White Paper on Bangalore Garment Manufacturing Industry

White Paper on Bangalore Garment Manufacturing Industry 2010

2 About us Our Services Market Analysis Trade Analysis Training and Consultancy Seminars and Workshops Apparel Resources is as an organization with over two decades of deep interaction with the Apparel and Textile industry in the Indian subcontinent under the name and style Apparel Resources. We are an established name as a knowledge partner to not only the industry but also to the academicians and students. The organization is actively involved in Research & Development, Industrial Training and Consultancy initiatives. Apparel Resources has been involved in conducting surveys, publishing annual Top 100 rating of companies in the garment industry besides insightful research/ analysis of textile and apparel trade statistics, especially related to global trade. Industry targeted events Fairs, Buyer Seller Meets Fashion and Product designing Colour and Trend Forecasting Print and web magazines Fashion Forward Trends (FFT) Apparel Online India Apparel Online Bangladesh Stitch World Resource Guide

3 Scope of White Paper Every manufacturing region has some core strengths and buyers world over not only appreciate but expect certain benchmarks from each of these hubs. Among the most progressive and organized garment manufacturing regions in India today is Karnataka, more specifically Bangalore. Known for core strengths in structured garments this manufacturing base is feeding both international buyers and domestic brands. The White Paper analyses what makes Bangalore such a favored destination for buyers. Over 50 companies were contacted and inferences drawn. The White Paper also looks at the future prospects of he region and government initiatives for investment in the textile sector.

4 table of content Introduction: White 5 Paper On Bangalore Product Strengths and 6 New Directions Shortage of Labour the 8 biggest Challenge Moving into the interiors 9 Incentives to Textile & 11 Garment Industry in Karnataka Advantage Karnataka 14 Government Initiatives to 15 Uplift the Backward Regions Why Bangalore? 17 Be it Exports or Domestic

5 Major Garment Players in Bangalore Gokaldas Exports Gokaldas Images LT Karle FFI Shahi Exports Texport Group Bombay Rayon K. Mohan Go Go International Mandhana Industries Raymonds Madura SKNL WHITE PAPER ON BANGALORE Region evolving from structured products to fashion Professional approach to manufacturing the way of life Over the time Bangalore has earned the reputation of being one of the most strategic destinations for professionally run apparel companies in India with proficiency in manufacturing tailored products and large capacities. The city is the home of big names like Gokaldas Exports, Gokaldas Images, LT Karle, FFI, Integra besides being the chosen manufacturing destination for exporters of other regions like Shahi Exports, Texport Group, Bombay Rayon, K. Mohan, Go Go International, Mandhana Industries, Raymonds, Madura, SKNL and a host of Mumbai-based exporters. Though there are hundreds of units in and around Bangalore, there are but 12 major players controlling the industry, all others are small and medium players with niche product strengths or working as contract factories for bigger players both in the international and domestic retail. In fact, Bangalore was the choice of many exporters moving out of Mumbai/Delhi, as it had the right climate, manpower, support structure in terms of technology and accessories, and attitude to foster bigger runs. With a down to earth approach to business, the work culture in the city is more committed than the north. Shahi s voyage to Karnataka started in 1988 with 200 machines and 400 associates and today the company has over 23,000 machines.

6 Product Strengths and New Directions Some of the best international and national brands in shirts, bottoms, outerwear, suits, blazers and sportswear are sourcing from Bangalore. Factories like Silver Spark, Gokaldas Images, Silver Crest, RVV and Arvind have excelled in fully constructed garments, while LT Karle, Gokaldas Exports have expertise in outer wear and sportswear. Casual bottoms is the forte of companies like Texport Overseas, Golden Seam, Texport Industries, K Mohan and Denim is being manufactured by companies like FFI, Ever Blue, Gokaldas Images, Shahi. Shirts are coming from factories like Laguna, Integra, Bombay Rayon, Go Go International to name a few leading ones. Laguna claims to have the only dedicated setup in India for very high-end formal shirts at par with Italian standards and in the four years of operation the company has already crossed Rs. 120 crore turnover. While the list of exporters is not exhaustive, it suggests that there is specialization in product range and even companies like Gokaldas Exports, Gokaldas Images and Shahi Exports which are doing multiproducts have dedicated factories for different product range, unlike in the north, where most factories are flexible units that can manufacture many products as per buyer demand. This need for specialized factories is of course fed by the nature of the product which is more technology-dependent. A casual bottom for A&F could require as many as 65 different machines for its unique operations. Even as factories in the north rule, the ladies wear market with interesting techniques, handwork and product development strengths, Bangalore is slowly but surely moving in that direction. Hindustan Clothing and Marketing (HCM), started just a year ago is already offering fashion ladies wear to buyers like Primark, New Look, C&A, Zara, Landmark and with the positive response it has received from buyers it is looking to expand machine strength from 750 to around 2000 by the end of 2011.

