Photograph: Palak Jhaveri
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Sanjay S Lalbhai, the man steering Arvind Ltd, has secured some of the best jeans brands and otherwise under his belt. We crack the formula behind the success of one of India’s top textile and apparel conglomerate 32 | FDD | May 2013
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By Sapna Khanna ome say it is in his genes, others swear it is in his jeans. But whatever it is that industry pundits decide to label Sanjay S Lalbhai, the chairman and MD of Arvind Ltd, one thing is clear: the 58-year-old entrepreneur par excellence has revolutionised the way India does business. Over the last three decades, Lalbhai has not only brought the biggest apparel brands to India – Lee, Wrangler, Tommy Hilfiger and Arrow – but has also given big denim brands around the world a run for their money with some of the toughest denims India has ever produced – Newport, Flying Machine and Ruf & Tuf. Lalbhai is the fourth generation of Lalbhais, the founding fathers of the oldest home-grown textile and clothing company in the country. Arvind Ltd is today India’s largest denim manufacturer, apart from being the world’s fourth-largest producer and exporter of denim. It is presently a $1.1 billion conglomerate with a CAGR of around 25 per cent in the last three years. The company brought denim into the domestic market in the early ’80s and subsequently started the jeans revolution here. Today, Arvind Ltd not only retails its own brands but also sells licensed international brands through its nationwide network. The company also runs a value retail chain, Megamart, which stocks company brands. Lalbhai, who joined the business 33 years ago, takes us through the highs and lows that he rode over the last three decades to bring Arvind Ltd at the forefront of the Indian branded apparel industry. When he joined, Lalbhai was assigned a functional responsibility of looking after material procurement. And he took this opportunity to learn how the textile business works. However, his business instincts were genetic. “From the beginning, I had an urge to start new businesses. So I started various new initiatives with my friends, learning the nuts and bolts of business,” he says as he reveals that Amtrex Airconditioners, which later collaborated with Hitachi, was started with Naishadh Parikh, his friend. Likewise, he partnered with a number of friends to open various companies such as Associated Chemical Industries, Ashima, a texturising yarn company, and Gujarat Fastners Ltd. But his major breakthrough came in 1986 when he launched the denim business. Though, at the time, he claims that it was already a successful company started in 1931. The business was profitable from day one and had an enviable track record of not missing dividend for a single year right up to 1986, when crisis hit the composite textile industry.
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he powerloom sector had gravely damaged the profitability of composite textile units. Majority of textile mills in Ahmedabad were closing down. There was no option but to think of something out of the box. “At that time, at Arvind, we were dyeing twill material to look like denim for my brother-in-law Rajiv Badlani’s company, Flying Machine. He urged us to make the real thing and we took the bold step forward,” says Lalbhai. So, Arvind Ltd became the first company in India to enter this segment. But it was a far cry from the traditional fabric that Arvind manufactured and the machinery and process were highly specialised. “Many people expressed doubts about its viability but we pushed on. The rest, as you know, is history,” he shares with pride. While most textile units perished, Arvind managed not only to survive but to also forge ahead. “In a short span of 15 years, we became the largest manufacturers of denim in the world,” says Lalbhai. Lalbhai was early to spot the global mega-trend in denim. By ensuring that Arvind invested in best-in-class manufacturing assets, they were able to develop a world-class product. They did not stop at investing in production, but went ahead and also invested in setting up a global marketing division, a robust product development and innovation engine and cost-efficient production processes. “Our success was a combination of good execution and a clear vision,” he adds.
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n 1997, Lalbhai Inc. promoted the largest integrated textile complex at Santej near Ahmedabad. It housed the largest yarn-dyed woven facility in India,making it the fourth largest in the world, today. In 1999, when Arvind’s Santej plants were ready to roll out production, denim markets worldwide plunged. The power plants became unviable as naphtha prices went through the roof. The company was in deep crisis as they were unable to service the debt they had created. They had to then focus their attention on coming out of this problem through restructuring. “Convincing 68-odd creditors to see our point of view was a
“we were dyeing twill material to look like denim for my brother-in-law Rajiv Badlani’s company, Flying Machine. He urged us to make the real thing and we took the bold step forward.”
