Textile industry to witness consolidation

Domestic textile industry, so far insulated from consolidation, is set to transform. Following the deal between the Blackstone Group and Gokaldas Exports amounting to Rs 660 crore, industry players said that the era of consolidation in textiles has began.

The industry was taken by surprise by the quantum of the deal. This is a clear indication that foreign funds have smelled the phenomenal growth prospects in the industry, market players said. With growing competition from neighbouring countries such as Bangladesh, Srilanka and Vietnam in the export markets, consolidation on a larger basis with larger capacities is the need of the hour. Rajendra Hinduja, managing director, Gokaldas Exports said, "Further consolidation is very much possible." He indicated that more private equity players will come into the sector now. Due to rupee appreciation and slow down in US market (the largest export market of the country), Indian exporters are feeling the pinch. However, at the same time newer markets are also being explored. "As industry is so fragmented, smaller players will go for consolidation as creating larger capacity is the requirement and boost exports. In fact, this is the time to consolidate," said R K Dalmia, president, Century Textiles and Industries.

He added that export business has now to be looked at from different angle now. Though, the US and Europe would continue to remain our traditional markets, industry is venturing into other regions too. Africa, West Asia, Russia, Latin America and Australia are on the radar, Dalmia said. According to industry sources, private equity players such as Merill Lynch and Goldman Sachs might be in the run to pick up stake in textile players. However, these players with financial muscles, sources said, might not go for small-sized deal of less than $ 100 million.

Sunil Khandelwal, chief financial officer, Alok Industries said, "Smaller firms may get consolidated into bigger ones and this could open the door for them to attract foreign investment." According to Akhil Jindal, president, Welspun Group - one of the largest textile exporters, global private equity players have realised that textile sector is now one of the growth engines in India.