The Hindu Business Line : Celebrity Fashions looks to Vietnam as sourcing base

Chennai, July 2 Chennai-based garments exporter Celebrity Fashions Ltd plans to take up manufacturing in Vietnam by partnering with a local garments maker to take advantage of that country’s lower cost structure.

The company will seek out a local manufacturing unit with around 500 machines which will then work to Celebrity’s design specifications for its clients.

While Bangladesh is another country which Celebrity is looking at as manufacturing base, the company is in active negotiations with a handful of companies in Vietnam, said Mr V. Rajgopal, Chairman & Managing Director.

Speaking to mediapersons, he said that Indian units could not match Vietnam in cost — while it costs $2.10 in India per garment in 35 minutes, Vietnamese manufacturers could offer it at $1.10 in the same time.

The plan to take manufacturing to Vietnam; a planned private equity investment from a Singapore-based fund in its domestic retail play, Indian Terrain; an aggressive slashing of a high-cost base; opening of a marketing office in New York; and the roping in of new global brands to export to are all part of a turnaround plan sewed up by Celebrity which had been hit by adverse market conditions and acute labour problems.

Order book

Mr Rajgopal said that apart from some top American labels it was already exporting to — such as Kohl’s, Eddie Bauer, Timberland and Northface — it had bagged a $1.5-million order from another top label, L.L. Bean, and a trousers order worth $4 million from Academy. Altogether, Celebrity has on hand $12 million worth of fresh business and the impact of this on the company would be felt from the fourth quarter of this financial year.

The company incurred a total loss of Rs 19 crore in the last financial year, caused partly by the appreciation of the rupee and the operation of a high-cost trousers plant at the Madras Export Processing Zone which it acquired early last year for Rs 85 crore.

Mr Rajgopal said that over the past year there had been a right-sizing of the mammoth plant which has 2,200 machines and 5,700 workers. This plant was shut down for three weeks when workers struck work resisting efficiency standards the company was enforcing.

Subsequently it was opened after the removal of 200 workers from the payroll. Now, this unit has 2,800 workers while Celebrity altogether employs 7,500 people in units in and around Chennai.

The MEPZ plant, which operated with a fixed cost base of Rs 6.75 crore a month, has seen this reduce to Rs 4.3 crore. Altogether, the company has seen a cost savings of Rs 24 crore over the past year. Mr Rajgopal avers that the worst is behind the company. “I am convinced we have the skills to capitalise on the export business,” he said.

While the skills acquired in garments exports has helped in a robust domestic business with the launch of womenswear in Indian Terrain, the company could look at a demerger and subsequent listing of Indian Terrain if the Singapore-based private equity fund offered a good premium. “We will look at a minimum investment of Rs 100 crore,” he said.

However, Mr Rajgopal said that the company was sitting on cash of Rs 42 crore to invest in its Vietnam project and for the retail expansion of the Indian Terrain brand. This is from the IPO it had in late 2006 and the sale it made earlier this year of a 1,000 machines shirts plant.

The company targets to finish this financial year on a turnover of Rs 345 crore — Rs 220 crore of this from exports — and expects to make an operating profit. Last year it had revenues of Rs 332 crore.

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Celebrity Fashions to sell Chennai facility

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