When global economic turmoil was on its peak shivering all industries, India’s Rs 120,000 crore synthetic textile industry sustained over five percent growth continuously driven largely by value added segments. Since then, the industry has trebled growth percentage to rapidly narrowing the gap between use of cotton and synthetics in textile industry which shows that synthetic textile is the future of India, says S K Khandelia, Chief Executive Officer and President of Sutlej Textiles and Industries Ltd, promoted by K K Birla and one of the largest producers of value added dyed and mélange yarns in India in an interview with Dilip Kumar Jha. Edited excerpts :
Six months to December was a glorious period for textile industry. What changed suddenly so that trouble started brewing once again?
July to December is normally a good period for textile industry due to seasonal reasons. This year, after December cotton prices moved up significantly but cotton yarn prices remained stable resulting in pressure on margins. Besides, volume of exports of cotton yarn to China has come down in recent months putting pressure on domestic supply. However, Sutlej is insulated from such fluctuations as we are into value added dyed and mélange yarn segment and our exports to China is negligible.
What is your strategy?
We have wide product range and we are one stop supplier of all types of spun yarn in any count upto 60s in any blend of natural or synthetic fibres in any colour in grey, dyed or mélange. Thus we have the flexibility to change the product mix from time to time.
Did your change in strategy help on export front?
Yes. We concentrated on export of value added yarns and which helped us in improving our margins. Our overseas buyers are spread over more than 60 countries. During FY14 our exports increased to Rs. 445Crores from Rs 326 crores in previous year.
India is way behind global average of cotton-synthetics mix in garments. Where are we lacking?
Share of synthetic textiles in total textile in India is abysmally low at 35% as against 65% globally due to high burden of taxes like Excise Duty, Custom Duty etc. However, due to limitation of land for growing cotton to meet the increasing demand for domestic and export markets, synthetic textiles is the future of textile industry in India and hence needs to be encouraged by rationalizing duty structure as envisaged in the National Fibre Policy.
This is mainly due to following faulty policies by the Government over decades. While there is no duty on cotton and cotton yarn, synthetic textiles are subject to various duties and consequently we did not get manmade fibres at international rates while our competitors are getting the same at international rates. Thus we are out-priced in case of synthetic whereas in cotton we are getting advantage of nil duty.
Elevated cotton price estimates pose a threat for domestic textile industry. Will it affect demand going forward ?
No, since as a practice we book raw material five months in advance which helps us to mitigate increase in raw material costs including cotton. For synthetic yarns, however, raw material prices are governed by global markets. Hence, it will not affect demand in future.
What is your future plan?
We are looking for further expansion of our textile business by greenfield and brownfield in India and abroad. We are generating cash flows and hence funding of a project expansion will not be a problem. Our debt-equity ratio stands at a very comfortable level of 0.6% and our utilization of working capital limits is below 70%.