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Page 1 Techtextile – India Symposium : 30th – 31st October 2012
Knowledge Partner
Gherzi van Delden GmbH, Germany www.gherzi.com
Mumbai – October 30th and 31st, 2012
Technical Textiles
Techtextil – India Symposium
Are Joint Ventures or Strategic Tie-Ups
the Right Recipe for the
Indian Technical Textiles Industry?
Page 2 Techtextile – India Symposium : 30th – 31st October 2012
11 bn USD
In 2012 the Indian Techtex industry is estimated by Gherzi at about 1/10 of the Techtex industry in China
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Indian Techtex Industry Chinese Techtex Industry
Source: Gherzi research and estimates
116 bn USD
58‘000 Rs cr.
636‘3560 Rs cr.
Page 3 Techtextile – India Symposium : 30th – 31st October 2012
The Indian Techtex market today is mainly focusing on Packtech, Clothtech and Hometech. Higher value added applications like Indutech or Medtech still have to be expanded, coming from a smaller base
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
World Techtex Market Structure Indian Techtex Market Structure (2010)
Source: Gherzi research
Packtech Clothtech Hometech Agrotech, Buildtech, Geotech, Indutech, Mobiletech, Oekotech, Protech, Sporttech
81 %
33 %
13 % 15 %
39 % 7 %
7% 5 %
Page 4 Techtextile – India Symposium : 30th – 31st October 2012
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
India: Attractiveness (1)
Indian TechTex has recently seen major indigenous capacity investments without
support by a western tie-up or JV partner. Examples include:
Gini Filaments into spunlace nonwovens
Ahlstrom Gujarat into SMS nonwovens for gowns and drapes
SRF into High Tenacity PET yarns and downstream PVC lamination (signage) and PVC coating (tarpaulins)
Welspun into spunlace nonwovens
Arvind into glass fabrics and wide width technical wovens
Neocorp into wide width tape wovens
Techfab into geogrid and woven geotextile manufacturing
etc.
Page 5 Techtextile – India Symposium : 30th – 31st October 2012
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
India: Attractiveness (2)
These investments demonstrate that India has reached the stage to become a major
player in Technical Textiles outside of the traditional Packtech segment
For the local market which seems finally to take off
For the international market which shows an increasing acceptance for India made products
After many years of focus chiefly on China, major foreign TechTex producers and converters have discovered India as the next growth market. Segments which should be the main focus of foreign interest include in Gherzi`s view:
Composites (wind energy, Mobiletech)
Automotive textiles (nonwovens and moulded parts, headliner, airbag, seat fabrics)
Hygiene (baby diapers, women’s hygiene)
Defence textiles
Specialty Geotextiles (like shore reinforcement)
State of the art crop protections / crop transport (Agrotech)
Contract home textiles for modern large scale offices in the Software, IT and BOP sector
Page 6 Techtextile – India Symposium : 30th – 31st October 2012
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
India: Attractiveness (3)
The advantage of Indian firms being ‘a late entrant’ into the Techtex domain
(compared to China) is, that companies can directly invest into state of the art technology. However,
Factories must be conceived as flexible as possible (a maximum number of segments to be served from one manufacturing line)
Exportability of the product range constitutes an important asset to quickly fill a new, highly productive facility
Page 7 Techtextile – India Symposium : 30th – 31st October 2012
Foreign investors in Indian Techtex have partially opted for a 100 % foreign owned local set-up …
Recent Techtex FDIs in India
Saertex India (D): Glass multiaxial fabrics (composites) Lear Corporation (USA): Tier 1 for Automotive
Ahlstrom (USA):
Nonwovens and specialty papers (Medtech) Autoneum (CH): Tier 1 for Automotive
Freudenberg Nonwovens India (USA): Interlining and
Industrial Nonwovens Brinton carpets (UK)
Autoliv India (D): Seat belts and Airbag Skaps (USA): Geotextiles
Bond Safety belts (Sicherheitsgurte) (D): Seat belts Meccaferri (I): Geotextiles
Johnson and Johnson (USA): Hygiene, Medtech TB Kawashima Automotive (Textile) India Pvt. Ltd
(recently announced) (J): Automotive
KOB Medical Textiles (D): Elastic Bandages (Medtech)
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Source: Press Info
Page 8 Techtextile – India Symposium : 30th – 31st October 2012
Foreign investors in Indian Techtex have partially opted for a 100 % foreign owned local set-up … (ct’d)
Recent Techtex FDIs in India
