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

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

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 2

3 Global textile & apparel trade is worth US$ 827 bn. The global trade in textiles and apparel has grown at a CAGR of more than 6% from 2005 to 2014 Apparel Exports Textile Exports T&A Exports % Share 55% % Date Source: UN Comtrade, Wazir Analysis

India is the second biggest exporter of textile &

Values in US$ Billion Share in Global Exports China &

Bangladesh 31 4% Turkey 29 4% Vietnam 27 3% USA 26 3%

Rep. of Korea 16 2% Netherlands 15 2% Total T&A

2014 2 nd in Textile Export with 6% Share 8 th in

with 5% share India has potential to double its export

4 India is the second biggest exporter of textile & apparel Largest Exporters of T&A Country 2014 Exports Values in US$ Billion Share in Global Exports China & HK % 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 India s Ranking in Global T&A Trade in nd in Textile Export with 6% Share 8 th in Apparel Export with 4% Share 2 nd in Global Export with 5% share India has potential to double its export share from present 5% to 10% in next 10 years 4 Date Source: UN Comtrade, Wazir Analysis

5 Polyester fibre production first started in , 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 5

6 Ktes Globally polyester consumption is growing & will continue to grow further Ktes World Mill Consumption by Fibre 70,000 8,000 World Mill Consumption by Fibre (excl Polyester and Cotton) 60,000 50,000 6,000 4,000 2,000 40,000 30,000 20,000 10, Polyester Nylon Acrylic Viscose PP&Other Cotton 40% 35% 30% 25% 20% Nylon Acrylic Viscose PP&Other Cotton Share of World Mill Consumption Cotton Share Polyester continues to grow market share. Other MMFs have relatively flat volumes 6 Date Source: PCI

7 Globally consumption of polyester will increase further 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. 37% 36% 27% Global Fibre Consumption Trend Cotton Polyester Others 43% 44% 46% 48% 50% 50% 52% 36% 36% 35% 33% 31% 31% 30% 59% 27% Widening gap between Polyester and Cotton fibre consumption 21% 20% 19% 19% 19% 18% 18% 14% (P) 2030 (P) 7 Date Source: PCI Fibres

8 China, South Korea & Taiwan are the Global leaders in MMF based fabric Top Exporting Countries of MMF Based Fabrics 45% 42% 40% 38% 35% 33% Top Exporting Countries of MMF Based Fabrics (excluding China) 9% 8% 6% 5% 5% 5% 5% 6% 5% 4% 4% 4% 4% 4% 4% 9% 8% 6% 5% 5% 6% 4% 5% 4% 5% 4% 4% 4% 5% 4% South Korea Taiwan Italy Turkey China South Korea Taiwan Italy Turkey Top 10 exporters of MMF based fabrics constituted 81% of world s total trade in 2014 India ranked 7 th among the top exporting countries of MMF Based Fabrics in Date Source: UN Comtrade, Wazir Analysis

9 But Indian textile industry is still Cotton focussed 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. Fibre Consumption Trend in India Cotton Polyester Others 6% 6% 6% 6% 6% 7% 7% 8% 9% 34% 35% 35% 35% 36% 37% 38% 39% 40% 60% 59% 59% 59% 58% 56% 55% 53% 51% Date Source: Fibre Policy, Wazir Analysis

10 India s presence is insignificant in some of the major MMF based product categories 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 Trade Share in Top Traded MMF based Apparel Categories in 2014 Category End user Total Trade (US$ Billion) Indian Trade (US$ Billion) Dresses W/G % Trousers, bib and brace overalls, breeches and shorts W/G % Jackets W/G % Trousers, bib and brace overalls, breeches and shorts M/B % Brassieres W/G % Blouses, shirts and shirt-blouses W/G % Jackets M/B % Share China is the leading exporter of the apparel categories mentioned above Note: M/B Men s/boys ; W/G Women s/girls 10 * At 6 digit HS code level; Data Source: UN Comtrade, Wazir Analysis

11 Consumption of Polyester based products will increase in domestic market as well 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 11

12 Indian textile industry will consume more Polyester than Cotton within next five years Total Fibre Consumption At Mill Level Polyester Other MMF Cotton Other Natural Fibres Values in 000 MT 9,163 9,741 10,189 10,670 11,093 11,392 11,678 17,951 3% 4% 4% 5% 4% 3% 3% 5% 51% 48% 47% 46% 45% 44% 43% 32% 11% 6% 6% 6% 7% 7% 8% 8% 40% 41% 42% 43% 44% 45% 46% 53% Share of manmade fibre in total mill consumption is expected to reach ~65% by Share of polyester fibre is expected to show a drastic increase and grow to 53% by Source: Wazir & PCI Analysis

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

14 Leading companies in MMF based textile manufacturing are mostly vertically integrated with big capacities Company Taiwanese competitor Chinese competitor South Korean competitor Far Eastern New Century Jiangsu Hengli Group Hyosung Products 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 In-house Facilities Fibre & filament manufacturing, spinning, weaving/ knitting, processing and apparel manufacturing Filament manufacturing and weaving Fibre & filament manufacturing, weaving and processing Capacities 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 Revenue 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 Date Source: Company Websites

India has to work across its value chain Staple fiber Filament Existing Indian manufacturers can scale up the capacities International players will invest in specialty fibers Yarn spinning Weaving

Weaving infrastructure will need to be upgraded to handle specialty yarns and complex fabric types Garments Processing Home Textiles Technical textiles Processing will be the main challenge for

15 India has to work across its value chain Staple fiber Filament Existing Indian manufacturers can scale up the capacities International players will invest in specialty fibers Yarn spinning Weaving Knitting 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 Garments Processing Home Textiles Technical textiles 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 15

Investment in MMF based fabric manufacturing, processing as well as garmenting is an attractive investment opportunity Fiber Manufacturing India is leading man-made fibre manufacturer of the world

position. The intra-industry competition level is very high and it is majorly a commodity business.

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

16 Investment in MMF based fabric manufacturing, processing as well as garmenting is an attractive investment opportunity Fiber Manufacturing India is leading man-made fibre manufacturer of the world and has over capacity of manufacturing polyester fibre Spinning Attractive Investment Opportunities Fabric Manufacturing Processing 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. 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 Garmenting 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 16

17 Thank You! For further information or queries: Contact: Prashant Agarwal Joint Managing Director Wazir Advisors Pvt. Ltd. Tel :

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