Interview of Mr. Sanjay Lalbhai
The Managing Director of M/s Arvind Mills Ltd

India's one of the largest composite manufacturer of textiles, denims, shirting's, knits and khakis, Arvind Mills Ltd. has today become one of the most recognized name all over the world as a world class manufacturer of denim and jeans. This group was founded by scion Kasturbhai Lalbhai. The Lalbhai family is one of the leading families of the State of Gujarat, India, and Ahmedabad City, in particular. Ahmedabad City rightly reserves the right to be referred as "Manchester of the East"', and the credit for this goes to the Lalbhai family. Thus, Arvind Mills Limited has a rich legacy. Today Mr Sanjay Lalbhai, Managing Director, M/s Arvind Mills Ltd. leads the third generation of the Lalbhai family in the business. With ample experience in relation to the textile industry, Mr. Sanjay Lalbhai has led the company to its present stature. We give below excerpts of the interview of Mr. Lalbhai who speaks about the company and shares its vision.

How does India 'fit the bill' in the post - quota free regime?

Post 2005, the global textile industry is poised for significant shift in trade patterns. Asia will emerge as the key textile outsourcing base due to strong cost and raw material advantage. Within Asia, China & India will be the biggest beneficiaries and would become the clothiers to the world. Post ATC, growth is expected to surge in the apparel segment. This provides immense opportunities for companies and countries that are vertically integrated. Since India & China have a large vertical set-up, global sourcing of apparels will shift to Asian & African region.

The abolishment of quotas from January1, 2005 under WTO has opened a new era for Indian textile industry. It ended 40 years of protectionism by developed countries. Approximately, 47% of the restricted markets, or 35% of the world textile and apparel market will be opened up for free trade. Considering India is the 3rd largest cotton producer in the world (after china & US) and steps being taken to improve the yields and competitive manufacturing cost, Indian textile companies will be able to grab a larger share of the textile trade post WTO.

The global textile industry is in a fluid state, what is your reading of the prevailing situation?

In the early phase of quota removal, global trade needs to live with competition through pressure on prices and protection in other forms like high tariff barrier, anti-dumping safeguards and bilateral agreements. The situation will tide over as the consumer pressure increases as is evident from EU textile trade row with China.

Do you share the official vision of India achieving 7-8 percent textile and apparel exports in the coming three years, and about 15 to 16 percent by the year 2010?

India has several advantages over other countries namely large fiber base and low cost labor and presence across the textile value chain. The opportunity for Indian textile growth arises from direct demand growth from quota-restrained markets and indirect demand growth for textile from other Asian countries.

As per independent studies (KSA Techno study), the global trade is expected to rise to USD 650 billion by 2010. At the same time, India's share will double from 3.6% to 7.6% by 2010.

Apart from the opportunity in world textile trade, domestic trade at USD 16 billion also presents a good opportunity due to growing consumerism. The optimism is due to

• Growing population with higher disposable income
• Favorable demographic profile - More than 70% of our population is below the age of 35
• Emergence of organised retail - 314 Malls coming in India with 3 M sq ft of retail space being added in next two years

Undoubtedly, it is retail boom in India. The domestic textile and apparel demand is likely to grow at a healthy CAGR of 8-9% between 2005 & 2010.

What kind of management do you profess for Indian textile companies to survive global competition? Any changes suggested for sectors (management, labour policies etc.) within the industry?

Unlike other countries, Indian textile industry has dominant share in the country's economy:

• At Rs 1,430 bn, accounts for 6% of the GDP
• At USD 12 bn, accounts for 30% of India's exports
• Provides employment to 18% of India's workforce

Despite having good potential, India's participation in global trends in Textiles so far was comparatively limited and constrained due to trade barriers in the form of quotas and internal inefficiencies. However, the industry will witness structural changes in the years to come like

• Sourcing pattern changing towards integration - Global retailers preferring to source directly from vertically integrated textile players
• Vertical integration order of the day
• Size determines bargaining power - Global buyers are looking at reducing no of vendors & hence opting for large vertically integrated players

The government in the latest budget has identified the textile industry as a thrust sector. Some of the measures like reduction in import duties on textile machinery, 10% capital subsidy for new investment in processing in addition to TUFS benefit will mobilize and encourage new investment in Textile industry. These measures will enhance conviction by creating favorable investment climate to mobilize necessary funds to double share of India's world trade.

However, the present labour laws may continue to be a constraining factor in mobilizing investment at a pace at which it is intended.

Post-quota era, can you list out specific plans and actions taken to position or reposition Arvind Mills in the domestic and global market? Are any realignments or M&As or JVs in the offing?

In the last two years, Arvind Mills has undertaken expansion projects in garments (Jeans- 4 Mn Pcs pa, trousers-1.5 Mn Pcs pa, shirts garments- 4.8 Mn Pcs pa and knits garments- 4 Mn Pcs pa) to the tune of Rs 50 crores besides normal capital expenditure in other divisions like denim and shirting fabrics. All the expansion projects were completed during FY05.

