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A ‘STURDY’ TURNAROUND
Its obituary had been in the offing for a long time. Sturdy Synthetics, the country’s second largest polyester manufacturer, proved its critics wrong by achieving a remarkable turnaround after three tumultuous years in 2000-01.
Its profile looks all the more impressive when one takes into account an environment where company after company in this business-such as Oriya synthetics, JK Synthetics, Raymond, DCL, Parasrampuria, JCT Phagwara--either folded up, reported sick or went up for sale. The global and domestic environment during 1996-99 for the polyester business had adversely impacted almost every Indian manufacturer except Reliance Industries. Triggered by the Asian currency crisis, the prices of raw materials fluctuated sharply during this period. Added to it was the Indian government’s skew towards the cotton fibre industry (which continues till date) and its apathy towards polyester manufactures, which was manifested in heavy import duty on raw material for polyester as well as the imposition of stiff excise duty. While excise duty charged on cotton was 9.2 per cent, it was 36.8 per cent for polyester. Polyester was also perhaps the only industry where the customs duty on raw materials was higher than the customs duty on finished products. In such a stifling environment, the Indian polyester industry gasped for survival. Only the toughest could survive and Sturdy did. In doing so, Sturdy has emerged stronger, stable and better positioned to pursue a bold new strategy for growth and profit in the future. Today, Sturdy is the single largest dedicated polyester manufacturer in
the country, with an 18 per cent market share and sales touching Rs. 1986.03 crore during 2000-01.
Sturdy Synthetics (I) Ltd. had commenced production through spinning operations in 1989 from Pithampur in MadhyaPradesh, with an initial capacity of 21,120 spindles, which soon increased to 122,880 spindles per year and Sturdy grew rapidly into one of India’s leading manufacturers and exporters of synthetic blended yarn by 1992. The turning point came in 1993 when Sturdy undertook the strategic decision to integrate backwards in the textiles value chain by setting
up a Rs. 170 crore integrated polyester plant at Butibori, near Nagpur. This saw the transformation of the company from that of a pure spun yarn company to emerge as India’s second largest polyester player, with an installed capacity of
280,000 tons per annum. Sturdy also went for technical collaborations with Du Pont of USA and Toyobo of Japan.
The year 1994-96 was a boom period for the polyester industry and Sturdy reaped a good harvest. But the boom phase also saw the international prices of raw materials shoot up. Besides international price fluctuation, Sturdy had also to
fight major forces in the domestic market. Rival manufacturers, who had economies of scale, resorted to slashing their prices, thereby forcing producers like Sturdy to follow suit. Consequently, margins came under pressure. Sturdy, like many other companies, went into the red. But unlike most others, it survived, fighting with its back to wall.
Interestingly, it also continued to grow at a steady rate of 15-20 per cent per annum during this period. It operated at 97 per cent of capacity, while the industry average was 83 per cent during 1998-99. Ironic though it sounds, it was a period of high growth and high losses. It was again an unusual situation, whereby industry was growing at a rate of 15-20 per cent but margins continued to be under pressure.
In 1999-2000, the situation had begun to stabilize. Sturdy, which had posted a net loss of Rs. 160 crore during 1998-99, was able to bring it down to Rs. 70.65 crore by 1999-2000, while its operating profit increased to Rs. 266 crore. So
where does Sturdy figure in this environment? Increasing demand and firming prices do not necessarily mean profit and survival in the polyester business today.