Textile industry of india case & analysis of siyaram silk mill ltd

Textile industry of India case &analysis of siyaram silk mill ltd

KANDIVALI EDUCATION SOCIETY’S

B.K. SHROFF COLLEGE OF ARTS

AND

M.H. SHROFF COLLEGE OF COMMERCE

Bhulabhai Desai Road, Kandivali (West), Mumbai – 400067

CERTIFICATE

This is to certify that SURENDRA .C. SAROJ of

TY.BMS has successfully completed a project on TO STUDY

“ TEXTILE INDUSTRY OF INDIA - CASE & ANALYSIS

OF SIYARAM SILK MILL LTD. ” for the semester under the

guidance of the PROF. UMADEVI KOKKU during the

Academic year 2011-2012.

Project Guide

Co-ordinator Principal

Internal Examiner External Examiner

College Seal

Surendra .c. saroj 1




AND



DECLARATION

I SURENDRA .C. SAROJ from KES Shroff College Of

Arts & Commerce and a student of T.Y. BMS here submit my

project on TO STUDY “ TEXTILE INDUSTRY OF INDIA -

CASE & ANALYSIS OF SIYARAM SILK MILL LTD. ” .

I also declare that the project which has been in the

partial fulfillment of the requirement of the Mumbai University is the

result of my efforts.





AND



PROJECT REPORT ON

“textile industry of india case analysis of

siyaram silk mill ltd.

SUBMITTED BY

SURENDRA.C.SAROJ

TY.BMS

SEMESTER V

SUBMITTED TO

UNIVERSITY OF MUMBAI

PROJECT GUIDE

PROF. UMADEVI KOKKU

ACADEMIC YEAR

2011 - 2012



ACKNOWLEDGEMENT

The joy of ingenuity!!! This is doubtlessly what this

project is about. Before getting to brass tacks of things. I would like to

add a heartfelt word for the people who have helped me in bringing out

the creativeness of this project.

To commence with things I would like to take this

opportunity to gratefully and humbly thank Prof.Umadevi kokku , who

has giving me an opportunity to undertake this project in textile industry

of India.

I also thank Mr. Sanjay patil to give knowledge on this topic

My parents need special mentions here for their constant

support and love in my life. I also thank my friends and well wishers,

who have provided their whole hearted support to me in this exercise. I

believe that this Endeavour has prepared me for taking up new

challenging opportunities in future.



Table Of Contents

Chapter No. Topic Pg. No.

1 INTRODUCTION 6-11

2 Indian Textile Industry 12-22

3 Global Scenario 23-27

4 GLOBAL TRADE VOLUME AND TRENDS 28-32

5 INDIA’S COMPETITIVENESS 33-37

6 INDIAN SUPPLY DEMAND SCENARIO 38-39

7 FASHION APPAREL INDUSTRY OVERVIEW 39-47

8 MAJOR PLAYERS 48-66

9 INDUSTRY AVERAGE 67-87

10 FUTURE SCENARIO 88-97

11 CHALLENGES FACED BY INDUSTRY 98-99

12 SIYARAM’S SILK MILL LTD 100-107

13 SWOT Analysis of textile industry 108-112

14 FUTURE PROSPECTS 113

15 CONCLUSION 114-115

16 Bibliography 116



CHAPTER – 1

INTRODUCTION

HISTORY OF TEXTILE



No one knows when exactly the spinning and weaving of textile began. It

has been said that people knew how to weave even 27000 years ago. This

was even before humans were able to domesticate animals. The oldest

actual fragment of cloth found was in southern Turkey.

People used fibers found in nature and hand processes to make fibers into

cloth. Even though high technology was not available, skilled weavers

created a wide variety of fabrics. Dyeing of fabrics was done to satisfy

the universal human need for beauty. Within time, more complex social

and political organization of people evolved. With the growth of cities

and nations, improvements in technology came into place and there was a

substantial development in the international trade, both of which involved

textiles.

Chinese textile was considered to be the most significant in international

trade. Historians have claimed that silk from China has reached ancient

Greece and Rome along a trade route called the Silk Road in the latter

part of the second century B.C. and Egypt in 1000 B.C. The Romans also

imported cotton from nearby Egypt and from India. Archeologists have

found facilities for dyeing and finishing cotton fabrics in settlements

throughout the Roman world. During the middle ages, the production and

trading of the plant called ‘woad’, an important source of dye, was a

highly developed industry. During the fifteenth century, Trade Fairs in

southern France provided a place for the active exchange of wools from

England and silks from the Middle East. The economic activities

surrounding these events gave rise to the first international banking

arrangements. Even the discovery of America was a result of the desire of

Europeans to find a faster route not only to the spices but also to the

textiles of the Orient. Textile trade quickly took root in America, as

colonists sold native dyes such as indigo and cochineal to Europe and



bought cottons from India. Although advances were being made in the

technology of textile production, the manufacture of cloth in Western

Europe in 1700 was still essentially a hand process. Yarns were spun on a

spinning wheel and fabrics were woven by hand-operated looms.

A major reorganization of manufacturing of a variety of goods occurred

during the latter half of the 1700s in Western Europe. These changes,

known as the ‘Industrial Revolution’, altered not only technology, but

also social, economic, and cultural life. The production of textiles was the

first area to undergo industrialization during the seventeenth and

eighteenth centuries as the result of an economic crisis. Good quality

textile products, produced inexpensively in India and the Far East, were

gradually replacing European goods in the international market. In

Britain, it became imperative that some means be found to increase

domestic production, to lower costs, and to improve the quality of

textiles. The solution was found in the substitution of machine or

nonhuman power for hand processes and human power.

Many important inventions, most importantly spinning machines,

automatic looms, and the cotton gin, improved the output and quality of

fabrics. These inventions provided the technological base for the

industrialization of the textile industry. Each invention improved one step

of the process. For example, an improvement that increased the speed of

spinning meant that looms were needed that consumed yarn more rapidly.

More rapid yarn production required greater quantities of fiber. The

growth of the textile industry was further hastened by the use of machines

that were driven first by waterpower, then by steam, and finally by

electricity. The textile industry was fully mechanized by the early part of

the nineteenth century. The next major developments in the field were to

take place in the chemist’s laboratory. Experimentation with the synthesis

of dyestuffs in the laboratory rather than from natural plant materials led



to the development and use of synthetic dyes in the latter half of the

nineteenth century. Other experiments proved that certain natural

materials could be dissolved in chemical solvents and re-formed into

fibrous form. By 1910, the first plant for manufacturing rayon had been

established in the United States.

