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Techtextil India Symposium Are Joint Ventures or Strategic Tie-Ups the Right Recipe for the Indian Technical Textiles Industry?
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
In 2012 the Indian Techtex industry is estimated by Gherzi at about 1/10 of the Techtex industry in China Indian Techtex Industry Chinese Techtex Industry
6363560 Rs cr.
116 bn USD
58000 Rs cr.
11 bn USD
Source: Gherzi research and estimates Techtextile India Symposium : 30th 31st October 2012
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
The Indian Techtex market today is mainly focusing on Packtech, Clothtech and Hometech. Higher value added applications like Indutech or Medtech still have to be expanded, coming from a smaller base World Techtex Market Structure Indian Techtex Market Structure (2010)
5%
7%
7%
33 %
39 %
81 %
13 %
15 %
Packtech
Clothtech
Hometech
Source: Gherzi research Techtextile India Symposium : 30th 31st October 2012
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
India: Attractiveness
(1)
Indian TechTex has recently seen major indigenous capacity investments without support by a western tie-up or JV partner. Examples include:
Gini Filaments into spunlace nonwovens Ahlstrom Gujarat into SMS nonwovens for gowns and drapes SRF into High Tenacity PET yarns and downstream PVC lamination (signage) and PVC coating (tarpaulins) Welspun into spunlace nonwovens Arvind into glass fabrics and wide width technical wovens Neocorp into wide width tape wovens Techfab into geogrid and woven geotextile manufacturing etc.
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
India: Attractiveness
(2)
These investments demonstrate that India has reached the stage to become a major player in Technical Textiles outside of the traditional Packtech segment
For the local market which seems finally to take off For the international market which shows an increasing acceptance for India made products
After many years of focus chiefly on China, major foreign TechTex producers and converters have discovered India as the next growth market. Segments which should be the main focus of foreign interest include in Gherzi`s view:
Composites (wind energy, Mobiletech) Automotive textiles (nonwovens and moulded parts, headliner, airbag, seat fabrics) Hygiene (baby diapers, womens hygiene) Defence textiles Specialty Geotextiles (like shore reinforcement) State of the art crop protections / crop transport (Agrotech) Contract home textiles for modern large scale offices in the Software, IT and BOP sector
Techtextile India Symposium : 30th 31st October 2012
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
India: Attractiveness
(3)
The advantage of Indian firms being a late entrant into the Techtex domain (compared to China) is, that companies can directly invest into state of the art technology. However,
Factories must be conceived as flexible as possible (a maximum number of segments to be served from one manufacturing line) Exportability of the product range constitutes an important asset to quickly fill a new, highly productive facility
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Foreign investors in Indian Techtex have partially opted for a 100 % foreign owned local set-up
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Foreign investors in Indian Techtex have partially opted for a 100 % foreign owned local set-up (ctd)
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
and partially opted for a tie-up with a qualified Indian counterpart (ctd)
Arvind - Du Pont (USA): Aramide fabrics (Protech) Arvind - Rhodia (F): Cotton FR Proban (Protech) Vardhman - A&E (USA): Sewing thread (Clothtech)
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
In some cases Indian firms have ventured abroad to acquire know-how and market access through M & A
M&A
S. Kumars Ltd (takeover of Klopmann) Italy
Neo Corp International Ltd (takeover of Europlast) UK Binani Group / Goa glass fibre (3 B takeover) Belgium
SRF Belting division (takeover of Industex) S. Africa Alok Protech & Workwear division (takeover of Mileta) Czech Republic
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
The right approach Entering into new Techtex market segments requires
a) Know-how b) Investment in a manufacturing technology suitable for product certification to international norms and c) Customer access (locally and abroad)
A tie-up with a foreign partner can but most not always and in every case supply answers to the missing market entry skills described above
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Larger enterprise
Source: Gherzi research Techtextile India Symposium : 30th 31st October 2012
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Case 1
Scalability?
Limited, as foreign partners will try to limit JV scope to India
Source: Gherzi research Techtextile India Symposium : 30th 31st October 2012
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Case 2
Source: Gherzi research Techtextile India Symposium : 30th 31st October 2012
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Case 3
Source: Gherzi research Techtextile India Symposium : 30th 31st October 2012
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Case 4
Small, but developing Indian market Low cost base for global exports
Scalability?
Source: Gherzi research Techtextile India Symposium : 30th 31st October 2012
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Investment Memorandum:
Initial approach:
Which product / market segment Prio 1: Attractiveness of a tie-up for foreign partner Type of transaction: Off-take Strategic alliance or licensing JV Optimum fit optimum size Prio 2: Suited but less optimal
Attractiveness of the transaction IM sent for the foreign partner 1st meeting Ideal transaction structure
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Initial Approch
Short list:
LOI / MOU:
Pre-Contract:
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Closure
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Success factors In Gherzis experience the following criteria are important to successfully close a transaction Show the attractiveness of the project for the foreign partner Identify the right partner and approach the right person on a personal level
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Conclusion (1) Not always is a tie-up required to build up a successful business in Technical Textiles. A number of Indian firms have followed a stand alone approach Typically, foreign partners are mainly interested in the Indian market. The market is, however, still small outside of the Packtech Hometech Clothtech segments
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Conclusion (2) A thorough analysis of the right partner to be approached helps to avoid disappointment lateron in the process
A clearly defined product / market focus and set of goals accompanied by a professionally worked out investment memorandum helps to attract the interest of a foreign partner
It is important to a) build trust between the parties in the series of negotiations and b) agree on a joint business plan in order to close the transaction in a manner satisfying both the Indian as well as the foreign party
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Any questions?
Techtextile India Symposium : 30th 31st October 2012
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