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Indian Polyester – 2016 Celebrating 75 years of Polyester 10 th August 2016 Prashant Agarwal Jt. MD and Co Founder - Wazir Advisors

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Indian Polyester – 2016 Celebrating 75 years of Polyester

10th August 2016

Prashant Agarwal

Jt. MD and Co Founder - Wazir Advisors

2

Presentation Flow

1 Global Trade

2 Changing Pattern of Fibre Consumption at Global Level

3 Disconnect in Fibre Consumption in India vis-à-vis Global Level

4 Opportunities for Indian Textiles Industry in Domestic & Export Market

5 Action Plan for Indian Textile Players

3

The global trade in textiles and apparel has grown at a CAGR of more than 6% from 2005 to 2014

Global textile & apparel trade is worth US$ 827 bn.

Date Source: UN Comtrade, Wazir Analysis

228 254 301 303 212

284 373 324 377 358

276 302

315 340

346 358

378 404 412 469 504

556 616 643

558 642

751 728 789

827

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Apparel Exports

Textile Exports

T&A Exports

45%

55%

Share

+6%

4

India is the second biggest exporter of textile & apparel

Country 2014

Exports Share in Global

Exports

China & HK 317 38%

India 41 5%

Germany 38 5%

Italy 37 5%

Bangladesh 31 4%

Turkey 29 4%

Vietnam 27 3%

USA 26 3%

Viet Nam 25 3%

Spain 17 2%

France 17 2%

Belgium 16 2%

Rep. of Korea 16 2%

Netherlands 15 2% Total T&A Exports

827

Largest Exporters of T&A

Date Source: UN Comtrade, Wazir Analysis

2nd in Textile

Export with 6% Share

8th in Apparel

Export with 4% Share

2nd in Global

Export with 5% share

India’s Ranking in Global T&A Trade in 2014

India has potential to double its export share from present 5% to 10% in next 10 years

Values in US$ Billion

5

1941, England – British scientists John Winfield & James Dickson invented polyester fibre

1946, USA - After the World War II was over, DuPont bought the right to make polyester fibre

1950, USA – Production of polyester fiber, named Dacron, started in DuPont factory in Delaware, USA

1951, USA – Polyester fabric was introduced to American public as “magic fabric” that needed no ironing

1982, India - Reliance Industries started production of polyester yarn

Polyester fibre production first started in 1950

6

Globally polyester consumption is growing & will continue to grow further

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2000 2005 2010 2015

Kte

s

World Mill Consumption by Fibre

Polyester Nylon Acrylic

Viscose PP&Other Cotton

0

2,000

4,000

6,000

8,000

2000 2005 2010 2015 2020

Kte

s

World Mill Consumption by Fibre (excl Polyester and Cotton)

Nylon Acrylic Viscose PP&Other

20%

25%

30%

35%

40%

2000 2005 2010 2015 2020

Cotton Share of World Mill Consumption

Cotton Share

Polyester continues to grow market share. Other MMFs have relatively flat volumes

Date Source: PCI

7

Till 2000, fibre consumption at global level was majorly cotton focussed.

By 2030, it is expected that consumption of polyester will be more than double to that of the cotton fibre.

Globally consumption of polyester will increase further

37% 36% 36% 35% 33% 31% 31% 30% 27%

36%

43% 44% 46% 48% 50% 50% 52%

59%

27%

21% 20% 19% 19%

19% 18% 18% 14%

2000 2007 2008 2009 2010 2011 2012 2020 (P) 2030 (P)

Cotton Polyester Others

Date Source: PCI Fibres

Widening gap between

Polyester and Cotton fibre

consumption

Global Fibre Consumption Trend

8

Top 10 exporters of MMF based fabrics constituted 81% of world’s total trade in 2014

India ranked 7th among the top exporting countries of MMF Based Fabrics in 2014

China, South Korea & Taiwan are the Global leaders in MMF based fabric

Top Exporting Countries of MMF Based Fabrics

Date Source: UN Comtrade, Wazir Analysis

33% 35%

38% 40%

42% 45%

5% 5% 5% 5%

9% 8% 6% 5% 5% 5% 6% 5% 5% 5% 5% 4% 4% 4% 4% 4% 4% 4% 4% 4%

2009 2010 2011 2012 2013 2014

China South Korea Taiwan Italy Turkey

5% 5% 5% 5%

9%

8%

6%

5% 5% 5%

6%

5% 5% 5% 5%

4% 4% 4% 4% 4% 4% 4% 4% 4%

2009 2010 2011 2012 2013 2014

South Korea Taiwan Italy Turkey

Top Exporting Countries of MMF Based Fabrics (excluding China)

9

Cotton accounted for nearly 51% of total fibre consumption in 2014

Polyester fibre consumption is gaining momentum due to factors like increased presence & sourcing by global brands where polyester fibre dominates, growth of women’s wear segment, growth of value retail etc.

But Indian textile industry is still Cotton focussed

Date Source: Fibre Policy, Wazir Analysis

Fibre Consumption Trend in India

60% 59% 59% 59% 58% 56% 55% 53% 51%

34% 35% 35% 35% 36% 37% 38% 39% 40%

6% 6% 6% 6% 6% 7% 7% 8% 9%

2000 2007 2008 2009 2010 2011 2012 2013 2014

Cotton Polyester Others

10

Out of total 866 textile and apparel commodities* traded in 2014, India’s trade share is less than 1% in 402 commodities.