The manufacture of rayon marked the beginning of the manufactured

textile fibers industry. Since that time, enormous advances have been

made in the technology for every field in the textile industry. Today, the

textile industry utilizes a complex technology based on scientific

processes and vast economic organizations.

With the application of advanced technology to the textile field, textile

use has expanded from the traditional areas of clothing and home

furnishings into the fields of construction, medicine, aerospace, sporting

goods, and industry. These applications have been made possible by the

ability of textile scientists to utilize textile fibers, yarns, and fabrics for

specific uses. At the same time that textile technology is making strides in

new directions, the fabrics that consumers buy for clothing and household

use also benefit from the development of new fibers, new methods of

yarn and fabric construction, and new finishes for existing fibers and

fabrics.

Today, a huge international industrial complex encompasses the

production of fiber, spinning of yarns, fabrication of cloth, dyeing,

finishing, printing, and manufacture of goods for purchase. Consumers

purchase many different products made of textiles. The story of the

journey that these products make as they progress from fiber to yarn to

fabric to finished product is not just the story of spinning yarns, weaving

or knitting fabric, or constructing the end product. It is also the story of a



complex network of interrelated industries.

HISTORY OF INDIAN TEXTILE INDUSTRY

The history of textiles in India dates back to nearly five thousand years to

the days of the Harappan civilization. Evidences that India has been

trading silk in return for spices from the 2nd century have been found.

This shows that textiles are an industry which has existed for centuries in

our country. Recently there has been a sizeable increase in the demand

for Indian textiles in the market. India is fast emerging as a competitor to

China

In textile exports. The Government of India has also realized this fact and

lowered the customs duty and reduced the restrictions on the imported

textile machinery. The intention of the government’s move is to enable

the Indian producers to compete in the world market with high quality

products. The results of the government’s move can be visible as Indian

companies like Arvind Mills, Mafatlal, Grasim; Reliance Industries have

become prominent players in the world. The Indian textile industry is the

second largest in the world-second only to China. The other competing

countries are Korea and Taiwan. Indian Textile constitutes 35% of the

total exports of our country.

The history of apparel and textiles in India dates back to the use of

mordant dyes and printing blocks around 3000 BC. The foundations of

the India's textile trade with other countries started as early as the second

century BC. A hoard of block printed and resist-dyed fabrics, primarily of

Gujarati origin, discovered in the tombs of Fostat, Egypt, are the proof of

large scale Indian export of cotton textiles to the Egypt in medieval

periods.

During the 13th century, Indian silk was used as barter for spices from the

western countries. Towards the end of the 17th century, the British East



India Company had begun exports of Indian silks and several other cotton

fabrics to other economies. These included the famous fine Muslin cloth

of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was

widely practiced between India, Java, China and the Philippines, long

before the arrival of the Europeans.

India Textile Industry is one of the largest textile industries in the world.

Today, Indian economy is largely dependent on textile manufacturing and

exports. India earns around 27% of the foreign exchange from exports of

textiles. Further, India Textile Industry contributes about 14% of the total

industrial production of India. Furthermore, its contribution to the gross

domestic product of India is around 3% and the numbers are steadily

increasing. India Textile Industry involves around 35 million workers

directly and it accounts for 21% of the total employment generated in the

economy.

Strengths of Indian Textile Industry are as follows -

Huge textile production capacity

Efficient multi-fiber raw material manufacturing capacity

Large pool of skilled and cheap work force

Entrepreneurial skills

Huge export potential

Large domestic market

Very low import content

Flexible textile manufacturing systems



Weaknesses of Indian Textile Industry are as follows -

Increased global competition in the post 2005 trade regime under

WTO

Imports of cheap textiles from other Asian neighbors

Use of outdated manufacturing technology

Poor supply chain management

Huge unorganized and decentralized sector

High production cost with respect to other Asian competitor

INDIAN TEXTILE INDUSTRY

INTRODUCTION

The textile industry is the largest industry of modern India. It accounts

for over 20 percent of industrial production and is closely linked with the

agricultural and rural economy. It is the single largest employer in the

industrial sector employing about 38 million people. If the employment

in allied sectors likes ginning, agriculture, pressing, cotton trade, jute, etc.

are added then the total employment is estimated at 93 million. The net

foreign exchange earnings in this sector are one of the highest and,

together with carpet and handicrafts, account for over 37 percent of total

export earnings at over US $ 10 billion. Textiles, alone, account for

about 25 percent of India’s total forex earnings.

India’s textile industry since its beginning continues to be predominantly

cotton based with about 65 percent of fabric consumption in the country

being accounted for by cotton. The industry is highly localized in

Ahmadabad and Bombay in the western part of the country though other

centers exist including Kanpur, Calcutta, Indore, Coimbatore, and

Sholapur.



The structure of the textile industry is extremely complex with the

modern, sophisticated and highly mechanized mill sector on the one hand

and the hand spinning and hand weaving (handloom) sector on the other.

Between the two falls the small-scale power loom sector. The latter two

are together known as the decentralized sector. Over the years, the

government has granted a whole range of concessions to the non-mill

sector as a result of which the share of the decentralized sector has

increased considerably in the total production. Of the two sub-sectors of

the decentralized sector, the power loom sector has shown the faster rate

of growth. In the production of fabrics the decentralized sector accounts

for roughly 94 percent while the mill sector has a share of only 6 percent.

Being an agro-based industry the production of raw material varies from

year to year depending on weather and rainfall conditions. Accordingly

the price fluctuates too.

The Ministry of Textiles under the Government of India has taken some

significant steps to arrest these problems. It has framed "The National

Textile Policy 2000" to address the aforesaid issues. This policy aims at

negating these problems and increasing the foreign exchange earnings to

the tune of US$ 50 billion by the year 2010. It includes rational road-

maps for the development and promotion of all the sectors involved

directly or indirectly with the textile industry of India. Further, the policy

also envisages to bring the unorganized decentralized textile sector

(which accounts for 76% of textile production) at par with the organized

mill sector. Furthermore, the policy also aims at introducing odern and

efficient manufacturing machineries and techniques in the Indian textile

sector

INDUSTRY SUPPLY CHAIN



The apparel industry supply chain can be broadly categorized into six

major components - raw materials, textile plants, apparel plants, export

chains, retail stores and customers.

