The Hindu Business Line : `Post 2005, volumes can grow by 10-15 pc'

Few would have heard of Orient Craft, with the exception of players in the textile industry. So you would be surprised to know that it is India's largest garment exporter. Catering to the higher end of the market, the company has an estimated turnover of about Rs 450 crore. This, in an industry where very few can boast of even a Rs 100-crore turnover, given its fragmented nature. Mr Sudhir Dhingra, Founder, Chairman and Managing Director of Orient Craft, appears confident of his company's ability to deliver consistently and to remain the numero uno in the market. In an interview with Business Line, Mr Dhingra shared his views on the prospects for the garment industry post 2005.

Excerpts from the interview:

What is your outlook for the export market post 2005?

If you are a great supplier and offer a very good price and you have the infrastructure that can deliver to demand constantly you will benefit. Unfortunately most of the garment exporters in India are fragmented. You have thousands of very small manufacturers whose annual export is not even 50 lakh. They have not invested in infrastructure, built the factories, trained the manpower; their factories cannot pass compliance.

Today, we have safety compliances, social compliances, minimum wage requirements — you not only have to be aware of them, you need to have the infrastructure to oversee that these things are taken care of. I think the big customers will go to the big exporters who are very strong. The very small customers will stay with the very small exporters. But the mid-sized customers now have opportunities to go elsewhere.

Can you put any number to the kind of volumes growth you anticipate?

It is difficult to say but I think it could be anywhere between 10 per cent and 15 per cent in 2005. People are waking up... There is a lot of investment that is happening.

A number of companies are expanding capacities to capture the growth in volumes...

Capacity expansions are needed. But again you just cannot put up the capacity and not have the rest of the stuff. The market is looking at the shortest possible lead time, the best quality, the best price and the ability to move and change quickly.

Some of the spinning and fabric manufacturing companies are now entering the readymade garments business. They believe that the integrated facilities would give them advantages such as cost control and shorter lead times. What is your take on this?

I do not think that integration will necessarily help. Let us say someone is in the yarn business. These companies have a 5-7 per cent margin. Now he need not make 7 per cent, he may decide to make 5 per cent instead. So he can give up 2 per cent. Then in fabrics, the margins are similar. He can give up an additional 3 per cent. So now he is 5 per cent cheaper. But suddenly when he gets into the garment business he is in for a big shock, because the garment industry is a highly labour-intensive industry. He is used to having one man monitor 10-15 looms. Here every machine needs three-four men.

And then flexibility is very important. What they (integrated players) do not understand is that they cannot make shirts all day long because one does not get orders for shirts only. They have to make pants, dresses and other things. They will have to end up sourcing from somewhere else.

So garment as a business is a stand-alone one. I do not think any of these big houses with vertical operations can bring much value. Can you sell all the qualities all the time? If you were in the towel business probably you can. But in the garment business, with the sheer variety of products that is required to be produced, I don't think so.

So what would be the critical success factors in the garments business?

You have to be very efficient which is a challenge because labour is not efficient. You have to have the abilities required to produce multiple garments with the same perfection and efficiency. And efficiency is throughout the chain — starting from how you buy your fabrics. At the end of the day the customer wants a world-class fabric.

What are these international retailers looking for?

Basically every customer wants to know whether you have a history of producing similar goods. Who have you produced for in the past? They will not go to anybody. You have to have a track record.

Are they looking for high-end products?

No, there are different price-points in the garment business. One is the mass market — cheaper prices, decent quality. One is the moderate market where the raw material being used is better, the make and finish is also better and the price is higher. And then there are high-end customers who buy the best and the most expensive fabrics. If you are going to be at the very high-end segment, your productivity is not so high because you have to do a lot in the production processes that delay the production, the costs become higher but you can get a little bit more money.

So which segment you are in is important. Wal-Mart for example is a mass merchant. For them price is very important.

They want a shirt for $3 or $4 because they can only sell it at $16. So it depends what kind of customer you have, what kind of facilities you have, what the customer perceives you to be. If someone came to me and gave me an order for a million shirts but will give me only $4 per shirt, I cannot even make it. My infrastructure is not geared for it.

How do you keep track of fashion?

We are very clued on as a company. I have about 900 people within the group whose job is product development and product support. We spend huge amounts of money in sending our people overseas every week to Milan, New York, Paris, London... They work with designers. We work with some of the best names in the industry. We can tell you exactly what will sell in the summer of 2005. I can tell you in 15 days what would be selling the winter of 2005. We spend about Rs1.5 crore a month on design aspects.

What are Orient Craft's plans?

We are very upbeat about the opportunities ahead. We are considered as one of the top companies. Most of the buyers know us or know of us. We have expanded capacity. We just set up three factories this year. We plant to expand further at least 25 per cent next year. We are expanding our production of pants and jeans in the next 18 months.

Will you remain in garments?

Yes. We don't want to get into yarn or fabrics.

What about home textiles?

We already have a home textiles unit. We started that about four years ago. Our home textiles unit touched about Rs 100 crore worth of sales this year.

Any plans of going public?

It is being considered. But we will not be going public right now because I feel we have not reached our full potential. Maybe once 2005 has come and gone and we are where we think we are.

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