Transcript Project Nabojagoron - India Brand Equity Foundation, IBEF

Indian Textile Industry
October 2006
Contents
Market Overview
Government regulations & policy
Business opportunities and Advantage India
www.imacs.in
© IMaCS 2006
Printed 18-Jul-15
Page 2
Indian Textile industry - important from perspective
of overall economy


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% of the country’s 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
www.imacs.in
© IMaCS 2006
Printed 18-Jul-15
Page 3
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
India’s position is strong vis-à-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
Abundant
availability of raw
material is one of
the key
advantages of the
Indian textile
industry
Source: Ministry of Textiles Annual Report, Industry Research
www.imacs.in
© IMaCS 2006
Printed 18-Jul-15
Page 4
Industry fragmented and dominated by small scale units
Spinning
100% = 2922 mills
Composite mills 8%
Small
Large
independent independent
units
units
39%
53%
Weaving
Processing & manufacturing
100% = 5.83 million units

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
Organised sector 2%
Powerloom
Handloom
31%
sector
67%

The textile industry across the value chain is largely decentralised

Units mostly independent and small scale in nature, rather than composite
units undertaking all activities together

Large scope for entry of organised integrated textile manufacturers
Source: Compendium of Textile Statistics, 2004
www.imacs.in
© IMaCS 2006
Printed 18-Jul-15
Page 5
Manufacturing units present at all levels of value chain
Raw materials
Cotton, wool,
silk, jute
Garments
Fibres and yarn
Grey fabric
 Knitting
 Weaving
Petrochemicals
Production
unit
Processed fabric
 Dyeing
 Finishing
Man-made fibre/
filament yarn*
Spinning mills
Home textiles
Weaving/ knitting
units - handlooms,
powerlooms, hosiery
units
Hand processing
units, 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
www.imacs.in
Source: Industry Research
© IMaCS 2006
Printed 18-Jul-15
Page 6
Industry experiencing high growth
Yarn production
million tonnes
3.1
8%
2.4
100% non
8%
cotton yarn
Blended yarn 17%
CAGR
3.4
3.6%
10%
6.0%
17%
3.8%
20%
Cloth production
billion sq. mtrs
100% non
cotton cloth
www.imacs.in
75%
72%
73%
1996
2000
2006
3.2%
45.0
38.6
31.5
Cotton cloth
4.1%
8.9%
41%
36%
27%
Blended cloth 13%
Cotton yarn
CAGR
15%
13%
4.6%
0.9%
60%
49%
46%
1996
2000
2005

Increased output of yarn and fabric - CAGR of 3.6% and 4.1% respectively;
global market has grown at a CAGR of 2-2.5% in this period

Highest growth seen in 100% non cotton yarn and fabric, followed by
blended yarn and fabric

Cotton cloth continues to dominate the industry
Source: Compendium of Textile Statistics
© IMaCS 2006
Printed 18-Jul-15
Page 7
Exports are dominated by readymade garments
100% = INR 654 bn
Textile exports
800
700
7%
100% = INR 390 bn
600
9%
5%
500
34%
400
13%
25%
52%
55%
Year 2005-06
100% = INR 199 bn
10%
200
100
Cotton yarn, fabric & made-ups
4%
Year 1999-00
300
35%
Readymade garments
Manmade staple fibres, yarn,
fabric & made-ups
Silk & woolen textiles, cotton
raw, incl waste
51%
Year 1994-95
0
www.imacs.in

Readymade garments dominate textile exports

Share of manmade textiles in overall textile export basket
has risen, whereas that of cotton textiles has fallen
Source: Ministry of Textiles
© IMaCS 2006
Printed 18-Jul-15
Page 8
Dismantling of quotas has resulted in higher growth
in large markets

In the first nine months of
CY2005, US imports grew by
Share in US textile and
clothing market
7% to USD 8.9 bn and EU
Share in EU textile and
clothing market
imports grew by 3.7% to Euro
9.0%
15.0%
4.4%
54.5 billion
7.3%
6.0%

