Aiming to become debt-free by 2016
Alok Industries Ltd. has assured the textile fraternity with strategic moves to repay its consolidated debt of Rs. 20,000 crores by 2017. The company bets big on its export capabilities with respect to the US and European Union countries and is planning to hive off non-core businesses and also to dispose of Rs. 2,000 crores worth of property in the next six months.
After shying away from the media for almost a year, the top-level management of Alok opened up to The Textile Magazine to reveal its future plans. The hour-long interaction was held with Mr. Dilip B. Jiwrajka, Mr. Surendra B. Jiwrajka and Mr. Sunil Khandelwal of Alok Industries, along with Mr. Arun Agarwal, CEO of Next Creations.
Alok Industries, a major brand on the Indian textile scene, recently announced a fresh action plan to get rid of its huge debts within 18 months. The Mumbai-based company is very positive and has assured the investors of staging a real come-back by 2016.
Asked about the reason for Alok’s current financial turmoil, Mr. Sunil Khandelwal said: “Non-core businesses such as retailing and infrastructure didn’t yield the expected returns. As a first step, we have decided to sell all non-core businesses, including real estates at Mumbai, Silvassa and Vapi.”
The overall company effort is directed at consolidation. The immovable assets at the company’s three locations which are expected to fetch more than Rs. 2,000 crores and the proceeds from the sale of the UK-based retail chain would substantially help reduce the huge debts and the interest generated.
“The increase in interest rates had a major role to play in our current financial deficit,” stressed Mr. Surendra Jiwrajka. “During the expansion phase, interest rates have gone up from 5.5% to 13%. More debt means a higher level of interest payment each year, which is paid from net income.”
With its revival mission, the textile major has approached banks for debt restructuring. At the same time, it is taking several steps to increase exports. With higher dollar earnings, the company is also planning to swap its local loans with dollar loans, thereby cutting the interest cost by half and reducing the annual outgo by almost Rs. 600 crores.
The company also banks on the home textile business and yarn exports to realise its time-bound objective. It may be noted that the company’s home textile business is so well established in the US market as to account for more than 35 per cent of its overall exports.
“Alok’s strategic tie-up with Next Creation in 2010 to strengthen business opportunities in the US has paid good dividends. We see good scope to increase its marketshare in kitchen textiles and beddings”, said Mr. Arun Agarwal.
Meanwhile, the Yarn Division of Alok is expected to yield better results in the coming years as the demand for Indian yarn is on an upswing. The company is currently exporting yarn to more than 90 countries and plans to take advantage of the current downtrend in yarn exports from China.
The company optimism over its restoration to health sooner or later is purely based on the appreciable rise in exports from a level of Rs. 100 crores in 2000 to the current Rs. 4,000 crores. There is also adequate scope for a further rise in exports in the next 10-15 years.