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Contents Advantage India Market overview and trends Growth drivers Success stories: Raymond, Alok Industries Opportunities Useful information 2
Advantage India 2011 Market Value: USD89 billion Robust demand Increased penetration of organised retail, favourable demographics,and rising income levels to drive textile demand Growth in building and construction will continue to drive demand for nonclothing textiles Competitive advantage Abundant availability of raw materials such as cotton, wool, silk and jute India enjoys a comparative advantage in terms of skilled manpower and in cost of production relative to major textile producers Advantage India Increasing investments Over USD35 billion of investments have been made in the textile and clothing sector during the last four years, with the cotton textile segment accounting for around 75 per cent Policy support 100 per cent FDI (automatic route) is allowed in the Indian textile sector SITP was approved in July 2005 to facilitate setting up of textiles parks with world class infrastructure Free trade with ASEAN countries will boost exports 2021E Market Value: USD223 billion Source: Technopak, Aranca Research Notes: SITP - Scheme for Integrated Textile Park, FDI - Foreign Direct Investment, 2021 E - Estimated figure for 2020; ASEAN - Association of Southeast Asian Nations ADVANTAGE INDIA 3
Contents Advantage India Market overview and trends Growth drivers Success stories: Raymond, Alok Industries Opportunities Useful information 4
Evolution of the Indian textile sector 2000 onwards 1951-2000 1854-1900 1901-50 The first cotton textile mill of Mumbai was established in 1854 The first cotton mill of Ahmedabad was found in 1861; it emerged as a rival centre to Mumbai Number of mills increased from 178 in 1901 to 417 in 1945 Out of 423 textile mills of the undivided India, India received 409 after partition and the remaining 14 went to Pakistan In 1999, TUFS was set up to provide easy access to capital for technological upgradation TMC was launched to address issues related to low productivity and infrastructure In 2000, NTP was announced for the overall development of the textile and apparel industry NTC started selling few mills to private businesses in 2005 SITP was implemented to facilitate setting up of textile units with appropriate support infrastructure Post MFA cotton prices are aligned with global prices Technical textile industry will be a new growth avenue Notes: NTP - National Textile Policy, NTC - National Textiles Corporation, TUFS - Technology Upgradation Fund Scheme, TMC - Technology Mission on Cotton MARKET OVERVIEW AND TRENDS 5
Segments in the textile and apparel sector The textile and apparel industry can be broadly divided into two segments: Yarn and fibre (including natural and man-made fibre as well as yarn) Processed fabrics (including woolen textiles, silk textiles, jute textiles, cotton textiles and technical textiles), readymade garments (RMGs) and apparel Key segments of the textile industry Process Raw material Ginning Spinning Weaving/ Knitting Processing Garment/ Apparel production Output Cotton, jute, silk, wool Fibre* Yarn Fabric Processed fabric Final garment/ Apparel Yarn and fibre segment Woollen textiles Silk textiles Jute textiles Technical textiles Source: Aranca Research Note: * - Including cotton, jute, silk, wool and manmade fibres MARKET OVERVIEW AND TRENDS 6
Key Facts The fundamental strength of the textile industry in India is its strong production base of wide range of fibre / yarns from natural fibres like cotton, jute, silk and wool to synthetic /man-made fibres like polyester, viscose, nylon and acrylic India is the world s second largest producer of textiles and garments Indian textile industry accounts for about 24 per cent of the world s spindle capacity and eight per cent of global rotor capacity India has the highest loom capacity (including hand looms) with 63 per cent of the world s market share India accounts for about 14 per cent of the world s production of textile fibres and yarns (largest producer of jute, second largest producer of silk and cotton; and third largest in cellulosic fibre) Source: Textile Ministry, Aranca Research MARKET OVERVIEW AND TRENDS 7
