Asia's Largest Denim Bloc, Satisfied with Home Front, Turns Eye on Exports

From pre-pandemic exports a little under 2% of its total revenues to gunning for a 15-20% growth this fiscal, the Ahmedabad-based Chiripal Group, is on an expansion drive as it looks to augment its overall denim capacity to 240 MMPA.

Long Story, Cut Short
  • Vishal Fabrics Limited and Nandan Denim Limited, both part of the Chiripal Group, together serve as the biggest denim bloc in India.
  • The company is looking at a turnover of ₹2,000 crore this year.
  • The current capacity utilisation stands at 85%, and the target set for this fiscal is 88%.
With a firm and assured foothold in the domestic market, India's largest denim manufacturer has sights set on the world.
Slub takes With a firm and assured foothold in the domestic market, India's largest denim manufacturer has sights set on the world. Subir Ghosh / texfash.com

Some 90 minutes down south from Ahmedabad, as the SUV zips through a well-tarred road, the semi-arid region becomes starker by the mile. It hasn't rained here for a while, and there are few turns to take off this state highway. As the SUV makes one last swerve towards the right to pull into a road that a hundred-odd metres inside draws up to an imposing iron gate, you might have well ended up at a non-descript place that barely exists on the district map.

As you saunter up to the sparsely-utilised parking lot, you can't help noticing the two huge sheds, so to speak. The week has just begun, but the place is not bustling as yet. You wouldn't know if you weren't told aforehand: this is one of the main factories of one of Asia's largest denim manufacturers—Vishal Fabrics Limited. It's not a name that creates waves among the chatterati or sets social media ablaze with its achievements, but together with Nandan Denim Limited (both part of the Chiripal Group), the duo serve as the biggest denim bloc in India.

Till the pandemic, VFL was an out-and-out domestic-centred company. When everything was shut down in India, VFL managed to add 12 countries (mostly in South Asia and MENA regions) to its portfolio, and last year it added three more geographies (in Europe). Now, the immediate target is Latin America.
Outward Show Till the pandemic, VFL was an out-and-out domestic-centred company. When everything was shut down in India, VFL managed to add 12 countries (mostly in South Asia and MENA regions) to its portfolio, and last year it added three more geographies (in Europe). Now, the immediate target is Latin America. Subir Ghosh / texfash.com

Exports beyond the pandemic

VFL closed FY 22 with a revenue of ₹1,547 crore. Vinay Thadani, who has been the CEO for a little more than a year, attributes the growth story in the post-pandemic period to the better capacity utilisation of 85%. The second reason has been the rise in raw material prices, which has had a consequent spin-off effect on overall revenues.

Thadani speaks of a change in the demand pattern (for the company's customers) after the COVID-19 pandemic, particularly because of the China + 1 policy of many countries. Those countries were considering India as an alternative to China, with India being that mature textile economy. Till the pandemic, as Thadani outlines, VFL was an out-and-out domestic-centred company. Even in FY 21, only 1.81% of the company's revenues of ₹967 crore came from the international market.

In the last FY, this number has climbed up to 8–9%. During the pandemic, even as many Indian states and also other countries remained under lockdown, there were still some nations which were open. "We felt that we should diversify; this was the right time to go into the Western markets." In the first year, VFL managed to add 12 countries (mostly in South Asia and MENA regions) to its portfolio, and last year it added three more geographies (in Europe). Now, the immediate target is Latin America.

The export growth has also raised the company's ambitions: this year VFL is targetting a 15–20% revenue share for its exports. The company is planning another two lines for denim with ₹30 crore which will be raised internally. The capacity will then rise to 100 MMPA (million metres per annum). Nandan Denim stands at 110 MMPA and another small group company Nova Textiles with three lines has 30 MMPA. The Chiripal Group altogether would be having a capacity of 240 MMPA, which Thadani asserts is the largest in Asia. [One line produces roughly 10MMPA.]

The capacity utilisation currently stands at 85%. "The highest that one can go up to is 92%. But we will be targetting 88% this fiscal year." Overall, the company would be looking at a turnover of ₹2,000 crore.

