cost economy is to be seen in a total scenario whether it is denim or any other product, Dr Agarwal said that as power and labour cost remain the twin challenges on the cost front, the new project is equipped with agro-based captive power generation.

As the labour cost in Kanpur being slightly above the norm prevailing in Gujarat and Maharashtra, the company proposes to engage 2,500 workers against the general industry norm of 4,000 workers to churn out 2 million metres.

Dr Agarwal said that the company had tie-up with defence outfits such as Defence Research Development Organisation, Defence Materials Stores Research and Development Establishment.

"We have purchased different technology from them and developed products and supplied to them," he said, adding that recently an order for nylon fabrics has been procured from them to supply to defence personnel.

He said the company has procured order for producing nuclear biochemical clothing (NB suiting).

Besides catering to the demands of defence establishments, SLCL has been actively selling in the domestic segments too for various cotton-based clothing at competitive rates. He said the proposed product line such as denim, wide width sheeting, cotton suiting and terry towel have immense demand in the indigenous markets too.

Being an established player in the blended fabrics, quilted fabrics, fusible interlining and embroidered fabrics markets, the company's move into the denim segment would contribute at least 9 to 10 per cent to the company's bottomline, Dr Agarwal said.

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