Indian Company Arvind to partner with Chinese mill for denim (Indian)

In a bid to cash in on the declining denim capacities in China, textile conglomerate Arvind Ltd. is set to partner with a local denim mill there to tap the Chinese market. The textile conglomerate is banking on its superior quality denim fabric to make a mark in the neighbouring country.

"We are going to partner with a denim mill in China and plan to sell our denim fabric there. Not only is our denim fabric superior in quality to that of China, it is also about 10 per cent cheaper in cost," said Sanjay Lalbhai, CMD, Arvind Ltd. Talking about the company's export plans, Lalbhai said that with the US and Europe markets not doing good in the fiscal 2011-12, the company is now focusing on newer regions like South East Asia and Brazil, apart from China.

"Exports will remain good for us. It is rather the domestic market that is a worry. However, it is an aberration. Our long term view is that the Indian domestic market will outperform exports," he added.

Internally, the company has planned an investment outlay of Rs 300 crore for expanding its brands, retail, and technical textiles business segments in the 2012-13 financial year. "Brands, retail, and technical textiles will be the three major avenues for investment this year," said Lalbhai. Apparently, higher inventory cost had left squeezed Arvind's operating margins in its brands and retail segment. Add to that, poor domestic economy had resulted in weak retail demand in the country in last couple of quarters.

However, the company is expecting both input costs and retail demand to improve post June, said Lalbhai.

Meanwhile, Arvind Ltd., which saw its CARE rating rise from BB to A minus, is looking to bring down its debt:EBIDTA ratio to 2 in next two years from the current 2.9. "This way we expect our rating also to move up to AA," said Jayesh Shah, director and CFO, Arvind Ltd.