7 Working with Systems Because of the nature of product manufactured in the region, most of the garments are made in modular setups though batch system and assembly line are also popular formats. The average size of factories are also much bigger than what is found in Delhi and there are around 10-12 players who have 1000 machines or more under one roof. Some of the best technologies for manufacturing of structured products are available in the city and management concepts like six sigma, 5 S, lean management are found extensively at the production units. The IE department is an integral part of most units and production schedules are laid out based on SAM calculations. ERP and other IT-enabled software are used to create TNAs and online monitoring systems. The traditional manufacturing stronghold of the region Shirts both casual and formal Bottoms denims and non denims Outerwear like jackets Suits formals and blazers Sportswear

8 Shortage of Labour the biggest Challenge Even as the city expands into the outskirts to unfold the growing industry, shortage of labour is crippling operations. In fact, beyond the macro issues like escalating prices of cotton, appreciating rupee, shrinking margins and increasing wage rates that are impacting the apparel industry in general, the biggest constraint in Bangalore today is the shortage of labour. Every exporter in the region is spending a good amount of time and money to work out strategies on how to retain labour and also seek out new pool of workers. At any point of time there is a 15-20% shortage of operators on the sewing floor. Many expect the situation to improve after June, though the factories will still not see 100% attendance. According to survey findings of exporters in Bangalore, the key reasons for the acute shortage are many: Increasing opportunities in alternate industries like retail, automobile, electronics and IT-related assembly units NREG Scheme, which is a respite for less efficient workers Back to back festivals in the region over the past few months Piece rate system during peak season. Some of the initiatives to tackle the problem of labour problems include: Taking factories into the interiors, Aligning with skill development initiatives like IL&FS for regular supply of trained manpower from BPL section of society, Running buses into the nearby villages to pick up workforce from outside the city, Taping migrant labour from other states by providing hostel facilities Taping NGOs for workers also a part of CSR effort, Conducting intensive training programmes to skill fresh hands Relying more on automated solutions to cut down manpower requirement.

9 Moving into the interiors Proactive is the only word that can describe the response of the industry to the increasing gap between the supply and demand of workers in the city. One of the major thrusts is to take factories into the interiors. In fact most of the new units that are coming up are in rural areas around Bangalore within 100 km of the city. The new unit of Laguna is coming up at Kannakpura around 60 km from the city. Companies like Gokaldas Exports, Bombay Rayon, Integra, Texport Garments, Scotts Garments, Arvind Mills to name some prominent ones have tied up with IL&FS to absorb workers trained by the IL&FS from remote areas. While the training cost is borne by government funding, the IL&FS identifies and trains youth from below the poverty line segment of society and places them with factories who commit to employ such workforce. Technopack also has a skill development project and Bombay Rayon is absorbing large quantities of workers trained by them. Already most of the bigger units have busses running for workers living in villages around Bangalore. While this is a major expense, it is a source of steady workers and the employers are assured of committed labour. Further, some companies like Golden Seam feels that while the labour wages are cheaper in the villages by around 15%, the consistency in quality is an issue. So they prefer to induct raw hands and train them internally to suit their product profile and working culture. Meanwhile, the rising number of companies offering subsidized hostel facilities has increased the number of workers from outside the city and even outside the State. One of the advantages cited for encouraging migrant labour is that with a mix of workers from different regions and communities the chances of lines closing down because of a festival common to all is less, further workers are less inclined to waste time talking and socializing. However, on the reverse side if one person from a particular region leaves, he takes the whole group with him! Factories are gearing up to deskill operations and substitute manpower with technology wherever possible. Specialized machines

10 and modular workstations are the growth norms in production. But having said that, it cannot be denied that the garment industry can never be completely mechanized and the human element will always be a poser. Other reasons to move into the interiors As factories in Bangalore move to interiors, it is not only about finding labour in abundance but also unlocking value and taking advantage of cheaper land rates and incase of industrial parks incentives offered by Government. Shahi is planning to expand its operations to smaller towns of Karnataka namely Shimoga and Mysore. The company is investing Rs. 270 crores in Phase I in Shimoga district to set up a spinning unit with 50,000 spindles.

