From one small textile unit to a Rs 382 Cr business: the story of Surat-based Shahlon Group
In 1984, three brothers started a small textile unit in Surat, Gujarat. Pooling in their resources, Dhirajlal Raichand Shah, Arvind Raichand Shah, and Nitin Raichand Shah equipped the unit with 12 conventional power looms.
Soon, the Shah’s family business, aptly named Shahlon, began making the most out of India’s booming textiles industry.
“In those days, textile was becoming the pioneer of industrialisation in India. We saw a business opportunity as this industry was becoming increasingly crucial to the country’s industrial output, employment generation, and export earnings,” says Dhirajlal Shah, Chairman of Shahlon Silks, in an interaction with SMBStory.
But the dream of becoming a success in the textile industry was not achieved overnight. The brothers toiled for 16 years with 12 conventional power looms, gradually adding 282 water jet looms to their arsenal.
In 2000, Shahlon formed a partnership with Reliance Industries for synthetic yarn, a move that would give the three brothers their big break.
Over the next 10 years, Shahlon expanded its production capacity by installing 100 water jet looms, and by incorporating wind energy in its manufacturing process.
“Post 2011, we saw tremendous growth with yarn dyeing, and further expanded our capacities. We had become a fully-integrated textiles enterprise, engaged in all types of fabrics and yarn manufacturing and sales,” Dhirajlal says.
At present, Shahlon is a leading textiles enterprise in India, clocking a turnover of Rs 382 crore and employing a workforce of more than 2,200.
The company is into yarn marketing, texturising, twisting, sizing, dyeing, and weaving. Besides its yarn manufacturing, Shahlon supplies fashion, shirting and suiting, furnishing, and technical fabrics to leading trading houses in India and fashion brands across the world.
Surat’s robust textile ecosystem
Operating out of Surat district— India’s textile hub — gave Shahlon a business edge. A significant part of Surat’s population is engaged in the textile industry. It is estimated that around 65 percent of India’s manmade fabric is produced in the district.
For decades, companies like Shahlon have accessed Surat’s robust and systematic network of wholesalers, retailers, suppliers, and manufacturers of textile products.
“We have four manufacturing units in Gujarat located at Kim, Karanj, Kosamba, and Sachin while our corporate office is in Surat [city]. Being based in Gujarat, we have been able to become fully integrated through continuous investment in state-of-the-art technology and equipment across all our areas of operations,” Dhirajlal explains.
Before Shahlon became fully integrated and self sufficient, the brothers faced numerous challenges related to product costs. The company used to procure basic raw materials from large spinners who controlled the downstream industries.
These raw materials were prone to big price fluctuations, which used to impact Shahlon’s cost structure and operating margins.
The brothers tackled the challenge by slowly building their own textiles infrastructure, network, and supply chains, and eventually stopped relying on big spinners.
Increasing their own manufacturing capabilities, they built a fabric manufacturing capacity of 42 million tonnes per annum and a yarn manufacturing capacity of 22,200 tonnes per annum, Dhirajlal claims .
“In 2019, we also consolidated operations, through an amalgamation with our group company Fairdeal Filaments. This is expected to increase effectiveness, increase market share, and enhance Shahlon’s market offerings. It will also help us in building a stronger manufacturing base and de-risking of business models led by possessing complementary portfolios,” he adds.
The unorganised market
Going forward, Shahlon is looking to tap more potential sectors and markets with its products. It seeks to become a global leader in the textiles industry, and exceed customer and stakeholder expectations.
However, two important challenges stand in its way — the strength of the unorganised textiles market and the impact of COVID-19 on production.
The textile industry in India is varied, with expensive hand-spun and hand-woven textiles at one end and cutting-edge fabric production mills at the other.
The decentralised and unorganised power looms, hosiery, and knitting sector form the majority of the textile industry. There are also several middlemen in the value chain.
On how this affects Shahlon, Dhirajlal says, “The large, unorganised textile market impacts the pricing power of organised players like us. It has been a tough challenge operating in a largely unorganised market. But we don’t consider unorganised players as competitors.”
According to him, players in the unorganised textile sector have limited scale and product offerings. Shahlon, however, is fully integrated, and is able to ensure scale and product quality, and build a portfolio of value-added products.
“This allows us to command a premium over unorganised players. So, we only consider other organised fabric manufacturers as our competition,” he adds.
Textile businesses such as Donear, Vimal Textiles, Garden Textiles, Cotton Hub, etc., are some other organised players in Surat.
COVID-19 impact and future plans
The lockdown imposed to curb the outbreak of the COVID-19 pandemic resulted in widespread loss of business, and even organised and fully-integrated businesses couldn’t escape the effects.
Supply chain disruptions caused capacity to drop at Shahlon’s plants and its offices also had to be shut down. While the company implemented work-from-home policies for office work almost immediately, it took over a month to resume production.
“With the partial lifting of lockdown restrictions, we restarted manufacturing in a gradual manner from April 27. We made necessary arrangements for sanitisation and screening, and have been continuing operations since then,” Dhirajlal says.
Shahlon is now confident of reaching pre-COVID-19 levels this quarter. The company made efforts to convert a challenging period into an opportunity by rationalising costs and tapping into a new and relevant area of textiles manufacturing — fabric for Personal Protective Equipment (PPE).
It received certification from the South India Textile Research Association (SITRA) for manufacturing of fabric for PPE kits to be used by healthcare workers.
“Under our existing manufacturing setup, we had the capacity and capability to make PPE fabric. We needed no further capex or investment. The fabric meant for PPE and its certification are in line with the guidelines and requirements of the Ministry of Health and Family Welfare,” Dhirajlal says.
After receiving approval, Shahlon partnered with Laxmipati Textiles to manufacture PPE kits, face masks, coveralls, shoe covers, etc. This temporary pivot allows the company to make revenue and also buy some time for its primary yarn and fabric business to recover.
With the Indian textiles industry expected to reach $223 billion by 2021 from $108 billion in 2017, Shahlon Group can soon look to capitalise on growing domestic consumption and export demand for textiles.
Edited by Saheli Sen Gupta
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