Madura Garments (BMC)

 21 December 1999: The A V Birla group's Indian Rayon Ltd.

won the race to acquire Madura Garments, the apparels and
garments division of Madura Coats. Arvind Mills and a new
entrant, Indus League Clothing Co, were also bidders.
 The A V Birla group concluded the deal with Coats Viyella
plc of the UK at Rs 236.23 crore. From 1 January 2000,
Indian Rayon owns the rights to six Coats Viyella brands --
Louis Philippe, Van Heusen, Allen Solly, Byford, Peter
England and San Frisco.

 Indian Rayon acquires Madura Garments as a going concern

with all employees, brand licences, and distribution and
manufacturing networks for Rs 189.23 crore, along with the
brand rights for India.

 All of Madura Garments' employees, except its president George

Zacharias, were transferred, with the business, to Indian Rayon.
They were assured continuity of service on existing terms and
conditions.

Madura Garments thus became a division of Indian Rayon, which

already has a Rs 300-crore textile business that includes India’s only
linen brand, Jayshree Linen.

Dramatic change

 For the Kumar Mangalam Birla-led Rs 20,000-crore Aditya Birla

group, this deal marked a dramatic change in image. It brought in
instantly recognisable top-of-the-line brands into a group whose
focus had till then been on commodities.
 The three labels, Allen Solly, Louis Philippe, and Van Heusen
together claim a 40 per cent share of the premium branded
menswear market. The Peter England shirt brand, launched in
1997, has been an instant success and is said to be the country’s
largest selling mid-priced shirt brand in 1999.

 The Aditya Birla group’s own Wall Street brand is not in the
premium segment. Branded garments have been an important part
of the growth plans. Building its own brands would have taken
a considerable amount of time as well as money. Hence a
brand acquisition was the obvious answer.

Why Madura Coats sold garments

For Madura Coats, the transfer of its garments division to the A V
Birla group's Indian Rayon signifies its exit from the premium
branded men's wear segment. There are probably two reasons for
the sale. One, the company needed the cash. But, more important,
it was falling in line with the restructuring its British parent
had gone through recently.

 The company is a 51 per cent subsidiary of J&P Coats Ltd, UK, a

wholly-owned subsidiary of Coats Viyella plc. The rest of
Madura Coats' equity is held by financial institutions and the
public. Coats Viyella is one of the European companies in
textiles, accessories and ready-made garments.
 Madura Coats is an integrated, broad-based textile company.
The company was divided into Coats India (threads), Madura
Textiles (fabrics and industrial textiles), and Madura
Garments (Louise Phillipe, Van Heusen, Allen Solly, Peter
England, Byford and San Frisco). The fabrics and industrial
textiles divisions were merged in 1998. Coats India contributes
about 40 per cent of the company's total turnover, Madura
Textiles 20 per cent and Madura Garments 40 per cent. The
garments division grew 40 per cent in 1998.

 The company first launched Louis Philippe in 1989, Van Heusen

a year later, followed by Allen Solly.

 The reason for Madura Coats' decision to sell the garments

business is said to be an urgent need for infusion of capital.
The crippling labour strikes at its textile mills in Tamil Nadu in
the middle of 1999 were expected to have an adverse impact on
the company's bottom line in the year ending 31 December
1999.

 The company, which made a profitable start in the first quarter

of 1999, with a net profit of Rs 4.2 crore, plunged into the red,
with a loss of Rs 7.9 crore in the second quarter and Rs 5.4
crore in the third quarter. That meant a loss of over Rs 9 crore
in the first nine months of 1999.

Negative aspects of the Sale:

After taking out the value-added garments business, the company was
left with its textiles and threads divisions, with all their problems.
Threads have been under pressure due to a combination of high
excise duties and competition from other spinning mills. The textile
business is subject to the vagaries of fluctuating cotton prices and the
whims of labour unions. Madura Coats without Madura Garments
may be a tough proposition.

