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| Gokaldas' retail initiative on the upswing |
| Archana M Prasanna & Rashmi Shrikant / Chennai/ Bangalore Nov 11, 2009, 00:26 IST |
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Company launches ‘Cash & Carry’ format.
India’s biggest garment exporter, Blackstone-controlled Gokaldas exports is eyeing a greater proportion of its revenues from the domestic market. To tap the small and medium garment retailers, the company has launched a concept — ‘Cash & Carry’ — which it claims is the first of its kind in the country.
Under the initiative, the company has set up a 25,000 sq ft store in Yeswanthpur where it stocks readymade garments for men, women and children. To encourage smaller retailers, the minimum purchase order has been kept at Rs 10,000. The store began operations in September 2009 and officials say it has received a good response from small and medium garment retail stores on M G Road, Commercial Street and Lavelle Road.
“There are so many small retailers who want to buy garments but can’t buy big volumes. We are circulating the news to smaller towns of Tamil Nadu and Karnataka, and are seeing a positive response,” said Rajendra Hinduja, managing director, Gokaldas Exports.
The move is expected to boost its presence in the domestic market. “We never used to look at the domestic market. We have now started doing it. Awareness has come that we cannot ignore the domestic market. When such market situations arise (recession), we can take care of them by supplying more to the domestic market,” said Hinduja. This year, close to 7-8 per cent of the company’s total sales revenue of around Rs 1,100 crore is expected to come from the domestic market, which has gone up 4 per cent last year.
With fashion trends in the US being a heavy influence on garment buyers in India, the company will not need to make a change in its product mix for India. It is expecting its revenues from India to be 10-14 per cent in the next few years. However, one major drawback in selling to India as Hinduja sees it is the delay of payments by customers. “We have to carefully choose our buyers,” he said.
Gokaldas Exports, which suffered Rs 70 crore mark-to-market (MTM) losses against forward covers last fiscal, has done away with MTM losses in the second quarter of the present fiscal. “The rupee fluctuation we witnessed last year was the worst in the last 40 years. Within a span of about 11 months, the Rupee moved wildly — from Rs 45 and Rs 38.30 and then to Rs 51 — vis-a-vis dollar. The volatality shook the entire exporting industry,” he said. During fiscal 2008-09, the company’s net profit dipped 92 per cent to Rs 3.4 crore from Rs 47.8 crore in the previous year.
After going through the worst, Gokaldas Exports managed to derisk the rupee, by adopting a different forex strategy. “As per the new approach, we conclude an order on the basis of the rate of the rupee on that particular day. Suppose we get an order on a day when rupee is at 45. We lock that rate. So we are not exposed to any ups or downs. We will neither get any bonanza nor will we lose in case of a disaster. This strategy has helped us overcome losses and eliminate uncertainities,” he said.
By doing away with forex hedging losses and better cost management, Gokaldas Exports posted a three-fold increase in its net profit to Rs 9.12 crore for Q2-ending September 2009 compared to Rs 3.05 crore during the corresponding period of previous year. For Q1, the net profit stood at Rs 3.09 crore and forex losses were about Rs 3 crore.
The company has seen the second quarter of the fiscal showing an improvement in retail sales of clothing in the US. “After a disappointing 2008-09, there seems to be a stable trend in the textile and clothing sector. Customer interest and fresh activity is seen in the western markets. However, it is too early to predict a permanent return to normalcy,” said Hinduja. He added that the company’s order book for the Q3 and Q4 is at a comfortable level.
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