textile industry study

8/8/2019 Textile Industry Study

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Indian Textile Industry

November 2010

A Presentation by DeoMac


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Contents

Market Overview

Government regulations & policy

Business opportunities and Advantage India


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Indian Textile industry Overview IBEF 2009

Total market size (2004-05): USD 38 bn

Domestic market ~ USD 25 bn

Exports ~ USD 13 bn

Strong contribution to Indian Economy

14% contribution to industrial production

4% contribution to GDP

16% contribution to export earnings

Direct employment to more than 35 million people

Industry functions in the form of clusters (roughly 70 in number) across India, producing 80% ofthe countrys total textile

Sector is diverse, with the hand-spun and hand woven sector at one end of the spectrum, and

the capital intensive, sophisticated mill sector at the other

Source: Ministry of Textiles Annual Report, Industry Research


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India has a strong base in raw materials

Cotton dominates the industry

Nearly 56% of yarn produced is made of cotton

Country produces nearly 23 varieties of cotton

India is the second largest player in the world cotton trade

Indias position is strong vis--vis other countries in most raw

materials

Largest producer of jute

Second largest producer of silk

Third largest producer of cotton, accounting for nearly 16% of

global production

Third largest producer of cellulosic fibre/yarn

Fifth largest producer of synthetic fibres/yarn

Eleventh largest producer of wool

Source: Ministry of Textiles Annual Report, Industry Research

Abundant

availability of raw

material is one ofthe key

advantages of the

Indian textile

industry


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Industry fragmented and dominated by small scale units

The textile industry across the value chain is largely decentralised

Units mostly independent and small scale in nature, rather than composite unitsundertaking all activities together

Large scope for entry of organised integrated textile manufacturers

Spinning Weaving Processing & manufacturing

Source: Compendium of Textile Statistics, 2004

Largeindependent

units53%

Smallindependent

units39%

Composite mills 8%

100% = 2922 mills

100% = 5.83 million units

Handloomsector67%

Powerloom31%

Organised sector 2%

Of the 2300 processors in

India, only 200 units are

integrated with spinning,

weaving or knitting units

Bulk of apparel and home

textile manufacturing

accounted for by 77,000

small scale units


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Manufacturing units present at all levels of value chain

Raw materials

Cotton, wool,

silk, jute

Petrochemicals

Fibres and yarn

Man-made fibre/

filament yarn*

Grey fabric

Knitting

Weaving

Processed fabric

Dyeing

Finishing

Garments

Home textiles

Production

unitSpinning mills

Weaving/ knitting

units - handlooms,

powerlooms, hosiery

units

Hand processingunits, independent

power processing

units, units attached

to mills

Garments &

home textile

producers

Composite Mills

*Includes viscose staple fibre, polyester staple fibre, acrylic staple fibre, viscose

filament yarn, nylon filament yarn, polyester filament yarn

Source: Industry Research


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Exports are dominated by readymade garments

Readymade garments dominate textile exports

Share of manmade textiles in overall textile export basket hasrisen, whereas that of cotton textiles has fallen

Readymade garments

Cotton yarn, fabric & made-ups

Manmade staple fibres, yarn,fabric & made-ups

Silk & woolen textiles, cottonraw, incl waste

51%35%

10%4%

52%34%

9%5%

55%25%

13%

7%100% = INR 654 bn

100% = INR 390 bn

100% = INR 199 bn

Year 1994-95

Year 1999-00

Year 2005-06

Textile exports

Source: Ministry of Textiles


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Dismantling of quotas has resulted in higher growth in large markets

In the first nine months of CY2005,

US imports grew by 7% to USD 8.9

bn and EU imports grew by 3.7% to

Euro 54.5 billion

India has been one biggest

beneficiaries in post quota regime in

these two markets, while countries

like Mexico, South Korea and Turkey

have lost share

4.4% 5.2%

15.0%

2004 1st 9months of

2005

2008*

.0%

7.3%

9.0%

2004 1st 9months of

2005

2008*

Share in US textile and

clothing market

Share in EU textile and

clothing market

Source: WTO study on gainers and losers post quota abolishment*F

orecasts


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Going forward, exports as well as domestic market to drive growth

