Tamil Nadu's textile belt weaves IPO yarn

CHENNAI:Entrepreneurs in Western Tamil Nadu's textile belt who had till now banked on debt to run their privately held businesses are concertedly opening up to the idea of taking their companies public -a marked departure in raising funds and change of mindset in one of the state's oldest business clusters.

Integrated firms manufacturing goods across the supply chain from yarn to finished apparel numbering close to at least 80 work out of Coimbatore, Tirupur and Erode. They boast fairly high levels of operating margins, international clientele like Walmart and Macy's and strong business continuity typical of family-run businesses. But, have thus far held back their exposure to capital markets.

Over the last decade, only a handful of Tamil Nadu's textile barons have taken to Dalal Street -KRP Mill, Ambika Cotton and Loy al Textile Mills being the prominent names that have fared well after their IPO and sustained interest among investors over the decade. A slow-but-promising European recovery , strong domestic demand and a gradual increase in exposure to how the capital markets work appear to have pushed entrepreneurs towards the markets now.

Cotton Blossom, a Tirupurbased garment maker specialising in knitted apparel, began nearly two decades ago -with 40 workers and 24 sewing machines. Now, it runs 3,600 sewing units, rolls out 40,000 pieces a day to Indian retailers and the ones in West and Australia. Even though, it had entered the global markets nearly a decade ago, the thought of going public is discussed only now at Cotton Blossom.“It was largely our mind set. Lack of exposure limited the way we structured our companies -it was either proprietary or the Limited Liability Partnership. Some extended it to Private Ltd companies,“ said Milton Ambrose John, MD of Cotton Blossom, who estimates about six months to apply for listing. “But now, globalisation has expanded our horizons to the avenue of tapping public money . Secondly, in a competitive, volumes-driven business environment, a company needs to have a strong fund flow,“ he noted.

Peers like CBC Fashions, a 40-year-old manufacturer of knitted garments, now supplying to brands like Allen Solly , Peter England, and Alpine Knits of Tirupur, are considering it too. TR Vijayakumar, MD of CBC Fashions, says it was a gradual awakening. The process was aided by two awareness sessions by NSE for its Emerge platform. One such meet, held four months back, had Chitra Ramkrishna, MD of NSE, deliver a talk to Tirupur's entrepreneurs for months on why they should end their IPO drought.

“At a time of high interest costs, capital markets are a great way to access funds.Moreover, clients would feel safer buying from a listed company ,“ said Kumar.