Procter and Gamble (USA):Hygiene Karl Otto Braun (D): Cotton gauze and wound dressing
(Medtech)
Kimberly Clark (USA): Hygiene MEP Olbo (D): Mechanical rubber good reinforcements
(Indutech)
3 M India (USA): Industrial and Medtech Madura-Coats (UK): Sewing thread (Clothtech)
LANEX (Seile and Gurte) (CZ): Ropes and belts Lindstrom (SF): Laundry rental (Protech)
TAKATA (J): Seat belts and Airbag BWF (D): Filter bags for hot gas filtration (Indutech)
Schoeller India (CH): Functional textiles Andrews (UK): Filter bags for hot gas filtration
(Indutech)
Wilhelm India (D): Laminated fabric for shoe industry Unicharm India (J): Hygiene
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Source: Press info
Page 9 Techtextile – India Symposium : 30th – 31st October 2012
… and partially opted for a tie-up with a qualified Indian counterpart
Source: Press info
Key foreign JVs / Tie-Ups in India – Technical Textile Field
Supreme NW / Textilgruppe Hof (D): Nonwoven interlining
(Clothtech) Kineco, Kaman Corporation (USA): Composites
KE - Burgmann Fibre India (D): Synthetic yarns (Indutech) Strata Geosystems India Pvt. Ltd, (USA): Geotextiles
Indo – Danish (Past JV mit KE Burgmann fibre) Hindoostan and TOHO (J): Carbon / Aramid composites
Harley Nirafon India and Keld Ellemtoft (for Filters) –
Finland Tata and Johnson Control, (USA): Automotive – Tier 1
Aunde (D) Faze 3: Automotive seat fabrics ATM and Colan (AUS): Glass Fabrics (Composites)
Supreme Treves nonwovens (F): Automotive interior
(Mobiltech) TRW (D) / Rane: Automotive Seat Belt
Treves Banswara Pvt Ltd (F): Automotive internal
furnishing (Mobiltech)
KSS(USA) / Abhishek Auto Ind. Ltd.: Automotive Seat
Belt, Airbag
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Page 10 Techtextile – India Symposium : 30th – 31st October 2012
… and partially opted for a tie-up with a qualified Indian counterpart (ct’d)
Source: Press info
Key foreign JVs / Tie-Ups in India – Technical Textile Field
H & V (USA), Nath group: HVAC filtration and battery
separator (Indutech) Lenzing (CH) Modi Fibres India Pvt. Ltd. - Fibres
Arvind, P.D. Group (D): Glass fabrics (Composites) Arvind - Du Pont (USA): Aramide fabrics (Protech)
Kusumgar Corporates, Saati (Italy): Protech Arvind - Rhodia (F): Cotton FR Proban (Protech)
DSM (CH), Kemrock: Specialty composite resins Vardhman - A&E (USA): Sewing thread (Clothtech)
Loyal Textiles & M/s. Gruppo P&P Loyal SpA and
Schaefer Loyal (I) and (D): Workwear
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Page 11 Techtextile – India Symposium : 30th – 31st October 2012
In some cases Indian firms have ventured abroad to acquire know-how and market access through M & A
M & A
S. Kumars Ltd (takeover of Klopmann) – Italy
Neo Corp International Ltd (takeover of Europlast) – UK
Binani Group / Goa glass fibre (3 B takeover) – Belgium
SRF Belting division (takeover of Industex) – S. Africa
Alok Protech & Workwear division (takeover of Mileta) – Czech Republic
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Source: Press info
Page 12 Techtextile – India Symposium : 30th – 31st October 2012
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
The right approach Entering into new Techtex market segments requires
a) Know-how
b) Investment in a manufacturing technology suitable for product certification to international
norms and
c) Customer access (locally and abroad)
A tie-up with a foreign partner can – but most not always and in every case – supply answers to the missing market entry skills described above
Page 13 Techtextile – India Symposium : 30th – 31st October 2012
Acquisition of market entry skills: Four different cases
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Indian Producer
Targeted Market
Source: Gherzi research
Small to Medium Enterprise
Larger enterprise
Developed Indian market Packtech, Hometech Clothtech
Market less developed in India All other Techtex segments
Stand alone or licensing / distribution
agreement
Tie-up or Joint Venture for local market
and global exports
Stand alone approach or M & A
Tie-up or Joint Venture for local market development
Page 14 Techtextile – India Symposium : 30th – 31st October 2012
Case 1 Small to medium enterprise: Packtech / Hometech / Clothtech market focus
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Issues to deal with:
Source: Gherzi research
Why only licensing or distribution agreement required? Large Indian market allows for scale without foreign partner Penetration of higher end segments (FDA approved,
pharma, …) requires skills best supplied, however, through a tie-up
