After Central Government announced export incentives recently, yarn manufacturers of Tamil Nadu are all set to forward integrate fabrics, and even garments into their value chain, as they have been facing a lot of pressure on account of margins, due to oversupply. Some 25 mills in the state have either installed knitting machines or have gone up to apparel manufacturing, with influence from the export push which included introduction of new products and export target nations to its list of items eligible for support to increase exports after the decline in exports observed as compared to last year’s exports.
The yarn manufacturers are making investments in order to clinch better deals from Indian and foreign buyers, as textiles have been facing a lot of heat due to Chinese import onslaught in India. Srihari Balakrishnan, MD KG Fabriks, said “In Tamil Nadu, the big garment makers are into reverse expansion to set up their own yarn units but the reverse is not happening much because there is a risk of holding inventory without knowing there is a buyer. This Central Government’s incentive has brightened possibilities of forward integration.” KG Fabriks is one of the pioneers who expanded into fabrics and garments 10 years back and are reaping benefits of the decision made. With knitting machines from Taiwan costing around Rs. 15 lakh each, and that from Europe costing Rs. 25 lakh, a textile mill would have to invest somewhere around Rs. 3 crore to upscale its value chain.
Even though Tamil Nadu has a huge yarn manufacturing capacity of 2.25 crore spindles, only a few yarn manufacturers have invested in fabric manufacturing as most of the textile companies have turnovers under Rs. 50 crore, with a very few touching the Rs. 1,000 crore mark.