ATUFS to aid textile value addition, exports: Lakshmi Machine

Textile companies are expecting a bright new year as the government has approved the Amended Technology Upgradation Fund Scheme (ATUFS) for the sector.

Under ATUFS, Rs 17822 crore will be allotted to clear pending claims and for roll-out of new schemes.

Lauding this move, Rajendran R, CFO of Lakshmi Machine told CNBC-TV18 that this scheme will help the textile industry as it will pave way for value addition.

However, further clarification is needed on whether this scheme covers the other sectors like spinning, weaving and processing, he added.Below is the verbatim transcript of Rajendran R’s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18. Nigel: Yesterday the government introduced this new fund for the textile as well as the government sector. It has broken up into two parts roughly Rs 12,000 crore to clear any pending claims and secondly around Rs 5,000 crore as subsidy payment for the next seven years. How does it impact your company? Could you tell us whether this Rs 5,000 crore is enough? A: This is a good move made by the government; definitely it is going to help the textile industry. The focus is very clear that they should aim for value addition. So the apparel and garment sector is a very good move which will also pave way for value addition. We are in the spinning industry but spinning alone is only a commodity and subsequent process of weaving, processing is more important. It also helps to increase our export performance also. The move informed by the government is a right move. Only thing is they have put a cap and also the subsidy amount is also given. Earlier scheme it is only interest subvention but the current scheme stipulates very clearly it is only a subsidy. Also they have put a cap of Rs 30 crore investments spread over a period of five years. The remaining sub-sector we have to still get clarification whether it covers the other sectors as I mentioned spinning, weaving and then processing. If it is included even the ceiling limit is only Rs 20 crore. At the same time subsidy has also been reduced to 10 percent. Anyway it is a good thing at least it is going to definitely have an effect on the textile sector as a whole. Once if the textile ends in the value chain that is in the apparel and garment sector performs well definitely by way of a backward movement. There is going to be a demand for the other activities as I mentioned spinning, weaving and processing. At least this is definitely going to move the textile industries exports as well as performance are going to improve. Once the textile industries sector performance improves, so it will definitely give a boost to the textile machinery sector also, not immediately but it will come through only after a period of time. Reema: So you are saying that it is a positive, but clauses like the Capping of the subsidy to Rs 30 crore per entity, excluding the interest subvention, not including spinning, ginning and pressing, all these will reduce the benefit that could come to a company like yours? A: That is true. Remaining sector covers, they are able to give a clear indication that what are all the remaining sectors, sub-sectors within the textile value chain. Reema: But can you tell us for a company like yours, if you had to realistically guess, if you had to guess what the benefit could be, how much would your revenues go up on the back of this particular development? Could you help us with some numbers? A: No, so far as LMW is concerned, we have got orders. Only thing is that the orders to get triggered. Once the value chain and then the textile industry performs well, the inactive orders will also becoming active. Otherwise, we have got pending orders. So, the pending orders will get revised and then we could able to see that our capacity utilisation will improve. Nigel: What is your current outstanding order book, what kind of inflows are you expected to see in the second half of the year? And also, your capacity utilisation, the last time we spoke, it was hovering around 60 percent roughly, could it give us an update on both those two figures? A: The order book is really in the region of about Rs 2,850 crore, same level what we had earlier period also. And then capacity utilisation is also between 65-70 percent, still at the same level. So, when the demand picks up, all the inactive orders become active, we could able to utilise our capacity in full and satisfy the customer needs.