Best CEOs: Behind S.P. Oswal's quest to make Vardhman Textiles into India's largest yarn spinner

Even as i show up early for our 10 am appointment on a Thursday, Vardhman Textiles Chairman S.P. Oswal is in his first meeting of the day. In about 15 minutes, I am shown into a room which could be mistaken for a meditation chamber. Ludhiana’s golden winter sunrays streaming through the all-glass windows illuminate titles on the Indian philosopher Sri Aurobindo. Seated on one of the grey sofas lining the three walls of the room is the bespectacled second-generation businessman. The octogenarian’s slight frame, on which his grey woollen suit hangs a tad loosely, belies the vertically integrated billion-dollar textile giant he has built the company into since joining the family business as his uncle’s reportee in 1966.

“I don’t like to beg from bankers,” says Oswal softly but firmly, harking back to a bloody incident in Vardhman’s history—which shaped some key decisions at the company. On April 14, 1982, a factory manager carries a pistol unbeknownst to Oswal; a skirmish and a gunshot kills a factory worker; violence leaves 72 people injured and rioters try to attack Oswal in his office. “I prayed to The Mother, ‘What can I do now?’ Instantly, (it occurred to me) to tell them, ‘You want to kill me? I have no arms. You can kill me.’” The unexpectedness of it calmed down the mob and helped start peace talks, he says with a laugh.

Oswal says that was the only year his cash flow was tight because of the long lockout following the episode, and he had to request the bank to defer the repayment of one loan instalment. “I had to wait outside the manager’s office for three hours. I came out with tears in my eyes that God may not show me this day again…but after that my balance sheet has always been strong and we have carried on the growth.”

Despite the Rs 1,980-crore debt on its balance sheet as of FY22, analysts tracking the firm see its net debt to equity ratio of 0.25 as a big positive, especially in an asset-heavy business. “Vardhman is among the few textile companies that have been able to maintain a debt-equity ratio below one despite continuous capacity addition,” says a stock update report by ICICI Securities from November 2022.

Oswal says 1982 was a turning point for him both personally and professionally. Already an avid reader of Sri Aurobindo’s writings, every year for the next 32 years, he visited the ashram in Puducherry. And the company decided to set up a Maanav Vikas Kendra at every factory to train workers. His 28,000 employees are a cornerstone of Vardhman’s success, says Oswal, the winner in the Textiles & Apparel category of the BT-PwC India’s Best CEOs ranking.

In 1984, the violence that followed Operation Blue Star gave Vardhman a new direction—diversification into Madhya Pradesh and Himachal Pradesh to ensure more than 50 per cent of its revenue comes from outside Punjab.

Today, it has 15 factories across Punjab, Himachal Pradesh, Madhya Pradesh, Gujarat, Tamil Nadu and Andhra Pradesh powering its diversified business in yarn, fabric, garments, fibre and sewing thread. “A lot of textile firms expand fast and their balance sheets run faster than their revenues. But Vardhman has been prudent, ensuring that they expand only after their capacity gets significantly absorbed by their sales volumes,” says ICICI Securities Analyst Bharat Chhoda. Take its yarn business, for instance. Founded with just 6,000 spindles in 1965, it is the country’s largest yarn spinner today with 1.2 million spindles producing 670 tonnes of plain and dyed cotton, polyester, acrylic, viscose, specialised fibres and blended yarns per day. Yet, it utilised more than 90 per cent of its yarn capacity even when the domestic spinning industry was operating at 50 per cent last year due to uncharacteristically high cotton prices, says the ICICI Securities report.

Apart from the diverse product mix, Chhoda says its high capacity utilisation is also a result of good long-term client relationships which ensure orders don’t dry up in tough times. Its roster includes international and Indian brands such as M&S, Gap, H&M, Tommy Hilfiger, Calvin Klein, Superdry, Levi’s, Puma, Arvind, Pantaloons and Raymond for its yarns and fabric businesses.

The 81-year-old Chairman’s tenure comes to an end in 2024. No stranger to a family feud having seen both his brothers splinter away from the main Vardhman business, he says, “I can sit back with satisfaction that there will be no dispute I can foresee in the time to come.” His only daughter Suchita Oswal Jain is the Vice Chairperson of Vardhman Textiles.

It is for the future generations to explore growth opportunities now, he says. While yarn accounts for two-thirds of its revenues, the fabrics segment—which accounts for the rest—is the company’s growth engine, says Oswal. This is where Oswal sees immense potential for both his company and the country.

@SaysVidya