'Do or Die... The New Mantra for Growth in Garment industry
THE NEW MANTRA FOR GROWTH IN GARMENT INDUSTRY
The dichotomy of views on garment exports is a study on how different companies working in the same industry can perceive the same situation as positive and negative! While some companies are talking of all the reasons that will spell doom for the industry, there are others who have not only come to terms with the situation, but are actually moving ahead with investments and expansion plans. It is obvious that the industry has evened out, and only those who are ready to change will remain and prosper. Opportunities are floating, but grabbing them requires a strong mindset and a competitive manufacturing set-up.
Enough has been said on the role, or rather on the absence of a role, by the Government, particularly the Textile Ministry, about supporting the industry in its time of need. The good thing that has come out of all this is that the industry has finally come to terms with the fact that they have to pave their own road and just waiting for things to happen is not a solution. Also, the fact that both the Minister and the senior officials who are responsible to interact with the industry and provide necessary support, do not understand the nature of the industry, is obvious. How can the Government support an industry that is neither a priority industry nor manned by people who understand and appreciate the importance of the industry, as a major employment generator?
One exporter, who did not wish to be named, informed Apparel Online that when drawbacks were being withdrawn, many exporters had requested that the move should be postponed for the next buying season as orders had already been placed based on calculation of the expected drawbacks, and pulling the plug at this time could be ‘suicidal’. But the Ministry could not apprehend why it should make a difference… In fact, if sources are to be believed, the Minister suggested that they should discuss with their buyers and renegotiate!
This only goes to show that the Ministry does not even understand how the industry works… Will a buyer ever renegotiate because our duty drawbacks have been withdrawn; even this very thought is perplexing! When the Tirupur Exporters Association suggested asking for a 10% price hike from its buyers to beat the price pressures, the industry was taken aback. Most exporters felt that any such move would actually be counterproductive and buyers would naturally move to more competitive manufacturing destinations. “The suggestion is very far-fetched and unfair… How can we ask buyers to pay for our inefficiencies?” reasoned Vinit Sethi, Director,
Orient Fashions, Gurgaon adding that companies now have to make investments at the right place if they want to stay in business.
While the exporters found the suggestion completely bizarre, even buyers were surprised.
In a note to Apparel Online
Senior Executive Sourcing & Merchandising, Benetton Asia Pacific Limited, Noida said, “TEA’s decision for 10% hike on Garment FOB will certainly lead to losing upcoming business opportunities for Tirupur. India’s textile market has already suffered a lot since a year now (after the GST implications). The current situation is all about gearing up and getting the business back to India. In the present scenario, approaching for price hike will be a hair-raising situation for Tirupur’s economy and of course for India too.” He went on to add, “Making new properties is always appreciable; however, maintaining the old one is even more important. Price hike will enforce Buyers and Concerned Buying Offices (Sourcing Team) to look for substitutes and business will move to other regions like Ludhiana, Bangalore and NCR or even this will be a big opportunity for Bangladesh and China too.”
Animesh agreed with Vinit that rather than asking for price hike, we should focus on increasing the efficiencies. “Approaching for price hike will lead to loss of business; so targeting to increase efficiency is the only solution to grow and sustain in market,” he opined, suggesting that the industry should currently focus on grabbing the business as much as they can (at least for 2 more seasons) till Spring/ Summer 2020 and then they can go for 2-3% price hike on FOB.
What is heartening is that the younger generation of exporters understand this strategy and are now focused on change. “There is no point of talking about change unless we set it rolling; just waiting for change to happen, is a strategy that losers use,” said emphatically Pranab Mahajan, Director, Mahajan Overseas, Panipat. His views are shared by many of the younger generation entrepreneurs who have grown up seeing the industry struggle. “Investment that can make us more efficient and also increase our value addition potentialities is important because even countries like Bangladesh are catching up on products that we always thought were our forte,” reasoned Aditya Nath, Director, General Commerce Ltd. from the house of Nath Brothers. Adding a fresh dimension to the discussion, Animesh Saxena, MD, Neetee Clothing, Gurgaon suggested
that India has to expand its product basket. “We are confined to Spring/ Summer garments when 65% of the world is focused on Fall/Winter. Government should do something for the lack of technology and raw materials,” he said. The opportunities that are presenting themselves because of China taking a step backward in garment manufacturing are huge, but the full potential can only be realised if India increases its offerings. However, many believe that it is not only about the limited product basket, but also the capacities. “How can we even think of grabbing orders that are being re-routed from China; we don’t have the capacities. It is a catch-22 situation, if we don’t have capacity, we cannot explore opportunities and we do not want to increase capacity because of the uncertainties,” rued Vikram jit Singh, Director, Fiori Creations, Faridabad.
Exporters adding new buyers, capacities
Not everyone is waiting…; many have started to invest believing that the future is bright. Some of the companies are expanding not only their infrastructure but even adding new top brands/buyers with them. To grab more bulk orders is one of the main reasons for their expansion. Among such proactive companies, Texport Syndicate, Mumbai has added 2,000 machines in last three months and now it has 5,500 machines. The expansion was done in its unit at Kodur (Andhra Pradesh). Earlier the company was working with 4 to 5 limited buyers like Walmart, Inditex, C&A and Ralph Lauren but recently it also started working with M&S, GAP and Monoprix. Abhay, GM, Washing Division of the company shared, “In current scenario, to survive in business it is all about volume orders; it is not time or question of making profit. For profit, we have to wait for future as slowly policy changes seem to be in garment manufacturers’ favour.”