Diagram No: 4.1 Supply Chain of the Textile Industry

CURRENT INDUSTRY SCENARIO:

Close to 14% of the industrial output and 30% of the export market share

is contributed directly by the Indian textile industry. Indian textile

industry is also the largest industry when it comes to employment that

generates jobs not just within but also in various support industries like

agriculture. As per a recent survey the textile industry is going to

contribute 12 million new jobs in India by 2010 itself.

Indian textile industry is as old as the word textile itself. This industry

holds a significant position in India by providing the most basic need of

Indians. Starting from the procurement of raw materials to the final

production stage of the actual textile, the Indian textile industry works on

an independent basis.

The final phase-out of the Multi-fiber Arrangement (MFA) and the

system of quotas that has governed the global trade in textiles and

apparel for the last forty-two years has significantly altered the



institutional rules of trade in the textile and clothing industry. With the

elimination of all remaining quotas on apparel from January 1 2005, the

textile and clothing sector is now fully integrated into the regulatory

framework of the General Agreement on Tariffs and Trade (GATT) of the

World Trade Organization (WTO). Buyers are now free to source textile

and apparel in any amount from any country; suppliers are similarly free

to export as much product as they are able, subject only to a system of

national tariffs. As global competition intensifies under the new quota-

free trading regime, countries are bracing for major changes in the

structure of sourcing and apparel supply worldwide. With the removal of

the quotas, it was expected that the developing countries, which have a

major play in the textile industry will benefit themselves as they have

stable supply network, experience in networking, capacities for scaling

up and the ability to offer a full bundle of services. It was also expected

that smaller countries, which enjoyed the restriction on trade will fall

out from the picture.

The textile sector has increased their investment in projects to upgrade

their equipment amid fierce market competition and to meet the growing

demand for more textile products. Total investment in the textile industry

between 2004 and 2008 was around Rs.65, 478 crore in India, which is

expected to reach Rs.1,50,600 crore by 2012. This enhanced investment

would generate 17.37 million jobs-- 12.02 million direct and 5.35 million

indirect—by 2012.

Investments in the textiles sector can be accessed on the basis of three

factors:



Plan schemes such as the Techno Up-gradation Funds Scheme

(TUFS), Technology Mission on Cotton, Apparel Parks, etc.

Under the TUFS scheme, a total of Rs 916 billion has been

disbursed for technology up gradation. There are around 26

Apparel Parks in eight states in India, with a total estimated

investment of Rs 134 billion

Industrial Entrepreneurship Memorandums implemented from

1992 to Aug 06, amounting to Rs 263 billion

Foreign Direct Investments inflows worth US$ 910 million have

been received by the textile industry between Aug 91 and May 06,

which account for 1.29% of total FDI inflows in the country.

Though significant investments are being made in the textiles segment,

the bulk of them are in the spinning and weaving segments. A cumulative

total of US$ 6.67 billion in investment was done in 2008. Of this, more

than two-thirds is in the spinning and weaving segments, while only 25%

is in processing and garment units

The elimination of global textile quotas is expected to drive garment

production to China, benefiting consumers in North America and Europe

at the expense of developing nations where apparel manufacturing has

become a bridge to an industrial economy. Africa received record high

foreign direct investment (FDI) inflows in 2005 of US$31 billion, but this

was mostly concentrated in a few countries and industries. The textile

sector has increased their investment in projects to upgrade their

equipment amid fierce market competition and to meet the growing

demand for more textile products.

The global fiber industry will continue to shift to the Asia/Pacific region,

particularly China, South Korea and Taiwan. Textile trade in the world is



estimated to be around US$ 300 billion currently. Industry experts predict

that by 2014 the facilities in the west will close down and they will

source their textiles from more efficient areas of the world resulting in the

trade volume of around US$ 800 billion. The Indian textile industry,

which has accelerated to an annual growth of 9-10 per cent, is expected to

grow at a rate of 16 per cent in value terms and reach a level of USD 115

billion by 2012. With 8.6% growth rate, Turkey also recorded a very

strong average annual growth rate of its textiles and clothing exports but

from a much lower basis. It could increase its exports from 8.6 to 17.6

billion US-Dollars. Pakistan exports amounted to 9.9 billion US-Dollars

in 2005 which translates into an average annual growth rate of 5.4%.

As of now, the general impression any individual would get about the

Indian textile industry leaders in the past few months is that it is in a

major decline state. The following could be the reasons that attribute to

this decline.

Global recession

Less export orders due to reductions in inventories by global retail

giants like Wal-Mart

Rising price of raw materials like cottons

Infrastructure bottlenecks such as power, particularly in Tamil

Nadu

In the times of adversity, like what we are facing right now, it is an

immediate task for all stake holders to pause for a moment and take stock

of the difficulties and chart plans for sustainability and growth of the

Indian textile industry.

With the opening of world markets and the abolition of textile quotas

since 2005, there came a negative situation as well. But, hindsight is



always 20-20. Indian textile industry should have focused on all major

sectors right from fiber to fashion and planned for an organized growth

across the supply chain so as to compete with China and even countries

such as Pakistan, Vietnam and Thailand, which are also growing from the

textile perspective. Instead, the industry had put majority of its stock in

the spinning sector. This is clearly evident in the utilization of

Technology Up gradation Fund Scheme effectively by the spinning

sector. Although it is a positive outcome, the industry did not focus on

many other value adding segments such as weaving and finishing. Indian

power loom sector, which enables value-addition is a highly unorganized

industry and needed major up gradation. As of now, the power loom

segment is also picking up where in many of the unorganized power

looms are becoming organized. Technical textiles sector is still in its

infancy and a tangible growth will be highly visible by 2035 when the

growth in this sector will be exponential.

The weak links in the Indian conventional industry such as weaving and

finishing have to be strengthened. There must be consolidated efforts by

Indian Textile Machinery Manufacturers Association, end-users and the

Government to undertake a major step and come-up with alternatives to

European Machinery, which the Indian weaving sector can afford. This

should be put into practice within the next five years, if dedicated efforts

are undertaken with the financial support for R & D by the Government

through its various schemes. Technical textiles sector must transform

from a non crawling phase to at least a crawling industry in the next three

years. General awareness on nonwoven and technical sectors has been

created with the recent marathon training workshops and conferences

such as, "Advances in Textiles, Nonwoven and Technical Textiles",

organized for the past five years in Coimbatore by Texas Tech

University, USA and those such as the Texcellance and IIT's Technical



Textiles conferences. These have put India on the international map in

technical textiles. These conferences are of less use if they do not

translate into investments and new projects.

