Sunil Khandelwal, CFO, Alok Industries, inconversation with ET NOW talks about growth of textile industry, impact ofincreasing cotton prices on the industry per say and more.


What scenario are you seeing building up in terms of inputcost if you are using cotton or using polyester at the moment and how are youseeing price increases if you can give us a percentage term of knit's andwoven's at the time?


In fact textile sector is going see buoyancy - that we havenever seen in the past. Yes, cotton prices have gone up mainly due to thedemand. If you look at globally, India is the only textile manufacturingcountry in the world which is cotton surplus. And except India, all other manufacturing country - like China, Pakistan, Bangladesh, Sri Lanka or even Vietnam - are importing cotton. The only other country which is supplying cottonUS but there are again the farmers are moving to other crops. Hence the demandfor cotton fabric is going up and as a result the cotton prices are also goingup. Yes, cotton prices have gone up by 15% to 20% in the last couple of monthsbut the best part of this is that we have been able to pass on this increase tothe buyers. In fact we have increased our prices across the product category and the buyers have accepted that.


So, could you tell me at what capacity utilisation you areat right now and could you give us a percentage increase that you have seen inthe cost of your selling prices and how much more can we expect in the next 10to 15 days or 30 days or 45 days?


Well presently Alok is running, see we have been expandingour capacities very rapidly in fact we did a very large capex of almost 6,500crore in the last six years and so capacities which have already beingestablished are running at 90% but the newer capacities are running at about50% so averagely we are at about 70% and next two years we will optimise thesecapacities and as far as selling prices are concerned it depend upon product categories and of course the value addition that goes into the product. So we haveincrease our prices by almost 10% to 15% across all the products be woven or beknits.


Could you give us a sense of the funding that you requireright now because we are given to understand that couple of the textilecompanies are looking at capacity expansion you are also planning on a QIP anddetails of that?


Yes, of course there is a buoyancy in textile sector and theworld retailers are looking at India for sourcing their volume expansion and ofcourse after the quotas have gone up, Indian players have also expanded theircapacities. So India has become a strategic destination for their sourcing andmore so because their dependence on China has really gone up. They aredepending on China for almost 40% of their requirement. India is meeting only 4%, so there is a great scope for Indian players, and thisopportunity is now known to the Indian players so they are definitely going togo for rapid expansion. We believe that in next five years industry would expandto at least $40 billion.


So, what are the plans?


So this part of money will come from debt as well as equityas far as Alok is concerned as I have said we done a very big expansionsalready so we are basically at the fag end of our expansion plans but most ofthe past expansion have been funded by debt so these QIPs basically to fund ourpolyester expansion plus we want to improve our overall gearing.


Originally published in The Economic Times, Ahmedabaddated: March 17, 2010