Birla Cotsyn textile proj to be completed by FY10 end

Birla Cotsyn’s Initial Public Offer (IPO) opens today and closes on July 4. It will raise close to Rs 150 crore.

Yash Birla of Birla Cotsyn sees margins stabilizing around the 6-7% mark. He said that textile will always have a strong demand globally and India will continue to be a good source for textile products because there is cost advantage and an advantage vis-à-vis the raw material. “The quality of cotton that we get in India is probably even better than what we have in China. So, it will always have an advantage over any other textile manufacturing country in the world. From that point of view, 6-7% will remain as it is and will continue to grow.”

He added that the integrated textile project is about Rs 320 crore and will be completed by March 2009, which is the non-retail phase.Weaving will be implemented before the 2009 period, he added. Birla stated that the entire project will be completed before the end of 2009-10.

Excerpts from CNBC-TV18’s exclusive interview with Yash Birla:

Q: You are raising close to Rs 150 crore in terms of the IPO. What is the amount to be used for? What is the likely timeline for the projects to be completed?

A: The entire project was about Rs 320 crore and will be completed by March 2009, which is the non-retail phase, or the production of cotton and synthetic yarn and spinning part of it. The weaving will also be implemented before the 2009 period. What happens in the next financial year 2009-10 is the processing, dyeing and the retail part of it. The fabric making and selling in the retail market happens in 2009-10. So, the entire project will be completed before the end of 2009-10.

Q: How are the retail ventures going, aside from the textile business that you are formally in the company for? We have news that you are planning to launch some 20 retail stores in various parts by FY10. Would the IPO money be used for that also or is that an independent project?

A: Part of the IPO is for opening 20 retail stores of our own in 2009-10 and 20 stores will be opened in the metros and semi-metros. That will be done in the next financial year and the IPO proceeds would be used for that.

Q: What about the garment manufacturing plant and the textile project? When will they come on stream and contribute to your financials?

A: The cotton-spinning unit has already started in its implementation. The first phase will be implemented in the first quarter of this year. It will be fully operational by September of 2008-09. Synthetic spinning is also fully operational and will be completed by June quarter this year.

The weaving unit will be implemented before the end of next year and the processing unit will start in the next financial year, which should be completed in the next financial year 2009-10.

Q: What about the export market? How much are you looking at exporting from these units?

A: Around 60% of our production would be for the export market and that is where our advantage comes in because we have tied up with PB Bharadwaj Group, who has infrastructure distribution offices throughout the world including South America, North America, Canada and Africa and are already into distributing these products. We would be simply selling through their infrastructure and already have a ready market for that.

Q: In terms of margins, do you see them stabilizing around the 6-7% mark? Will there be some compression seen in the coming quarters?

A: Textile has always been a commodity industry. So, 6-7% is relevant and is not sub standard. But textile will always have a strong demand globally and India will continue to be a good source for any kind of textile product because we have cost advantage and an advantage vis-à-vis the raw material. The quality of cotton that we get in India is probably even better than what we have in China. So, it will always have an advantage over any other textile manufacturing country in the world. From that point of view, 6-7% will remain as it is and will continue to grow.