The Hindu Business Line : Garden Silks losing out to big players

Mumbai, July 17 Gujarat-based Garden Silk Mills, well-known for its Garden Vareli brand of sarees and dress materials, will restrict production of the same to the current numbers and has no plans of expansion.

This is due to a continuous fall in its revenues from the segment, because of entrance of big retailers, said a senior company official.

Too may players

Due to the presence of “too many players in the unorganised sector,” the company will not expand its fabric division, even though the sector as a whole is booming, he said.

Instead, the company informed BSE that it has tied up with China Textile Industrial Engineering Institute to set up a continuous polymerisation plant with a capacity of 2,60,000 tonnes per annum.

backward integration

This is in keeping with the company’s plans of expanding its backward integration, which is more profitable than its fabric business, said the official.

Of the over Rs 1,200-crore sales of Garden Silks, only Rs 200 crore comes from sarees and dress materials, while the rest is from its yarn and polyester manufacturing.

It has also tied up with Oerlikon-Barmag of Germany and TMT of Japan who will supply machinery and technology for the polyester yarn plant with a capacity of 55,000 tonnes per year.

This is the second phase of expansions of the plant in Jolva, Gujarat, which was set up in August 2005. A total investment of Rs 350 crore has gone in to the expansion of continuous polymerisation and yarn manufacturing, of which one-third will be funded through internal accruals while the rest through bank loans.

To double turnover

The company hopes to double its June 2007 turnover of Rs 1,300 crore to Rs 3,000 crore in October 2008 when the new plant will start functioning.

The company is open to tie-ups with malls for setting shops but will not make further investment in the retail business, he said.

It currently has 293 retail outlets in 65 cities with 18 company owned depots.