We are focusing only on Tier II and Tier III cities for our retail outlets

Updated: Apr 30 2006, 05:30am hrs
Nahar group, a Rs 2,000-crore textiles conglomerate, has a presence in cotton and woolen textiles. Rutu Chhabria of The Financial Express spoke to Kamal Oswal, vice-chairman-cum-managing director, Nahar Industrial Enterprises, on the plans for their Cotton County brand and growth in business. Excerpts:

You want to increase your retail presence. Will these outlets be owned or franchised

Presently, we have almost 75 outlets, which are operational. By June this year, the figure will go up to 100 and in this calendar year, we are targeting a total of 170 outlets.

All these outlets are based on the franchisee model as we feel this is a more efficient model. A major part of the retail expansion will take place in FY07.

Which cities are you focusing on to set up your retail outlets

We are presently focusing only on Tier II and Tier III cities. Competition in these cities is lower and aspirations are high. The demand for branded goods in these cities is also high.

The sales that these outlets are generating are phenomenal. Our outlets concentration is in the northern states of Punjab, Haryana, UP, Rajasthan and certain parts of Bihar. But now, we are planning an all-India expansion. Only after reaching a critical mass in terms of number of outlets will we target bigger cities.

Presently, major portion of your revenue is coming from your textiles division. How much would your brand Cotton County contribute after your retail expansion

Cotton County is contributing approximately 7% to the total turnover and the balance is coming from textiles. However, after our aggressive retail expansion plans, revenues from Cotton County should more than double to at least Rs 100 crore in FY07.

Do you have any plans of getting into womens wear

Cotton County offers a full range of mens wear. But if we have to increase our revenues per outlet, we will eventually have to get into womens wear.

Your expansion plan to ramp up your textiles division capacity is going to be executed in two phases. How much of the investments have been deployed by now

Out of the Rs 800-crore expansion plan, Rs 200 crore has already been spent. In FY07, another Rs 480 crore will be deployed and the balance will be invested in FY08. By FY08, the expansion project should be fully complete and operational.

What are your revenues and PAT for FY06 Any growth projections for FY07

As we have not disclosed our results yet, we cannot give the exact figures. However, we are expecting a 15% growth in turnover for FY06 and growth in PAT to be substantial over the last year. We are targeting a turnover of Rs 1,400 crore by FY09.

What would be your revenue break-up from domestic and international business

The textiles business revenue breakup is almost 50-50% from domestic and international brands. Out of the international business, almost 70% would be from the US and the balance from European brands.

What are the synergies that you have managed to achieve in the last one year post-amalgamation of your group companies Any impact on margins

Earlier, the spinning unit was separate, weaving unit was separate, hence costs and time factor involved was higher. Now, its a composite unit. Thus, there have been savings in terms of raw material costs as economies of scale have been achieved.

Margins have obviously been positively impacted. Operating margins have improved by almost 7-8%. EBITDA has also improved considerably. Interest costs have gone down due to repayment of high-cost debt by low-cost debt and reduction in working capital requirement due to better cash flows. Also the capital expenditure is under TUF (Textile Upgradation Fund) where you are eligible for 5% interest rate subsidy.

What about your sugar division Any plans to hive off these divisions

We are keeping the sugar unit, as it is debt-free. We expect crushing to double this year from last sugar year due to better availability of cane. We are adding another 8MW of power generation capacity to the sugar mill this year to take it up to 16MW. This additional power will be used for our textile unit for which we have already applied to the regulatory commission for approval to transfer power from one unit to another.