The sector has been posting healthy growth over the years Textile plays major role in the Indian economy India's textile market size (USD billion) It accounts for 27 per cent of foreign exchange inflows 223 It has a share of 14 per cent in industrial production It is the largest source of employment generation in the country 70 78 89 The size of the Indian textile market in 2011 was USD89.0 billion; the market is expected to record a CAGR of 10.1 per cent over 2009-21 2009 2010 2011 2021E Source: Technopak, Ministry of Textiles, Aranca Research Note: CAGR - Compound Annual Growth Rate, E - Estimated MARKET OVERVIEW AND TRENDS 8
Market share: Apparel has the larger share Apparel constitute a large share in the overall sector Shares in India s textile and apparel sector in 2011 In 2011, apparel had a share of 69 per cent of the overall market; textiles contributed the remaining 31 per cent To improve technical skills in Apparel industry government established 75 Apparel training and design centre across India 31% Apparel Textile National Institute of Fashion Technologies played pioneering role in growth of Apparel industry and exports 69% To promote Apparel exports 12 locations has been approved by the government to set up Apparel parks for exports Source: Technopak, Aranca Research Note: NIFT - National Institute of Fashion technology MARKET OVERVIEW AND TRENDS 9
Cotton production over the past few years has been volatile Production of raw cotton grew to 35.3 million bales in FY12, up from about 28.0 million bales in FY07 Production of raw cotton (million bales) During this period, the CAGR in production was 4.7 per cent; annual growth in FY12 was at 4.1 per cent 33.9 35.3 Of the total amount of raw cotton produced in the country, 25 million bales were used up in domestic consumption while 8.5 million bales were exported 28.0 30.7 29.0 30.5 Note: CAGR - Compounded Annual Growth Rate one Bale - 217.7 kilo gram P - Data for FY12 is provisional FY07 FY08 FY09 FY10 FY11 FY12P Source: Ministry of Textiles, Aranca Research Raw cotton and man-made fibres are the major segments in this category Raw wool and raw silk are the other components - their production levels are much lower MARKET OVERVIEW AND TRENDS 10
Production of manmade fibre has also been rising Production of man-made fibre has also been on an upward trend Production stood at 1.230 million tonnes in FY12 with the figure reinforcing a recovery from 2009 levels Production of man-made fibre (million tonnes) 1.268 1.285 1.244 1.230 1.139 1.066 FY07 FY08 FY09 FY10 FY11 FY12P Source: Ministry of Textiles, Aranca Research Note: P - Data for FY12 is provisional MARKET OVERVIEW AND TRENDS 11
Cotton is the major segment in both yarn and fabric (1/2) Production of yarn grew to 5.8 million tonnes in FY12 from 5.2 million tonnes in FY07, a CAGR of 2.4 per cent Production of yarn (million tonnes) Cotton yarn accounts for the largest share in total yarn production; in FY12 the segment s share amounted to 53.6 per cent 1.4 1.5 1.4 1.0 1.1 1.0 1.5 1.1 1.5 1.2 1.5 1.2 2.8 2.9 2.9 3.1 3.5 3.1 FY07 FY08 FY09 FY10 FY11 FY12P Cotton Yarn Other Spun Yarn Manmade Filament Yarn Source: Ministry of Textiles, Aranca Research Note: P - Data for FY12 is provisional MARKET OVERVIEW AND TRENDS 12
Cotton is the major segment in both yarn and fabric (2/2) Fabric production rose to 61,364 million sq. metres in FY12 from 52,665 million sq. metres in FY07, a CAGR of 3.1 per cent The major segment is cotton yarn which accounted for 50 per cent in FY12 Fabric production (million sq mtr) 7,767 8,278 8,394 6,888 6,882 6,766 23,652 22,563 22,377 19,545 21,173 20,534 26,238 27,196 26,898 28,914 31,718 30,593 FY07 FY08 FY09 FY10 FY11 FY12P Cotton 100% Non Cotton Blended Source: Ministry of Textiles, Aranca Research Notes: Sq Mtr is Square meter, P - Data for FY12 is provisional MARKET OVERVIEW AND TRENDS 13
Exports have posted strong growth over the years Exports have been a core feature of India s textile and apparel sector, a fact corroborated by trade figures Exports grew to USD33.2 billion in FY12 from USD17.6 billion in FY06, a CAGR of 11.2 per cent FY12 was a particularly good year for the sector with exports shooting up by an annual rate of 19.4 per cent India's textile trade (USD billion) 33.2 27.8 22.4 22.1 21.2 19.1 17.6 3.3 3.4 3.5 4.2 5.2 2.7 2.8 FY06 FY07 FY08 FY09 FY10 FY11 FY12P Exports Imports Source: Ministry of Textiles, Aranca Research Note: P - Data for FY12 is provisional MARKET OVERVIEW AND TRENDS 14