TEXTILE INDUSTRY BENEFITS OTHER INDUSTRIES

TOO

The pursuit of a better fiber and a better fabric is yielding products used

in medicine, aeronautics, astronautics, seawater desalination, and

construction of buildings and roads. The new kinds of textiles possess

characteristics that make them useful in numerous formerly unexpected

applications. Although textiles are still the major component of the

clothes we wear and of many furnishings in our homes and offices, they

are also used widely in medicine, aeronautics, astronautics, pollution

abatement, and numerous other fields. Innovation in textile technology

continues and more unusual products will almost surely emerge

MEDICAL

Certain fibres and textile materials are especially suitable for use in

building synthetic body parts and medical scientists are steadily

expanding the types of body parts whose function can be mimicked. The

artificial kidney is made from 7,000 hollow fibres, each of which is about

the size of a human hair. Patients whose kidneys no longer function

normally must have their blood freed by dialysis of metabolic wastes and

excess water about every three days. This is accomplished by pumping

the blood through a textile, hollow-fibre module while clean-sing solution

rinses the blood free of urea. Patients with diabetes have a tendency to

suffer from cholesterol blockage of arteries leading to their feet. If not

corrected, poor circulation can lead to gangrene and loss of limbs.

Artificial arteries that look like pencil diameters are surgically inserted to



bypass the blockages, thus restoring circulation and saving limb

functions. These implants require crucial textile technology to prevent

clotting and rejection. It is estimated that more than 150,000 people in the

United States have now had these artificial arteries for over five years.

SPACE

NASA space suits for launch and for space walks require zero-defect

performance. The launch suits are made from PBI non-flammable high-

performance fibres. The space-walk suits have different requirements.

They require air-purifying, cooling, and pressurizing systems. Each suit is

tailor-made for a particular astronaut and costs $1-1.5 million. Since the

astronaut is under an oxygen pressure of eight pounds per square inch in

this suit, special flexibility is needed to allow him or her to bend an elbow

or grasp an article. Rocket exhausts and nose-cone covers for space

shuttles are made of carbon and other high-performance fibres. These

protect the vehicles from heat from air friction during launch and re-

entry. The flames generated on the launch pad do not ignite the rocket

because of the flame-resisting properties of graphite carbon-fibre-textile

exhaust shields. Similarly on re-entry, the white-hot temperatures from

atmospheric friction do not consume the shuttle because high-

performance fibre and ceramic structures provide protection

AERONAUTICS

Airplane parts, other than body construction, are also made of textiles. All

U.S. commercial jets have brakes made from carbon composites. These

are the only materials that can withstand the extreme high temperatures

generated if takeoff is aborted. Stopping a plane weighing many tons in a

short distance generates temperatures high enough to melt metals, making



carbon brakes indispensable for heavy jets. Kevlar non-woven felt liners

are now used as fire barriers to cover the urethane foam seats on all

aircraft to prevent the production of highly toxic cyanide gases when such

foams burn during airplane accidents.

PURIFICATION OF WATER AND AIR

Whole-body gas suits are required to protect soldiers from the chemicals

used in gas warfare today. These chemicals can kill by absorption into the

bloodstream through skin. The suits allow for transport of perspiration

moisture to prevent soldiers from being overcome internally as would

occur from a non-permeable film covering. It is well known to chemists

that a cube of activated charcoal powder measuring one inch on each side

has an adsorptive capacity equal to a football field. It was therefore

believed that properly constructed porous carbon fibres could exhibit

superior gas-adsorption capability. Drinkable sea water is now available

through properly prepared hollow fibre reverse osmosis modules. Sea

water is forced through these modules under a pressure of 400 pounds per

square inch. Pure drinking water passes through the hollow fibre wall

while concentrated salt water exudes out of the end. Concentration of

liquids that normally deteriorate from heating is possible with reverse

osmosis fibres and membrane systems. Many liquids, including orange

juice and tomato juice, can be concentrated by pressure without heat to

preserve the thermally unstable flavour ingredients. Most orange-juice

concentrate on the market today is prepared this way. Similarly

concentration of gases can be achieved by proper use of membrane and

fibre composition. Gas-separation systems are currently in use at most

U.S. petroleum refineries.

CONSTRUCTION MATERIALS



Super domes and stadiums are being constructed with roofs of silicone-

coated fibreglass. This is particularly important in northern areas where

heavy snowfall has caused the collapse of heavy concrete roofs. At the

Hubert Humphrey dome in Minnesota, 800,000 square yards of such

material in two layers allow warm air to be circulated to melt the snow.

At an air terminal in Saudi Arabia, a multi-funnel design allows

circulation by convection of the air up through hollow top ports. Many

shopping malls are turning to these flexible composites to allow for more

freedom in architectural design, improved aesthetics, better air

circulation, and better light transmission.

Rapid technological advances in the textile industry have opened now

opportunities for many technical disciplines, but have resulted in a

shortage of textile chemists, textile engineers, and textile-management

executives. Some U.S. colleges with textile-engineering programs report

that they could place nearly three times as many students in well paying

jobs as they are currently graduating. Together with a bright outlook for

further rapid advances and new products with unusual but useful

properties, this shows that textiles remain among the most dynamic

contemporary sectors in technology.



GLOBAL SCENARIO

The textile and clothing trade is governed by the Multi-Fiber Agreement

(MFA) which came into force on January 1, 1974 replacing short-term

and long-term arrangements of the 1960’s which protected US textile

producers from booming Japanese textiles exports. Later, it was extended

to other developing countries like India, Korea, Hong Kong, etc. which

had acquired a comparative advantage in textiles. Currently, India has

bilateral arrangements under MFA with USA, Canada, Australia,

countries of the European Commission, etc. Under MFA, foreign trade is

subject to relatively high tariffs and export quotas restricting India’s

penetration into these markets. India was interested in the early phasing

out of these quotas in the Uruguay Round of Negotiations but this did not

happen due to the reluctance of the developed countries like the US and

EC to open up their textile markets to Third World imports because of

high labour costs. With the removal of quotas, exports of textiles have

now to cope with new challenges in the form of growing non-tariff / non-

trade barriers such as growing regionalization of trade between blocks of

nations, child labour, anti-dumping duties, etc.

