Plans Rs. 600 cr. Investment in capacity expansion
In a landmark move, SVG Group’s acquisition of Raj Rayon Industries Ltd. has set the stage for a significant turnaround and future growth. Established in 1993, Raj Rayon, a producer of high-quality man-made fibers, faced substantial challenges leading to the cessation of production in 2018. However, SVG Group’s strategic acquisition and investment initiatives have revived Raj Rayon’s operations, positioning the company for remarkable growth.
Raj Rayon Industries Ltd., established in 1993, has been a key player in the production of high-quality man-made fibers, specializing in Polyester chips, Partially Oriented Yarn (POY), and Drawn Textured Yarn (DTY). The company’s extensive operations include a 25-acre land and a 600,000 sq ft manufacturing plant in Silvassa. Despite its promising start, Raj Rayon faced severe challenges, culminating in the cessation of production in 2018.
Today, Raj Rayon has set an ambitious goal to achieve a topline of Rs. 2900 crores by FY2027, reflecting their confidence in the company’s growth potential. The revenue breakdown targets Rs. 780 crores from POY, Rs. 1760 crores from DTY, and Rs. 360 crores from chips.
The company has outlined a capex plan of INR 500-600 crores over the next 2-3 years, focusing on adding new machinery with the latest technologies. This investment will expand the POY capacity from 225 TPD to 600 TPD and DTY capacity from 100 TPD to 400 TPD. The shift towards better margin products through continuous polymerization processes is expected to enhance gross margins, driving high net profit margins.
SVG GROUP
SVG Group, a leading vertically integrated producer of polyester knits, recognized the potential in Raj Rayon and acquired the company in 2021. SVG Group’s expertise in textiles and strong management, combined with strategic investments, has revitalized Raj Rayon’s operations. This acquisition integrates Raj Rayon’s upstream capabilities with SVG’s downstream processes, optimizing the value chain from fiber production to finished garments, enabling comprehensive textile solutions.
Prior to the acquisition, SVG Fashions operated a Drawn Textured Yarn (DTY) manufacturing unit with a capacity of 32 TPD. Post-acquisition, this operation was strategically merged with Raj Rayon, streamlining production and enhancing supply chain efficiency. SVG’s strong market presence and premium client base, including brands like Reliance, Adidas, and Puma, ensure a steady order flow for Raj Rayon, stabilizing production and maximizing output.
Technological Advancements and Cost-Saving Measures:
SVG Group has made substantial investments in modernizing Raj Rayon’s production capabilities. Key technological advancements include the integration of advanced technologies such as VAM, which contribute to significant cost reductions. Additionally, the company has implemented various cost-saving strategies to enhance EBITDA margins, including utilizing reusable packaging, optimizing logistics, and leveraging increased capacity to negotiate better dealer margins. These measures aim for an additional 2-3% savings at the EBITDA margin level.
Raj Rayon anticipates maintaining sustainable margins in the range of 5-7% for POY, with DTY margins expected to be between 10-12%. The company is also poised for vertical and lateral expansion, adding niche products in yarns and knitted fabrics, which are expected to be margin accretive. With planned capital expenditures, the company aims to increase its existing combined capacity from 400 TPD to 700 TPD, nearly doubling the production capacity.
Strategic Insights from Leadership:
Mr. Rajkumar S. Agarwal, Chairman & Managing Director, emphasized the significance of the past year’s achievements: “The past year has been exceptionally eventful for Raj Rayon Industries Ltd., marking a significant turning point in our journey. After several years of diligent effort and strategic planning, we are proud to say that our facility in Silvassa is now fully equipped and operational. This achievement is a testament to the valiant efforts of our management team and dedicated workforce. FY23-24 represents our first full year of revived operations, and we are delighted with the progress we have made.”
SVG Group’s presence in high-margin fabric and garment manufacturing, coupled with strong client relationships, positions Raj Rayon to benefit from consistent order supply for fibers, acting as backward integration for the group. The Indian textile and apparel market, valued at USD 175 billion in FY24, offers significant growth opportunities, with the domestic market projected to grow at a CAGR of 9% to USD 250 billion by FY31.
Future Outlook
SVG Group’s acquisition and strategic investments have set Raj Rayon Industries Ltd. on a path of sustained growth and industry leadership. With robust expansion plans, advanced technological integration, and a focus on high-margin products, Raj Rayon is poised to achieve extraordinary milestones. The company’s comprehensive plan and commitment to excellence and innovation are expected to drive significant value for stakeholders, marking a new era of success in the textile sector.
