Haberdasher to the world

In 1949, long before ‘Make in India’ became a catchphrase, Needle Industries, a company from Studley in the UK, chose to invest and manufacture in India.

Oddly, it did so after Independence, when the country was barely two years old, and most Englishmen had made their way back to Old Blighty.

The company decided to set up its plant 7,000ft above sea level, in the Nilgiris, near Ooty. This had nothing to do with the British proclivity to head for the cooler climes of hill stations. Rather, it was a decision dictated by the product it wanted to make: the gramophone needle.

“Gramophone needles are made of unplated steel but need a good finish so they can sit in the groove of a 78 rpm disc and play music. For that, it is important to have a dry atmosphere — even a little rust kills the product. In the Nilgiris, humidity is very low for nine months of the year,” explains Theo Devagnanam, managing director of Needle Industries India Pvt Ltd, as the company is known today.

The British firm had a stroke of luck in finding the Nilgiris property. One of its directors had a friend who was a tea planter and was alerted to an estate with an idle brewery, the Rose & Crown.

Brewing history

According to the Madras District Gazetteers of 1908, authored by W Francis, the Rose & Crown was established in 1895 by one Muni Huchanna. “He sold it in 1900 to Mr C Akilanda Aiyar… and it is now the property of a limited company and holds the contracts for the supply of the troops at Wellington, Trichinopoly and elsewhere,” it adds.

In its time, the Rose & Crown is said to have slaked the thirst of Boer prisoners captured by the British during the Boer War of 1899-1902, some of whom were interned at Trichinopoly.

The 1916 edition of the Nilgiri Guide and Directory, a “handbook of general information upon the Nilgiris for visitors and residents” by JSC Eagan, also has an ad touting the brewery as a regimental supplier and brewer. “Our Pale Ale and Stout in bottles can be obtained from Messrs. Spencer & Co., Ltd. Ootacamund, Coonoor and Madras, or at the brewery,” it notes.

The Rose & Crown, along with four other breweries in the south, came to be owned by United Breweries in the early 20th century. According to an entry on the company’s website: “United Breweries Limited was founded on March 15, 1915, in Madras, by Thomas Leishman. UBL manufactured and sold only bulk beer for troops in both the World Wars. It was a classic case of role reversal — India being introduced to this ‘exotic’ brew and in turn becoming its major exporter.”

A few decades later, the same thing would happen with needles.

The post-Independence era

When India won independence, prohibition, first imposed in parts of the Madras province by C Rajagopalachari after he became its Premier in 1937, was reintroduced. And the Rose & Crown was forced to shut shop.

It was in these circumstances that the Needle Industries team found it. “When they came out here in 1948 to view the property, they made an 8mm movie of the premises, in colour. I have that film,” says Devagnanam, 59.

Even today, remnants of the plant’s origins keep popping up. “We find bottles of beer dating back to the brewery from time to time,” says Devagnanam, carefully taking out a couple of them from a cabinet. He also has two giant wooden casks on display outside his office.

In 1949, the company leased the premises and commenced operations. Soon after, it bought the property.

Thus began the saga that would see the needle factory in the blue mountains become haberdasher to the world.

Becoming Indian

In 1949 and long after, however, Needle Industries was still a foreign subsidiary. In the 1960s, Newey Brothers, a haberdasher, bought a stake in the British subsidiary.

Seen today, the shareholding pattern at the time was very interesting: legal documents show that in 1963 Needle Industries of Studley owned 67.96 per cent of the Indian unit, followed by Newey Bros with 32 per cent. TA Devagnanam (the current MD’s late father) was the managing director and the only Indian shareholder, with 0.04 per cent, or six shares.

In 1973, the Foreign Exchange Regulation Act (FERA) made it mandatory for foreign firms to Indianise their assets, with at least 60 per cent local equity participation. The company’s Indian shareholding had risen to 40 per cent by 1971, but it was still below the minimum.

At the time, say the legal papers, Glasgow-based Coats Patons Ltd, had taken over Needle Industries of Studley and controlled the entire foreign shareholding. With a deadline looming for transfer of ownership to Indian shareholders, a tussle for control ensued between Devagnanam Sr and Coats.

