Lux Industries plans Greenfield expansion with capex of Rs. 110 crores

March, 2021, Kolkata. Lux Industries Limited (NSE: LUXIND, BSE: BOM: 539542) one of India’s largest hosiery producer and exporter has announced that that its Board of Directors has approved a greenfield expansion plan attuned to INR 110 crores. The company has already identified a land parcel measuring the construction area of around 4,60,000 Sq.ft of which 20% to 30% will be used for manufacturing unit and balance for warehousing, storage and finishing facilities.

The capex will be completed over next 12-18 months. Lux Industries has three major facilities in Kolkata, Tirupur and Ludhiana, which are capable of producing more garments than the installed capacity due to the improved efficiency and flexible manufacturing capabilities. It is also working towards way more flexibility in terms of capacity with enhanced mechanical tools and scientific way of working according to the market demand.

Currently Lux Industries is running at full production capacity however it is also having 3rd party long-term contract to enhance the production capacity and hence company is planning to infuse the capital for supply chain but well supported with the increase in own production capacity also. Lux Industries generates sufficient internal accruals to finance its capital expenditure and do not need any external funding. The company’s profits take care of their capital expenditures. With this investment Lux Industries is expecting to get an incremental sale of around Rs. 400 crores.

Commenting on the expansion Mr. Ashok Kumar Todi, Chairman said, “Despite the advent of Covid-19, our performance continues to remain strong, and we continue to see robust demand. To support this northward trajectory of growth, we have decided to invest Rs. 110 crores in a greenfield expansion to be completed in next 12-18 months. Our flexible manufacturing approach has made us more agile in responding to strong demand estimation. The new investment will further augment our ability to act swiftly and improve our market share in existing segments as well as new segments like kids’ and women innerwear.”

Commenting on the expansion Mr. Pradip Todi, Managing Director said, “The new capex of Rs. 110 crores will have an asset turnover of around 4 times thereby generating additional revenue of around Rs. 400 Crores. The flexible manufacturing approach has helped usto improve our operating as well as return matrix and the new capex will strengthen it further. Ason December 31, 2020, we had a cash balance of Rs. 140 crores which will be sufficient to fund the capex fully. We expect to maintain our Net Cash status positive even after completing the capex backed by our strong operating cashflow and focus on reducing working capital further.”

Currently the company has around +1 million sq. feet area of which around 30% is being used for manufacturing process like knitting, cutting and rest is used as warehousing, storage and finishing facility. Due to improved operating efficiency and flexible manufacturing approach, the total stock movement in FY20 was around 200 million pieces translating to a utilization of around 100% across all the major facilities in Kolkata, Tirupur and Ludhiana. The company continues to operate at full capacity, which necessitated the investment in greenfield expansion of manufacturing as well as warehousing and storage facilities.

Lux have always been proactive in adopting newer methods of production developing innovative products and targeting the right audience via branding and promotional activities. Its customer centric approach has helped the brand to expand their visibility and created strong brand equity for the entire brand portfolio. With a strong assortment of 15 brands offering mass, mid premium and premium products across demographics.

It has helped the brand to outperform the market and generate a pricing premium. Another new initiative which the company recently ventured into is EBOs network called COZYWORLD, currently operating with 5 stores. And going forward by the end of FY2022, the company is looking at opening about 60 to 70 stores both company owned and franchisee operated stores enhancing the brand experience with all products from Lux portfolio under one roof.

Lux Industries works for increasing customer satisfaction by providing value for money. It aims to capture the additional market share in existing segment as well as entering to new segments like Kids and Ladies wear. The company is planning to expand in the southern parts of India where there is extreme potential for business growth. The merger with JM Hosiery and Ebell Fashions will help unlock substantial value to their stakeholders and will help in streamlining the business.