Denim garments maker Suryalakshmi Cotton Mills (SCM) is executing a Rs 285-crore investment plan for expanding its spinning capacity and setting up a 25 MW thermal power plant in Nagpur.
The company is looking at adding a capacity of 50,000 spindles in two phases to its existing capacity of 60,000 spindles, anticipating an almost 10 per cent growth in the domestic denim market in the next few years.
The Indian denim market is estimated at 400 million metres annually, with about 20 major players, including Arvind and Raymond, dominating the market. These players produce about 620 million metres of the material annually, with 220 million metres being exported to various foreign retail brands.
“In the first phase, we will be adding 25,000 spindles to our weaving facility in Andhra Pradesh at an investment of Rs 80 crore — this is expected to be completed within the next 12-15 months,” Mr Paritosh Agarwal, Managing Director, told
In the second phase, the company will subsequently add another 25,000 spindles at a cost of Rs 80 crore. “We have tied up funds for the first phase, with a 50 per cent debt component. For the second phase, we may consider going in for a small preferential allotment of about Rs 40 crore,” he said.
Simultaneously, it will add about 4 million metres capacity at its denim plant at Ramtek near Nagpur, which has a current capacity of 40 million metres per annum. It exports nearly 50 per cent of its denim production to major brands in the US and Europe such as Walmart, Tesco, NEXT and Sainsbury.
With power costs in Nagpur being relatively high, the company is setting up a Rs 125-crore 25 MW thermal power unit there, which is expected to be ready by the first quarter of 2012. “We will be using about 10 MW of power from the unit. With this, we expect our power costs to go down from the current Rs 4.50 per unit to less than Rs 3,” he said.
Denim prices to soften
Mr Agarwal said denim prices, which had moved up in the first quarter of 2011, will soften, with cotton prices coming down sharply last month.
Cotton prices had touched Rs 60,000 per candy in March this year, almost double the price prevailing a year ago — in April it fell to Rs 40,000 to Rs 45,000 per candy. “Denim prices may soften to Rs 155 a metre from current levels of about Rs 170 a metre due to the fall in cotton prices. We will be looking at lowering our prices next month,” Mr Agarwal said.
SCM had clocked a net profit and total income of Rs 34.80 crore and Rs 612.18 crore last fiscal.