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Sowmya Sundar

The past five years have been difficult for the textile machinery industry. Lack of orders and liquidity crisis eroded the net worth of quite a few companies. Veejay Lakshmi Engineering, a Coimbatore-based company with a turnover of just over Rs 100 crore, is one of the few that have managed to emerge from the red. With a presence in two niche product ranges, automatic cone winders and two-for-one twisters, the company is looking forward to a better future. In an interview to Business Line, the company's Managing Director, Mr J. Anand, shares his view on the industry and the prospects for his company.

Excerpts from the interview:

The year 2002-03 has seen quite a few textile machinery manufacturers posting better results and improved offtake. Does this signal a sustainable improvement in demand for textile machinery?

In our opinion, the improved offtake is mostly for modernisation and replacement and also to equip the user industry to produce better quality yarn both for the domestic and export markets.

With severe competition in the market, all textile mills are looking for new avenues to market their yarn with better price realisation. This is compelling the mills to equip themselves with machines of latest technology, which gives better quality and productivity.

Textile machinery exports have been stagnant over the past few years. How do you see the trend going? Indian textile machinery is considered uncompetitive in the domestic market, which is primarily catered to by imports. But how are textile machinery manufacturers placed vis-à-vis foreign competitors in the overseas markets?

The excess capacities in installed spindlage and worldwide competition is forcing textile mills to look for machines which are available at competitive prices. India has been mostly exporting to developing countries such as Indonesia, Thailand, Vietnam, the Middle-East and Africa. There is bound to be an increase in demand from these countries whenever they make investments either for modernisation or expansion.

Further, there is also the possibility of tapping the South American market. Most of the machines for the spinning industry produced in India are comparable with those of the developed countries in term of quality and productivity.

There has been lot of buzz about promising export prospects to Pakistan and Bangladesh? How competitive are we in these markets and what is the scope for exports to these countries?

The machines available in India are technically and commercially appropriate for these countries. Already, there are regular exports to Bangladesh. The exports to Pakistan will depend on the political relationship and Islamabad removing the ban on import of textile machinery from India.

The Government has announced a Textile Reconstruction Fund, a debt-restructuring scheme for the organised textile industry. What does it mean for the domestic textile machinery manufacturers? How long will it take for the industry to reap the benefits, if any?

The full operational details of the scheme are still not available. In our opinion, this fund is meant for replacing the existing debts of textiles mills and to bring down their cost of funds. If this helps textile mills improve their cash flows, it will certainly encourage investments in capital goods as well.

Quite a few companies have started joint ventures with overseas manufacturers, have converted themselves into 100 per cent export-oriented units in order to get the benefits of concessional imports, or have entered into buyback arrangements with overseas manufacturers. Is this a promising opportunity?

The 100 per cent EOUs produce mostly for their overseas partners, taking full advantage of the cost benefits available in manufacturing in India. Joint ventures mostly produce for local markets.

This results in the production of machines of latest design and technology in India and will benefit the user industry. But the Indian partner will continue to be dependant on foreign partners for technology, market support and exports.

Over the years, the share of imported textile machinery has been surging in the domestic consumption. Will this trend continue given the current circumstances and the fiscal policies?

A major portion of the imports is in the weaving and processing segments and this will continue till machines of good quality at competitive prices are made available in India. If the Government changes its policy of permitting import of second-hand machines, the imports may decline to some extent.

Veejay Lakshmi has a near monopoly in its product range. What is your market share? How is the demand? What is the order-book position ?

We continue to maintain a market share of above 70 per cent for our twisters and around 20 per cent for winders, which is expected to go up in future. We have firmed up orders for the next 3-4 months for twisters. We also expect orders from the NTC both for twisters and winders and this will keep us busy for the next 6-7 months.

Are exports looking up? What are the markets that you are exploring?

We did not make any exports in the previous year but in the current year we have received orders from Nepal, Thailand and Indonesia. There is still good scope of exporting our twisters to Iran, Egypt and also to Vietnam and China.

What are the future prospects for your company?

We will concentrate on expanding the market for twisters and increasing the market share for winders. Both our products are used in textile mills for processing of yarn mainly for exports.

The removal of quotas will result in increased demand for textile exports from India, which will have a positive impact on the demand for our machines.

Are you planning to retire some more debt during the year? What is the average cost of borrowing?

We have already repaid all the loans taken from IDBI and ICICI. The only term borrowing is now from TIFAC at 6 per cent. The working capital facility is partly utilised in the form of foreign currency loans, packing credit, and so on, at lower rate of interest. Our aim is to keep the average cost of funds 6-7 per cent per annum.

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