Readymade garments and cotton textiles dominate exports Readymade garments was the largest contributor to total textile and apparel exports from India in FY12*; the segment had a share of 39 per cent Cotton and man-made textiles were the major contributors with shares of 34 per cent and 17 per cent, respectively Shares in India s textile exports (FY12) 17% 3% 4% 3% 39% Readymade Garment Cotton Textiles Man-made textiles Handicrafts Silk & Handloom 34% Woolen & others Source: Ministry of Textiles, Aranca Research Note: Others include coir & coir manufacturers and jute MARKET OVERVIEW AND TRENDS 15
Key players in the industry Company Business areas Welspun India Ltd Home textiles, bathrobes, terry towels Vardhman Group Yarn, fabric, sewing threads, acrylic fiber Alok Industries Ltd Raymond Ltd Home textiles, woven and knitted apparel fabric, garments and polyester yarn Worsted suiting, tailored clothing, denim, shirting, woollen outerwear Arvind Mills Ltd Bombay Dyeing & Manufacturing Company Ltd Spinning, weaving, processing and garment production (denims, shirting, khakis and knitwear) Bed linen, towels, furnishings, fabric for suits, shirts, dresses and saris in cotton and polyester blends Garden Silk Mills Ltd Dyed and printed fabric Source: Annual Reports, Aranca Research MARKET OVERVIEW AND TRENDS 16
Notable trends in the Indian textile sector Increasing investment in TUFS The Ministry of Textiles is encouraging investments through increasing focus on schemes such as TUFS and cluster development activities Investments under TUFS increased to USD600 million in FY11, with spinning accounting for the largest share Multi-Fibre Arrangement (MFA) With the expiry of MFA in January 2005, cotton prices in India are now fully integrated with international rates Public-Private Partnership (PPP) The Ministry of Textiles commenced an initiative to establish institutes under the public-private partnership (PPP) model to encourage private sector participation in the development of the industry Technical textiles Technical textiles, which has been growing at around twice the rate of textiles for clothing applications over the past few years, is now expected to post a CAGR of 20 per cent over FY11-17 Source: Ministry of Textiles, Aranca Research MARKET OVERVIEW AND TRENDS 17
Contents Advantage India Market overview and trends Growth drivers Success stories: Raymond, Alok Industries Opportunities Useful information 18
Strong demand and policy support driving investments Growing demand Policy Strong support government support Increasing investments Rising demand in exports Inviting 100 per cent FDI in textile sector Resulting in Growing domestic and foreign investments Increasing demand in domestic market Government setting up SITPs and Mega Cluster Zones Commitment of USD140 billion of foreign investments Growing population driving textile demand Increasing loans under TUFS Government investment schemes (TCIDS and APES) Source: Ministry of Textiles, Aranca Research Note: TCIDS - Textile Center Infrastructure Development Scheme, APES - Apparel Park for Exports Scheme GROWTH DRIVERS 19
Continued support to the textile sector by the government in the FY13 budget Stress on mechanisation Automatic shuttleless looms fully exempted from basic customs duty of 5 per cent Automatic silk reeling and processing machinery as well as its parts exempted from basic customs duty Financial package of INR38.8 billion (USD809 million) for waiver of loans for handloom weavers and their cooperative societies INR5.0 billion (USD100 million) pilot scheme announced for promotion and application of geotextiles in the North Eastern Region Financial package FY13 Union Budget Infrastructure support Mega handloom clusters to be set up in Andhra Pradesh and Jharkhand Power loom mega cluster to be set up in Maharashtra Three Weaver s Service Centres (one each in Mizoram, Nagaland and Jharkhand) to be set up for providing technical support to poor handloom weavers GROWTH DRIVERS 20
Changing demographics has also contributed significantly to the sector By 2010, India s population had close to doubled compared to figures 30 years before The IMF expects India s population to touch 1.31 billion by end-2017 India s population in billions 1.19 1.31 India s growing population has been a key driver of textile consumption growth in the country 0.84 1.02 It has been complemented by a young population which is growing and at the same time is exposed to changing tastes and fashion 0.68 Complementing this factor is rising female workforce participation in the country 1980 1990 2000 2010 2017F Source: IMF, Aranca Research Note: F - Forecasts GROWTH DRIVERS 21