The untapped opportunity remains in MMF based product categories, which can give an exponential growth to India’s export of textile and apparel.

India’s presence is insignificant in some of the major MMF based product categories

* At 6 digit HS code level; Data Source: UN Comtrade, Wazir Analysis

India’s Trade Share in Top Traded MMF based Apparel Categories in 2014

Category End user Total Trade

(US$ Billion) Indian Trade (US$ Billion)

Share

Dresses W/G 15.1 0.71 4.7%

Trousers, bib and brace overalls, breeches and shorts W/G 14.9 0.28 1.9%

Jackets W/G 11.98 0.08 0.6%

Trousers, bib and brace overalls, breeches and shorts M/B 11.68 0.31 2.6%

Brassieres W/G 10.49 0.10 1.0%

Blouses, shirts and shirt-blouses W/G 9.25 0.81 8.7%

Jackets M/B 5.82 0.11 1.9%

Note: M/B – Men’s/Boys’; W/G – Women’s/Girls’

China is the leading exporter of the apparel categories mentioned above

11

Consumption of Polyester fibre in domestic market will increase in the following segments:

Active-wear and sportswear

Women’s western office wear, party dresses and lingerie

School and corporate uniform

Women hygiene product

Technical textile products like protective wears, seat belts, airbags, seat covers and headliners

Consumption of Polyester based products will increase in domestic market as well

12

Share of manmade fibre in total mill consumption is expected to reach ~65% by 2030.

Share of polyester fibre is expected to show a drastic increase and grow to 53% by 2030

Indian textile industry will consume more Polyester than Cotton within next five years

Values in ‘000 MT

Source: Wazir & PCI Analysis

40% 41% 42% 43% 44% 45% 46% 53%

6% 6% 6% 7% 7% 8% 8% 11%

51% 48% 47% 46% 45% 44% 43% 32%

3% 4% 4% 5% 4% 3% 3% 5%

2014 2015 2016 2017 2018 2019 2020 2030

Polyester Other MMF Cotton Other Natural Fibres

10,189 9,163 9,741 10,670 11,093 11,392 17,951 11,678

Total Fibre Consumption At Mill Level

To reap maximum benefit of the future scenario, India needs to focus on manufacturing of Polyester based textile products

14

Taiwanese competitor Chinese competitor South Korean competitor

Far Eastern New Century

Jiangsu Hengli Group

Hyosung

Polyester fibre & filament, spun yarn, knitted & woven fabric, apparel

Polyester filament yarn, garment fabric and home textile fabric

Polyester, Nylon, Spandex fibre & filament, Aramide & carbon fibre, performance fabrics and carpets

Fibre & filament manufacturing , spinning, weaving/ knitting, processing and apparel manufacturing

Filament manufacturing and weaving

Fibre & filament manufacturing, weaving and processing

PSF: 489,600 MT PFY: 180,847 MT Spun Yarn: 395 MT Fabric: 23,460 MT Apparel: ~60 million pcs.

PFY: 600,000 MT Loom: 12,000 (hydraulic & air-jet)

Spandex: 170,000 tons Processing: 2.3 million meter

Company Revenue of US$ 6.8 billion in 2015

Consolidated revenue of US$ 4.8 billion in FY 2010

Consolidated revenue of US$ 11.1 billion in 2015

Leading companies in MMF based textile manufacturing are mostly vertically integrated with big capacities

Company

Products

Revenue

In-house Facilities

Capacities

Date Source: Company Websites

15

India has to work across its value chain

Staple fiber

Filament

Yarn spinning

Knitting Weaving

Processing

Garments Home

Textiles Technical textiles

• Existing Indian manufacturers can scale up the capacities

• International players will invest in specialty fibers

• Existing Indian yarn spinners are competitive globally

• Significant investments will be required in knitting including warp knitting.

• Weaving infrastructure will need to be upgraded to handle specialty yarns and complex fabric types

• Processing will be the main challenge for Indian sector

• Players will have to opt for tie-ups with international partners for technical and market exposure

• Focus on design and product development aspect to sensitize demand growth

• Technical textiles investments will be required from Indian as well as international players

16

Investment in MMF based fabric manufacturing, processing as well as garmenting is an attractive investment opportunity

• India is leading man-made fibre manufacturer of the world and has over capacity of manufacturing polyester fibre

• India is globally very competitive in spinning and enjoys leading position. • The intra-industry competition level is very high and it is majorly a commodity

business.

• Investment in fabric manufacturing will open immense opportunities in garment sector

• Bigger players can leverage this opportunity by setting large scale factories with defined process systems

• Indian players can bring high end garment manuf. technology in JV with Korean, Chinese, Japanese companies

• Weak-link in manmade fibre based textile value chain of India • Smaller units are unable to take the advantage of economy of scale • Too many players are involved in this part of the value chain, which increases

the cost & degrades the quality of service • Most units have old technology, which are not suitable for high quality products • Focus is on commodity products • Lot of MMF based processed fabric are imported to India

Fiber Manufacturing

Spinning

Fabric Manufacturing

Processing

Garmenting

Attractive Investment Opportunities

17

For further information or queries:

Contact:

Prashant Agarwal Joint Managing Director [email protected] +91-9871195008 Wazir Advisors Pvt. Ltd. Tel : +91 124 4590300 www.wazir.in

Thank You!