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hile venturing into denim placed Arvind Ltd on the fast track, it was only a matter of time before competition caught up. The strategy was to stay ahead of the game. Hence, Lalbhai decided to bring international brands into the country — Arvind Ltd was the first Indian company to do so — with the introduction of Arrow in 1993. This is what changed the company’s fortunes and the company went on to build the largest portfolio of international brands. “Today, we have brands spanning across the luxury, premium and value segment,” says Lalbhai, adding, “The move towards international products also allowed us to seed our brand and retail business which is one of our most important future growth drivers.”
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highly impossible task but our finance team worked day in and day out till finally in 2002, we got the debt restructured,” says Lalbhai.
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rvind added another first to its credit in the ’90s when it launched Megamart, its value retail format. Today, Megamart has evolved into a format for the entire family. Over the years, it has refined its business model to become private label-led. “We chose to saturate focus territories and then replicate the model in other locations,” informs Lalbhai. With more than 250 stores, Megamart’s revenues are around $100 million. “Almost 75 per cent of our revenues come from our stores in the southern states, which are at the leading edge of the consumption boom,” he adds. Arvind now intends to replicate the Megamart model in other states and double revenues over the next three to four years The Arvind Store is a new retail concept from the company, which houses the best of Arvind under one roof — premium fab-
QUICK TAKE Number of global brands: 12 Number of in-house brands: over 15 Number of members in design team: over 30 people across verticals Retail strategy: It is a combination of exclusive stores, department stores and other regional multi-brand outlets. Current fiscal revenue: Rs5,500 crores Share of textile business: 65% Share of brands and retail: 35% Vision: To grow the conglomerate to $2bn in revenues in the next three to four years.
Sanjay Lalbhai with his sons, Punit and Kulin, who are executive directors at Arvind Ltd.
rics for customised clothes, the best of ready-made brands and styling solutions for garments. “The thought behind the store is to capture the large market of customised clothing, which is shifting away from traditional retailers to modern formats,” shares Lalbhai. Besides targeting this market, the Arvind Store that will soon reach more than 300 towns in India will allow the company to take its ready-made offerings to markets, which were previously inaccessible to the brands business. “Our longterm plan is to have over 500 stores spread across a large numbers of towns and cities,” he says.
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rvind’s new growth engine is technical textiles and it has invested in three product categories including protective, industrial and glass fibre textiles. The apparel and textile major will also soon enter the non-woven sector in technical textiles. The conglomerate has recently entered the innerwear market in their brands and retail business and plans entry into some niche positions in the suiting market. With China becoming more expensive due to labour, raw material costs and currency, a large number of brands are
looking for other production centres, informs Lalbhai. As China controls 30 per cent of the global textile trade, any loss in market share can lead to significant gains for other countries. India, with its large cotton production, low cost of labour and strategic location vis-a-vis other textile production countries like Bangladesh is in a sweet spot to capture the market share. Arvind Ltd intends to invest across product segments and grow its current installed capacity from 220 million metres to over 320 million metres in three to four years. It also intends to increase its garmenting capacity from 12 million to 24 million units per annum. “Our brands and retail business is likely to witness high growth rates of 25-30 per cent per year as we will continue to invest in existing as well as new brands,” explains Lalbhai. He further announces, “We will grow at close to 20 per cent per annum over the next three to four years, which will require a total investment of around $400 million.”
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albhai adds, “often beginner’s enthusiasm makes us rush into things without thought. In business, I have learnt the hard way that, before embarking on a new project, one should put in a lot of effort in working out a feasibility report for the project. One should find and put the best talent to manage the new business and, importantly, when one is going for rapid expansion one should not leverage the balance sheet. One should go for a moderate debt equity of 1:1.” One of the significant changes Lalbhai introduced at Arvind was in the management style. From a family-managed company, it is now professionally managed. He strongly believes that values and ethics are the guiding principles on which the foundation of a company has to be laid. The longevity of a company is determined by the values it imbibes and the governance which is practised by its board and top management. According to Lalbhai, it is necessary to maintain a balance in everything one does, “Honesty and hard work are perennial virtues and there are no short cuts to it. All successful people have a ‘never-say -die’ attitude and they pursue things till the goal is met.” This is a fitting advice for all entrepreneurs who would like to achieve similar success from the man who has always reached out for the skies without his feet ever leaving the ground.
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