Rising incomes and a growing middle class have been the key demand drivers Rising incomes has been a key determinant of domestic demand for the sector; with incomes rising in the rural economy as well, the upward push on demand from the income side is set to continue A rising middle class has also aided demand growth for the sector; the size of the middle class is forecasted to rise to 550 million by 2025 from more than 50 million in 2011 Trends in per-capita income in India Changing economic fortunes by income segments 3,000 2,500 2,000 1,500 1,000 500 0 30% 25% 20% 15% 10% 5% 0% -5% 2000 2002 2004 2006 2008 2010 2012F 2014F 2016F Per capita income, USD, LHS Annual growth rate, RHS 70 60 50 40 30 20 10 0 million households Aspirers: annual income INR90,000-200,000 Deprived annual income <INR90,000 Seekers: annual income INR200,000-500,000 Strivers: annual income INR500,000-1,000,000 Globals: annual income >INR1,000,00 0 2005 2010 2015 2020 2025 Strivers Seekers Deprived Source: IMF, McKinsey Quarterly, Aranca Research Notes: E - Estimates, F - Forecasts GROWTH DRIVERS 22
Exporters gaining from strong global demand Capacity built over years has led to low cost of production per unit in India s textile industry; this has lent a strong competitive advantage to the country s textile exporters relative to key global peers Growing textile exports from India (USD billion) 27.8 33.2 The sector has also witnessed increasing outsourcing over the years as Indian players moved up the value chain from being mere converters to vendor partners of global retail giants 19.2 22.2 21.1 22.4 The strong performance of textile exports is reflected in the value of exports from the sector over the years; In FY12, textile exports jumped by 19.4 per cent to USD33.2 billion In the coming decades, Africa and Latin America could very well turn out to be key markets for Indian textiles FY07 FY08 FY09 FY10 FY11 FY12P Source: Ministry of Textiles, Aranca Research GROWTH DRIVERS 23
Technical textile industry - A new arena of growth The major service offerings of the technical textile industry include thermal protection and bloodabsorbing materials, seatbelts and adhesive tapes Technical Textile Industry (USD billion) 31.4 Technical textile industry market is expected to expand at a CAGR of 20 per cent during FY11-17 to reach a value of USD31.4 billion in FY17 from USD12.6 in FY11 Healthcare and infrastructure sector are the major drivers of the technical textile industry 12.6 The government has also supported the technical textile industry during the Union Budget of FY13 with an allotment of USD1 billion for the SMEs in the sector and an exemption in custom duty for raw materials used by the sector FY11 FY17E Source: Ministry of Textiles, Techtextil, Aranca Research Note: SME - Small and medium enterprises GROWTH DRIVERS 24
Policy support has been a key ingredient to growth Technology Upgradation Fund Scheme (TUFS) TUFS infused an investment of more than USD43 billion until June 2010; another USD3.3 billion has been allocated for the 12th Five Year Plan Investment was made to promote modernisation and upgradation of the textile industry by providing credit at reduced rates National Textile Policy - 2000 The policy was introduced for the overall development of textile industry Key areas of focus include technological upgrades, enhancement of productivity, product diversification and financing arrangements Foreign Direct Investment FDI of up to 100 per cent is allowed in the textile sector through the automatic route Scheme for Integrated Textiles Parks (SITP) SITP was set up in 2005 to provide necessary infrastructure to new textile units; under SITP, 40 projects (worth USD900 million) have been sanctioned The planned outlay for the textiles and apparel sector under the 11th Five Year Plan (20012-17) was USD2.9 billion GROWTH DRIVERS 25