Nevertheless, it must be realized that the picture is not all rosy. It is now

being admitted universally and even officially that the year 2005 AD is

likely to present more of a challenge than opportunity. If the industry

does not pay attention to the very vital needs of modernization, quality

control, technology up gradation, etc. it is likely to be left behind.

Already, its comparative advantage of cheap labor is being nullified by

the use of outmoded machinery.

With the dismantling of the MFA, it becomes imperative for the textile

industry to take on competitors like China, Pakistan, etc., which enjoy

lower labour costs. In fact the seriousness of the situation becomes even



more apparent when it is realized that the non-quota exports have not

really risen dramatically over the past few years. The continued

dominance of yarn in exports of cotton, synthetics, and blends, is another

cause for worry while exports of fabrics are not growing. The lack of

value added products in textile exports do not augur well for India in a

non-MFA world.

Textile exports alone earn almost 25 percent of foreign exchange for

India yet its share in global trade is dismal, having declined from 10.9

percent in 1955 to 3.23 percent in 1996. More significantly, the share of

China in world trade in textiles, in 1994, was 13.24 percent, up from 4.36

percent in 1980. Hong Kong, too, improved its share from 7.06 percent

to 12.65 percent over the same period. Growth rate, in US$ terms, of

exports of textiles, including apparel, was over 17 percent from 1993-94

to 1995-96. It declined to 10.5 percent in 1996-97 and to 5 percent in

1997-98. Another disconcerting aspect that reflects the declining

international competitiveness of Indian textile industry is the surge in

imports in the last two years. Imports grew by 12 percent in dollar terms

in 1997-98, against an average of 5.8 percent for all imports into India.

Imports from China went up by 50 percent while those from Hong Kong

jumped by 23 percent.

CHINA:

China's investment spending in the textile industry slumped 20 percent in

the first two months of this year from the same period in 2008, the

National Bureau of Statistics said. Textile industry spending accounted

for 0.9 percent of the nation's overall investment of 1.03 trillion Yuan,

down 0.5 percentage point from a year earlier, the statistics bureau said.

China's garment and textile exports tumbled 15 percent to $21.9 billion in

the two months from a year earlier, customs data show. Exports of yarn,



fabrics and textile products totaled $7.29 billion, down 21 percent, while

apparel exports fell 11 percent to $14.6 billion, the Beijing-based

Customs Bureau said on March 11.

Textile firms, once an export engine of China, are fighting for their

survival this year with rising costs and dismal overseas market hit by the

subprime crisis. Those firms wooing foreign buyers at the 103rd China

Import and Export Fair, the largest trade fair in the country also called the

Canton Fair, felt the pinch. Few buyers visited their exhibition stall, and

fewer still signed contracts. Chinese product competitiveness was not

much as it was. The reduction in tax rebates and the devaluation of the

dollar have made Chinese products 20 percent higher than what it was.

The Chinese currency has ventured below the seven Yuan mark since the

government loosened the unit’s peg to the dollar in 2005. The Yuan has

gained about 18 percent since then. This has made Chinese textile

products more expensive and its price advantage has almost vanished

compared with products from Vietnam and India. The Yuan appreciation,

together with the rising material and labor costs, has driven some textile

firms to the brink of bankruptcy.

BANGLADESH:

Swedish Firms have Expanded Outsourcing in Bangladesh. Swedish firm

engaged in outsourcing home textiles and home furnishing items is

planning to expand its operations in Bangladesh. RMG Exports is

expected to Surge despite global recession. The readymade garment

sector, one of the pillars of the Bangladesh economy, is definitely in a

positive mode despite global financial meltdown. The three-day

Bangladesh Apparel and Textile Exposition (BATEXPO) wooed foreign

buyers to buy apparel products.



CAMBODIA:

Cambodia's garment industry is the country's biggest industrial employer,

and is now struggling against stiffer global competition and slowing

demand. Many Chinese and Korean companies have established a

presence in Cambodia for years. Now, more than 10 Chinese-owned

factories have moved to cheaper markets, leaving hundreds of thousands

of garment workers from the provinces facing destitution, reported

Phnom Penh Times in early 2008.The garment industry earns 80 percent

of Cambodia's foreign exchange earnings and employs an estimated

350,000 people in more than 300 factories. The industry began to grow

after a the country passed a new labor laws encouraging labour unions

and allowed the International Labour Organization (ILO) to inspect

factories and publish its findings. In turn, the United States agreed to cut

tariffs on Cambodian garment exports, buying 70 percent of all of the

country's textiles in the 1990s.

Cambodia maintained its higher working conditions after the deal expired

in 2005, and garment-making has made the national economy one of the

fastest growing in the region.

The World Bank reported that the industry grew only 8.0 percent in 2007

compared to the growth of up to 20 percent previously. The Cambodia

Ministry of Commerce said that the apparel exports had declined since

October 2007, mainly due to the US economic slowdown. Exports to the

United States slipped 1.44 percent in the first quarter of 2008, compared

with the same period in 2007. Predicted Trend .The Cambodia's Free

Trade Union (FTU) said that the factory owners are looking abroad for

greater productivity and lower costs. Kaing Monika, Manager at the

Garment Manufacturers Association of Cambodia, commented that many

manufacturers could move to Vietnam, Bangladesh or India if they could



get lower costs. Production costs, oil and power, are high in Cambodia,

and the demand for higher wages also put the country's garment industry

in danger, he said. Factory owners are also facing a proliferation of labor

unions and illegal strikes. Experts predict that in 2009 Cambodia would

even see more competition when US restrictions on Chinese textile

exports are scheduled to end. China and Vietnam are still Cambodia's

direct competitors. Cambodia's labor ministry said that to counter this

competition, Cambodia must increase productivity, quality and extend

their reputation as having high labor standards.

MAJOR MANUFACTURERS AND THEIR MARKET

SHARE

In 2006, the largest apparel manufacturers and exporters were countries

from the Asia-Pacific region which included countries like China, Hong

Kong, Philippines, Malaysia, Indonesia, Bangladesh, Srilanka, Pakistan,

Thailand and India. The other major apparel manufacturing nations were

USA, Italy, Germany and Mexico.



