Mumbai, Oct. 27: Textile major Raymond is poised to form a joint venture with Grotto S.p.A. of Italy to make and market the upscale jeans brand Gas in India.
Talks between Raymond managing director Gautam Singhania and Claudio Grotto, owner of the eponymous Italian company formed in 1982, have gone on for quite some time.
“The talks have entered the final stages,” said market sources. “They haven’t inked the deal yet but are very close to it.”
“It is a much smaller deal than the ones struck earlier,” said industry sources who put the size of the deal in the range of Rs 15-25 crore.
The deal size may be small but Gas is a widely respected brand and is expected to stir up the Rs 1900-crore market for branded jeans in India where popular brands have been finding it hard to ratchet up sales.
Raymond officials refused to talk about the deal. “The officials concerned are travelling; so we will not be able to comment,” said a company spokesperson. E-mails sent to Grotto SpA remained unanswered.
Raymond currently ranks among the top two producers of denim in India.
Grotto S.p.A, which manufactures and distributes the Gas brand of clothing worldwide, was founded by Claudio Grotto in 1982. The company website states that it had raked in revenues of close to 121 million euros in 2002. No financial figures are available since that year.
Jason Biggs, the star of such movies like The American Pie are some of the friends of Gas and famous Italian footballer Fabio Galante is one of several celebrities who wear Gas Jeans.
All over the world, denim — a rugged cotton twill textile which is made in a way that produces the familiar diagonal ribbing identifiable on the reverse of the fabric — has been struggling to hold on to its once-messianic thrall over the youth who have tended to drift towards softer cotton fabrics that are used to make the now ubiquitous cargo pants.
Over 44 million pairs of jeans were sold to about 35 million consumers in India in 2005. The branded segment accounts for approximately 60 per cent, says a Technopak study.
Denim fabric capacity is expected to go up to 500 million metres by the end of 2006. Investments expected in this segment will reach $225 million by then, says Technopak.
Vishesh, senior consultant with Technopak Advisors, said, “The super-premium segment where jeans retail for over Rs 2,000 is strengthening with increased brand presence, though currently dominated by non-Indian and domestic ‘designer wear’ labels. The entry-level under-Rs 300 jeanswear segment’s potential is massive and largely untapped. The estimated valuation is about Rs 2,000 crore, greater than the total jeanswear market size. This also offers tremendous potential.”
In February, Raymond had signed a memorandum of understanding (MoU) with a leading denim manufacturer in Belgium called UCO NV to form Raymond UCO Denim. The company is expected to manufacture and market denim fabric across the US, Europe and Asia. The new company, which started operations in August, was formed by hiving off Raymond’s denim division and merging it with UCO NV’s stake in its denim subsidiary. Raymond has been pushing ahead with several new strategies to grow its operations.
Shirting fabric foray
Last year, the company announced a 50:50 joint venture with Cotonificio Honegger of Italy, which is a part of Gruppo Zambaiti, for the manufacture and marketing of high value-added cotton shirting fabrics.
Test marketing of the fabric, which is being manufactured at the Kolhapur plant, has already begun and the response has been very good, said sources. The formal launch of the shirting fabric is scheduled sometime early next year for use in the portfolio of summer styles in 2007.
The deal with Honegger is expected to severely dent the market for high-priced shirting fabric brands from Italy like Albini, Monti, and Thomas Mason that premium shirt makers in India prefer to use, industry sources said.
“The reason is simple. The Raymond joint venture will be importing high-quality yarn on which the duty is nominal and finishing it here. The imported fabric brands bear a duty of 38 per cent. The Raymond Honegger shirting fabric brands should be about 25 per cent cheaper than the imported brands,” a textile industry source said.
It could also dent sales of premium shirting brands like Zodiac who use the imported fabrics, other sources said.
Gruppo Zambaiti is among the top three Italian high fashion cotton textile groups with strengths in design and development and is a supplier to leading premium shirt brands worldwide. Its products are exported to over 30 countries across the world and are being used by the best brands, including Levis, GAP, Zara and store brands like H&M and Next.
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