Delhi-NCR still re­ly­ing on value ad­di­tion for busi­ness

Apparel Online - - Lead Story -

• The re­gion is the most ex­pen­sive among the ap­parel man­u­fac­tur­ing hubs in In­dia.

• Em­broi­dery, prints, se­quin work and other value-added tech­niques are the spe­cial­i­sa­tion.

• The ex­port in­dus­try is now ex­plor­ing the do­mes­tic mar­ket to tide over the lean pe­riod.

• Ath­leisurewear is a new cat­e­gory that many com­pa­nies are look­ing at; most are test­ing the wa­ters in the do­mes­tic mar­ket.

• Ex­pan­sion plans, if any, are mostly in other states.

Among the old­est gar­ment­ing hubs in In­dia, the Delhi-NCR re­gion has been known for its strength in wom­enswear, mostly be­cause of the wide value ad­di­tion op­tions avail­able and the small run fac­to­ries that make fash­ion gar­ments. In­ter­na­tional buy­ers un­der­stand this edge and place or­ders ac­cord­ingly. How­ever, of late, many other hubs have also upped their game and are of­fer­ing tech­niques and quan­ti­ties that pre­vi­ously were only pos­si­ble in Del­hiNCR. The com­pe­ti­tion has in­creased sig­nif­i­cantly and fac­to­ries in the re­gion are search­ing for new ways to stay rel­e­vant. From go­ing deeper into the niche cat­e­gory to con­sol­i­dat­ing the op­er­a­tions and ex­plor­ing new mar­kets, the re­gion is in the process of reval­u­at­ing its growth av­enues and po­ten­tials.

Delhi-NCR, home to thou­sands of small ex­porters…

There is a seg­ment of ex­porters and in­dus­try watch­ers who be­lieve that noth­ing has changed in this re­gion… The big ex­porters are still grow­ing; the mid­dle ones are sta­ble and in­vest­ing in ways to stay rel­e­vant, while the small ones are strug­gling for sur­vival. But, there is also a seg­ment that be­lieves that this slow phase has ac­tu­ally been good for the in­dus­try as a whole and for Delhi-NCR, in par­tic­u­lar, as the re­gion is home to a large num­ber of small and medium com­pa­nies who are thriv­ing with im­porters/whole­salers and small bou­tique stores, which have with­ered the slow­down that has af­fected the big­ger brands and re­tail­ers, in a much bet­ter way, though prices have been hit.

These small- to medium-level play­ers are the back­bone of the gar­ment ex­port in­dus­try and a ma­jor­ity of them are pre­dom­i­nant in the Delhi-NCR re­gion. Many of these play­ers, par­tic­u­larly the smaller ones, have ei­ther closed shops or have reworked their strengths as global economies con­tinue to put great pres­sure on prices along with sev­eral pol­icy changes, in par­tic­u­lar GST, which has re­ally hit these small play­ers hard. “The big­ger ex­porters have the re­sources to fol­low-up on the GST pro­ce­dures and doc­u­men­ta­tion, as also the power to pres­surise the Min­istry for re­funds. If you check, none of the small ex­porters have got the re­fund yet, while the big­ger com­pa­nies have re­ceived their re­funds,” says Anil Varma, Pres­i­dent, Delhi Ex­porters As­so­ci­a­tion. He fur­ther points out that over­all GST re­fund is about 7-8% of to­tal turnover and from a small ex­porters’ (Rs. 1-5 crore) per­spec­tive, that is ac­tu­ally his mar­gin.

Value con­tin­ues to pull in the buyer…

It is no se­cret that this re­gion has the high­est wage and cost of pro­duc­tion, yet buy­ers still come search­ing for unique­ness. “The NCR is very im­por­tant to gar­ment trade and even to­day, when other cen­tres are com­ing up strongly, the re­gion ac­counts for nearly 40% of to­tal gar­ment ex­ports from this coun­try,” shares HKL Magu, Chair­man, AEPC and MD of Jyoti Ap­par­els, one of the stal­warts of the in­dus­try and the Delhi-NCR re­gion. He adds that the in­dus­try as a whole has seen some dif­fi­cult times, but sin­gling the NCR as hav­ing the big­gest im­pact is not fair. In fact, ex­porters in the re­gion are the most flex­i­ble in de­sign and quan­ti­ties, thanks again to the small- and medium-level play­ers that buy­ers find very creative to work with. Play­ers in the re­gion un­der­stand that just giv­ing value ad­di­tion is not enough and they are giv­ing buy­ers com­pelling rea­sons to come back sea­son af­ter sea­son. “Buy­ers come to us be­cause our prod­uct is more of niche than mass. If price is a con­cern, we can change fab­ric de­pend­ing on tar­get prices set by buy­ers. We start with at least US