“The Articles of Association of this company clearly stated that if an existing shareholder was willing to buy the shares at a fair value, there was no way you could sell to somebody else. Coats was not prepared to accept this,” explains Devagnanam.

Coats wanted to disinvest in favour of its nominee in India, he says. “They wanted to retain control of the company. They knew well that once we became independent, we would compete with their subsidiary in the UK, which was our parent (from Studley).”

In April-May 1977, the Indian shareholders got majority ownership through a rights issue after a board meeting that the foreign shareholders could not attend — they got to know about it too late. The battle then spilled over into the courts. Eventually, in 1981, the Supreme Court ruled in favour of the Devagnanams, but ordered them to compensate the foreign shareholders.

And so, a quarter century into the company’s existence, Devagnanam Sr, who had been managing Needle Industries India all along, ended up owning 60 per cent of the company, with his family.

Today, the British parent, Needle Industries, is no longer in existence. The Indian company is a global leader in haberdashery products. And Coats is its biggest client in the US and continental Europe.

Worldwide demand

Gramophone needles are still very much a part of Needle Industries India’s business. But over the years, the company has expanded into manufacturing a wide range of products.

Hand-knitting needles and accessories are its mainstay, accounting for 30-35 per cent of the turnover. Hand-sewing needles contribute 25 per cent, while surgical suture needles bring in 15 per cent of its revenue. The rest comes from pins, safety pins, sewing machine needles and knitting and sewing accessories, among others.

India is its biggest market, accounting for 30 per cent of the turnover. The rest is from export to just about every country the world over, barring a few in Africa and West Asia.

Production takes place entirely in the Nilgiris. “We make products both for our brand, Pony, and private labels,” says Devagnanam. “Everything is retail packed, ready for the store shelf.”

The company has just over 1,000 employees. Saravanan, senior works manager at one of the units, says a majority on the shopfloor belong to the indigenous Badaga community. “They are hard-working. But if there is a festival or a marriage in the community, many don’t show up, and we have to rework our production schedule,” he says with a grin.

The company’s Pony brand has become something of an icon in the haberdashery world. And, inevitably, has led the Chinese to make counterfeits. “One of our customers from Chennai went to China and found a manufacturer using our brand,” says Devagnanam. “The product is inferior, but by using the Pony brand in the local market, they’re able to get double the price of the other brands.”

The company’s turnover is modest at ₹124 crore, but it has been profitable. It has a comfortable debt level, with only ₹17 crore outstanding, which credit rater ICRA has certified stable. In a February 2014 note, the agency reaffirmed its rating commending Needle Industries’ healthy accruals, comfortable liquidity, and “steady demand for the company’s products across economic cycles”.

Indeed, Devagnanam says that Needle Industries weathered the global economic downturn without too much difficulty, barring some hiccups when the rupee appreciated and commodity prices shot up. “When there’s a recession, the industry does marginally better. There is more repair of garments,” he says. The late George Taylor, who put forth the theory that hemlines drop during an economic downturn, may well agree.

With the global economy still shaky, metal prices falling (steel is one of the company’s main raw materials) and the rupee holding steady at 60-plus levels, it’s fair to expect the exporter to do well.

E-commerce venture

In 2012, the company waded into the e-commerce waters. There is a large needle-craft market in India, says Devagnanam. “But there are no craft stores, as in the West. It is a difficult market to reach because it consists of individuals,” he says.

In a bid to capture a piece of this market, Needle Industries India set up the Pony Craft Store portal. Devagnanam says the response has been good and expects to close the financial year with ₹75 lakh in revenue. The orders and the unit values are small but the company gets thousands of orders.

Bhavana Stephen, an avid knitter and long-time customer from Coonoor, is all praise for the products. “I learnt to knit with Pony,” she says. “Earlier, they were not selling a lot of their high-end stuff in India because the quantities sought were too small. So, a lot of us knitters used to get together, place a bulk order and split it.” Now, the mother of three just orders online.

Elated by its success, the company is now finalising plans to sell its products through other e-commerce sites, such as Amazon.in.

Whether hemlines rise or fall, the gramophone needle maker in the Nilgiris is clearly in tune with the times.

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