11 Incentives to Textile & Garment Industry in Karnataka To reduce regional imbalances, the State of Karnataka has been divided into three zones for incentive purposes namely, Zone-1, Zone-2 and Zone-3. Zone-1 consists of most, more and backward taluks like Belur, Savanur, Malur, Koppal, etc. as stated by the High Power Committee for Redressal of Imbalances receives the maximum incentives. Zone-2 on the other hand receives normal incentives and comprises of most backward and backward Taluks of Bangalore Urban, Bangalore Rural and Ramangra districts. Also the identified potential taluks like Udupi, Karwar, Tiptur, Kolar, Mysore, etc. fall under Zone-2. The developed taluks like Ramanagara, Nelamangala, Devanahalli, etc. come under the category of Zone-3 and receive minimum incentives. Key Stake Holders in Apparel & Associated Industries Bangalore Garment manufacturing units in Karnataka around 2,931, Units located in Bangalore 2,638,

12 Government insentives to areas in Karnatka based on zones S1. No. 1 Credit linked Capital subsidy a) General Incentives Zone-1 Zone-2 Zone-3 20% on the value of fixed assets or Rs.20.00 lakhs, 15% on the value of fixed assets or Rs.15.00 lakhs, Nil b) Additional subsidy (i) Units within Designated Textile Parks 5% on the value of fixed assets or Rs.5.00 lakhs, 5% on the value of fixed assets or Rs.5.00 lakhs, 5% on the value of fixed assets or Rs.5.00 lakhs, (ii) SC / ST / Persons with disabilities / Minority / Exservicement / Women 2 Entry Tax reimbursement 3 Stamp Duty reimbursement 4 Land Acquisition / Allotment through KIADB / KSSIDC 5 Common infrastructure for Greenfield Textile Parks (i) SITP approved projects 5% on the value of fixed assets or Rs.5.00 lakhs, Full reimbursementon Plant & Machinery and Capital Goods including equipments for captive power generation and for Common Effluent Treatment and waste disposal facilities. Full reimbursement with respect to: (i) Execution of Lease, and Sale deeds in respect of industrial land / plots allotted. (ii) Execution of Lease deeds in case of industrial sheds / plots taken on Lease. (iii) Loan and credit deeds, including security documents such as mortgage deed, pledge deed etc., executed for availing long terms funds from banks / Fls and other agencies of Gok / Goi. (iv) Use-on Stamps Duty paid on Imports Reimbursement of 25% of the cost of land including acquisition charged, if any, as charges, by KIADB / KSSIDC of Rs.25.00 lakhs, 40% of the project cost or Rs.12.00 crores, 9% of the project cost or Rs.5.00 crores, whichever is less. 5% on the value of fixed assets or Rs.5.00 lakhs, Full reimbursementon Plant & Machinery and Capital Goods including equipments for captive power generation and for Common Effluent Treatment and waste disposal facilities. 50% reimbursement with respect to: (i) Execution of Lease, and Sale deeds in respect of industrial land / plots allotted. (ii) Execution of Lease deeds in case of industrial sheds / plots taken on Lease. (iii) Loan and credit deeds, including security documents such as mortgage deed, pledge deed etc., executed for availing long terms funds from banks / Fls and other agencies of Gok / Goi. (iv) Use-on Stamps Duty paid on Imports Reimbursement of 50% of only the acquisition charges levied by KIADB / KSSIDC or Rs.15.00 Lakhs, 20% of the project cost or Rs.8.00 crores, 9% of the project cost or Rs.5.00 crores, 5% on the value of fixed assets or Rs.5.00 lakhs, Full reimbursementon Plant & Machinery and Capital Goods including equipments for captive power generation and for Common Effluent Treatment and waste disposal facilities. Nil Nil 9% of the project cost or Rs.5.00 crores,

13 6 Power subsidy (i) Readymade garment units (ii) Hi-tech Powerloom units with power connection above 20 HP (iii) Spinning units Reimbursement of cost of power paid @ Rs.1.00 per unit. Reimbursement of cost of power paid @ Rs.1.00 per unit. Reimbursement of cost of power paid @ Rs.1.00 per unit 7 Common Effluent Treatment Plant and Hazardous waste disposal facility 8 Capacity building support (i) Market development and Branding (ii) Design development and Product diversification (iii) Standards and compliances (a) 50% of the project cost or Rs.5.00 crores, (b) Incase of projects funded under any GoI scheme - 20% of project cost or Rs.2.00 crores, Reimbursement of 50% of the project cost or Rs.50.00 lakhs, Reimbursement of 50% of the project cost of Rs.25.00 lakhs, Reimbursement of 50% of the cost or Rs.2.00 lakhs, 9 Mega Projects Special support on a case-to-case basis

