Gokaldas Exports sews up new tactics to stay afloat

The country's largest apparel exporter, Bangalore-based Gokaldas Exports, which has been posting losses quarter after quarter, is sewing up new tactics to counter the negative trend.

From addressing labour shortage in the city by moving capacity to Tier-2 towns and striving for better pricing from buyers to investing in technology, product development and modernisation, the company is looking at various strategies to achieve a turnaround soon.

No easy task

Given the challenges of sluggish consumer spending globally, spiralling raw material costs and currency volatility, the task of getting the company back on track will not be easy, says Mr Gautam Chakravarti, a senior executive from PE firm Blackstone who will take over as the CEO of the company from April 1. (Blackstone acquired Gokaldas Exports in 2007 and has a 68 per cent stake in the company.)

“Customers still have the pricing mind-set of the recession when they brought down prices by 10-15 per cent. Cotton prices are also going up each day, squeezing vendors literally. We are negotiating with buyers to take back pricing to levels where we can earn minimum levels of profitability. But this has to be done carefully; if we are too aggressive we could lose business. Some of our long-time buyers are agreeing to price increase, but this is a gradual process and will not happen overnight,” says Mr Chakravarti, who has earlier had stints with Hindustan Lever and Reliance.

Attrition

The other issue is that of severe labour shortage in Bangalore; attrition at 8 per cent is also high.

“Each time a mall comes up, the industry loses around 1,000 people. Gokaldas currently employs 38,000 people. We plan to consolidate our operations and move capacity outside Bangalore to our new factories in the nearby areas of Tumkur, Bangarpet, Madanapalli and Mysore, where stable labour is available.”

An inflationary environment has resulted in a significant correction of wages.

“In India, daily wages work to $125 a month, much higher compared to Bangladesh ($60), Vietnam ($80) and Indonesia ($100). Of course, this is justified given the inflationary environment,” says Mr Chakravarti, who will be taking over the family-run business from the Hindujas.

Rupee-dollar equation

Even as Gokaldas, which posted a turnover of Rs 1,068 crore in the last financial year, hopes for consumer spending to rise and the rupee-dollar equation to turn favourable, it is also the time to introspect. The company will invest in raising production efficiency, improving service, modernisation, design and product development, says Mr Chakravarti.

“We have around 40 customers, including big names like Gap, Nike, Adidas and Esprit, and we want to deepen the relationship with each of them, instead of going after more customers. Our endeavour is to be more relevant to our customers. We could also expand into emerging categories like industrial clothing.”

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