Among the new projects undertaken by Arvind are:

• Exploring to expand the shirts garment facility by another 1.5 Million pieces per annum.
• The company has acquired 53.4% equity of Arvind Brands Limited, an associate company engaged in the business of marketing and manufacturing of branded apparel in India, to make it 100% subsidiary.
• The company is expanding its denim operations and putting up a new denim dyeing and processing plant for manufacturing 10 Million meters per annum of fabric. With this addition the total denim capacity would be augmented to 120 Million meters per annum Rs.80 crores are to be installed by outside investors. These units would operate as dedicated job work units, with company entering into long-term supply contract with these units.
• The garment operations of the company currently operating at single shift would be converted into two shift operations during 2005-06. This will increase its installed capacity from about 13 Million pieces per annum to 20 Million pieces per annum

Who are your main customers?

Denim	GAP, Levi's, VF Corp., Liz Clairbone, etc.
Shirts	GAP, Levi's, Espirit, Osh Kosh Bgosh, etc
Knits	Nike, Reebok.

What kind of a growth is Arvind Mills expecting in the coming quarters? What growth avenues will you are targeting?

Company refrains from providing guidance on the financial performance. However, Arvind Mills is building operational capabilities to take advantage of the potential arising out of removal of quotas post 2005 by rapidly implementing plans in vertical integration.

In terms of cost advantage, does Arvind Mills see global leadership mantle falling on its shoulders? What value-adds are being done in the company's textile chain?

Forevision and Technology has brought Arvind to be one of the top three producers of Denim in the world, and on its way becoming the Global Textile Conglomerate. Arvind is already making its presence felt in Shirting's, Knits and Khakhis fabrics apart from being all set to create ripples in the ready to wear Garments world over. Today Arvind Mills is the largest integrated textile company and among the few in the world. With several cost advantages in cotton, labour, etc,

With its presence across the textile value chain, the company endeavors to be a one-stop shop for leading garment brands. Arvind Mills is among the most competitive entities globally and is uniquely poised to take advantage of the global textile trade and also in domestic market.

What innovations or products do you expect to hold sway over the global textiles and apparel industries in the near future?

We produce more than 50 varieties of denim for our international customers. Arvind Mills has dedicated R&D team comprising of textile professionals including international consultants. The company produces over 4 million metres of denim in product development and R&D develops 50 new products each month.

Arvind Mills has been a quality supplier of fabrics in denim and shirtings to some of the well-known international brands. Over the years, Arvind has developed several value added and differential fabric range which has been well accepted by the clients. As a result, Arvind has been successful to associate with premium brands in international brands commanding higher realization besides receiving numerous accreditations. The company is Asia's first fabric manufacturing unit to receive an ISO 14001 certification and accreditations by leading apparel companies in the world.

We have dominant share in the domestic market (upwards of 60%) in denim and confidant of growing the same. The company has reaped good benefits from introduction of value added denim fabric in domestic and abroad. At the same time Arvind has derisked the geographical spread in supply of denim, whereby supplies are now to over 60 countries.

Arvind Mills is an acknowledged leader in the denim world. Could you trace the roots of its successes or failures that have endured so far, since its establishment almost 75 years ago?

1930 was a year the world suffered a traumatic depression. Companies across the globe began closing down. In UK and in India the textile industry in particular was in trouble. During the Swadeshi Movement of boycotting fine and superfine fabrics, the Lalbhais sensed an opportunity for Indian made fine and superfine fabrics. The three brothers, Kasturbhai, Narottambhai and Chimanbhai decided to put up a mill to produce superfine fabric. And a company called Arvind Mills was born in 1931.

With the aim of manufacturing the high-end superfine fabrics Arvind invested in very sophisticated technology. With 52,560 ring spindles, 2552 doubling spindles and 1122 looms it was one of the few companies in those days to start along with spinning and weaving facilities in addition to full-fledged facilities for dyeing, bleaching, finishing and mercerizing. Steadily producing high quality fabrics, year after year, Arvind took its place amongst the foremost textile units in the country.

In the mid 1980's the textile industry faced another major crisis. With the power loom churning out vast quantities of inexpensive fabric, many large composite mills lost their markets, and were on the verge of closure. Yet that period saw Arvind at its highest level of profitability. There could be no better time, concluded the Management, for a rethink on strategy. The Arvind management coined a new word for it new strategy - Renovision. It simply meant a new way of looking at issues, of seeing more than the obvious and that became the corporate philosophy. The national focus paved way for international focus and Arvind's markets shifted from domestic to global. People the world over were shifting from synthetic to natural fabrics. Cottons were the largest growing segments. Thus in 1987-88 Arvind entered the export market for two sections- Denim for leisure and fashion wear and high quality fabric for cotton shirtings and trousers. By 1991 Arvind reached 100 million meters of Denim per year and it was the third largest producer of denim in the world.

In 1997 Arvind set up a state-of-the-art shirting, gabardine and knits facility, the largest of its kind in India, at Santej. With Arvind's concern for environment a most modern affluent treatment facility with zero affluent discharge capability was also established.

Year 2005 is a watershed year for textiles. With the mulitifiber agreement getting phased out and the disbanding of quotas, international textile trade is poised for a quantum leap.

Arvind has carved out an aggressive strategy to verticalize its current operations by setting up world-scale garmenting facilities and offering a one-stop shop service, of offering garment packages, to its international and domestic customers.

With the Indian economy poised for rapid growth, Arvind brands with its international licenses of Lee, Wrangler, Arrow and Tommy Hilfiger and its own domestic brands of Flying Machine, Newport, Excalibur and Ruf & Tuf, is setting it's vision on becoming the largest apparel brands company in India.