Potential interest for foreign partner in tie-up with Indian firm? Large size of Indian market Quick market entry through tie-up
Scalability? Limited, as foreign partners will try to limit JV scope to India
Page 15 Techtextile – India Symposium : 30th – 31st October 2012
Case 2 Large enterprise: Packtech / Hometech / Clothtech market
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Issues to deal with:
Source: Gherzi research
Why stand alone approach? Combination of larger Indian firm plus large domestic market
allows for trading-up into higher end markets without foreign partner support
Scalability? Yes – going global might best be achieved through M & A
(acquisition of foreign distributors or smaller producers)
Page 16 Techtextile – India Symposium : 30th – 31st October 2012
Case 3 Small to medium enterprise: All other segments
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Issues to deal with:
Source: Gherzi research
Why tie-up for local market? Development of a foothold in emerging Indian market requires
product and technology know-how often not available to Indian Techtex producers
Interest for foreign partner? Small, but rapidly developing Indian market
Scalability? Limited, as foreign partners will try to limit JV scope to India
Page 17 Techtextile – India Symposium : 30th – 31st October 2012
Case 4 Large enterprise: Tie-up for local market and global exports
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Issues to deal with:
Source: Gherzi research
Why tie-up for local market and global exports ? Investment in high performance western manufacturing
technology requires global sales to fill the plant
Interest for foreign partner? Small, but developing Indian market Low cost base for global exports
Scalability? Yes, if world market can be targeted
Page 18 Techtextile – India Symposium : 30th – 31st October 2012
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Route to success (1)
Set the goals:
Which product / market segment
Attractiveness of a tie-up for foreign partner
Type of transaction: • Off-take • Strategic alliance or licensing • JV
Long list of suitable partners:
Prio 1: Optimum fit – optimum size
Prio 2: Suited but less optimal
Investment Memorandum:
Presentation of the Indian market and Indian partner profile
Attractiveness of the transaction for the foreign partner
Ideal transaction structure
Initial approach:
1st contact
NDA
IM sent
1st meeting
Page 19 Techtextile – India Symposium : 30th – 31st October 2012
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Route to success (2)
Short list:
Limited number (1 – 3) of tie-up partners for further negotiations
LOI / MOU:
Agreement on transaction ‘subject to’
Pre-Contract:
Joint business plan
Detailed transaction structure
Due diligence
Initial Approch
Page 20 Techtextile – India Symposium : 30th – 31st October 2012
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Route to success (3)
Legal and tax:
Certifications
Licenses
Legal contracts
Closure
Page 21 Techtextile – India Symposium : 30th – 31st October 2012
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Success factors In Gherzi’s experience the following criteria are important to successfully close a transaction Show the attractiveness of the project for the foreign partner
Identify the right partner and approach the right person on a personal level
Build trust in a series of successive meetings
Respect need of western partner to protect his IP
Involvement of an experienced consultant often helps to achieve these aims
Page 22 Techtextile – India Symposium : 30th – 31st October 2012
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Conclusion (1)
Not always is a tie-up required to build up a successful business in Technical Textiles.
A number of Indian firms have followed a stand alone approach
Typically, foreign partners are mainly interested in the Indian market. The market is, however, still small outside of the … Packtech Hometech Clothtech
… segments
Page 23 Techtextile – India Symposium : 30th – 31st October 2012
Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
Conclusion (2)
A thorough analysis of the right partner to be approached helps to avoid
disappointment lateron in the process
A clearly defined product / market focus and set of goals accompanied by a professionally worked out investment memorandum helps to attract the interest of a foreign partner
It is important to
a) build trust between the parties in the series of negotiations and
b) agree on a joint business plan in order to close the transaction in a manner satisfying both the Indian as well as the foreign party
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