Sarju International: Rebuilds business, post downslide When the going gets tough, the tough get going!
90 per cent of the problems we face are related to fabric. All stakeholders of the industry need to sit together and see how we can probably invest more in processing. If we have good and enough process houses in India, we can bring down the cost and this can be a key to success.
When the going gets tough, the tough get going! It is always very hard for any apparel exporter to rebuild himself after major losses, however, some companies have achieved this ‘impossible’ with their sheer patience, hard work and well-formulated strategies which bring in results. A perfect example of the same is Mumbai-based Sarju International. After a long struggle of more than 4 years, the company is growing at the rate of 15 to 20 per cent from last 3 years. Apparel Online met Amit Goyal, MD of the company and discussed the ups and downs of his 27-year old organization. Wrong timing of some critical decisions were the main reasons for its failure; while cost-cutting and limiting or focusing itself on core issues were the significant routes which it took to come out of the situation.
In June 2006, Sarju International (doing a timely annual business of nearly Rs. 28 crore) acquired US designer brand Nick Hilton and one of the top outwear manufacturing company Gordon & Ferguson for
Rs. 7.5 crore and Rs. 34 crore respectively with an anticipation of considerable growth. Some other aggressive initiatives like going for an IPO, acquiring a brand and collaborating with a European company… were also in its pipeline. A Red herring prospectus by the company got clearance from SEBI but the plan was abandoned. Recalling those days, Amit thoughtfully briefs, “Regarding designer Nick Hilton, the idea was to launch mens’ suits in America for few years and then bring this concept to India and open retail stores. While for Gordon & Ferguson, we were planning to control the front-end and supply from here.” But overall things started changing and global recession of 2008 forced Sarju International to wind up all these. “Timing was not in our favour as we took these steps at the wrong time. Within 9 months of buying Gordon & Ferguson, it filed for bankruptcy. We lost lot of money due to which we struggled a lot from 2008 to 2012/2013,” adds Amit.
As an after-effect of all these problems, the company sold its Tirupur’s manufacturing unit in 2012 and started working as a merchant exporter. “By not having our own manufacturing, we were able to focus more on marketing rather than production and allied issues. By outsourcing, product cost increases almost 10 per cent but it gives us flexibility, like when there is a lean period, I don’t have any overhead cost. I found this model works for us very well and we are happy with this decision,” says Amit. He further added that to cut down the cost, two other major steps were taken. Earlier its Mumbai office which was of 10,000 sq. feet was changed and shifted to 2,500 sq. feet office. Its official workforce of nearly 45 persons was also brought down to half. These major changes helped the company to become more competitive, to grab more orders and retain the old buyers. “It was very difficult for us like being the ones who are used to travel in business class, we were forced to travel in economy class. But now we are used to it and are doing well,” states Amit and goes on to emphasize, “When business is good, one can employ more people, but when one starts cutting down the flab, one can do more work with less people. Now at every step, we keep ourselves very much lean.”
The company, majorly doing poplin shirts for men and kidswear (30 per cent of total business), is working on a strategy which gives it maximum gain from minimum efforts, like it is not investing to explore new buyers, new markets and is working with such kinds of importers, buyers who don’t insist on compliance, audits, but just focus on maintaining the law of the land. Currently some of the buyers of Sarju International are doing an annual turnover of US $ 500 million or even 800 million but they are buying just 3 to 5 per cent of their total requirements from the company. “I have lot of growth opportunities to develop along with
the same customers and the same happened in the last 2-3 years. As we are growing well, it means that we are growing with these customers. So why should I run to a new country or new market when I see enough potential in the same customers? If we exhaust or reach a certain level with our buyers… only then we will look for new buyers,” reasons Amit. The company is working 90 per cent with US-based buyers and rest with Latin American buyers who have average orders of 5,000 pieces and maximum up to 30,000 pieces. This gives a comfortable level to Sarju International and it doesn’t take orders of more than 30,000 pieces.
All these ups and downs have not limited the company from initiating further but it will take time as a confident Amit stresses: “We are growing at 15-20 per cent every year and we will be in this position for the next 2-3 years where we want to stabilize. After that we will decide about ‘what next’, be it backward integration or opening a design studio. Many things are in mind but nothing is concrete currently,” concludes Amit with a futuristic vision.
Amit Goyal, MD, Sarju International
Sarju International is doing mainly poplin shirts for men