First FDI in the tanning sector1 March 2004
The Forward Group, India, and Conceria Virginia, Italy, have agreed a joint venture for the setting up of a 6 million sq ft/year modern leather manufacturing facility in Chennai which is scheduled to start production in June 2004. This is seen as a significant development in the leather industry. The Chennai based Forward Group are leading leather manufacturers and exporters, specialising in finished leather, shoe uppers and full shoes. Conceria Virginia Italy (CVI), is a e20 million revenue earning, ten year old Italian tannery, specialising in leathers for shoes and leathergoods. This is the first foreign direct investment (FDI) in the tanning sector in India with investments by both partners, raw material resourcing expertise and technology transfer from Italy as well as marketing. Headquartered in Chennai, Conceria Virginia Chennai (CVC) will have a 25-75 equity participation (25% CVI and 75% Forward). This will represent the first bovine tannery in the country with Italian tanning technology and expertise and fills the existing vacuum for a bovine tannery in India of international standard. The manufacturing technology will be completely and exclusively provided by CVI, who will source European raw hides, wet-blues from their established sources and partners, provide complete technical know-how for manufacture and also market finished leathers for the JV. In addition to marketing to top shoe factories in India, CVC will target South East Asian countries, with special emphasis on China. Yavar Dhala, managing director of the Forward Group, will head the JV as managing director. Conceria Virginia Italy will base two senior technologists in Chennai to set up and run the manufacturing facility at the tannery. Ms Laura Verucci will head the global marketing operations of the JV as marketing director. Commenting on the venture, Dhala said: 'There are good tanneries in India producing goat and buffalo leathers, but the quality of cow finished leather from the best of Indian tanneries is not comparable with the quality of leather from an Italian tannery. This new tannery will combine India's traditional tanning strengths with the legendary Italian expertise to produce the highest quality cow leather at competitive Indian prices.' The off-shore boom of European shoe business into India has already created a decline in leather consumption in Europe and a consequent demand for superior leathers in India. Indian shoe manufacturers will benefit from this joint venture by sourcing their needs from CVC. This JV fulfils a long felt need for a superior cow leather tannery on the lines of an Italian one. This is a giant leap towards technologically and aesthetically superior leathers for the Forward Group. The group, headed by chairman Asgar Ali Dhala, were founded in 1966 and have a 1,600-strong workforce. It will now be cost effective for the Indian shoe manufacturers to buy cow leathers of Italian standards from India, whereby they get benefits of technologically superior quality product, price advantage, better logistics and shorter lead time. The JV will also set up a 3,000 sq ft leather show room cum commercial office in the heart of Chennai in April 2004. The showroom will be the focal point for prospective customers, giving them a single window access to the range of CVC's leathers and to place orders. Commenting on the JV with Forward Group, Matteo Di Palma, promoter, CVI, said: 'We see tremendous opportunities in India - abundant availability of technical skills at all levels, the world's largest research and development facility and a very vibrant tanning and leather chemicals industry to support the move. 'The Forward Group shares our belief in developing world class products. This requires a rare passion and the ability to combine the art and science of leather making. This JV will succeed because of our strong individual businesses and our shared vision for supplying the best bovine leathers from India.'