Textile SEZs in India Name of SEZ and status State Area (hectares) Sector Details Mahindra City SEZ (Functional) Surat Apparel Park (Functional) Brandix India Apparel City (BIAC) (Functional) (KIADB) (Functional) Tamil Nadu 607.1 Apparel and fashion accessories Gujarat 56.0 Textiles Andhra Pradesh 404.7 Textiles Karnataka 16129.0 Several sectors Mahindra City is India s first integrated business city, divided into business and lifestyle zones. It is a cluster of three sector specific SEZs in Tamil Nadu, for apparels and fashion accessories; IT and hardware; and auto ancillary. The business zone provides plug-n-play working spaces. This zone comprises a SEZ (primarily for exporters) and domestic tariff area (DTA) for companies targeting domestic market Key industrial units include Safari Exports, Venus Garments, Benchmark Clothings, P. K. International, Tormal Prints, J.R. Fashion and Ganga Export BIAC is an integrated apparel supply chain city, managed by Brandix Lanka Ltd. It aims to be a end-to-end apparel solution provider Karnataka Industrial Areas Development Board (KIADB) is a wholly owned infrastructure agency of Government of Karnataka. Till date, KIADB has formed 132 industrial areas spread all over the state Source: Aranca Research Note: KIADB - Karnataka Industrial Areas Development Board, SEZ - Special Economic Zone GROWTH DRIVERS 26
Key textiles and apparel zones in India NORTH: Kashmir, Ludhiana and Panipat account for 80 per cent of woollens in India EAST: Bihar for jute, parts of Uttar Pradesh for woollen and Bengal for cotton and Jute industry WEST: Ahmedabad, Mumbai, Surat, Rajkot, Indore and Vadodara are the key places for cotton Industry Major Textile and Apparel zones SOUTH: Tirpur,Coimabtore and Madurai for hosiery. Bengaluru, Mysore and Chennai for Silk Source: Aranca Research, Note: All figures as of 2011-12 GROWTH DRIVERS 27
M&A activity up in the sector M&A activity in the sector has been picking up pace over the years; in fact, within January 2000 to June 2011, 482 M&A deals took place and the trend has continued in FY12 as well The six major M&A deals* are listed below Top 6 deals Acquirer Name M&A scenario - details Period: 1 January 2000 to 1 September 2012 Target Name Deal size (USD million) 1 Madura Garments Pantaloon Retail 333.3 2 Himachal Fibres Balmukhi textiles Pvt Ltd. NA 3 BR Machine Tools Pvt Ltd Bombay Rayon Fashions Ltd 721.1 4 Group of investors Provogue (India)Ltd 526.9 5 M C Spinners Pvt. Ltd Maxwell Industries 8.47 6 Grasim Industries Terrace Bay Pulp 360 Sources: M&A, Thompson ONE Banker, Grant Thornton, CMIE, Aranca Research Notes: * - The value for 290 deals were not disclosed GROWTH DRIVERS 28
Foreign investments flowing into the sector 100 per cent FDI is approved in the sector Trends of FDI in textile industry (USD million) Cumulative FDI in the sector during April 2000 to August 2012 stood at USD1.2 billion The textiles industry in India is experiencing a significant increase in collaboration between global majors and domestic companies 90 130 190 160 140 129 165 International apparel giants like Hugo Boss, Liz Claiborne, Diesel, Kanz and many others have already started operations in India 9 40 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Source: Ministry of Commerce and Industry, Aranca Research GROWTH DRIVERS 29
Contents Advantage India Market overview and trends Growth drivers Success stories: Raymond, Alok Industries Opportunities Useful information 30
Raymond: A long journey of success Retail JV with GAS in India - 2007 Iron Furnishings making and castings Acquisition of ColorPlus - 2002 FY12 USD758 million turnover Corporate wear Alloy steel Woollen Wheel, outerwear tyre and axle plant (railways) Apparels Fabrics Organic growth in textiles 1964 Vertical integration in multifibres Capacity of 40 MM - 1996 1980 Transformed into industrial conglomerate FY06 USD364 million turnover 670 outlets currently and plans to add another 500 outlets by 2015 1925 1958 1964 1968 1990 1996 2000 2002 2006 2007 2008 2010 2011 2012 SUCCESS STORIES: RAYMOND, ALOK INDUSTRIES 31
Alok Industries: Integrated textile solutions Polyester Yarn Plans to enter in technical textiles and special textiles market JV with NTC - 2008 Iron Home making Textile and castings Garments - Woven Alloy & Knitted steel Acquisition of QS to gain retail holding in the UK - 2007 2007 ISO Accreditations FY12 USD1.8 billion turnover Wheel, Embroidery tyre and axle plant (railways) Apparel Fabric Organic growth in textiles 1995* Financial and technical collaboration through JV FY04 USD208 million turnover Cotton and Blended Yarn 1986 1988 1990 1992 1993 1995 2003 2004 2006 2007 2008 2010 2011 2012 Notes: NTC - National Textile Corporation *In 1995 Alok industries had sets up financial and technical collaboration with Grabal, Albert Grabher GmbH & Co of Austria to make embroidered products through a joint venture company, Grabal Alok Impex Ltd SUCCESS STORIES: RAYMOND, ALOK INDUSTRIES 32