$ 8/9 and it goes up to US $ 20 per piece. Ma­jorly our busi­ness comes from the prod­uct that varies from US $ 12 to 16. Buy­ers come see­ing the prod­uct. We have ev­ery­thing in our prod­uct right from em­broi­dery, print to other value ad­di­tion,” shares Ar­jun Sehgal, Di­rec­tor, Mariko Plus. To be even more niche, the com­pany has de­vel­oped skills re­lated to em­broi­dery

on del­i­cate fab­rics, such as chif­fon, rayon crepe and ge­or­gette which is ac­tu­ally a tough task. It hires highly skilled work­force for the same. Mariko has also de­vel­oped its own blocks for kalamkari print­ing which, it says, is its USP in the ex­port mar­ket.

New direc­tions in­clude fo­cus on do­mes­tic re­tail…

A trend that comes out strongly from talk­ing to play­ers in the re­gion is the in­creased in­ter­est in do­mes­tic mar­ket. Ear­lier the play­ers of NCR were fo­cused only on ex­ports, and do­mes­tic mar­ket was a to­tal no-no. But now with the global busi­ness get­ting not only very com­pet­i­tive in price, but also de­mand­ing on other is­sues like com­pli­ances and shorter lead time, many of the smaller fac­to­ries are opt­ing to man­u­fac­ture for small brands and re­tail­ers with 20-50 stores. “Why should I spend so much time and money on con­vinc­ing the buyer about my ca­pa­bil­i­ties when I can get lo­cal busi­ness that is bet­ter pay­ing and less of a headache? Also, now that we do not get duty draw­back in ex­ports and other ben­e­fits too have dwin­dled, there is no real ad­van­tage of work­ing in the in­ter­na­tional mar­ket,” rea­soned a small ex­porter from Gur­gaon with a turnover of less than Rs. 10 crore, on prom­ise of anonymity.

For big­ger ex­porters, the lo­cal mar­ket pre­sents an op­por­tu­nity to keep fac­tory run­ning in lean pe­riod. “We have got 2 units; 630 ma­chines in one unit and about 350 in other. These ma­chines run 100% from Oc­to­ber till March and rest of the year, they run at 50% ca­pac­ity. And that is the area we are try­ing to ad­dress. So, in the lean phase, we are do­ing busi­ness with do­mes­tic brands – Gini & Jony, Cover Story, Arvind Brands, Fu­ture Group, Be­ing Hu­man, to men­tion some. How­ever, pay­ment re­mains the big­gest chal­lenge in do­mes­tic. We, as ex­porters, are not used to han­dling such pay­ment is­sues,” says Karan Jain, Di­rec­tor, Pooja In­ter­na­tional.

Noth­ing new for ex­ports…, but ath­leisure from ex­port houses have caught at­ten­tion in do­mes­tic mar­ket

From a prod­uct cat­e­gory per­spec­tive, the re­gion has noth­ing new to of­fer to the in­ter­na­tional mar­ket, but some knitwear ex­porters from the re­gion are ex­per­i­ment­ing with ath­leisurewear though only for the do­mes­tic mar­ket. A few cases in point are Paragon Ap­par­els and Knitcraft Ap­par­els, both of which have in­tro­duced lo­cal brands for the seg­ment. While Aurro Sports­wear from the house of Knitcraft is be­ing sold through on­line plat­forms,

Al­cis prod­ucts from Paragon are avail­able in over 700 out­lets across the coun­try in­clud­ing all lead­ing large for­mat stores such as Life­style, Shop­pers Stop, Cen­tral, Globus,

Sports Sta­tion, etc. and on on­line re­tail web­sites and 5 ex­clu­sive brand stores at New Delhi, Mum­bai, Kochi, Jaipur and Guwahati.

