``The restructuring has been done to streamline operations. This has led to the entire garment manufacturing and distribution activities being shifted to Pantaloon Industries,'' said Pantaloon Retail (India) managing director Kishore Biyani.

As per the arrangement, Pantaloon Industries will pay a royalty of 5 per cent of the total sales to the flagship company. Pantaloon Industries, which has all along been a fabric manufacturing company, has a turnover of Rs 60 crore.

The group is believed to be planning to rope in a strategic partner for the garment business. As part of the recent initiatives, Pantaloon Retail (India) Ltd has formed a joint venture sportswear company with Indian cricket star Ajay Jadeja. The new company will market theapparel brands and directly compete with the foreign labels like Nike, Adidas and Reebok.

Biyani family's decision to initiate changes in the operations is part of the overall strategy to infuse more professionalism into the group. With the group being spilt into different entities having clear focus, the traditional image of a family-controlled structure could be done away with, said sources close to the group.

Moreover, for the first time in the history of the group, professional CEOs will soon be handed over the charge of each company leaving the Biyani family only with management control, sources said.

It is believed that the recast exercise is not complete and the group is gearing up to map out a fresh strategy for its infotech business. This apart, a valuation of the group's brands is under way and will be completed sooner than later.

Though Pantaloon group has been able to weather the recession through unique retailing initiatives, the traditional textile companies are collapsing under theweight of poor market conditions. For instance, the Lalbhai flagship Arvind Mills is struggling to come out of a declining fortunes brought about by recession.

To overcome the recessionary effects, Arvind Mills has recently announced its intention to hive off its garments business into a separate company. Lalbhais are talking to various players to pick up a strategic stake in the hived off garment entity.

INSIGHT
The transfer of garment manufacturing facilities from Pantaloon Retail to Pantaloon Industries is likely to have a positive impact on the fortunes of both the companies. Pantaloon Retail will be able to get out of a relatively low value-adding activity compared to its retailing activities. On the other hand, Pantaloon Industries, which produces fabrics, will move up the value chain to produce garments as well. The profitability of both the companies should improve as a result.
Sarad Saraf