Gokaldas explores industrial wear

Blackstone-controlled Gokaldas Exports, India’s biggest garment exporter, is exploring an entry into industrial wear to take advantage of better profit margins. This comes at a time when apparel buyers are still looking for prices that were offered during the economic downturn.

The Bangalore-based company, which has clients like Gap, Nike, Reebok, H&M, Diesel, Banana Republic and Zara, is present in apparel categories like woven wear, knitwear and formal suits. The company is in talks with a couple of industrial wear companies for possible deals. Industrial wear consists of uniforms for staff of businesses like airlines and hospitality chains.

“We are in talks with two-three industrial wear buyers from US and Europe. We hope to start manufacturing in a few months,” said Rajendra Hinduja, director, Gokaldas Exports. The company is looking to convert one of its existing manufacturing facilities for production of industrial wear. It will decide on manufacturing quantity on the basis of the orders.

During favourable market conditions, the company’s operating profit is around 12 per cent and the net profit is around 6-7 per cent for its apparel. In the present scenario, profit margins are learnt to be at nearly half of that. The company is expecting industrial wear to net profit margins that are almost on a par with peak levels of its other apparel offerings. “There is a big market for industrial wear and hardly any organised makers in India,” said Hinduja. While no formal figures are available on the market size for industrial wear, rough estimates are that it could be a $5 billion market worldwide.

For the third quarter ended on December 31, 2009, Gokaldas Exports reported a net profit of Rs 0.93 crore as against a loss of Rs 15.44 crore during the corresponding previous period. Absence of forex losses was attributed to its emergence back into the black. Meanwhile, escalating cost of raw materials continue to be a hindrance to growth.

“Though buyers from the western markets have increased their purchase volume, the prices offered by them are similar to the one offered during the downturn. Indian raw materials have risen 15-18 per cent (especially cotton fabric prices) and the export prices have not correspondingly increased. As a consequence of this situation, profitability has been hit,” said a statement from the company.

Blackstone owns 68 per cent of the company while the promoters hold 20 per cent and rest is held by the public. The company has a manufacturing capacity of one lakh units a day.