The USP of both Paragon Ap­par­els and Knitcraft Ap­par­els is that they have in­ter­na­tional qual­ity but In­dian price. “The idea be­hind set­ting up Al­cis Sports was to cre­ate a home-grown af­ford­able In­dian ath­leisure brand which is at par with in­ter­na­tional brands in terms of qual­ity and also in sync with

In­dian sen­si­bil­i­ties,” says Roshan Baid, Man­ag­ing Di­rec­tor, Al­cis Sports. The com­pany has se­cured an in­vest­ment from Sin­ga­pore-based ven­ture cap­i­tal firm RB In­vest­ments, which has a strong port­fo­lio of star­tups in In­dia, in­clud­ing The Beer Cafe, Swiggy, Blue­stone.com, Fab ho­tels, Faa­sos and PropTiger to name a few. The com­pany has also ap­pointed cel­e­brated In­dian crick­eter Shikhar Dhawan as its brand am­bas­sador for the com­pany along with pop­u­lar tele­vi­sion per­son­al­i­ties Lau­ren Got­tlieb and Karan Tacker.

San­chit Khu­rana, Founder, Pace Ath­let­ica, and the owner of the Aurro brand, feels that it is not just about price, and states, “Not just cost, but also mar­ket­ing of prod­ucts in In­dia to pen­e­trate the mar­ket holds the same level of chal­lenge.” He fur­ther opines that the over­seas ac­tivewear brands in In­dia are get­ting ben­e­fits de­spite hav­ing high prices be­cause they are not see­ing any com­pe­ti­tion from the do­mes­tic brands. He also men­tions that the man­u­fac­tur­ers are de­ter­mined to re­duce their cost of op­er­a­tions to be­come cost-com­pet­i­tive in the In­dian mar­ket. They are re­duc­ing the mar­gin of prod­ucts to make a sta­ble place for their prod­ucts. Apart from this, they are in­vest­ing in tech­nol­ogy to in­crease pro­duc­tiv­ity and re­duce hu­man in­ter­ven­tion.

Each hub within the re­gion has some­thing to of­fer…

His­tor­i­cally, the NCR re­gion was de­vel­oped as a gar­ment man­u­fac­tur­ing hub due to the need to shift fac­to­ries out of the main city, for var­i­ous rea­sons span­ning high cost of man­u­fac­tur­ing to pol­lu­tion con­cerns. Ini­tially, Gur­gaon was the pre­ferred des­ti­na­tion, with most of the big com­pa­nies like Ori­ent Craft, Richa Global, Jyoti Ap­par­els, and Mode­lama mov­ing in that di­rec­tion. Labour avail­abil­ity was good due to a strong im­mi­grant worker cul­ture and slowly the clus­ter de­vel­oped strong link­ages in ser­vice and prod­ucts that made the hub a work­able man­u­fac­tur­ing des­ti­na­tion. How­ever sit­u­a­tion is chang­ing and even the ad­di­tion of Mane­sar re­gion has not helped. “Udyog Vi­har is be­com­ing very un­vi­able and dif­fi­cult to work in now, more so as other in­dus­tries have also come up very strongly in and around the area, which are at­tract­ing the work­ers more, and also putting im­mense pres­sure on the in­fra­struc­ture,” says Aditya Mathur, Di­rec­tor, Akriti Cre­ations. The com­pany has re­cently set-up a new fac­tory in Noida, mainly to be more com­pet­i­tive.

Among the sub-hubs within the re­gion, while Delhi is the most ex­pen­sive, with wages for skilled work­ers go­ing up to an aver­age of

Rs. 15,000 a month, the same in

Noida would be around Rs. 8,000, and ap­prox­i­mately Rs. 11,000 in Gur­gaon and Farid­abad (both fall­ing within Haryana ju­ris­dic­tion). This wage dif­fer­ence is one of the ma­jor rea­sons for ex­porters to in­vest in Noida. How­ever, not every­one is happy with the ex­pe­ri­ence. No doubt, Noida is the best place not only in terms of wages, but also labour avail­abil­ity.

The only con­cern here is the se­cu­rity is­sue which is very high and many man­u­fac­tur­ers are ap­pre­hen­sive of labour un­rest, mostly brought about by the anti-so­cial el­e­ments in Noida. This is also true of Ghazi­abad again, tech­ni­cally within UP, which has not grown as a ma­jor hub pri­mar­ily due to the im­age of the city, as be­ing ‘crime-prone’.