14 Advantage Karnataka All industry leaders should come forward and invest in Karnataka. We will facilitate new investments and also set up a single window to speed up the process, Chief Minister B. S. Yeddyurappa. The Karnataka State anticipates an investment of at least Rs. 4,00,000 crore in 12 key sectors Aerospace, Minerals, Tourism, Biotechnology, Automobile, IT, Infrastructure, Power, Food Processing, Textile, Health and Education in which it would seek fresh investments. The traffic congestion in Bangalore is likely to ease as several projects with the help of private players are soon expected to be implemented. The High Speed Rail Link to Bangalore International Airport, the mono-rail feeder service and the Metro and Peripheral Ring Road are some of the major projects comming up that will support industy in the feature. Apparel production figures of Karnataka Exports Domestic Total worth Rs. 6,000 crore Rs. 2,000 crore Rs. 8,000 crore Employment Approx. 4 lakh workers Total number of garment factories in Karnataka 800 factories

15 Government Initiatives to Uplift the Backward Regions To facilitate the improvement of backward areas of North Karnataka the Government is setting up 18 industrial estates and five industrial corridors. Land banks have been created and as part of this 53,000 acres of land have been earmarked for acquisition. In addition to this 43,000 acres of land can also be acquired depending on the demand. The Garment industry in Karnataka has increased its total turn over by 3 times in the last 10 years. The new textile policy of Karnataka named Suvarna Vastra Neethi (2008-13), expects to attract new investments to the tune of Rs. 100 billion over a period of five years. The policy envisages setting up of textile and apparel parks in various districts of the State with the target of creating 5,00,000 new job opportunities. Suvarna Vastra Neethi expects to attract new investments to the tune of US $ 2.4 billion and create half-a-million jobs over a period of five years. Suvarna Vastra Neethi expects to attract new investments to the tune of US $ 2.4 billion and create half-a-million jobs over a period of five years. The policy envisages setting up of textile and apparel parks in various districts of the State worth nearly Rs. 5,000 crore excluding exports. The scheme is to create employment opportunities within the State and prepare a workforce for the following sectors Garments, Handlooms, Powerlooms, Spinning, Knitting, Processing and Technical Textiles. The State is very close to source of raw materials and offers organized format of business. The labour conditions are a lot conducive and stable which he attributes to large base of women labour force, an asset to Karnataka when compared to other sectors. And last but not the least, the State Government is proactive in promoting apparel manufacturing to create large employment. Apart from the above advantages Bangalore is considered as one of the most organized Apparel Clusters in the country for the production of readymade apparels. All the well-known brands, both national as well as international buyers have set their sourcing offices in Bangalore namely, Levis, Nike, Tommy Hilfiger, GAP, Walmart, Crocodile, Van Heusen, Arrow, Lee, Calvin Klein, Peter England to mention a few.

16 Bangalore apparel players are exploring new product opportunities in segments like industrial workwear, innerwear and sleepwear, formal structured suits, army and other uniforms. Development of the apparel business in Bangalore is at higher level when compared to all the other Indian manufacturing centres and the city of Rs. 8,000 crore figure can reach Rs. 16,000 crores by 2015. 11 Cluster-based development proposals being examined in Karnataka Total Apparel & Textile workforce in the State is 6,50,500 out of which 5,40,670 (83%) workers are working in Bangalore only, The majority of the workers employed in the garment industry in the State comprises of Skilled, Semi Skilled Unskilled, Women form 93% of workforce in the industry. Name of District Activity 1 Bellary* Garmenting (Denim) 2 Belgaum Weaving (Powerloom) 3 Bagalkot Weaving & Garmenting 4 Chikballapur Garmenting & Weaving 5 Chitradurga Integrated Development 6 Gadag Weaving (Handlooms) 7 Gulbarga* Garmenting 8 Hasan Integrated Development 9 Kolar Weaving & Garmenting 10 Mysore Garmenting 11 Tumkur Integrated Development [* Bellary and Gulbarga are already approved and in Mysore the land is being developed for industry.] Karnataka has an edge in power generation The first State in the country to have a renewable energy policy. Rapid strides in wind energy, small hydro, co-generation, bio-mass and gas-based thermal energy. GAIL has proposed to build gas pipelines from Dabhol to Bidadi and would be able to provide at least 30 million standard cubic metres of gas a day to Bangalore with an estimated project cost of Rs. 6000 crore.

