Gokaldas Says Atraco Buyout To Unlock U.S. Opportunities

Gokaldas Exports Ltd.'s acquisition of the U.A.E.-based apparel company Atraco Group for $55 million on Tuesday is expected to unlock opportunities in the U.S. market.

Gokaldas Exports aims to sustain a steady 20% year-on-year revenue growth rate, Sivaramakrishnan Ganapathi, vice chairman and managing director of the garment exporter, told BQ Prime's Niraj Shah.

The acquisition not only provides access to complementary geographies in Africa, but also unlocks significant opportunities in low cost, duty-free areas within North America, notably the U.S. market, Ganapathi said.

Over three decades, the Atraco Group has cultivated substantial capabilities across U.S. and Europe. Future procurement strategies, operational efficiencies and overhead management serve as a linchpin for synergy creation, he said.

Existing exports from India remain unaffected by the externalities of this acquisition, according to Ganapathi. In fact, exports from Kenya stand to benefit from duty-free access to the U.S. markets, directly translating into cost advantages for customers.

“The real growth possibilities of this venture will be tapped into once we receive the necessary regulatory approvals,” he said. The approvals are expected by the end of October.

Atraco's new factory offers scope for expansion because addition of new production lines will create valuable opportunities for growth, Ganapathi said.

Seizing Low-Hanging Fruits

Ganapathi highlighted the immediate gains achievable through the expansion of capacity within Atraco's existing facilities. The acquisition promises to yield favourable outcomes for both top-line and bottom-line growth, he said.

Targeted capital expenditure aimed at enhancing plant and machinery stand to amplify operational efficiencies, yielding results in the coming year, he said.

Fundraising

The company has current cash reserves of $50 million, which is net of debt, Ganapathi said. To execute the acquisition, a debt of $40 million is required, but the company will also be assuming Atraco Group's $15-million working capital loan, he said.

Based on the estimated profit from operations in the following quarters, he expects the company to be able to raise funds through borrowings.

Growth Outlook

While acknowledging the lingering volatility in western markets, the company continues to observe positive traction from brands in terms of order placement. A significant marker for improved conditions will be the stabilisation of interest rates in the U.S., Ganapathi said.

High interest rate regimes can strain disposable income and customer-spending patterns, he said. The emergence of early market green shoots is an encouraging sign, although brands remain vigilant in managing stock inventory amid cautious optimism, according to him.

Shares of Gokaldas Exports were among the top gainers during trade on Tuesday after the announcement, with the stock hitting the upper circuit after a 20% surge.

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