The sit­u­a­tion is of grave con­cern and many ex­porters and as­so­ci­a­tion have been try­ing to find a so­lu­tion. “We have been con­stantly writ­ing to the

au­thor­i­ties on the ram­pant cor­rup­tion and law and or­der sit­u­a­tion in Noida and are still to get re­lief that can be termed as worth­while,” says Shiv Bhar­gava, Pres­i­dent, Ex­porters Griev­ances As­so­ci­a­tion, Noida. Bhar­gava is among the pi­o­neers of the In­dian gar­ment in­dus­try and was also one of the first com­pa­nies to set-up a unit in Noida. In fact, the law and or­der sit­u­a­tion has in the past caused many fac­to­ries to spend good amounts on se­cu­rity agen­cies and many even claim that the po­lice de­part­ment is not very sup­port­ive in case a theft or any other in­ci­dent is re­ported.

Some com­pa­nies have also pulled out of Noida due to these is­sues, but the city is still an at­trac­tion. “Ear­lier the fac­to­ries moved from Okhla to Gur­gaon, but now most of the new fac­to­ries are com­ing up in Noida as the Gov­ern­ment in

UP is very proac­tive in sup­port­ing the gar­ment in­dus­try,” says Lalit Thukral, MD, Ma­ha­rana of In­dia.

As also the Pres­i­dent of Noida

Ap­parel Ex­port Clus­ter, Thukral is work­ing to make Noida the fu­ture gar­ment man­u­fac­tur­ing des­ti­na­tion, and ear­lier this year, the Ya­muna Ex­press­way In­dus­trial De­vel­op­ment Au­thor­ity ap­proved a 200-acre Tex­tile Park, wherein 100 tex­tile busi­ness­men will be al­lot­ted space. The park is ex­pected to boost in­dus­try growth by cre­at­ing nearly half a mil­lion em­ploy­ment, 90% of whom will be women. It will be ready in a span of three years.

For ex­porters in the re­gion, the choice of where to set up a fac­tory is not an easy one and some­times the na­ture of NCR it­self can be a hin­drance.

“For com­pa­nies that have fac­to­ries in Noida, Delhi and Gur­gaon, it can be very dif­fi­cult be­cause the states are dif­fer­ent and many rules and reg­u­la­tions, be­sides the min­i­mum wages dif­fer, so bal­anc­ing the man­age­ment can be very tough,” says Anil. In this con­text, Magu shares that Jyoti Ap­par­els too found it dif­fi­cult to run fac­to­ries in both Gur­gaon and Noida and has since re­lo­cated fully to Gur­gaon for man­age­ment con­ve­nience.

Wages: In­creased in Noida; Delhi’s is­sue still pend­ing

Con­tin­u­ously in­creas­ing min­i­mum wages in Delhi and sub­se­quently Gur­gaon was one of the ma­jor rea­sons for shift­ing to Noida, but that also is now go­ing to see change. Though the pro­posed wage hike in Delhi is still in court and var­i­ous stake­hold­ers have dif­fer­ent opin­ion and re­ac­tions, the min­i­mum wage is now go­ing to in­crease in Noida. Ac­cord­ing to a new no­ti­fi­ca­tion of Ut­tar Pradesh State Gov­ern­ment, the in­crease in wages will be ap­pli­ca­ble from 1st Oc­to­ber 2018. Cur­rently the min­i­mum wage for un­skilled, semi-skilled and skilled is Rs.7,674.45, Rs. 8,443 and Rs. 9,457.49, re­spec­tively. The wage is to be in­creased by Rs. 61, Rs. 69 and Rs. 76, re­spec­tively. These rates will be valid up to 31st March 2019.

Now with this in­creased wage rates in Ut­tar Pradesh, the dif­fer­ence be­tween the two main hubs of NCR – Noida and Gur­gaon – has nar­rowed down and is just Rs. 871, as the min­i­mum wage for a skilled worker is Rs. 10,328.83 in Gur­gaon. In Delhi, the min­i­mum wages of un­skilled work­ers were re­vised in March 2017 from Rs. 9,724 to Rs. 13,350 per month, for semi­skilled work­ers from Rs. 10,764 to

Rs. 14,698 and for skilled labour­ers from Rs. 11,830 to Rs. 16,182. In April 2018, there was again a lit­tle hike in these rates. As the Delhi High Court put a stay on the State Gov­ern­ment’s no­ti­fi­ca­tion, the is­sue is now in Supreme Court.

