Are JV The Right Hendrik H Van Delden

Technical Textiles
Techtextil India Symposium Are Joint Ventures or Strategic Tie-Ups the Right Recipe for the Indian Technical Textiles Industry?
Knowledge Partner
Gherzi van Delden GmbH, Germany

www.gherzi.com
th and Techtextile India Symposium : 30 31 October 2012 Mumbai October 30 31st , 2012
th st
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Are Joint Ventures or Strategic Tie-Ups the right recipe for the Indian Technical Textile Industry?
In 2012 the Indian Techtex industry is estimated by Gherzi at about 1/10 of the Techtex industry in China Indian Techtex Industry Chinese Techtex Industry
6363560 Rs cr.
116 bn USD
58000 Rs cr.
11 bn USD
Source: Gherzi research and estimates Techtextile India Symposium : 30th 31st October 2012
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The Indian Techtex market today is mainly focusing on Packtech, Clothtech and Hometech. Higher value added applications like Indutech or Medtech still have to be expanded, coming from a smaller base World Techtex Market Structure Indian Techtex Market Structure (2010)
5%
7%
7%
33 %
39 %
81 %
13 %
15 %
Agrotech, Buildtech, Geotech, Indutech, Mobiletech, Oekotech, Protech, Sporttech
Packtech
Clothtech
Hometech
Source: Gherzi research Techtextile India Symposium : 30th 31st October 2012
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India: Attractiveness
(1)
Indian TechTex has recently seen major indigenous capacity investments without support 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 PVC coating (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.
Techtextile India Symposium : 30th 31st October 2012
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(2)
These investments demonstrate that India has reached the stage to become a major player 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 made products
After many years of focus chiefly on China, major foreign TechTex producers and converters have discovered India as the next growth market. Segments which should be 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, womens hygiene) 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
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(3)
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 art technology. However,
Factories must be conceived as flexible as possible (a maximum number of segments to be served from one manufacturing line) Exportability of the product range constitutes an important asset to quickly fill a new, highly productive facility
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Foreign investors in Indian Techtex have partially opted for a 100 % foreign owned local set-up
Recent Techtex FDIs in India

Saertex India (D): Glass multiaxial fabrics (composites) Ahlstrom (USA): Nonwovens and specialty papers (Medtech) Freudenberg Nonwovens India (USA): Interlining and Industrial Nonwovens
Autoliv India (D): Seat belts and Airbag Bond Safety belts (Sicherheitsgurte) (D): Seat belts Johnson and Johnson (USA): Hygiene, Medtech KOB Medical Textiles (D): Elastic Bandages (Medtech)
Lear Corporation (USA): Tier 1 for Automotive

Autoneum (CH): Tier 1 for Automotive Brinton carpets (UK) Skaps (USA): Geotextiles Meccaferri (I): Geotextiles TB Kawashima Automotive (Textile) India Pvt. Ltd (recently announced) (J): Automotive
Source: Press Info

Page 7
Foreign investors in Indian Techtex have partially opted for a 100 % foreign owned local set-up (ctd)
Recent Techtex FDIs in India

Procter and Gamble (USA):Hygiene Karl Otto Braun (D): Cotton gauze and wound dressing (Medtech) MEP Olbo (D): Mechanical rubber good reinforcements (Indutech) Madura-Coats (UK): Sewing thread (Clothtech) Lindstrom (SF): Laundry rental (Protech) BWF (D): Filter bags for hot gas filtration (Indutech) Andrews (UK): Filter bags for hot gas filtration (Indutech) Unicharm India (J): Hygiene
Kimberly Clark (USA): Hygiene

3 M India (USA): Industrial and Medtech LANEX (Seile and Gurte) (CZ): Ropes and belts TAKATA (J): Seat belts and Airbag Schoeller India (CH): Functional textiles Wilhelm India (D): Laminated fabric for shoe industry
Source: Press info

Page 8
and partially opted for a tie-up with a qualified Indian counterpart
Key foreign JVs / Tie-Ups in India Technical Textile Field

Supreme NW / Textilgruppe Hof (D): Nonwoven interlining (Clothtech) KE - Burgmann Fibre India (D): Synthetic yarns (Indutech) Indo Danish (Past JV mit KE Burgmann fibre) Harley Nirafon India and Keld Ellemtoft (for Filters) Finland Aunde (D) Faze 3: Automotive seat fabrics Supreme Treves nonwovens (F): Automotive interior (Mobiltech) Treves Banswara Pvt Ltd (F): Automotive internal furnishing (Mobiltech) Kineco, Kaman Corporation (USA): Composites Strata Geosystems India Pvt. Ltd, (USA): Geotextiles Hindoostan and TOHO (J): Carbon / Aramid composites Tata and Johnson Control, (USA): Automotive Tier 1 ATM and Colan (AUS): Glass Fabrics (Composites) TRW (D) / Rane: Automotive Seat Belt KSS(USA) / Abhishek Auto Ind. Ltd.: Automotive Seat Belt, Airbag
Source: Press info

Page 9
and partially opted for a tie-up with a qualified Indian counterpart (ctd)
Key foreign JVs / Tie-Ups in India Technical Textile Field

