Business

India: Kusters Calico Has Put The Indian Textile Machinery Industry On The Global Map

How did Kusters Calico perform in the last financial year? How is the current scenario?

Current scenario for Kusters Calico is very good compared to last year. We are expecting a growth of at least 80% mainly because of our exports and all the new denim projects in India. We have got most of the orders and some are already in the execution stage while several others are waiting for the final approvals from the bankers' side, we expect delivery to begin from mid July.

In India, market did not grow much in the last two years. There were only three large greenfield projects and all of them chose Kusters Calico's machines and technology. Now from the project side, we are quite sound in India.

Which markets are propelling Kusters Calico's growth?

Turkish market has significantly contributed to our success. In the last four years, we have got 90% of market share, about 70 installations including all kinds of textile processing machines. Apart from Turkey, we have very good presence in Indonesia, Thailand, and in South America we are strong in Brazil, Argentina, etc.

How do you perceive Latin America as a textile manufacturing hub in the future?

Latin America is a high cost region and it might be difficult for them in the long term to be globally competitive in textile manufacturing. As long as they cater to the domestic market they can do well, but if they have to compete against other low cost countries it would be a real challenge.

Because of the NAFTA and CAFTA-DR agreements as well as fast changing trends in fashion, sizeable investment is coming to this region, especially in Mexico, as retailers want to reduce lead time. This is driving investment in this region and we are likely to get some orders from Mexico.

How is Africa doing in textile manufacturing?

The biggest problem with majority of the African countries is the lack of conducive political and business environment. There are very few countries where investment can happen but again, textile is such a long manufacturing chain starting from spinning to garmenting, so, by investing in one small segment, the industry cannot grow big. Also, there are issues related to work culture. Kusters Calico has some very good projects in Africa. I see some potential for textile industry in Ethiopia and people are talking about investing there.

How is the market in Middle East, especially Iran?

Iran is actually a good market for us. Kusters Calico has sold a couple of machines there. They have problems with sanctions, foreign trade transactions, etc. But in the long term, Iran could be a very good textile investment destination, it has very qualified people. With a population of 75 million, it is a big market. In the last decade, there was very little investment in its textile sector. Now they are investing. Among the other countries, Syria has potential for developing its textile industry but the unfortunate civil war has severely dented investment plans.

What about Pakistan market?

Pakistan could have made it big in the textile sector but political instability has stalled reforms and the country lacks conducive industrial environment. I don't think any large greenfield project will come in Pakistan in short to medium term.

As a whole, how do you see textile industry in India and elsewhere in the world?

You should look at the world population. Out of 7 billion, I would say 4 billion are under-clothed. In terms of fashion, availability, affordability, there is a growth in all countries where this 4 billion population is located. India and China both cumulatively make up for half of under-clothed population and are witnessing healthy economic growth. Thus, these two countries obviously would lead to more textile consumption and all the manufacturing of textile is going to happen in this zone. Therefore, I believe the textile industry would do well in this region.

How can textile consumption increase in the under-clothed zone?

The major hindrance to consumption growth is retail selling price of products. There is huge price difference between retailer's price tag and the manufacturer's selling price. So, to increase consumption, one has to find solution to minimise this gap to make clothes more affordable. I don't know whether it is margin, cost of operation or inefficiency that adds to the retail price.

India is still not a rich country but the cost of clothing is vey high in all categories of society. Upper middle class and above can afford the brands but issue is the mid and low level segments. Poor, lower middle and middle segment can't afford branded garments. So, there are very good opportunities for low cost garments and it can boost consumption of textiles. As the economy grows, peoples' income and buying power is increasing across the country, even in small towns and villages. In the coming years, there would be significant growth in consumption of textiles.

Lets look at the technology aspect. What are the factors that make a textile machinery company successful?

Nowadays, it is not just sufficient to have a good machine, one must have the ability of faster delivery, faster execution i.e. erection, commissioning, start-up, etc. All these have to be backed by excellent after-sales support and service. Obviously, all these factors and the whole exercise begins with good price and excellent technology.

What new can come to textile processing technology?