Contents Advantage India Market overview and trends Growth drivers Success stories: Raymond, Alok Industries Opportunities Useful information 33
Opportunities (1/2) Immense growth potential Private sector participation in silk production Proposed FDI in multi-brand retail The Indian textile industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand For the near term (2012), the sector is valued at USD110 billion by the Confederation of Indian Textile Industry (CITI) Estimates by the Alok Industries Ltd put the sector market value at USD220 billion by 2020 The Central Silk Board sets targets for raw silk production and encourages farmers and private players to grow silk To achieve these targets, alliances with the private sector, especially major agro-based industries in precocoon and post-cocoon segments has been encouraged For the textile industry, the proposed hike in FDI limit in multi-brand retail will bring in more players, thereby providing more options to consumers It will also bring in greater investments along the entire value chain - from agricultural production to final manufactured goods With global retail brands assured of a domestic foothold, outsourcing will also rise significantly OPPORTUNITIES 34
Opportunities (2/2) Retail sector offers growth potential Centers of Excellence (CoE) for research and technical training Foreign investments With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with several international players like Marks & Spencer, Guess and Next having entered Indian market The organised apparel segment is expected to grow at a compound annual growth rate (CAGR) of more than 13 per cent over a 10-year period The CoEs are aimed at creating testing and evaluation facilities as well as developing resource centres and training facilities Existing four CoEs, BTRA for Geotech, SITRA for Meditech, NITRA for Protech and SASMIRA for Agrotech, would be upgraded in terms of development of incubation centre and support for development of prototypes Fund support would be provided for appointing experts to develop these facilities The government is taking initiatives to attract foreign investments in the textile sector through promotional visits to countries such as Japan, Germany, Italy and France Notes: BTRA - The Bombay Textile Research Association; SITRA - South India Textile Research Association, NITRA - Northern India Textile Research Association, SASMIRA - Synthetic & Art Silk Mills Research Association OPPORTUNITIES 35
Contents Advantage India Market overview and trends Growth drivers Success stories: Raymond, Alok Industries Opportunities Useful information 36
Industry Associations The Textile Association (India) (TAI) 72-A, Santosh, Dr M B Raut Road, Shivaji Park, Dadar, Mumbai - 400 028 Telefax: 91-22-24461145 Website: www.textileassociationindia.org The South India Textile Research Association (SITRA) 13/37, Avanashi Road, Coimbatore - 641 014, Tamil Nadu Phone: 91-422-2574367, 6544188, 4215333 Fax: 91-422-2571896, 4215300 E-mail: sitraindia@dataone.in Website: www.sitra.org.in Northern India Textile Mills Association (NITMA) 121, Gagandeep Building (First Floor), 12, Rajendra Palace, New Delhi - 110 008 E-mail: nitma@vsnl.net, nitma@airtelmail.in Website: www.nitma.org USEFUL INFORMATION 37
Glossary (1/2) BTRA: Bombay Textile Research Association CAGR: Compound Annual Growth Rate FDI: Foreign Direct Investment FY: Indian financial year (April to March) GOI: Government of India INR: Indian Rupee NITRA: Northern India Textile Research Association NTC: National Textiles Corporation NTP: National Textile Policy SASMIRA: Synthetic & Art Silk Mills Research Association SEZ: Special Economic Zone SITP : Scheme for Integrated Textile Park USEFUL INFORMATION 38
Glossary (2/2) SITRA: South India Textile Research Association TUFS: Technology Upgradation Fund Scheme TMC: Technology Mission on Cotton USD: US Dollar Conversion rate used: USD1= INR48 Wherever applicable, numbers have been rounded off to the nearest whole number USEFUL INFORMATION 39
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