Creating a 'FAB' future

“Irrespective of the business environment, the textile industry has always faced challenges pertaining to environmental sustainability. This is an inevitable issue for all industry players. However, the time is now apt for finding solutions through technology and innovation. Jindal, being a Denim fabric manufacturer, is at the forefront of Reuse and Re-cycle philosophy. We re-use commonly discarded fabric waste and blend it with traditional raw materials to produce denim fabric, which effectively reduces the impact on the environment. In addition, we are shifting to a renewable energy source for the functioning of our units. The contribution of sustainable products is continuously increasing in our portfolio, and we believe that such practices from every player in the sector would go a long way in mitigating the major challenge faced by the industry,” emphasizes Gaurav Davda, Head – Corporate Finance & Strategic Initiatives, Jindal Worldwide Ltd., during an interview…

Can you tell us the transformation journey of Jindal Worldwide?

Jindal Worldwide Ltd. began its course with fabric trading and steadily expanded into weaving, processing, and home textiles. Jindal went public in late 90s early 2000s, and since then, has continued to increase the scale and range of its operations. Today, Jindal Worldwide is one of the largest denim exporters and manufacturers. By capacity, we are the largest manufacturer of denim in Asia, and third largest globally. The Group specializes in manufacturing premium quality denim, printed shirting, dyed yarn, and bottom weights. Jindal does its spinning, weaving, and processing and hence the factories are all extremely well-equipped with the right types of machinery. In addition, we invest in laboratories to conduct textile testing and R&D. Jindal has traversed a long threedecade journey with its dedicated family of a strong workforce. As a company, we believe that growth is constant and that effectively means the journey never ends. We will continue to strive harder to make our mark. 

Textile industry post a brief slowdown is set to break the shackles and emerge as one of the highest value contributors to the GDP. What's your views on this?

Textile industry was going through challenging times since last few years. The pandemic-led lockdown and restrictions impacted the financial health of most players terribly, which resulted in many unorganized players shutting down, which led to mass unemployment. However, factors like revival in domestic demand and surge in export demand owing to ‘China + 1’ strategy has fuelled the industry with renewed hope. We believe this is not going to be temporary phenomenon and ‘China + 1’ strategy is actually going to provide a major boost to the industry, which has among the highest export contributions and has a major share in employment in the country. The intervention by government in terms of incentives and schemes will go a long way in helping the industry recover the lost ground.

How has been the performance of textile industry over the years especially the last 18 months?

The textile sector had been reeling under a lot of external stress even before the pandemic. The industry was facing severe cost and cash flow pressures, which was accentuated by the pandemic. However, past few quarters has seen improvement in EBITDA margins and cash flow. The working capital issues have started getting resolved and the organized players are now aiming at capacity addition in different verticals to capitalize on the export demand. This is where the future of the industry lies now. If we can continue the current momentum, then the Indian textile sector will be one of the top players in the world in the next few years.

How is Jindal Worldwide poised to position itself in the sector?

In a scenario where domestic demand is robust and exports are surging, we are well poised to capitalize on the growth opportunities. In the last few years when the sector was facing challenging times, we prepared ourselves in terms of capabilities, capacities, and cost structure. Yes, we were going through period characterized by low margins and high capex costs, but we were confident that the investment and strategy that we are undertaking will provide us an ample room to outgrow the industry growth given the recent strength in demand both domestically and on the export side.

Even when our margins were low, due to our strategy, we were able to degrow less compared to industry. In the next 24 months, we are looking at a 20-25% capacity growth which will be primarily fuelled by the Company's strategy to expand its spinning capacity. The entire capex cost over next two phase will now go into value-added products primarily in denim, which will primarily help in boosting our margins. Our long-term vision is to be a one-stop fabric solution supplier for all the major brands. Hence, it is crucial to add capacity with differentiation so that our customers have more options when they work with us. It will help us to be cost-conscious and chart sustainable growth.

What are the USPs that set you apart from others?

Quality, trust, and diverse product range are the USPs, which sets us apart from our peers. Quality has been a constant companion of our brand while the trust fuels life into relations and has maintained & extended our relationships with our partners and loyal customers. With a complete perspective of the industry and an in-depth experience of three decades, we take a holistic approach to offering multiple products on a single platform. Dealing with the widest range of fabrics, designs (600-700 SKUs), yarn (being vertically integrated) it becomes possible for us to innovate solutions and respond quickly to customer demands.

What are the innovations achieved by Jindal Worldwide in the recent times?

We have added higher end denim fabric to our product mix, which has increased our realizations and will aid in increasing our margins. Additionally, we have strengthened our in-house R&D team to work on textile chemicals and product innovation. This is yielding very strong results.

How did you tide through the pandemic?

The past year has been challenging and threw many organisations, including us, off balance. Some businesses have it easy adapting to a 'Work from Home' setup, but for many like ours in the manufacturing sector, it was an arduous task at first. However, we didn't have the luxury of time and had to act swiftly to streamline work processes while working remotely. We made sure all staff mandated to 'Work from Home' had resources to do so. We quickly strengthened or internal software to monitor attendance and work progress remotely. In addition, we started learning programs for all eligible employees to help them sharpen their skills. We also conducted various online sessions for employees to keep them updated on protocols and prevention measures about the pandemic. We are still conducting these sessions.