17 Why Bangalore? Be it Exports or Domestic Today, we cannot ignore the large domestic Ready-to-Wear (RTW) market. Sometime from year 2000, the retail industry started getting organized (more corporatized). So where does Bangalore fit into domestic market? Looking back Bombay always dominated the domestic brand market. In days of made-to-measure, RTW market was limited. Consumers had apprehension of wearing readymades. They could not comprehend that readymade garments could fit all. Hence in RTW segment we had mainly men s formal shirts and kidswear. There was no mention of so-called casual wear. From the years 60s-70s some of the famous men s wear branded shirts were (if I remember well): Tata Cordell, Liberty, Zodiac and then came: Climax, Wembley, Nine AM, Cityman, Sero. One of the most fancy shirt brands was Double Bull being fancied across India. And not to forget the famous one-shop-one-brand CD Chiragdin both in basics and hi-fashion shirts and trousers. To add to the above mid price and high price range came Cambridge Shirts that created a niche market for them. All the above brands were Mumbai-based. How can we forget the ace stroke of Apeego Corpn (Anil Goyal) a Mumbai-based knitwear (and woven) exporter. Some time in early 80s, Apeego launched smash hit brand Smash line of knitwear T-shirts with heavy TV advertisements, a success story not repeated thereafter. In a way we cannot but ignore the contribution of CMAI (The Clothing Manufacturers Association of India) in promoting domestic market brands and organizing domestic fairs twice a year an occasion for a buyers/sellers meet. We still did not have casual wear fashion apparels. While the export sector continued to supply to Europe and USA fashion garments, the domestic market was starved off these lines of garments. The Indian customers had only export surplus to fall back on rather compromise on size and fit. Mumbai s Fountain area and Delhi s Palika

18 Bazar were the place to shop for casual fashion wear garments (ill fitted of course as not made to Indian sizes). Both men s and ladies could find their taste satiated from foot path at a very economical price. The change came in from Bangalore. It would be early 90s. Two of the biggest exporters were from Bangalore Gokaldas Exports and Gokaldas Images. They sensed the vacuum in the Indian market for men s and ladies in casual wear market. Gokaldas Images came up with their brand (and store) weekender, a range for kids/children/ladies and men s wear in casual line. They held on to the brand until couple of years back when they sold off the brand to Primus. While Gokaldas Exports started with wearhouse, a name synonymous literally with warehouse. They used their export surplus fabric and converted their styles to fit the Indian consumers. Today, they have curtailed their retail exposure reasons, obviously, best known to the Hindujas. Both Gokaldas were a hit with Indian consumers and at the same time took care of their export surplus garments and export surplus fabric. Around same time, Arvind (mills) made a base in Bangalore and set up their modern factory to manufacture jeans and their formal men s shirts range. And of course Madura garments/apparels also had their domestic and exports division operating out of Bangalore. How can Raymonds be far behind they have one of their group company Silver Spark manufacturing jackets and trousers in Apparel Park in Doddabalapur (Bangalore) and Everblue Apparels catering to denimwear. As exports grew from Bangalore, smaller job workers grew in Bangalore. And these smaller factories now started doing contract manufacturing for domestic brands. To cater to export market and also support the domestic brands Prateek apparels set up their factories in Bangalore. Today they have

19 a large manufacturing capacity to cater to domestic market and also have a design cell specific for the market. In fact they have set up a separate company Munch Design. Munch has developed into a design solutions and strategy provider in the apparel, accessory and textile design space. Among the major players in domestic market Arvind, Madura, Crocodile, Raymonds, S. Kumars, Pantaloons and future brands, Levis, Lee, Wrangler they source their most of the requirements from Bangalore. Indian Designs supply to some of the best labels in the world. It was their vision that they started their domestic retail chain Idenditi in late 90s. They cater to high-fashion in mid price segment. And now we have F Square (from the house of Prateek, Bangalore) making a mark in retail space an excellent range of casual wear high-fashion for men s and ladies. Bangalore has an edge over other manufacturing centres Bangalore has evolved over the years learning from exports has helped them to cater to the quality demands of domestic market. In fact the people in domestic market do have their background in exports. The systems, procedures, quality systems, factory compliance of exports have been well incorporated in policies of big retailers and brands of India. Surely Bangalore has made a mark in both domestic and export market.

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