Web Exclusive: 'Apparel exporters to face bigger impact in next quarter'

Q&A: Rajendra Hinduja, Managing Director, Gokaldas Exports

The country's apparel industry is expected to close the year with exports of just under $8 billion, or about 16 per cent lower than last year's figures. With orders from global retailing majors expected to drop 25 per cent, 2009 is likely to be even more challenging.

Gokaldas Exports — one of the three largest apparel exporters in the country controlled by global private equity giant Blackstone — has so far managed to raise its top line even though forex losses had led to a sharp 75 per cent slide in its second quarter net profit.

The company is looking to beef up its order book by leveraging the Blackstone network and has no immediate plans to lay off any of its 50,000 workers, Managing Director Rajendra Hinduja told Raghuvir Badrinath in an interview. Excerpts:

How has the global economic slowdown hit you?

We are managing to hold on. However, there are a slew of smaller players in the country who have been hit. Majority of the textile industries in the Tamil Nadu belt are bearing the brunt of this downturn.

Bigger players like us may feel the impact during the first quarter of 2009. Orders from buying houses are getting delayed. The recent "Thanksgiving Day" in the US did not bring any cheer to us and even the Christmas season is not expected to be anything substantial.

The apparel exports industry is expecting a 25 per cent dip in order books in the immediate future.  Compound this with aggressive competition from Vietnam, Cambodia and Bangladesh, where there is cheap labour, we may have to tough it out next year.

How is Gokaldas Exports planning to manage this downturn?

Our longstanding relationships with buyers and global retailers are expected to come to our rescue. Our top line may not see much of a movement this financial year, and the profit margin is expected to be around 6 per cent against more than 7 per cent last year.

We are putting all our expansion plans on hold and are improving efficiencies. We haven’t pressed the panic button yet. We are adopting a "wait-and-watch" stance on how the second half of 2009 will be.

Many in the industry are resorting to lay offs. Has Gokaldas needed to lay off people?

At least 3 lakh employees have lost their jobs as the smaller units have no other option. The textile industry in India employs nearly 50 lakh people and the apparel sector 5 lakh.

Gokaldas Exports employs more than 50,000 people across various units and we are trying hard not to resort to lay offs. That will be the last thing we will do. We will take a hit in our profitability but will not lay off people.

In what way can the Union government help the sector?

When the rupee was appreciating in the middle of this year, the government had announced some sops for the textile industry, but it is taking too long to come. Credit was offered at an average of 7 per cent against 11 per cent and duty drawback was brought down to 8.8 per cent from 11 per cent.

However, even before this was streamlined, the downturn has taken a toll on the industry. It's time that the Indian government stepped in and moved fast to implement these measures.

As of now, we understand there will be some meetings in this regard and a decision is expected soon.

It has been a year since Blackstone gained control of Gokaldas Exports. Have the synergies kicked in?

Blackstone has a global network of portfolio companies on which we can bank on. We are talking to various global players through Blackstone, but such deals take time in shaping up.

For example, Blackstone has a global hospitality group in their portfolio, which may turn out to be a major client for us in the future. There are immense opportunities that we can derive from the Blackstone network and we are working on it.