Alok Industries to up polyester capacity, raise prices

Alok Industries to up polyester capacity, raise prices

Mumbai: Textile firm Alok Industries which raised about Rs424 crore from a share sale to institutions, plans to use part of the funds to double its polyester yarn capacity, a top official said on Wednesday.

The company will invest Rs300 crore to double polyester yarn capacity to 1,200 tonnes a day by setting up a new polymerization plant, chief financial officer, Sunil Khandelwal told the Reuters Trading India chatroom.

The plant would begin production in a phased manner from October 2010.

The firm had however spent a much higher capex of about Rs1,000 crore in FY10 towards spinning, weaving, terry towel knitting and processing, he said.

“We will try and optimise the capacities already created," he said.

The firm is also expecting to raise at least Rs600 crore in the next 18 months by selling its real estate parcels to cut down its debt which currently stands at about Rs8,300 crore, he said.

Alok, a supplier of textile products to global retailers such as Wal-Mart Stores and Gap Inc currently has an order book of about $150 million on the exports side and about Rs450 crore on the domestic side, Khandelwal said.

“The orders are coming on rolling basis, everyday we execute some orders and we receive some new orders so it is an on going process. The indications for the orders is quite good," he said.

“In fact during last one year, the US and European buyers have started consolidation of sourcing, in which large suppliers like us have been benefited."

“The consolidation process is still on and we are getting new buyers in our basket. The scene in US and Europe is now improving and we expect full normalization in next one year," he added.

The company is also expanding its domestic retail operations in the wake of the demand rebound for textile products.

It current has 170 stores and will add 200 stores on a franchise basis each year for the next 2-3 years under the H&A stores brand.

“We are also looking at larger format stores upto 2500 square feet to accommodate all our catergories--mens, ladies, kids, home and accessories".

Its UK retail arm-Grabal Alok UK has achieved break this fiscal even as against a loss of 22 million UK pounds in FY09, Khandelwal said.

Price Hike

Alok Industries has raised prices of all its cotton products by at least 10% earlier this calendar year and will raise it by a similar amount in the next one month to offset surging cotton costs, Khandelwal said.

Current cotton prices are higher by up to 54% over same period last year in almost all the varieties, government data showed.

“We have increased the prices of all our cotton products by at least 10% and are further looking at in near future," Khandelwal said.

The present price of candy (355 kilograms of cotton ) is about Rs27,000 for the benchmark Shankar 6 variety, he said.

At 3:31 p.m., shares of Alok Industries were trading down 0.45% at Rs22.15 in a weak Mumbai market.