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How TK Chandiran of SCM Group Companies created a textile empire

By tapping into the ready-mades market, TK Chandiran turned his father's humble textile retail business into a ₹3,000-crore enterprise

mg_98699_tkchandiran_bg_280x210.jpgTK Chandiran, managing director of the SCM Group Companies, was only 10 when his father opened his first shop in Madurai
Image: P Ravikumar for Forbes India

 
TK Chandiran answers his own phone, he has no fancy corporate communications executive controlling access, and you won’t find a conversation with him peppered with trendy buzzwords. Responses to questions are pithy, straightforward and simple, so even someone with little knowledge of the textile empire he runs can comprehend the size and scope of how far his business has evolved.

Chandiran, 64, is managing director of the SCM Group Companies, of which The Chennai Silks, the flagship selling silk sarees, is a household name in Tamil Nadu. The group is a 3,000-crore enterprise that includes businesses like textile and apparel manufacturing, domestic retail and exports and jewellery retail. Another key part of the group is SCM Garments (contributing over 900 crore to the topline), the manufacturer and exporter of apparel—think T-shirts, hoodies, jerseys, denim and polo necks—to customers from the Sea of Japan to the Bay Area.

This journey began in a small shop started by A Kulandaivel Mudaliar, his father, in 1962 in Madurai, to sell khadi and handloom textiles. Its rise is even more spectacular given that there is no private equity or venture capital money involved, epitomising the family’s ethos of self-reliance even in its business. “If our own capital is used, we can take the risk, and without any influence or disturbance in our day-to-day affairs, we can do it in a better way. We will have more freedom,” says Chandiran.

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Back in the 1950s, Mudaliar was working as a weaver, but soon realised he would have to do something a tad more ambitious. Recalls Chandiran, “My father started off as a handloom weaver, who then became a master weaver.” It pushed him up the value chain, but only just—he became a businessman who was purchasing yarn and subcontracting it out to weavers. However, his earnings weren’t enough for his family. That’s when he decided to take the plunge, and, with the help of a cousin, started the shop in Madurai.

Chandiran was only 10 at the time, and the youngest two of his seven brothers—he is the eldest—weren’t even born. His father cobbled together about 10,000, including the money he had saved and proceeds from selling some of his wife’s jewellery. “I was working as an office boy. Part-time office boy, part-time school, that is my original story,” Chandiran recalls. “Before going to school, I had to clean the shop and after completing school, I had to go to the shop and attend to customers along with my uncle.”

After that first shop, Mudaliar opened a second in two years and a third in 1973. “It was only by then that we reached business of 1,000 a day,” he says. “We still have the three showrooms that we opened in Madurai,” he adds. While this was a decade of a gradual build-up, the following one was where he pushed for expansion and acquired the financial wherewithal to start looking at manufacturing on his own.

SCM’s earliest experience with apparel was simply to hire tailors to stitch garments from the cloth that people bought from their retail stores. But it kept an “eye on the sector”, and, in 1984, spotted an opening—most people wore made-to-order clothes and the market for ready-mades was still untapped. The family was selling ready-made garments made by its own tailors, as well as purchased from contractors, in its retail showrooms that, by then, numbered 12, but that wasn’t enough. In 1984, it started its own textile processing unit, which has grown to become one of the largest manufacturers in Tirupur, one of India’s biggest apparel-making hubs.

That year, and the foray into manufacturing ready-made garments, marked the “main turning point in the history of our company”, Chandiran says. “We got very good orders and very good margins.” These efforts can be seen as the precursor to what would eventually become SCM Garments.

The timing was fortuitous because the economic liberalisation followed soon after and SCM entered what Chandiran calls modern retail, employing modern equipment and processes for manufacturing, as well as the exports business. The company started with exports to Japan, and soon added Europe and the US as well.

By 2000, export regulations were relaxed further and provisions like the quota system (that restricted the number or the value of units that could be exported or imported at a given time) prevalent in 1990 were abolished. That led to the unbridled growth that the company is seeing today. Its international client roster comprises marquee names like Marks & Spencer, Disney, Hanes, Walmart stores and Decathlon SA.

Originally set up as a partnership firm, SCM Creations, in 1998, the manufacturing unit was made a privately held company, SCM Garments, in 2006. It has its manufacturing units in and around Tirupur.

SCM Garments reported a profit after tax (PAT) of 52 crore on an operating income of 951 crore for fiscal 2016 against a PAT of 24 crore on an operating income of 816 crore for fiscal 2015, rating firm Crisil noted in May 2017, after raising the apparel maker’s credit rating.

Chandiran has a simple answer when asked about why the family has relied on its own money, other than some bank loans.

“When we get funds, it means we have to pay the cost,” he quips. “Whether it is the bank or equity shareholder or the venture capitalist, they will need the return on investment. If our own capital is used, we will have more freedom.”

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(This story appears in the 18 August, 2017 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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