En­cour­ag­ingly, the com­pa­nies in Noida seem to be pre­pared for the rise. “Def­i­nitely in­creased wage is al­ways a bur­den but there is no op­tion. As we knew well in ad­vance that min­i­mum wage has to grow from this month, ten­ta­tively, one could plan in ad­vance ac­cord­ingly,” says Ra­jeev Bansal, MD, Ce­les­tial Knits & Fabs, Noida and Di­vi­sional Chair­man, In­dian In­dus­tries As­so­ci­a­tion, Meerut. The full im­pact of the wage raise will be known in a few months, but as of now, the in­dus­try does not seem to be too wor­ried, which is a pos­i­tive sign.

Ex­pan­sions now in other states…

While ex­porters in other hubs have read­ily re­lo­cated to more lu­cra­tive ar­eas when cost of pro­duc­tion in­creases, like Mum­bai fac­to­ries mov­ing to Ban­ga­lore and Chen­nai fac­to­ries go­ing to Tirupur, Delhi fac­to­ries have mostly shifted to the NCR hubs. Only Shahi from Farid­abad has re­ally shown courage to take fac­to­ries to the south in a big way. There are some other ex­am­ples though, but even Shahi be­ing In­dia’s lead­ing ex­porter and hav­ing set a suc­cess­ful ex­am­ple, has not mo­ti­vated the in­dus­try at large to move out of the com­fort zone… But things could change now! With cost of pro­duc­tion in the Delhi-NCR be­com­ing un­com­pet­i­tive, es­pe­cially if a com­pany wants to ex­pand, the new emerg­ing states of Odisha, Jhark­hand and even Te­lan­gana are the pre­ferred lo­ca­tions. Com­pa­nies like Ori­ent Craft, Ma­trix, Pearl Global, Mode­lama, Richa Global, Meenu Cre­ation, Akriti Ap­par­els have started ex­plor­ing the op­por­tu­ni­ties in these emerg­ing man­u­fac­tur­ing bases. But then there are oth­ers who feel that too much time is spent in cre­at­ing the right eco­sphere. “We are plan­ning to set up a train­ing cen­tre in Ranchi. We did an in­ter­nal sur­vey that 50% peo­ple in our fac­tory be­long to Bihar and Jhark­hand. Be­cause if you keep run­ning to low-cost area, where will they go af­ter 5 years? Also, set­ting up a fac­tory in a new area is time-con­sum­ing. By the time it gets ap­proved and the plant starts func­tion­ing, we might come to know that tech­nol­ogy has al­ready up­graded. So, these col­lec­tive is­sues are stop­ping us from mov­ing out of Delhi-NCR,” says Karan Jain.

En­thu­si­asm at buy­ing houses/li­ai­son of­fices in Delhi for in­creased busi­ness…

Some of the buy­ing houses across Del­hiNCR are do­ing well; few are be­com­ing more or­gan­ised and con­tin­u­ously adding new­ness into their prod­ucts and ser­vices. To men­tion few: New Times Group, Gur­gaon of­fice re­cently was in process to hire new staff as it is grow­ing well. Glo­ria Jeans’ In­dia of­fice also con­firmed an in­crease in its sourc­ing. Patan­jali re­cently opened its sourc­ing of­fice in Noida. Apart from these well-known and es­tab­lished buy­ing of­fices, few new buy­ing houses are also emerg­ing in the re­gion, like Avanni Ap­parel Sourc­ing of Delhi, which is a new name that’s hav­ing a ma­jor fo­cus on do­mes­tic and also hav­ing clients in over­seas mar­kets.

Creat­net Ser­vices, an­other Noid­abased buy­ing house, in­stalled ERP and is geared up for con­sis­tent growth of 25%. The buy­ing house re­cently also as­so­ci­ated with young women clus­ters of Ut­tarak­hand to reimag­ine and con­tem­po­rise their tech­niques into beau­ti­ful and mod­ern boho-luxe sil­hou­ettes.

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