Sreekumaar TexInd Corporation Streamlines Its Cash Flow with C2FO

A textile and apparel exporter and manufacturer experiences the power of efficient working capital management, amidst global competition and dynamic market trends.

Overview

Indian textile has had a reputation for fine craftsmanship and international appeal since time immemorial. There is evidence of the textile trade from India to Egypt and China that dates back to the early 16th century.            

Today, India stands amongst the world’s top five exporters of textiles and apparel. The textile industry supports a massive raw material and manufacturing base in the country. The industry contributes significantly to the nation’s economy, both in terms of the domestic production share and exports. 

The textile industry’s contribution to India’s industrial production is at 13%. It contributes 2.3% to the nation’s Gross Domestic Product (GDP) and nearly 12% to the country’s total export earnings. A significant employment generator, the sector employs about 35 million people directly and 60 million people in allied industries.

The journey

The Sreekumaar TexInd Corporation, formerly known as ‘Sreekumaar Textiles,’ was founded by Mr. M. A. Ramaswamy in 1970. Mr. Ramaswamy began with a power loom set up in the industrial town of Salem, Tamil Nadu. His vision saw the company expand into textile exports within just two years of its inception. 

In 1985, the company began supplying fabric to Polo Ralph Lauren-USA and has never looked back. Sreekumaar TexInd moved up the value chain from textiles to apparel exports in 1992 and is now a government of India star trading house and an important member of  Apparel Export Promotion Council (AEPC) – an apex body of apparel exporters in India. 

Sreekumaar TexInd is managed by Mr. M A Ramaswamy’s son – Senthilkumar. It has grown leaps and bounds from a single rented unit in 1997 with 25 machines and 50 workers to an organization with four units, 400 machines and over 1,000 workers.

“Ninety-five percent of our company’s workforce is women and we are really proud of it,” said Priyadharshini, a partner with Sreekumaar TexInd.

Sreekumaar TexInd has an impressive list of buyers from all over the world. Those clients include Bass Pro Shops (USA), Cabela’s (USA), Urban Outfitters (USA), Just Jeans (Australia), Review (Germany), to name a few. 

The fast-growing company manufactures apparel for both men and women, and exports products to the USA, Europe and Australia. For exports, the company deals either directly with the buyers or the buying agents. In terms of numbers, Sreekumaar TexInd manufactures more than 1 million pieces of garments annually, shipping them to brands across the world.

A need for quicker payments

As has been the industry practice for decades, modes of payment have been through Letter of credit (LC), Document against acceptance (DA) or Document against payment (DP). It used to take about 15 to 30 days for the payment to be realised through an LC, DA or DP. However, due to the pandemic-induced challenges, the industry has seen some buyers seeking credit periods of up to 60 days for the payment of their invoices.     

The expenditure pattern for Sreekumaar TexInd’s production is straightforward — 70% of working capital expenditures can be attributed to raw material procurement and labour costs. 

Almost all payments to raw material suppliers are in advance or on a cash-on-delivery basis. A few of these suppliers do extend a credit period, which is usually 15 to 30 days. Labour costs, on the other hand, are crucial, time-bound payments and absolutely non-negotiable. 

“As a new trend in the industry – buyers across the world are now seeking credit periods of up to 60 days,” said Shivam, general manager for Sreekumaar TexInd. “To make things worse, there is also a labour shortage, container shortage, ship-liner shortage and this extends the credit period over 90 days. In such a scenario – early payment from C2FO helps us immensely.”

The industry is extremely price-sensitive. There is stiff competition from apparel manufacturers that make relentless efforts to acquire orders at extremely thin margins. This challenge comes especially from aggressive and emerging markets such as Bangladesh, Sri Lanka and Vietnam.

Shivam adds that during the pandemic, the industry, in general, saw a dip in orders and subsequent losses. Sreekumaar TexInd in particular experienced a loss of approximately 12% in annual sales during this period. In spite of this setback, the expenditure on labour, raw material and infrastructure remained unchanged. 

While quality and deadlines remain the primary focus, the industry usually walks a tightrope in terms of pay-outs and working capital management – more so during the last two years, owing to the pandemic. Fortunately, early payment through C2FO can help Sreekumaar TexInd walk that line.

“We believe that C2FO, with its global reach, can extend and leverage their buyer network
to get the business back on track,” Priyadharshini said.

The C2FO difference 

C2FO representatives made contact with Sreekumaar through one of their major buyers – Urban Outfitters from the USA. Urban Outfitters is a part of the C2FO global network of enterprise customers and makes up about 15% of Sreekumaar’s total business, against a credit period of 45 days.

After discussions with a C2FO Supplier Relationship Manager (SRM), Shivam realized that the C2FO platform could be the solution to his company’s working capital requirements and decided to activate Sreekumaar TexInd’s account. The first use of early payment enabled the company to accelerate payment on an invoice 30 days early. C2FO’s global operations, allowing for cross-continental transactions, was another key benefit. 

The dedication and personal touch of C2FO’s SRM team, as well as the ease of use of the platform, made it convenient for Sreekumaar TexInd to request early payment on selected invoices at times that worked best for the company.  

The outcome 

Since signing up in 2020, Sreekumaar TexInd has been using the C2FO Early Payment platform to regularly accelerate payments on invoices well in advance and manage expenditures in an efficient manner. 

The company now receives payment within a week as opposed to the usual credit period of 45 to 60 days. The improved cash flow helps Shivam plan his working capital requirements and his business processes more effectively. 

Shivam rated C2FO an impressive 9 out of 10 in terms of personalized service and convenience. He advocated that C2FO build more international relationships and bring on more buyers to help the Indian textile and apparel export industry. 

In C2FO, Sreekumaar TexInd has now found a partner for prosperity, one that is strongly committed to being a part of Sreekumaar’s quest for growth and expansion at a global scale.

“Assurance is a crucial element of the export-import industry. And when it comes to payments, C2FO has proven itself in providing us with just that,” Senthilkumar said. 

Learn how C2FO can help your company manage working capital.