5.2%
India has been one biggest
beneficiaries in post quota
2004
1st 9
months of
2005
2008*
2004
1st 9
months of
2005
2008*
regime in these two markets,
while countries like Mexico,
South Korea and Turkey have
lost share
*Forecasts
www.imacs.in
Source: WTO study on gainers and losers post quota abolishment
© IMaCS 2006
Printed 18-Jul-15
Page 9
Going forward, exports as well as domestic market
to drive growth

Drivers of exports

Rising outsourcing budgets of retail giants

Indian companies evolving from mere
converters to vendor partners of global buyers

Large outsourcing orders helping Indian
companies build capacities, lower their per unit
cost and become more competitive

37
Imposition of caps on certain import segments
from China by EU and US given the surge in
12
Chinese exports has opened up opportunities
for India
Market size estimates
USD bn
65
30
Exports
Domestic
market
25
2005
35

2010*
Drivers of domestic market

Growing young population

Rising household income levels

Growth of organised retail
*Forecasts
Source: Research commissioned by Confederation of Indian Textile Industry
www.imacs.in
© IMaCS 2006
Printed 18-Jul-15
Page 10
Contents
Market Overview
Government regulations & policy
Business opportunities and Advantage India
www.imacs.in
© IMaCS 2006
Printed 18-Jul-15
Page 11
Industry has witnessed a change in regulations
Emphasis on increasing scale
Post 1985
Emphasis on small scale sector

Pre 1985





Importance given to cotton textiles
Favourable fiscal treatment given to
powerlooms (mainly tiny and smallscale units) as compared to composite
mills
Most segments reserved for smallscale industry (SSI)*
Restrictions on installation of
automatic looms


Many segments (especially readymade garments,
knitwear and hosiery) deserved from reservation
for SSI
Schemes for technology upgradation and
modernisation introduced
Multifibre approach adopted; emphasis on man
made and synthetic fibres, in addition to cotton
Taxation structure made simpler
*Latest definition: Investment in plant & machinery of INR 10 million for
most industries, INR 50 million for specified industries like hosiery, hand
tools, drugs & pharmaceuticals, sports goods and stationery items
www.imacs.in
Measures aimed at
improving competitiveness
of industry to face a post
quota regime
© IMaCS 2006
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Page 12
Several government initiatives targeted to
attract investments
Technology Upgradation
Fund Scheme



Policy related to
foreign investment



Upgrading
infrastructure


www.imacs.in
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 apparel
manufacturing industry, with approval of the Foreign Investment Promotion
Board (FIPB)
~ USD 1.02 bn of FDI 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 of 100
additional clusters in textiles
Technology Mission on Cotton (TMC), focusing on cotton R&D,
dissemination of technology to farmers, improvement of market
infrastructure and modernisation of ginning and pressing sector
Source: Ministry of Textiles, Industry Research
© IMaCS 2006
Printed 18-Jul-15
Page 13
Contents
Market Overview
Government regulations & policy
Business opportunities and Advantage India
www.imacs.in
© IMaCS 2006
Printed 18-Jul-15
Page 14
India has a cost advantage vis-à-vis
competing countries
Cost competitiveness
South Korea
China
Brazil
India
Yarn: USD per kg of yarn
Fabric: USD per yard of fabric
Open-ended yarn & fabric
Ring yarn & fabric
2.35
Yarn
2.61
2.17
Knitted
fabric

www.imacs.in
1.90
2.06
2.45
0.55
0.75
0.65
0.69
0.60
0.65
0.61
0.66
0.51
0.55
0.59
0.06
1.22
0.04
1.21
0.07
1.21
0.06
1.40
2.76
2.31
0.70
1.68
2.68
2.51
Woven
fabric
Textured yarn & fabric
1.12
0.18
0.14
0.20
0.21
India is cost competitive vis-à-vis competing countries in textile production,
except in case of textured yarn and fabric
© IMaCS 2006
Printed 18-Jul-15
Page 15
There are several other industry specific advantages
arising out of the unique nature of 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 of cotton produced India, making India capable of catering to various segments of world
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 of excise duty structure removed
Flexibility in production



