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The GST regime has indeed triggered the move from the unorganised to the organised.
Kolkata-based hosiery and knitwear maker, Dollar Industries, is eyeing acquisition of half-a-dozen unorganised players having strong presence in pockets of Northern and Western India.
According to Vinod Kumar Gupta, Managing Director, the acquisitions, worth ₹200 crore, may be mostly funded through internal accruals.
NSE-listed Dollar Industries posted ₹906-crore turnover in 2016-17 and a net profit of ₹43 crore.
Scope for consolidationAccording to Gupta, nearly two-thirds of the ₹25,000- crore hosiery and knitwear market in India is controlled by the unorganised sector, which is finding the going tough in the GST regime due to compliance issues. This opens scope for the the formal sector to consolidate.
This process may accelerate as and when the e-way bill is introduced, bringing an end to GST avoidance. The GST Council has announced that the e-way bill would be in place between February 1 and June 1.
“We are in preliminary talks with four-five regional brands and unorganised players. We could pick up stake in these companies and scale up our holding later too,” Gupta told BusinessLine.
Bottomline boostThe GST regime has already improved the profitability of the company.
“The input tax credit on service tax and excise duty could push up our bottoline by ₹7 crore in FY-18. For a full year, the GST may bring a positive benefit of ₹14-15 crore,” he said.
Dollar Industries reported a net profit of ₹27 crore for the first half of 2017-18. Gupta expects the second half performance to be better.
“In H1 (April to September). growth was sluggish primarily because of trade de-stocking following the general perception and some bad advice,” Gupta said.
The effective tax rate on hosiery products has remained unchanged at 5 per cent (between VAT and GST regimes); but trade panicked. The company saw its turnover grow 4 per cent, year-on-year, to ₹452 crore.
For the full-year, Dollar Industries is eyeing a turnover of ₹1,030 crore, up 14 per cent over last year.
A slew of new launches in the athleisure and gymwear segment, focus on women’s innerwear and kidswear are expected to boost growth. The company continue its push of existing premium and popular brands.
ExportsThe company will also look to ramp up exports to Ukraine (for thermals); Saudi Arabia and African nations like Kenya, Nigeria, Sudan, and Algeria.
“Contribution of exports to the turnover is expected to rise to 9 per cent this year from 8 per cent,” he added.
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