The Dholi plant of Vishal Fabrics, some 60-odd km from Ahmedabad, could well be far from the madding crowd and yet this was exactly what allowed the company to run production, albeit on a low key.
Oiled Wheels The Dholi plant of Vishal Fabrics, some 60-odd km from Ahmedabad, could well be far from the madding crowd and yet this was exactly what allowed the company to run production, albeit on a low key. There were no Covid outbreaks, provisions were religiously supplied by the headquarters in the city, and most workers who had fled at the onset of the pandemic too returned to work in due course. Subir Ghosh / texfash.com

International impact on product mix

In the sourcing world, you produce what the buyers want. The demand earlier was that of cotton products, but with cotton price fluctuations, the demand for blended products in the domestic market has gone up in the last two quarters. The rough estimate: from 5% to 15% (of the overall product mix).

But will these cotton price hikes affect the shelf price of the end-product as well? Thadani doesn't think so. He explains, "The cost of fabric is only 15% of the overall inputs for a manufacturer. So, if there is some cost fluctuation within that component, it does not make much difference to the shelf price of the garment." In any case, VFL caters to the premium and super-premium segments. The prices per metre of the fabric are ₹250–300 and ₹300–380 respectively. For the mass-market / economy segments, this comes down to ₹140–160.

The prices can also dependent on specific orders. For instance, a super-premium recent order from Zara had made a requisition for Egyptian cotton, in which case the per metre price of the fabric would have shot up to ₹400.

But coming back to blends, with more strident campaigns against blends (w.r.t. the problem with recycling of garments) gathering steam in Europe particularly, does this affect VFL's production? Thadani reiterates herein that the company's product mix depends explicitly on the demand from brands. So, if they decide to cut down on blends, then the company would react accordingly. Even otherwise yarn issues don't pinch VFL so much since about 30% of the company's yarn requirements are in any case taken care of by other Group companies.

VFL closed FY 22 with a revenue of ₹1,547 crore. Vinay Thadani, who has been the CEO for a little more than a year, attributes the growth story in the post-pandemic period to the better capacity utilisation of 85%.
Growth Story VFL closed FY 22 with a revenue of ₹1,547 crore. Vinay Thadani, who has been the CEO for a little more than a year, attributes the growth story in the post-pandemic period to the better capacity utilisation of 85%. Subir Ghosh / texfash.com

How isolation helped, and other pandemic lessons

The Dholi plant of Vishal Fabrics could well be in a remote area, far from the madding crowd and just as distant from the hustle and bustle of a nearby big town. Yet, this was exactly what saved the company and its 2000-odd workers at its eight facilities across the state when the COVID-19 pandemic first hit.

All factories have their own dormitories and at least 1,500 of them stayed back at the factories till the last of the major lockdowns was lifted. The company tried to maintain as much liquidity as possible, both as salaries to workers as well as payments to smalltime suppliers/vendors.

The company could still run production, albeit on a low key, simply because there was precious little to and from movement at the factories. There were no outbreaks, provisions were religiously supplied by the headquarters in the city, and most workers who had fled at the onset of the pandemic too returned to work in due course.

Both during and after the pandemic, supply chains have been ripped apart. That's where Vishal Fabrics was hit too, and the company learnt its bitter lesson. Thadani says some chemicals (particularly indigo blue) were being imported from China, whose supply was hit by the lockdowns and logistics bottlenecks. "We increased our carrying inventory from 15–20 days up to 60–90 days."

All said and done, Vishal Fabrics learnt how to cushion itself during the pandemic. And now, with a firm and assured foothold in the domestic market, India's largest denim manufacturer has sights set on the world.

During the pandemic, even as many Indian states and also other countries remained under lockdown, there were still some nations which were open. We felt that we should diversify; this was the right time to go into the Western markets.

Vinay Thadani
Vinay Thadani / Chief Executive Officer / Vishal Fabrics Limited
Disclosure: This report is the outcome of a media fam trip organised by Vishal Fabrics Limited. However, the latter did not have a say in the editorial content of this write-up.
 
 
  • Dated posted: August 2, 2022
  • Last modified: August 2, 2022