Drivers of exports

Rising outsourcing budgets of retail giants

Indian companies evolving from mereconverters to vendor partners of global buyers

Large outsourcing orders helping Indiancompanies build capacities, lower their per unitcost and become more competitive

Imposition of caps on certain import segmentsfrom China by EU and US given the surge inChinese exports has opened up opportunitiesfor India

Drivers of domestic market

Growing young population

Rising household income levels

Growth of organised retail

2005 2010*

*Forecasts

Market size estimates

USD bn

Domestic

market

Exports

25

12

37

35

30

65

Source: Research commissioned by Confederation of Indian Textile Industry


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Contents

Market Overview




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Industry has witnessed a change in regulations

Pre 1985

Emphasis on small scale sector

Importance given to cotton textiles

Favourable fiscal treatment given to

powerlooms (mainly tiny and small-

scale units) as compared to composite

mills

Most segments reserved for small-

scale industry (SSI)*

Restrictions on installation of

automatic looms

Emphasis on increasing scale

Post 1985

Many segments (especially readymade garments,

knitwear and hosiery) deserved from reservation

for SSI

Schemesfor technology upgradation and

modernisation introduced

Multifibre approach adopted; emphasis on man

made and synthetic fibres, in addition to cotton

Taxation structure made simpler

Measures aimed at

improving competitiveness

of industry to face a post

quota regime*Latest definition: Investment in plant & machinery of INR10 million for

most industries, INR 50 million for specified industries like hosiery, hand

tools, drugs & pharmaceuticals, sports goods and stationery items


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Several government initiatives targeted to attract investments

Technology Upgradation

Fund Scheme

Policy related to

foreign investment

Upgrading

infrastructure

Scheme launched in 1999 to provide firms access low interest loans for

technology upgradation and setting up new units with state-of-art technology

Scheme has disbursed INR 91.61 bn till 31st December 2005

Upto 100% foreign direct investment allowed in textile and apparelmanufacturing industry, with approval of the Foreign Investment Promotion

Board (FIPB)

~ USD 1.02 bn ofFDI in the sector approved between 1991 and 2004

Companies free to set up fully-owned sourcing (liaison) offices, as well as

marketing operations

Scheme for Integrated Textile Parks (SITP), based on public-private

partnership model to build world class infrastructure facilities

Product specific Cluster Approach targeting development of100

additional clusters in textiles

Technology Mission on Cotton (TMC), focusing on cotton R&D,

dissemination of technology to farmers, improvement ofmarket

infrastructure and modernisation ofginning and pressing sectorSource: Ministry of Textiles, Industry Research


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Contents

Market Overview




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India has a cost advantage vis--vis competing countries

India is cost competitive vis--vis competing countries in

textile production, except in case of textured yarn and fabric

Cost competitiveness

Yarn: USD per kg of yarn

Fabric: USD per yard of fabric

Open-ended yarn & fabric Ring yarn & fabric Textured yarn & fabric

Yarn

Woven

fabric

Knitted

fabric

South Korea

China

Brazil

India


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There are several other industry specific advantages

arisingo

uto

f the unique natureo

f the industry in India Large raw material base

India has a rich raw material base, especially cotton which has seen improved productivity in the country

under the Cotton Technology Mission

Wide variety ofcotton produced India, making India capable ofcatering to various segments ofworld

trade

Indian industry has ability to handle different materials - cotton, wool, silk and jute with equal skill

Positive developments in the Textile Policy

Reservation for small scale sector, especially key segments removed over last few years

Fiscal anomalies in terms ofexcise duty structure removed

Flexibility in production

Capabilities across the entire value chain within the country reduces lead time

f

or production andreduces intermediate shipping time

Indian companies have flexibility and skilled manpower to handle small orders with complex designs

Product development and design capabilities

Several institutes in India for textile development, the major one being National Institute o fFashion

Technology (NIFT)

Several leading colleges also offer courses in Textile Engineering


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Business opportunities exist for foreign players