Diagram No: 3.1 Country wise Market Share

Source: www.fashionproducts.com (http://www.fashionproducts.com/fashion-apparel-overview.html)

GLOBAL TRADE VOLUME AND TRENDS

As the apparel manufacturing industry has become more labour intensive

and requires less capital investment, its concentration is shifting more

towards the developing countries and even constituting large amount of

their exports. They are concentrating more on developing countries as the

labour cost is very less in such countries. This can be analyzed by the fact

that the apparel production in industrialized countries decreased between

1980 and 1996, where as the production increased in developing

countries during the same period. Similar trend was seen in exports, the

apparel exports of developing countries increased six times between 1980

and 1997, and that of developed economies rose by 150%.

The global apparel industry’s total revenue in 2006 was US$1,252.8

billion, which was approximately 68% of the overall industry value. Asia

Pacific constitutes the largest amount of production and trade in the

apparel industry worldwide.


http://www.fashionproducts.com/fashion-apparel-overview.html

http://www.fashionproducts.com/


Table No: 3.1 Region wise Share of Total Trade Revenue (2006)

Region % Share

Asia Pacific 35.40%

Europe 29.40%

USA 22.30%

Rest of the world 12.90%


China had captured 65% of the global market share towards the end of

2006 in total apparel exports. The other major apparel exporting nations

include USA, Germany, Hong Kong, Italy, Malaysia, Pakistan, Thailand

and India. Some of the apparel trade statistics are presented below.

Table No: 3.2 Exports of Apparels in 2006

Country US $ Billion

China 8,260.921

Hong Kong 1,723.210

Italy 1,353.586

Malaysia 1,255.069

Germany 669.130

Pakistan 618.830

Thailand 597.758

USA 595.171

India 522.463







GLOBAL FACTORS INFLUENCING TEXTILE

INDUSTRY

The history of the textile and clothing industry has been replete with the

use of various bilateral quotas, protectionist policies, discriminatory

tariffs, etc. by the developed world against the developing countries. The

result was a highly distorted structure, which imposed hidden costs on the

export sectors of the Third World. Despite the fact that GATT was

established way back in 1947, the textile industry, till 1994, remained

largely out of its liberalization agreements. In fact, trade in this sector,

until the Uruguay Round, evolved in the opposite direction.

Consequently, since 1974 global trade in the textiles and clothing sector

had been governed by the Multi-fibre agreement, which was the sequel to

an increasingly pervasive quota regime that began with the Short-term

arrangement on cotton products in 1962 and followed by the Long-Term

arrangement. After the successful conclusion of the Uruguay Round in

1994, the MFA was replaced by the Agreement on Textiles and Clothing

(ATC), which had the same MFA framework in the context of an agreed,

ten year phasing out of all quotas by the year 2005. The section that

follows takes a brief look at the history of these protectionist regimes as

also a more detailed look at the MFA and the ATC.



CHAPTER-2

REVIEW OF LITERATURE



CONTRIBUTION TO ECONOMY:

With 3.9 million handlooms, India is the highest handloom producing

country in the World. 30% of the total export income is generated by

textile alone; it is second largest Employer industry after agriculture. The

textile industry constitutes approximately 14% of country's total

industrial production.

THE WORLD MARKET SHARE

In spite of the Chinese dominance, India has a fair opportunity to grab a

substantial stake in the projected garment market share. According to

PHD Chamber of Commerce and Industry (PHDCCI), post-MFA, India's

market share in the US is expected to go up to 15 per cent from the

present 4 per cent. In the EU, the market share increase is expected to be

50 per cent from the current 6 per cent to 9 per cent

Table showing the India’s Competitiveness with Other Country

There is no denying India is competitive enough and will become even

more competitive once its infrastructure issues are sorted out. China has

probably already reached its peak and further improvements may not be

as dramatic, henceforth



Table No: 5.1 Countries and their positive and negative aspects with regard to

textiles

Key countries / regions

Key positives Key negatives

China Efficient, low cost, vertically integrated

Growth at the cost of profits

India, Pakistan Vertically integrated, low cost

Lacks economies of scale and

infrastructure support

Mexico (NAFTA), Turkey

Proximity to market, duty and quota free

Lack China and Indias degree of competitiveness

ASEAN (Vietnam, Cambodia, Indonesia)

Cheap labor No other cost or locational advantage

AGOA (African) countries, Bangladesh

Quota and tariff free, cheap labor

Lacks integration and China and Indias

degree of competitiveness

Hong Kong, Korea, Taiwan

Trading hubs proximity to China

No cost advantage, protected currently by

quotas

USA and EU Non-quota barriers likely to prove irritant

to imports

US$ 400 bn trade loss likely ov

Source - Industry, I-SEC Research



Indian Textiles targets- 11th Five year Plan (2007-2012)

Market size of US$ 115 Billion

Export target US$ 55 Billion

Domestic market US$ 60 Billion

India’s market share in world textiles trade to grow from 3% to 8

%

12 Million additional jobs

Investment Rs.150,600 Crs

Table No: 5.2 Textiles Export Target (In Billions)

Year ( April March) Target Achievement

2006-07 19.73 19.62

2005-06 15.565 17.80

2004-05 15.16 13.04

2003-04 16.31 13.16

2002-03 15.05 12.41

2001-02 13.72 10.76

Source: Textile India Progress



Top 10 Exporters (Textile)

Country 1990 1997

Billion US$ % share Billion US$ % share

Hong Kong 7.99 7.68 14.6 9.42

China 7.10 6.82 13.83 8.92

South Korea 6.04 5.81 13.35 8.61

Germany 14.00 13.46 13.05 8.42

Italy 9.80 9.43 12.9 8.32

Taiwan 6.13 5.90 12.73 8.21

USA 5.03 4.83 9.19 5.93

France 7.21 4.65 5.86 5.64

Belgium-

Luxembourg6.54 6.29 7.01 4.52

Japan 5.88 5.65 6.75 4.35



Top 10 Exporters (Apparel)

