Sangam (india) limited case analysis

Sangam (India) Limited
(SIL)
 Born of humble beginnings in the year 1984, Sangam (India)
Limited (SIL) today is a business giant with over 10,000
employees.
 The Group has more than 200,000 spindles and 3000 rotors
for producing PV dyed yarn, cotton and OE yarn with an
enviable reputation for quality, which is underlined by its ISO
9001:2008 certification.
 Sangam (India) Limited (SIL) is the largest producer of PV
dyed yarn in Asia at single location.
 The Group is a forerunner in manufacturing ready to stitch
fabric with the annual capacity to produce 30 million meters
of fabric and 40 million meters of denim.

Established all its
spinning and weaving
facilities in Bhilwara.
Procured raw
materials polyster
and viscose
staple fiber from
Reliance
Industries Limited
and Grasim
Industries
respectively.
Cheap cost of
labor in Bhilwara
town.

The Group's Spinning division is
ranked amongst world's largest PV
Dyed yarn industry.

In 1995, the
company
undertook
capacity
expansion
increments.
First spinning
mill with 17,280
spindles was
established in
1995.
Added another
10,368 spindles
to its capacity in
1998 followed
by 8,640
spindles in
2000.
In 2002 the total
capacity of the
spindles was
increased to
36,288, in 2003
to 48,384 and in
2004 to 64,032.

50% of SIL’s produce was consumed by
the many small and medium textile mills in
Bhilwara town.
Another 25 percent was sold to corporate
clients like Grasim, Siyaram’s, Raymonds,
S.Kumar’s, BSL, Donear etc.
Around 13% of the produce was exported
to countries like Egypt, South Africa,
Turkey, and the Gulf.
SIL used the remaining produce for captive
purpose, i.e., it used this part of the
produce to manufacture fabrics under its
own brand name.

SIL procured state-
of-the-art
machinery to
produce both yarn
and the fabric.
Since 1998, SIL
replaced its ageing
weaving machines
(nearly 60 in
number) by new
Sulzor machines
imported from
Switzerland.
The modern
machines gave SIL
the flexibility to
shift from coarse
count yarn to fine
count yarn during
production of P/V
dyed yarn.
SIL is an ISO 9002
certified company
and kept its
product quality in
tune with the
customers’
requirements.

SWOT ANALYSIS
Strengths
 Domestic market
 Skilled workforce
 Barriers of market entry
 Healthy relationships with world class suppliers
 Location of industry
 Latest technology
 Pro-active management
Weakness
 Investments in research and development
 High debt burden

Opportunities
 Dyed yarn market has a huge potential in textile industry
 Availability of world class suppliers in vicinity
 Huge scope of global expansion
Threats
 Indian textile products were costlier
 Increasing competition (specially from China)
 Cost of raw materials was increasing

Performance of SIL
 Polyester/Viscose dyed yarn was 5% of
textile industry in 2005
 SIL was market leader with 20% market
share
 Largest manufacturer of P/V dyed yarn
in country
 Achieved success in just 10 years
 Capacity: 17280 spindles in 1995 to
64032 in 2004

Future Position of SIL
 Capacity expansion with investment of
Rs.400 crores
 Decided to install 50,000 spindles more
 Expansion of fabric capacity by another 100
looms
 Plans to venture into production of quality
cotton yarn
 Hopes to achieve a turnover of over Rs.8
Billion by 2008
 Expect Sales to grow at a CAGR of 37%
2005-08

Reasons for argument
For High Market Growth
 Investment to match increased demand
For Low Market Share
 Government’s Incompatible tax structure
 Increasing competition from China
 In 2006 China was biggest competitor

Discuss the changes in the export environment of
the Indian textile industry in general and that of
SIL in particular. What strategies can SIL adopt to
overcome the Chinese competition in the global
textile export market?

Changes in the export environment of Indian
textile Industry and initiatives by SIL
 Textile industry was suffering from export restrictions or quota
by WTO
 Quota regime was eliminated in January 2005 and presented
greater opportunities for textile manufacturers
 SIL anticipated the change and increased production since
1990’s
 SIL began targeting US and Europe and believed in
increasing volumes
 SIL decided to venture into high quality cotton yarn
 SIL decided to enhance capacity to meet existing and future
demands

Strategies SIL can adopt to overcome the Chinese
competition in the global textile export market
 SIL spending more in infrastructure
 SIL concentrating on high quality products
 SIL investing in R&D to come out with value added
products
 SIL initiating aggressive marketing and selling for brand
recall of its products

QUOTA ELIMINATION
 Quota was a government-imposed trade restriction
 Quota in all textile trading was abolished by WTO in
2005
 All garments and fabrics are traded freely into
the European Union (EU)
 Beneficial for fabric manufacturers because now there
are fewer restrictions
 Most benefits to the SME’s of India and Pakistan

 Developing a marketing strategy for a long run
competitive advantage.
 Backward integration strategy to control costs and gain
economies of scale
 Growth through phased capacity expansion and
introduction of higher value products
 Importance of selecting a proper manufacturing
location
 Systematic financing for the company's growth
The Polyester/Viscose dyed yarn market in India

 The caselet focuses on the company's success
story in the polyester/viscose (P/V) dyed yarn
market in India.
 It highlights the various growth strategies
adopted by the company that led to economies
of scale, increase in market share and
profitability.
 The caselet also focuses on the measures
adopted by the company to manage the
changes in the economic and legal environment
and become a leader in the textile industry in
India

Sangam (india) limited case analysis

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Sangam (india) limited case analysis