Abhay further added that in denim structure, random bleach and full pigment dyeing are more in demand now in the overseas market. More casual look and different attitude of the garment is the main reason for this trend. In womenswear, lycra is gaining momentum now in overseas as well as in the domestic market. Producing 25 lakh metres of fabric per month, Goodwill Fabrics, Bangalore is also producing 3 lakh pieces per month (totally woven, 70% bottom and 30% tops) for garment export. Recently company expanded into denimwear which is a new product category for the company.
For this, a new unit of 100 stitching machines was recently set up at Gwalior (MP) in the mill premises of the company. This gives an edge of having the entire process under one roof. Moving further, the company is setting up a laundry unit in the same premises also. Suresh Kumar, VP – Marketing of the company informed, “Garments have more growth opportunities compared to fabric as fabric business seems to be saturated. For us, there is no expansion on the fabric side but the garment is rapidly expanding.” Through jeans, the company is targeting export as well as domestic market. Domestic is a new segment for the company’s garment division. Apart from this new unit, the company has 4 garment factories and is exporting garments all over the globe. “We are expecting at least 20 per cent growth. With the strength of fabric, decades’ of experience, continuous improvement and good control over cost from the beginning, we are able to deliver quality products at the right price…, so we are expanding and growing,” added Suresh. Out of its total fabric capacity, 10 per cent is being used for in-house garment production.
SME adding new product categories
Market forces are also motivating medium-level exporters to add new product categories. To mention
Amber Home, Mumbai, a home furnishing player which two years ago, entered into shirts manufacturing for export, and is now going to start a unit of the knitted garment. This new unit in Solapur (Maharashtra) will have an initial capacity of 3,000 pieces daily and Polo tees will be the core product. Nimish Shah, Partner of the company told, “Our knitted products are particularly for African countries. We got this buyer through reference and it is our first ever deal with African buyer, but we are hopeful to get regular orders from there.” This project is expected to start production within one month. It has the capacity of home furnishing products (mainly kitchen linen 5,000 pieces per day) and shirts and workwear (2,000 pieces per day). The company works with some top retailers also.
Jobworkers adding capacities too
Though the majority of exporters are criticising some of the decisions taken by the Government, but some of the policies are motivating garment manufacturers to expand. Based at Haveri (Karnataka), Prabhanjan Industries is currently into shirt manufacturing with its small unit. Mainly doing jobwork for companies like Prateek Apparels, Bangalore,
Prabhanjan Industries is now coming up with a new factory of jeans manufacturing. Pavan Kumar of the company shared, “We have enough experience and some resources also. Normally banks don’t support projects which are into remote areas, but we are getting support. So we decided to go for a factory which will have 300 to 500 machines.”
Investing nearly Rs. 3.5 crore, Pavan further added that choosing jeans as a product category is more viable due to good demand. The new facility will also work as a job working unit. The company is also exploring the option to invest in CAD as currently it does cutting manually.
Fresh start-ups also geared up
Recently Team Apparel Online met two professionals who have built their own start-ups in Bangalore having enough experience in the garment industry. Now they are expanding as their initial experience of entrepreneurship proved good.
One of them Harsha, who has worked as a merchandiser in top apparel companies like Arvind Ltd., Madura Fashion & Lifestyle, just four months back started his own organisation Seam Works. Having 200 machines in Bangalore, his firm offers formal shirts and is expanding further. “So far our operations are going smoothly and now we are moving forward with a new factory. My idea was to come up with multiple categories, but I started with shirts as there is huge scope in this category,” shared Harsha. His upcoming new unit of 1,000 machines (in phase manner) will be in Andhra Pradesh and will be a big support to target premium brands in domestic and overseas markets.
What do the numbers say?
Of all the associations, the Confederation of Indian Textile Industries (CITI) under the leadership of Sanjay Jain, Chairman, is the most proactive in sharing recent trends and commenting on policies and their impact. Just recently Sanjay exuded confidence that the worst is over for the Textile & Clothing Industry and it is finally on the verge of a turnaround; and he put the credit for this U-turn on the shoulders of the Government! As per the quick estimates data by DGCI&S, the exports of textiles and apparel has increased by 11% in July 2018 over the same period last year. According to Sanjay this has been possible with continuous support from the Government with a slew of measures on all fronts. Sanjay also stated that overall growth in exports during April-July 2018 has been
3%, vis-à-vis same period last year. Further, the MMF segment, which is expected to be the growth driver of the industry in the coming years, has seen increase in production. Growth has been observed in production of man-made fibre, spun yarn and fabric during April to June 2018.
Another positive is that as per RBI Financial Stability Report – June
2018, the stressed advance ratio of textile sub-sector has also improved from 23.7% in September 2017 to 22.3% in March 2018, indicating signs of recovery. It has been pointed out that the maintenance of a competitive exchange rate is an essential prerequisite for labour-intensive manufacturing in mature industries like textiles. According to Sanjay, the currency management by the Government has benefited the exports and is discouraging imports. Significantly, this year, the imports’ growth has come down. While the import of textile and clothing has increased from US $ 1.78 billion in April-June 2017 to US $ 1.87 billion in the same period this year, an increase of 5%; it is significantly lower than the growth of 16% last year. The measures taken by the Government to increase the import duty on various textile and apparel items will help in further reducing the imports in coming months, feels Sanjay. He added that continuous support from the Government is expected to put the industry back on track and it is anticipated that the textile and apparel exports should grow by 7% while imports will stay flat in this 2018-19 season.