Le Merite (LMEL) is a renowned & popular brand name in several yarn importing countries. LMEL has long standing customer relationship, exclusive tie-ups & agents in top importing countries of cotton yarn & fabrics; Bangladesh, China, Turkey, Portugal, Egypt, South Korea, Iran, Italy, Vietnam, Thailand, Peru, UAE, USA to name a few.
LMEL is exporting to almost 37 countries. Its annual export revenue is more than Rs. 4000 million which is expected to double to Rs. 10,000 million within the next 2 years.
Speaking to the Textile Value Chain, Mr Abhishek Lath, Managing Director, Le Merite Exports, revealed about the company’s new products
What are the new products that you have launched in this Yarn Expo?
We have set-up two new spinning mills, where we manufacture synthetic products which include 100% polyester ring spun yarn, 100% viscose ring spun yarn, polyester and viscose double yarn. All these products have been launched for the Surat market and we are showcasing these in this exhibition.
What is your vision for the company? Recently, your company has become a public limited company, what are your thoughts regarding this? How do you plan to take this forward?
We have successfully got our IPO and become a listed company. Our vision is very clear, we want to become a billion-dollar manufacturer and entrepreneur and we are working in that direction only, where we are trying to make the domestic market our forte. The export demand has become very poor in the past 4-5 months; therefore, we have to find more markets to sell our manufactured products. Our manufacturing capacity has become 30-32 tonnes per day. If export is not going that smooth, we have to divert those sales to the domestic markets.
How much was your domestic and export turnover in the last financial year?
The export and domestic turnover ratio was 85 is to 15, wherein, 85 was export and 15 was domestic and this year I think, it will change to 70-30 0r 60-40 if the export market doesn’t improve.
As you have said, many economies like the US and the UK are also having depression, so, are you exploringnew markets?
Actually, if you understand, the consumption is mainly in the European markets or in the US. The consumers are mainly spending on clothing in the Europe, where the main problem is the Russia-Ukraine war, due to which the fuel prices and the other requirements for daily living have increased. There is an inflation and therefore, their first priority is their survival, the basic needs and then probably their lifestyle.
In US, we have a smaller problem: they have inflation. The prices have gone up drastically due to this. So, the interest cost which was less than 1% for the risk-free assets, has now gone up to 3-3.5%. Therefore, the riskier loans, like home loans must have now gone to 6-7% which earlier was 2-3 %. This means that their EMI has increased a lot, it has increased by 30-40%. However, the income has not increased that much. so, in total, their spending power on their lifestyle has reduced drastically. We still feel that US will recover quickly and we will be getting orders again. But Europe is still a major challenge.
Is there any other alternative market that you are exploring?
We are trying to exhibit our products all over the world. We are doing aggressive marketing, not just in domestic markets, we are also doing it in export markets. We have exhibitions coming up in Egypt, Indonesia, Bangladesh, Vietnam, Morocco. These are the trade fairs coming up in the nest month and we are participating in all trade fairs. So, we are doing marketing, but all the markets where they are producing these finished garments are ultimately sold to Europe and US, of course they have their home business as well, but still that earlier demand from these markets is not revived yet and we might face these problems.
You are into the export business for a long time now and now you have also entered the manufacturing sphere. What are the challenges that you are facing, as manufacturing is completely different from trading?
We started our manufacturing around three years ago. We have an asset-like model where we have taking units on long lease basis. Initially, it was challenging. We had to procure raw material, which should be of the right quality, right price, we have to manage the deliveries and stock the materials accordingly. This year, we faced another big challenge, thatraw cotton quality is not up to the mark. We have kept enough cotton stock that was sufficient for us till the end of May. Despite this our average costing has been quite reasonable. We have found our forte in manufacturing also, the challenges will keep on coming. But because of our model, where we don’t have any kind of interest re-payment, depreciation or term-loan repayment, we are in a very good space.
How do you see the future of cotton in India?
Future is very good. After these speed-breakers which we are having currently, we will be having a very good time ahead and there are many problems in China, because of which people are moving to different markets. India is the biggest beneficiary of this, where alternate sourcing can happen,we will be having a very good market after all these challenges subside and demands increase. The exports will also be good.
