ICRA – a leading credit rating agency and an associate of Moody’s Investors Service – in it’s Credit Perspective report on Raymond UCO Denim Private Limited (RUDPL) has made several key observations regarding it’s performance and prospects while outlining the profile of the Company. We are giving below extracts from this report in the form of RUDPL’s Company Profile through the courtesy of ICRA.Raymond UCO Denim Private Limited (RUDPL) was incorporated in August 2006 as 50:50 joint venture between Raymond Limited and European denim major, UCO NV (Belgium). RUDPL is engaged in the manufacturing and marketing of denim fabrics. It manufactures and sells specialty ring colour and stretch denim and is a leading supplier of premium denim fabric in the global market. It has a current combined fabric capacity of 47 million meters per annum (India – 40 million meters and Romania – 7 million meters) reduced from 80 million meters per annum (with the closure of the US plant with 15 million meters and the Belgium plant with 20 million meters).
UCO NV, the joint venture partner, is a Belgian textile group, with executive headquarters in Belgium, has interests in denim, flat, filament fabric and yarns. It produces and sells a diversified collection of denim for leisure wear. UCO NV is a leading denim player in Europe, specially known for colour denim with a 70% share. In 2006, RUDPL also marked its entry into garmenting by entering into a business conducting agreement with Raymond Limited’s subsidiary Everblue Apparel Limited (EBAL) for the use of its denim garmenting facility at Bangalore.
Scale, Diversification and Market Position
Raymond Limited made an entry in the denim fabric space in 1996, with the set up of a 10 million meter per annum capacity at Yavatmal, Maharashtra, and gradually expanded the same to 40 million meters by 2005-06. In August 2006, Raymond Limited entered into 50:50 joint venture with European denim major, UCO NV (Belgium), to form a global denim powerhouse – Raymond UCO Denim Private Limited (RUDPL). Until December 2008, RUDPL had manufacturing facilities at India (40 million meters), Romania (5 million meters), US (15 million meters) and Belgium (20 million meters). However, witnessing operational losses at the US and Belgium locations on account of their high cost of manufacturing, RUDPL closed down those units in December 2008. With the closure of these units, RUDPL’s current denim fabric manufacturing capacity stands reduced to 47 million meters per annum (40 million meters in India and 7 million meters in Romania) from the initial 80 million meters per annum, thereby slipping RUDPL’s position to the third (after Arvind Limited and Aarvee Denim) in India in terms of denim fabric manufacturing capacity.
The last three years have witnessed healthy growth in the demand as well as consumption of denim-wear in the Indian sub-continent resulting in constant and consistent capacity expansion for denim fabric and
garmenting. The Indian denim industry has been growing steadily with a total capacity of ~780-800 million meters per annum as on March 2012 which is further expected to increase by the end of 2013. The domestic denim market grew by ~10% during FY2012 over FY2011, while the growth in exports market was in the range of 10-15% due to increase in export demand on account of rupee depreciation. The growth in exports is further fuelled by the decrease in manufacturing capacities in China, world’s largest denim manufacturer and exporter, on account of its declining competitiveness stemming from increase in power and labour cost and appreciation in the value of Chinese Yuan.