Product development and design capabilities


www.imacs.in
Capabilities across the entire value chain within the country reduces lead time for production and
reduces intermediate shipping time
Indian companies have flexibility and skilled manpower to handle small orders with complex designs
Several institutes in India for textile development, the major one being National Institute of Fashion
Technology (NIFT)
Several leading colleges also offer courses in Textile Engineering
© IMaCS 2006
Printed 18-Jul-15
Page 16
Business opportunities exist for foreign players

Investing in India




Sourcing from India


Export to India
www.imacs.in
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
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 India’s
cost competitiveness
With Indian consumers increasingly getting exposure to
international fashion trends, potential exists for export of
lifestyle brands of garments and accessories to India
© IMaCS 2006
Printed 18-Jul-15
Page 17
Many foreign players have also entered India
Illustrative, not exhaustive

Buying and liaison
offices

Brand licensing/
franchising

Manufacturing/
manufacturing
cum retailing






www.imacs.in
Top 10 buyers in India (Gap, Wal-Mart, Li & Fung, The Children’s 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
Brand licensing - Hugo Boss, Tommy Hilfiger, Mango, Lovable, Nike, Lacoste
Master franchisee - Marks & Spencer, Crocodile
VF Arvind Brands - joint venture between Arvind Brands and VF
Corporation to manufacture and sell latter’s brands in India
Benetton
Levi Strauss
Reebok
Carreman Michel Thierry
Source: News articles
© IMaCS 2006
Printed 18-Jul-15
Page 18
Key players in India
Illustrative, not exhaustive




Large industry conglomerate, with turnover of USD 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 of the oldest textile companies in the country, having turnover of USD 231 million
Produces suitings, shirtings, sarees, towels, bed linen and men’s apparel; significant exporter of
polycotton blended fabrics and made ups

One of the largest producers of denim in the world, having turnover of USD 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 of USD 400 million
Significant presence in acrylic fibre, cotton, synthetic and blended spun yarns, grey and
processed fabrics, cotton and synthetic sewing threads



India’s largest exporter of readymade garments, having turnover of USD 180 million
Supplies to more than 100 retailers and fashion brands across 39 countries
Source: Capitaline, Company websites
www.imacs.in
© IMaCS 2006
Printed 18-Jul-15
Page 19
Key players in India
Illustrative, not exhaustive

Leading producer of silk yarns and fabric (mainly for decorative and bridal use), with annual
turnover of USD 32 million

Other businesses include retailing of home furnishings in India and manufacture of bed linen
products for domestic and export market

Amongst the top 3 terry towel producers in the world, with annual turnover of USD 132 million

Other products include cotton yarns, polyester filament yarn, bathrobes, buttons and saw
pipes


Belongs to one of the most diversified business groups in India (Aditya Birla Group) and has
turnover of USD 577 million)
Key products in textiles include viscose filament yarn and branded apparel; other interests
include insurance, telecom, IT, carbon black

Having turnover of USD 303 million, company is a major producer of polyester
yarns, fabrics, garments and textiles

Has the largest composite textile mill in India for producing cotton fabric
Having a turnover of USD 95 million, its products include viscose filament yarn,
viscose tyre/ industrial yarn, denim, cement and pulp and paper

www.imacs.in
Source: Capitaline, Company websites
© IMaCS 2006
Printed 18-Jul-15
Page 20
The India Brand Equity Foundation is a public-private partnership between the Ministry of
Commerce & Industry, Government of India and the Confederation of Indian Industry. The
Foundation’s primary objective is to build positive economic perceptions of India globally
India Brand Equity Foundation
c/o Confederation of Indian Industry
249-F Sector 18, Udyog Vihar Phase IV
Gurgaon 122015, Haryana, INDIA
Tel +91 124 401 4087, 4060 - 67
Fax +91 124 401 3873
Email [email protected]
Web www.ibef.org
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© IMaCS 2006
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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 be reproduced, wholly or in part in any material form (including
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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
Author’s and IBEF’s knowledge and belief, the content is not to be construed in any manner
whatsoever as a substitute for professional advice.

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
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© IMaCS 2006
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