are jv the right hendrik h van delden

8/12/2019 Are JV the Right Hendrik H Van Delden

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Page 2TechtextileIndia Symposium : 30th31stOctober 2012

11 bn USD

In 2012 the Indian Techtex industry is estimated by Gherzi at about 1/10 of theTechtex 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

58000 Rs cr.

6363560 Rs cr.


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The Indian Techtex market today is mainly focusing on Packtech, Clothtech andHometech. Higher value added applications like Indutech or Medtech still have tobe expanded, coming from a smaller base


World Techtex Market Structure Indian Techtex Market Structure (2010)

Source: Gherzi research

Packtech Clothtech HometechAgrotech, Buildtech, Geotech, Indutech,Mobiletech, Oekotech, Protech, Sporttech

81 %

33 %

13 %15 %

39 %7 %

7%5 %


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India: Attractiveness (1)

Indian TechTex has recently seen major indigenous capacity investments withoutsupport 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 PVCcoating (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.


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These investments demonstrate that India has reached the stage to become a majorplayer 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 madeproducts

After many years of focus chiefly on China, major foreign TechTex producers andconverters have discovered India as the next growth market. Segments which shouldbe 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, womenshygiene)

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





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 arttechnology. However,

Factories must be conceived as flexible as possible (a maximum number of segments to beserved from one manufacturing line)

Exportability of the product range constitutes an important asset to quickly fill a new, highlyproductive facility



Foreign investors in Indian Techtex have partially opted for a 100 % foreign ownedlocal 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 andIndustrial 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, MedtechTB Kawashima Automotive (Textile) India Pvt. Ltd

(recently announced) (J): Automotive

KOB Medical Textiles (D): Elastic Bandages (Medtech)


Source: Press Info



Foreign investors in Indian Techtex have partially opted for a 100 % foreign ownedlocal set-up (ctd)

Recent Techtex FDIs in India

Procter and Gamble (USA):HygieneKarl Otto Braun (D): Cotton gauze and wound dressing

(Medtech)

Kimberly Clark (USA): HygieneMEP 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 textilesAndrews (UK): Filter bags for hot gas filtration

(Indutech)

Wilhelm India (D): Laminated fabric for shoe industry Unicharm India (J): Hygiene


Source: Press info


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and partially opted for a tie-up with a qualified Indian counterpart

Source: Press info

Key foreign JVs / Tie-Ups in IndiaTechnical 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

IndoDanish (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): AutomotiveTier 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



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and partially opted for a tie-up with a qualified Indian counterpart (ctd)

Source: Press info

Key foreign JVs / Tie-Ups in IndiaTechnical 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



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In some cases Indian firms have ventured abroad to acquire know-how andmarket 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


Source: Press info


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The right approach

Entering into new Techtex market segments requires

a) Know-how

b) Investment in a manufacturing technology suitable for product certification to internationalnorms and

c) Customer access (locally and abroad)

A tie-up with a foreign partner canbut most not always and in every case supplyanswers to the missing market entry skills described above


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Acquisition of market entry skills: Four different cases


Indian Producer

Targeted Market


Small to

MediumEnterprise

Larger enterprise

Developed Indian marketPacktech, Hometech Clothtech

Market less developed in IndiaAll other Techtex segments

Stand alone or

licensing / distributionagreement

Tie-up or Joint Venturefor local market

and global exports

Stand alone approach

or M & A

Tie-up or Joint Venture forlocal market development


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Case 1

Small to medium enterprise: Packtech / Hometech / Clothtech market focus


Issues to deal with:


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, througha 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


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Case 2

Large enterprise: Packtech / Hometech / Clothtech market




Why stand alone approach?

Combination of larger Indian firm plus large domestic marketallows for trading-up into higher end markets without foreignpartner support

Scalability?

Yesgoing global might best be achieved through M & A(acquisition of foreign distributors or smaller producers)


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Case 3

Small to medium enterprise: All other segments




Why tie-up for local market?

Development of a foothold in emerging Indian market requiresproduct and technology know-how often not available to IndianTechtex producers

Interest for foreign partner?

Small, but rapidly developing Indian market

Scalability?

Limited, as foreign partners will try to limit JV scope to India


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Case 4

Large enterprise: Tie-up for local market and global exports




Why tie-up for local market and global exports ?

Investment in high performance western manufacturingtechnology 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


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Route to success (1)

Set the goals:

Which product / market segment

Attractiveness of a tie-up forforeign partner

Type of transaction:

Off-take Strategic alliance or licensing JV

Long list of suitablepartners:

Prio 1:

Optimum fitoptimum size

Prio 2:

Suited but less optimal

Investment Memorandum:

Presentation of the Indianmarket and Indian partnerprofile

Attractiveness of the transactionfor the foreign partner

Ideal transaction structure

Initial approach:

1stcontact

NDA

IM sent

1stmeeting


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Short list:

Limited number (13)of tie-up partners forfurther negotiations

LOI / MOU:

Agreement ontransaction subject to

Pre-Contract:

Joint business plan

Detailed transaction structure

Due diligence

InitialApproch


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Legal and tax:

Certifications

Licenses

Legal contracts

Closure


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Success factors

In Gherzisexperience the following criteria are important to successfully close atransaction

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


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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


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Thank you very much

Any questions?

are jv the right hendrik h van delden

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