Country 1990 1997

Billion US$ % share Billion US$ % share

China 9.41 9.14 31.8 21.06

Hong Kong 15.37 14.92 23.11 15.30

Italy 12.07 11.72 14.85 9.83

USA 2.57 2.49 8.68 5.75

Germany 7.82 7.59 7.29 4.83

Turkey 3.44 3.34 6.7 4.44

France 4.65 4.51 5.34 3.54

UK 3.08 2.99 5.28 3.50

South Korea 8.11 7.87 4.19 2.77

Thailand 2.86 2.78 3.77 2.50

Total (top 10) 69.38 67.36 111.01 73.52

World 103.00 100.00 151.00 100.00

Multifibre Arrangement (1974-94) under which countries whose markets

are disrupted by increased imports of textiles and clothing from another



country were able to negotiate quota restrictions. The MFA was

introduced in 1974 as a short-term measure intended to allow developed

countries to adjust to imports from the developing world. The textiles and

clothing industry was, until recently, the only major manufacturing

industry that was not subject to the rules of the General Agreement on

Tariffs and Trade (GATT). Instead, it was subject to extensive use of

quotas by the major importing countries. The quota system started with

the Long Term Agreement Regarding International Trade in Cotton

Textiles (LTA) under the auspices of the GATT in 1962. In 1974 the

LTA was extended to cover other materials than cotton, and became

known as the Multi-Fiber Agreement (MFA). At the end of the Uruguay

Round of negotiations it was agreed that t countries wishing to retain

quotas would commit themselves to phasing them out gradually over a 10

year period, with the last quotas being lifted 1st of January 2005, as stated

in the Agreement on Textiles and Clothing (ATC).Developing countries

have a natural advantage in textile production because it is labor intensive

and they have low labor costs. According to a World Bank/International

Monetary Fund (IMF) study, the system has cost the developing world 27

million jobs and $40 billion a year in lost exports. At the General

Agreement on Tariffs and Trade (GATT) Uruguay Round, it was decided

to bring the textile trade under the jurisdiction of the World Trade

Organization. The textiles and clothing (T&C) industry is considered to

be an opportunity for the industrialization of developing countries in low

value added goods. The industry is labor intensive and thus requires a

large number of unskilled workers, including a high share of female

workers. The end of the MFA in 2005 will change international trade

significantly and lead to a restructuring of the sector worldwide. This

restructuring process will result in major employment shifts within and

between countries. However, the last three decades have seen various



changes in the clothing and textile sector, thus forcing many countries to

adjust to a constantly altering environment. Now, a number of countries

fear that a new wave of cheap textile and clothing products will flood

their markets, threatening their domestic industries that are not adequately

prepared to face the new challenge. There are also those countries that

hope for new export opportunities as a result of a free quota trade

environment and a third set of countries that will lose their preferential

access to the US or EU markets, thus facing higher competition for their

exports to them. However, large tariffs remain in place on many textile

products. However, the last three decades have seen various changes in

the clothing and textile sector, thus forcing many countries to adjust to a

constantly altering environment. Now, a number of countries fear that a

new wave of cheap textile and clothing products will flood their markets,

threatening their domestic industries that are not adequately prepared to

face the new challenge. There are also those countries that hope for new

export opportunities as a result of a free quota trade environment and a

third set of countries that will lose their preferential access to the US or

EU markets, thus facing higher competition for their exports to them.

INDIAN SUPPLY DEMAND SCENARIO

Textile engineering enjoys good growth in the country. The business in

2004-05 amounted to Rs 1,650 crore, which was a Rs-250 crore increase

from the year-ago level.

Despite the Bull Run, textile industry is running short of machinery.

Today, textile companies have to wait one or two year for delivery of

machines, whereas, orders are completed within 10-12 months. This

growing demand is a tough challenge to cope with for Lakshmi Machine

Works (LMW), Coimbatore. It takes 18 months to fulfill new orders, but

R. Rajendran, spokesperson for LMW, expects the delivery time to be cut



down to 10-12 months in 2006-07 with its new capacities. Two reasons

forwarded for the delay in delivery of machines: textile companies are

expanding capacities rapidly and pace of supply of machinery not in tune

with the current demand.

Second reason is the Technology Up gradation Fund Scheme (TUFS) of

the Textile Ministry is likely to end by March 2007. As a result, textile

companies wishing to make the most of the scheme are rushing to place

orders for the machines, says C V Radhakrishnan, Advisor, Textile

MachineryManufacturersAssociation.

Considering the development of textile industry, India would need 12

million spindles in the next five years, whereas only 10 million spindles

would be provided by domestic textile engineering industry.

In 2008, the Indian textile industry suffered from overcapacity. There was

talk that a consolidation in the local industry would inevitably have to

take place if India is to remain competitive in textiles, but there was also

talk that the government may offer a U.S.-styled bailout of the Indian

textile industry in order to keep employment levels high. These

conflicting signals continue to make an assessment of the Indian textile

sector difficult to make.

FASHION APPAREL INDUSTRY OVERVIEW

The global fashion apparel industry is one of the most important sectors

of the economy in terms of investment, revenue, and trade and

employment generation all over the world. Apparel industry has short

product life cycles, tremendous product variety, volatile and

unpredictable demand, long and inflexible supply processes. The industry

has been in a transition over the last 20 years. Some of the major



contributors are significant consolidation in retail, increasing use of

electronic commerce in retail and wholesale trade.

The clothing and apparel industry produces finished clothing products

made from both natural and manmade fibers like cotton, silk, wool, linen,

polyester, rayon, Lycra and denim. The important segments covered in

apparel industry includes children clothing, men’s clothing, clothing for

women, bridal wear, men’s wedding wear and intimate apparel. The

apparel is sold through three major channels, which are brick & mortar,

catalog and through internet.