On the cotton side, I would say there is not much left and the technologies have reached maturity. But nevertheless, we always try to see what can be added to the machine so that it benefits the customer. Fortunately, with all our efforts of the last 5-6 years, Kusters Calico has made lot of small successes which adds up to sizeable benefit to customers if they adopt our products. This may be the reason why we are performing well today. I can declare, in every large project across the globe, Kusters Calico would be one of the shortlisted machinery and technology suppliers. In India, I would say we have bagged 80% of the orders in recent years.

So, Kusters Calico is now a dominating processing machinery manufacturer?

Kusters Calico is part of Jagenberg Group of Germany. The group has business interest in engineering and technical textile manufacturing. The textile machinery manufacturing business i.e. Kusters Calico Machinery Private Limited is based out of India. Kusters Calico today is a globally known and accepted brand for textile processing machinery and we have grown at an average rate of over 30% in last three years. With customers over 30 countries, Kusters Calico has put the Indian textile machinery industry on the global map.

We believe in very high depth of manufacturing. Our machines are completely manufactured in our own factory and we don't outsource much. We are utilising full capacity and are running on three shifts 24 x 7. We have over 300 people working in the manufacturing facility in Baroda. As order intake is adequate we are going to expand our manufacturing capacity.

What is new coming from Kusters Calico?

We are coming with an absolutely new product which is an open width singeing line for knitted fabrics. We should have the first installation running in the next couple of months at a customer's South India plant. Now, printed designs on knitted fabric are in fashion, therefore, importance of singeing of knits is going up. Another new product from Kusters Calico portfolio is an open width mercerising unit which will also be running in another four months' time.

What are the challenges to the Indian processing sector? How can it move forward?

I think the textile processing industry is in dilemma how to move forward. Look at Ahmedabad, the existing processing plants are quite old and they want to speed up modernisation. But in reality, modernisation is moving very slow due to market conditions, government regulations, pollution, and water norms, etc. All the processors being big entrepreneurs and industrialists, they also want to make things move faster.

The situation is improving now but the issue is how much capacity is going to be added in terms of greenfield projects and in terms of modernisation or upgradation. Handling greenfield projects in processing in India is a bit difficult. On one hand, the project is unviable if one sets up a small scale say, 40,000 metres per day plant. On the other hand, bigger plants of 1 or 2 lakh metres are not manageable. This is a very tricky situation and I am very cautious about the speed at which the Indian processing industry is going to modernise.

Also, in many companies, the new generation is looking at new areas of businesses rather than being in the same business. If you look at the challenges of the processing industry, they are a bit different. For example, spinning or weaving is more machine-oriented and one can put up the factory far away from cities as skill requirement is less. But in case of processing, a lot of chemistry is involved, skill and experience required is high and interaction with your buyer, etc compels one not to move away from the big cities. But in cities, factories are not welcome. Also, spurt in real estate sector make it more lucrative for entrepreneur to encash the land value rather than run a factory. Therefore, the development of the Indian textile processing sector depends on several other factors in addition to the reasons that are usually mentioned.

Fabric is practically the last product in the chain before conversion to end product. Because of the discrete nature of Indian textile industry, the garmenter negotiates the price only with the stand alone fabric supplier. Garmenter can't squeeze the spinner, or the weaver in spite of having a target price for the garment. Again, the target price is based on the costing quoted some three months back and industry dynamics changes in three months. A processor does not buy fabric and keep it in stock, because it is a fashion item, there is no standardisation, so anybody can demand anything which can be done. The burden will come obviously on the manufacturer. So, it's a very challenging environment for the processor.

What are your views on government policies?

I believe government should have a consistent policy for the industry at least for a 10-year period. The modifications made each year do not help the industry. If the government wants to increase any incentive due to changing business climate, it can, but not reduce what has been given, as those incentives form part of the quotations given to buyers. Also, the norms and formalities for providing the project approvals should be rationalised.

Further, government should listen to the representative large industry association’s only rather than meeting and accepting recommendations from local industry associations. One particular section's recommendations go against other's interest many times. The policies should be formulated considering long term goals for the industry with pragmatic implementation plans.