What are the learnings that you achieved during the Covid-19 pandemic?

The pandemic has been nothing like any crisis that the world has faced so far. In these times, we realized that what matters the most is the physical and mental well-being of our employees. To help our employees deal with the adversities of the COVID-19 infections, we have dedicated a helpline and initiated programmes to help them destress. Also, every other weekend, we plan some virtual engagement activities for our employees. These are a few things that we will continue to implement even after the pandemic is over. The other learning, which probably every other industry has is to ensure proper manufacturing & supply chain to deal with such disruptions.

How has been the supply chain network in the last one year and how have you streamlined the same?

When the COVID-19 pandemic struck, it brought with it several unseen challenges in terms of lockdown and disruptions. Raw material prices surged and caused a dislocation in the global supply chain. To overcome this, we relied on our longtested strengths of using technology and our extensive network to steer past the rough quarters. What worked to our advantage was that we were not that dependent on imported raw materials and had lesser exposure to exports. However, in the past year or so, we have not only streamlined our supply chain domestically but have also increased our

export share.

How is the export market going on as far as your products are concerned?

Three years ago, export contribution to our total revenue was almost zero. However, we changed our strategy and started to focus on export markets post 2018. This was because we felt that it offered higher margins owing to subdued domestic demand. After the pandemic struck and with global sentiments shifting towards ‘China + 1’ strategy, we started getting better value for our products and higher inquiries. As of second quarter, we have exports booked for next two months and contribution to total revenue is currently at around 25%. But we believe that China + 1 strategy is likely to pan out over a longer period and we expect our export contribution to jump to 40% over next two years. On the international front, we have collaborated with clients in north and South America, Europe, Africa and Middle East Asia. With a growing pool of customers our client dairies include the best brands in the country.

What are the challenges that the industry is facing and how do you plan to contribute to mitigate the same?

Irrespective of the business environment, the textile industry has always faced challenges pertaining to environmental sustainability. This is an inevitable issue for all industry players. However, the time is now apt for finding solutions through technology and innovation. Jindal, being a Denim fabric manufacturer, is at the forefront of Reuse and Recycle. We reuse commonly discarded fabric waste and blend it with traditional raw materials to produce denim fabric, which effectively reduces the impact on the environment. The waste generated is treated, neutralized, and reused on a regular basis. In addition, we are shifting to a renewable energy source for the functioning of our units. The contribution of sustainable products is continuously increasing in our portfolio, and we believe that such practices from every player in the sector would go a long way in mitigating the major challenge faced by the industry.

Would you like to tell us about Gujarat as the investment hub? What are the strategic advantages that it offers?

Gujarat is an investor's paradise. It gives resources, facility and talent to any sector looking to call it home. The conducive industrial policies and exposure to global markets and world-class technology make it a desired destination for businesses worldwide.

Where is the industry headed from here on? How can the industry aid in India's 'Make in India' movement?

The textile industry is one of the largest employers in India. It has immense potential in not only creating livelihoods but also adding to the country's growth story. With PLI schemes for textile manufactures and the establishment of mega textile parks, the sector will be a driving force in realising the "Make in India" and "Atmanirbhar Bharat" initiatives.

How are you planning to compete with Chinese players as it's by far one of the biggest markets?

The pandemic has led many international players in the textile segment to think of a China plus strategy, which would not have been the case earlier. So, global and domestic brands have already started working on alternatives and with its existing infrastructure, India is a natural investment destination. Having said that, can we replace China completely? Probably no, but we can take a bite, which will be significant for the overall prospects of the Indian textile industry. For a quantum leap, the Indian textile sector must switch gears to export now. That is where the future growth lies.

Also, if one were to look at various markets outside China, they have their own competence. If India has advantage in fabric manufacturing, Bangladesh excels in garment manufacturing, while Vietnam competes on both fronts. China, though, has much larger share of export pie for fabric and garment both and hence, there is no way India or Bangladesh, or Vietnam can fully compete with China soon, but we can keep pecking away at their business.

What are your future plans?

We are currently working on expanding our capacity in Denim and other verticals in a phased manner. The two-phase capex is likely to cost around Rs700 crore and is expected to spread over next three years. As far as denim goes, we are currently having capacity of 140 mn meters per annum (MMPA). We are planning to add 20 MMPA in 2022 and another 30 MMPA by 2024. Similarly, we are expanding our spinning capacity. In yarn, currently 30% of our capacity is for captive use. However, due to higher cotton prices, we are in the process of increasing the share of captive usage to 70% by next 2-2.5 years. We believe, this would help us in reducing our import cost and thereby result in higher margins. For the capex, we are in the process of raising funds. The capacity expansion will be funded by both – internal and external sources. We are evaluating various options. This entire capex is expected to be brownfield in nature and hence the capital cost saving would be substantial.