Also, the government is doing various things for the textile industry, like they are pursuing FDAs with Europe, UK and other markets like Australia and UAE. This will help us a lot. Besides they are promoting manufacturing in a big way, there are many schemes like PLI 1 and 2, the TUFS scheme is also being revised and there are many incentives that are being given for both capital and sales models, which we feel will bring in a lot of investments for textiles.
How do you develop your new products or carry out the innovation? Do have a share of fixed funds that you use for it?
We are a kind of company that tries to bring both forward and backward integration into play. We were yarn exporters from where we did the backward integration of yarn manufacturing, we are also doing fabric exports and now we are thinking of getting into the garment business also, we are trying to launch a brand. But it will take time as we want to do it in a proper manner. We do the new product development as per the market needs. As far as the research is concerned, we take the customer’s feedback, we are visiting a lot of trade fairs in Europe, Asia, Latin America, where we see the new fashion and new likings of the customers and then we try to develop those products.
For examples, sustainability has become a big innovation for us. We have seen that there is a huge demand for organic products and hence we have all the certificates like OEKO-TEX, Fair trade, BCI etc Our company can produce and supply all these products that sustainable and organic to our customers. Thanks to these kinds of innovation and market research, we have customers like H&M, who are buying these products from us, including sustainable yarns. We are manufacturing organic fabric for customers in Japan, which is a very big brand.
When you talk about sustainability, are you talking about natural fibres like hemp or recycled fibres?
Here, the sustainable products that we supply are mainly out of organic cotton, like BCI. We also have certificates for supplying recycled cotton yarn. We are already exporting GRS certified, recycled cotton yarn to Europe.
What is the future of recycling? These days everyone is into recycling, whether it is cotton or polyester, so, it is everywhere.
We have to understand that anything whichis recycled is not fresh or not like the first-hand product. The recycled products will always have a little inferior quality than the first-hand products. But that is something which is not acceptable at the consumer level. Imagine you are going in a shop and there are two t-shirts, out of which one is looking very good on you, the colour is nice and it is priced at $100. The other t-shirt is made from a recycled yarn, or fabric and it is priced at 125 dollars, but it is not looking as good as the fresh one. So, this is the challenge. With the research and development and the technology the price gap is reducing and with the GRS, the quality is almost similar to that of the fresh products. Slowly and steadily, the acceptance for these recycled products is increasing. This will keep on increasing, the market has a huge potential. Currently, the recycled product market is 5% and the fresh product market is 95%. The sustainable market can increase. This 5% can become 20% which is 400 times the jump. The sustainable products will eventually take over the market.
Many brands are using these recycled products. How does this work?
People are trying to mix the recycled products with the conventional products by adding some percentage of the products. So, these are some measures taken to save the environment.
Right now, there are a lot of start-ups and new entrepreneurs coming into the market. What is your advice to them?
When we hear about start-ups, we relate it with technology and digitalisation. So, in other industries there are a lot of advancements that have happened like in the IT sector. In textile industry also, it has happened, but not to that extent. If there is someone who can come and solve this problem in the real way, it will be very successful. There are many players in the industry, including many small players like MSMEs that are working in textiles. It is a fragmented industry, so it is a bit difficult to connect the whole industry with technology. Also, the personal relations and comfort that comes is also considered, hence, it is a traditional industry. So, our company has got a very good responsefrom the investors, with the new mode of working in our industry. Investors are not that comfortable in textile industry because of the high debts, but now it is changing. Our asset-like model is getting a good response. Therefore, we don’t have factors like debt or interest. Our investments are also without debt. The new start-ups should promote such kind of innovative ideas, rather than promoting technology only. Textile industry is one place where technology might not have that much role to play, unless your target is of a very few companies. They need to come up with new ideas and think differently. I have not seen any unicorn in textile industry, so, this should change. We are the second largest industry in the country after agriculture and we also have a genuine business, so, it should grow.
What are the solutions that people can come up with, in the textile industry?
Reliance is doing phenomenal progress; they are getting many international brands into India. They have subsidies and many new brands. Start-ups can think of this, they can improve how the brands work. One thing which the start-ups can do is improvement in the payments of the textile industry, because here the biggest problem is credit. Fabrics and garments are sold in 60-90 days, and this is one area where they can work. They should develop a market place and sell in B2B so it can be a great success.
How is the E-commerce for B2B? Amazon is B2C, but what about the B2B?
As I have mentioned earlier, in textile industry, people want to work in a traditional way. So, they will prefer with their known business partners, so it is a bit difficult.