textile industry study
TRANSCRIPT
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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
Government regulations & policy
Business opportunities and Advantage India
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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
Government regulations & policy
Business opportunities and Advantage India
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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
Illustrative, not exhaustive
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
Illustrative, not exhaustive
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
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