Investing in India

Sourcing from India

Export to India

Partner with Indian vendors to import from India, by nominating

large Indian companies having credibility in terms of capacities

and quality

Readymade garments have maximum opportunity, given Indias

cost competitiveness

Invest in setting up vertically integrated large scale units

Invest in setting up retail chains (single brand)

Enter into marketing joint ventures with Indian companies

Brand licensing to Indian players

With Indian consumers increasingly getting exposure to

international fashion trends, potential exists for export of

lifestyle brands of garments and accessories to India


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Many foreign players have also entered India

Top 10 buyers in India (Gap, Wal-Mart, Li & Fung, The Childrens Place, JC

Penny, H&M, Federated, Fifth Avenue, Carrefour and Synergies India)

account for 35% of total textiles sourced from India

Other major companies include El Corte, Ecko, Kellwood, VF Corporation,

Tesco, Next, Karstadt-Quelle

Buying and liaison

offices

Brand licensing - Hugo Boss, Tommy Hilfiger, Mango, Lovable, Nike, Lacoste

Masterfranchisee - Marks & Spencer, Crocodile

Brand licensing/

franchising

Manufacturing/

manufacturing

cum retailing

VF Arvind Brands - joint venture between Arvind Brands and VF

Corporation to manufacture and sell latters brands in India

Benetton

Levi Strauss

Reebok

Carreman Michel Thierry

Source: News articles

Illustrative, not exhaustive


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Key players in India

Large industry conglomerate, with turnover ofUSD 279 million and presence in textiles, retail,

engineering goods, personal care and prophylactics

Textile products - worsted fabrics, wool and blended fabrics, specialty ring colour and stretch denim

fabric, cotton and linen shirting fabric, readymade garments, woolen blankets and home furnishings

One o

fthe oldest textile companies in the country, having turnover o

fUSD 231 million

Produces suitings, shirtings, sarees, towels, bed linen and mens apparel; significant exporter of

polycotton blended fabrics and made ups

One of the largest producers ofdenim in the world, having turnover ofUSD 338 million and

exports to more than 70 countries

Produces denim fabric, cotton and blended fabric, knitted fabric, voiles, apparel


One of the largest textile business houses in India, having turnover ofUSD 400 million

Significant presence in acrylic fibre, cotton, synthetic and blended spun yarns, grey and

processed fabrics, cotton and synthetic sewing threads

Indias largest exporter of readymade garments, having turnover ofUSD 180 million

Supplies to more than 100 retailers and fashion brands across 39 countries

Source: Capitaline, Company websites


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Leading producer ofsilk yarns and fabric (mainly for decorative and bridal use), with annual

turnover ofUSD 32 million

Other businesses include retailing ofhome furnishings in India and manufacture ofbed linen

products for domestic and export market


Key players in India

Source: Capitaline, Company websites

Amongst the top 3 terry towel producers in the world, with annual turnover ofUSD 132 million

Other products include cotton yarns, polyesterfilament yarn, bathrobes, buttons and saw

pipes

Belongs to one of the most diversified business groups in India (Aditya Birla Group) and has

turnover ofUSD 577 million)

Key products in textiles include viscose filament yarn and branded apparel; other interests

include insurance, telecom, IT, carbon black

Having turnover ofUSD 303 million, company is a major producer ofpolyester

yarns, fabrics, garments and textiles

Has the largest composite textile mill in India for producing cotton fabric

Having a turnover ofUSD 95 million, its products include viscose filament yarn,

viscose tyre/ industrial yarn, denim, cement and pulp and paper


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Disclaimer

This presentation has been prepared jointly by the India Brand Equity Foundation (IBEF) and ICRA Management Consulting

Services Limited, IMaCS (Authors)

All rights reserved. All copyright in this presentation and related works is owned by IBEF and the Authors. The same may not

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communicated to any third party except with the written approval of IBEF.

This presentation is for information purposes only. While due care has been taken during the compilation of this presentation

to ensure that the information is accurate to the best of the Authors and IBEFs knowledge and belief, the content is not to be

construed in any manner whatsoever as a substitute for professional advice.

The Author and IBEF neither recommend or endorse any specific products or services that may have been mentioned in this

presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any

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Neither the Author nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the

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