 The company, which was known as Madura Coats in the past,

had changed its name to Coats Viyella for a while after Coats
and Viyella merged overseas.
 In 1998, Coats and Viyella went through a demerger into Coats
plc and Viyella plc, after which the Indian subsidiary became
known as Madura Coats all over again.

 The demerger resulted in Coats retaining the threads and

precision engineering business, and Viyella the fashion retail,
clothing and home furnishing lines. Strategically, given the
demerger of Coats and Viyella, Madura Coats, a subsidiary
of Coats, has no reason to retain its garments business in
India. Its entry into garments was, in fact, motivated by the
merger of Coats and Viyella over a decade ago. Coats was then,
as it is now, a globally present thread company, while Viyella
was a UK-based retail clothing company.

Madura Garments' focus on suit segment

 The ready-made suit segment is expected to grow from 10

per cent to at least 30 per cent in five years, according to
Vasanth Kumar, Vice President (marketing), Madura Garments.
He said the suit market was five lakh pieces annually out of
which 90 per cent was tailor-made. Wedding contributed 50 per
cent, corporates 30 per cent and others 20 per cent of the suit
market. The company was expecting a big growth in sales from
the South, a brand conscious market.
 The company had recently launched suits under Van Heusen
and Louis Philippe brands. It had over 500 varieties of suits.
The company's suits were being made from imported fabrics.
 The launch of Purista, Dazzlers and Satin Trouser collections
from Peter England; Colour Max from Louis Philippe; Lazer'd
and Mother'd Denim from SF Jeans; Inferno and Worldwear
from Van Heusen and Las Vegas from Allen Solly were all part of
the efforts to capture and consolidate its ever-growing market
share in the branded clothing segment and these would be
available at all exclusive brand showrooms, Planet Fashions,
Trouser Towns and multi-brand outlets.

Madura Garments opens Trouser Town in Mumbai

Madura Garments, launched Mumbai's first and only store dedicated
solely to readymade trousers - `Trouser Town'. The store will stock
all trouser brands of Madura Garments - Allen Solly, Van Heusen,
Louis Philippe, San Frisco, Spiritus and Allen Solly Outdoors.

 According to Mr. Vikram Rao, group executive president, fabrics

and apparel business, Grasim Industries, the Rs. 6,500 crore
readymade garments market is growing at 15-20 per cent.
 Mr Vikram Rao, said "As market leaders in branded
menswear, we will continue to sustain our number one
position. Our vision is to build large profitable brands in
every opportune market segment."
 To take Madura Garments vision forward, intensifying
interaction with leading global manufacturers for
strategic technology alliances is very much a part of Mr Rao
and his team's game plan.
 A constant focus on innovation and design has and continues
to ensure that Madura Garments is always on the cutting edge
of fashion.

 Allen Solly's "Uncrushables", Van Heusen's "Durafresh", "Super

Permapress" from Louis Philippe and San Frisco's "Zero
Wrinkle". The "Louis Philippe stretch", a first in the Indian
market, proved very successful innovations as well.

 Brand extensions such as "Spiritus" from Louis Philippe and

"Elements" from Peter England, aided the process of innovation.
Madura Garments also launched the Monet collection from
Louis Philippe and formal flat fronts from Van Heusen.

 Mr Rao mentioned that Madura Garments aims to step up

growth through accelerating conversions from the ready-
to-stitch mindsets to ready-to-wear customer delight.

Madura Garment’s thrust is to be strengthening of marketing and

distribution efforts, development of the market through
launching a slew of new collections, periodically, raising its global
presence manifold, optimising costs and tapping new growth
segments.

Madura Garment’s new retail format, Planet Fashion, is proving to

be extremely popular with customers, providing as it does a superior
quality retail experience wherein all leading brands of Madura
Garments are available under a single roof. One can get to see
more than 6000 garments in the store and there is an exclusive
selection for formals where one can have more than 500 blazers and
suits.