H & V (USA), Nath group: HVAC filtration and battery separator (Indutech) Arvind, P.D. Group (D): Glass fabrics (Composites) Kusumgar Corporates, Saati (Italy): Protech DSM (CH), Kemrock: Specialty composite resins Loyal Textiles & M/s. Gruppo P&P Loyal SpA and Schaefer Loyal (I) and (D): Workwear Lenzing (CH) Modi Fibres India Pvt. Ltd. - Fibres
Arvind - Du Pont (USA): Aramide fabrics (Protech) Arvind - Rhodia (F): Cotton FR Proban (Protech) Vardhman - A&E (USA): Sewing thread (Clothtech)
Source: Press info

Page 10
In some cases Indian firms have ventured abroad to acquire know-how and market 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

Page 11
The right approach Entering into new Techtex market segments requires
a) Know-how b) Investment in a manufacturing technology suitable for product certification to international norms and c) Customer access (locally and abroad)
A tie-up with a foreign partner can but most not always and in every case supply answers to the missing market entry skills described above
Page 12
Acquisition of market entry skills: Four different cases
Targeted Market Indian Producer

Developed Indian market Packtech, Hometech Clothtech Market less developed in India All other Techtex segments
Small to Medium Enterprise
Stand alone or licensing / distribution agreement
Tie-up or Joint Venture for local market development
Larger enterprise
Stand alone approach or M & A
Tie-up or Joint Venture for local market and global exports
Page 13
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, through a 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
Page 14
Case 2
Large enterprise: Packtech / Hometech / Clothtech market

Why stand alone approach? Combination of larger Indian firm plus large domestic market allows for trading-up into higher end markets without foreign partner support Scalability? Yes going global might best be achieved through M & A (acquisition of foreign distributors or smaller producers)
Page 15
Case 3
Small to medium enterprise: All other segments

Why tie-up for local market? Development of a foothold in emerging Indian market requires product and technology know-how often not available to Indian Techtex producers Interest for foreign partner? Small, but rapidly developing Indian market Scalability?
Limited, as foreign partners will try to limit JV scope to India
Page 16
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 manufacturing technology 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
Page 17
Route to success (1)
Set the goals:
Long list of suitable partners:
Investment Memorandum:
Initial approach:
Which product / market segment Prio 1: Attractiveness of a tie-up for foreign partner Type of transaction: Off-take Strategic alliance or licensing JV Optimum fit optimum size Prio 2: Suited but less optimal
Presentation of the Indian market and Indian partner profile
1st contact NDA
Attractiveness of the transaction IM sent for the foreign partner 1st meeting Ideal transaction structure
Page 18
Initial Approch
Short list:
LOI / MOU:
Pre-Contract:
Limited number (1 3) of tie-up partners for further negotiations
Agreement on transaction subject to
Joint business plan Detailed transaction structure Due diligence
Page 19
Legal and tax:
Closure
Certifications Licenses Legal contracts
Page 20
Success factors In Gherzis experience the following criteria are important to successfully close a transaction 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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Conclusion (2) A thorough analysis of the right partner to be approached helps to avoid disappointment lateron in the process
A clearly defined product / market focus and set of goals accompanied by a professionally worked out investment memorandum helps to attract the interest of a foreign partner
It is important to a) build trust between the parties in the series of negotiations and b) agree on a joint business plan in order to close the transaction in a manner satisfying both the Indian as well as the foreign party
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Thank you very much
Any questions?
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Are JV The Right Hendrik H Van Delden

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Technical Textiles

Gherzi van Delden GmbH, Germany

Agrotech, Buildtech, Geotech, Indutech, Mobiletech, Oekotech, Protech, Sporttech

Techtextile India Symposium : 30th 31st October 2012

Techtextile India Symposium : 30th 31st October 2012

Recent Techtex FDIs in India

Lear Corporation (USA): Tier 1 for Automotive

Source: Press Info

Recent Techtex FDIs in India

Kimberly Clark (USA): Hygiene

Source: Press info

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

Key foreign JVs / Tie-Ups in India Technical Textile Field

Source: Press info

Key foreign JVs / Tie-Ups in India Technical Textile Field

Source: Press info

Source: Press info

Techtextile India Symposium : 30th 31st October 2012

Acquisition of market entry skills: Four different cases

Targeted Market Indian Producer

Small to Medium Enterprise

Stand alone or licensing / distribution agreement

Tie-up or Joint Venture for local market development

Stand alone approach or M & A

Tie-up or Joint Venture for local market and global exports

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

Potential interest for foreign partner in tie-up with Indian firm?

Large enterprise: Packtech / Hometech / Clothtech market

Small to medium enterprise: All other segments

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

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

Yes, if world market can be targeted

Route to success (1)

Set the goals:

Long list of suitable partners:

Presentation of the Indian market and Indian partner profile

1st contact NDA

Techtextile India Symposium : 30th 31st October 2012

Route to success (2)

Limited number (1 3) of tie-up partners for further negotiations

Agreement on transaction subject to

Joint business plan Detailed transaction structure Due diligence

Techtextile India Symposium : 30th 31st October 2012

Route to success (3)

Legal and tax:

Certifications Licenses Legal contracts

Techtextile India Symposium : 30th 31st October 2012

Build trust in a series of successive meetings

Involvement of an experienced consultant often helps to achieve these aims

Techtextile India Symposium : 30th 31st October 2012

Techtextile India Symposium : 30th 31st October 2012

Techtextile India Symposium : 30th 31st October 2012

Thank you very much

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