SCOT Analysis

Strengths

  Experienced promoters with over 40 years of experience in the industry
  Successfully implemented various expansion schemes in the past with in-house expertise
  Consistently achieved capacity utilisation over 90% in respect of POY in the past.
  FIL’s Dadra unit enjoys certain locational advantageous such as sales tax exemption, Income Tax deduction u/s 80 IB of the Income Tax Act, 1961, lower cost of power @ Rs.2.60 / unit at Dadra Plant and close proximity to air/ seaports.
  Products are well accepted in the market
  With the implementation of the proposed project, the company will reap the benefits of economies of scale due to optimum utilisation of the existing facilities.
  Satisfactory organisational set-up with experienced and well-qualified employees.
  Strong marketing network with low selling and distribution costs

Challenges

  The prices of raw materials and finished goods move in tandem with international prices, which, in turn, have positive correlation with the prices of petrochemical products.
  A major portion of the manufacturing capacity originates from second hand equipment.
  FIL adopts the technology of spinning POY from polyester chips which are an intermediate and may put FIL at a comparatively disadvantages position due to relatively higher cost vis-à-vis the other players who manufacture POY directly from PTA/DMT/MEG. Company is taking planning to putting up its own captive poly- condensation facility.
  Debts of FIL have been restructured under CDR mechanism due to which it is bound by the CDR conditions. However the company is planning to swaping its debts of IDBI, ICICI & IDBI bank with Foreign currency loan which will also reduce the overall cost of debt of the company.

Opportunities

  With no major capacity increase being created in the recent past / being planned in the near future, the existing players are well positioned to take advantage of the emerging scenario where demand is expected to exceed supply.
  Potential growth in exports of POY / PFY. With quantitative restrictions on textile exports being dismantled under the aegis of World Trade Organisation (WTO) from 2005, it is expected that low cost producers like India will benefit.
  With tariffs proposed to come down in India over a period of time, it is expected that raw material costs will be comparable to those prevailing in the international markets.
  Potential growth in domestic demand for POY due to increase in share of non-cotton fabric in total fabric production on account of lower availability of cotton, reduction in the excise duty on non-cotton yarns, and higher cotton yarn exports.

Threats

  Likely expansion by large players like Reliance Industries, Indo Rama Synthetics, Century Enka Ltd., etc.
  India has concluded / is in the process of concluding Free Trade Agreements (FTA) with a number of countries like Sri Lanka, Thailand, China, etc. This will lead to lower tariffs all round and may affect Indian textile units, including FIL.
  Post WTO, when India would be exposed to international competition. FIL’s position is expected to be vulnerable vis-à-vis those companies with global size and modern facilities.