Table No: 7.1 Apparel Sales by Channel

Category Sales in $ Billion Market Share (%)

Brick and Mortar 169.256 92.9

Catalog 7.177 3.9

Online/ Internet 5,873 3.2

Total 182.306 100.00


INDUSTRY CHALLENGES:

The Apparel Industry is growing at a very high rate but still there are

some barriers, which are hindering the growth of this industry. Some of

them are:

• Though the demand for garments is increasing day by day but the

production rate has still not been able to match with the ever rising

demand. More production facilities are needed to meet the demand





• Most of the raw material needed for apparel manufacturing is available

in the developing or under developed countries and these countries do not

have enough resources and manpower to explore them. These countries

also do not have finance to set up factories for clothing and garment

production

• Globalization has helped the trade in many ways but due to

globalization the competition has increased and so it is not very easy for

the firms to cope up with so much competition, as they have to meet the

deadlines and also maintain quality

• The importers of developed economies are facing very stiff competition

as countries like China are producing good quality products in low prices

due to availability of very cheap labour

• Some trade laws still are very much in favor of developed countries and

they need to be reviewed, to facilitate imports from the developing

countries

• As apparel industry is fashion driven, and fashion keeps changing, the

firms have to cope with the changing apparel industry trends and still

complete orders in time. Thus they usually have to work under pressure

National Textile Policy 2000:

ON NOVEMBER 2, the Government announced the New Textile Policy

(NTP), outlining measures to make India a global player in textiles and

readymade garments by raising exports from $11 billion to $50 billion by

2010. Of this, the share of readymade garments will be half. The

Government has decided to de reserve the garment industry from the SSI

category to make the former internationally more competitive. Till now,

the garment sector was under SSI reservation, with an investment ceiling



of Rs 3 crore, and the maximum foreign direct investment limit of 24 per

cent.

There are two more modifications. First, the FDI limit of 24 per cent has

been removed, and foreign companies will be able to make 100 per cent

investments through the Foreign Investment Promotion Board (FIPB)

route. Second, the 50 per cent export obligation on firms with foreign

equity has been done away with.

The Government intends to implement, in a time-bound manner, the

Technology Up gradation Fund Scheme covering all manufacturing

sectors of the industry. According to the Textiles Minister, Mr. Kashiram

Rana, response to this scheme is improving, and proposals worth Rs

11,000 crore were received.

According to the RBI, exports of readymade garments in the 11 years

from 1987-88 to 1998-99 rose from $1,430 million to $4,444 million --

more than threefold. The annual average growth rate readymade exports

during this period were 10.9 percent, against the overall export growth

rate of 9.7 percent.

Exports of readymade to the developed countries are improving. Against

exports of $427 million to the US, in 1987-88, they touched $1,503

million -- again, more than threefold-- in 1998-99. There have been

similar increases in dispatches to the UK, Germany, France, Canada,

Italy, Japan and the Netherlands. There was a decline in exports to the

Commonwealth of Independent States (CIS) because of the unstable

conditions.

India was also able to capture markets in developing countries, especially

the UAE. The rising trend of readymade garment exports, even to the



most developed countries, proves beyond doubt the competitive ability of

the small sector.

TECHNOLOGY UPGRADATION FUND SCHEME

(TUFS):

Government of India, Ministry of Textiles has launched a Technology Up

gradation Fund Scheme (TUFS) for the Textile and Jute Industries, which

is in operation since 01.04.1999 for 5 years i.e. up to 31.03.2004. There is

no cap on funding under this scheme. It is an open-ended scheme

depending on the capacity of the industry to absorb funds in bankable and

techno-economically feasible proposals.

The main features of the TUFS are given below: -

i) The scheme provides a reimbursement of 5% point on the Interest

charged by the lending agency on a project of Technology Up gradation

in conformity with the scheme.

ii) The identified sectors in the textile industry viz. Cotton ginning and

pressing, spinning/silk reeling and twisting/wool scouring and combing/

synthetic filament yarn text rising, crimping and twisting, manufacturing

of viscose filament yarn (VFY) / Viscose Staple Fiber (VSF),

weaving/knitting including non woven and technical textiles,

garments/made-ups, Jute industry are eligible to avail of these

concessional loan for their technology up gradation requirements.

Investments in common infrastructure or facilities owned by the

association, trust or co-operative society of the units participating in the

TUF Scheme and other investments specified are also eligible for funding

under the scheme.



iii) Technology levels are benchmarked in terms of specified machinery

for each sector of the textile industry. Machinery with technology levels

lower than that specified will not be permitted for funding under the TUF

Scheme.

iv) General eligibility condition and sector specific eligibility conditions

have also been specified in the scheme.

v) Nodal agencies for the scheme are as follows: -

For the Textile Industry (excluding SSI sector) – IDBI

For the SSI Textile Sector (Cotton Ginning & Pressing, Weaving,

Knitting, Processing & Garmenting Manufacturing) - SIDBI

For Jute Industry - IFCI

vi) The interest @5% would be reimbursed to the respective nodal agency

through the budget (plan) provisions of the Ministry of Textiles.

vii) The functioning of the scheme is being periodically monitored by

TAMC Chaired by Textile Commissioner and Inter-Ministerial Steering

Committee, Chaired by Secretary (Textiles).

viii) A special cell has been set up in the financing institutions for

expeditiously processing loan application received under the scheme.

ix) All the 18 SFCs, 17 SIDCs and 11 Twin function IDCs, EXIM Bank

and NCDC have been co-opted by SIDBI and IDBI. Further SIDBI has

co opted 81 commercial banks, 12 coop. banks and NSIC and IDBI has

co-opted 36 commercial banks, 1 co-operative bank and 4 AIFIs (IFCI,

ICICI, IIBI and LIC) have also been co-opted by IDBI. IFCI has co-opted

3 SFCs, 1 SIDC, 6 commercial banks, 3 AIFIs and Exim Bank for

financing jute industry under the scheme.



x) An option has also been provided to the Small Scale Textile and Jute

Industries to avail of either 12% Credit Linked Capital Subsidy (CLCS)

or the existing 5% interest reimbursement under the TUFS. CLCS-TUFS

will be in operation from 1st Jan., 2002 to 31st March, 2004. There is no

distinction between public sector, co-operative sector or private sector

mills under the scheme, if project proposal is bankable and techno

economically feasible.

Indian textile industry should have focused on all major sectors right

from fiber to fashion and planned for an organized growth across the

supply chain so as to compete with China and even countries such as

Pakistan, Vietnam and Thailand. Instead, the industry had put majority of

its stock in the spinning sector. This is clearly evident in the utilization of

Technology Up gradation Fund Scheme effectively by the spinning

sector. Although it is a positive outcome, in my opinion, the industry

turned a blind eye on value-adding sectors such as weaving and finishing

TEXTILEWORKERS’REHABILITATIONFUNDSCHEM

E (TWRFS):

Textile Workers’ Rehabilitation Fund Scheme came into force with effect

from 15th Sept. 1986.The objective of TWRFS is to give interim relief to

the workers rendered jobless due to permanent closure of the mills.

Another reason also was to curtail the widespread disguised employment

in the textile industry. Relief under the scheme is available only for 3

years on a tapering basis, 75% of the wage equivalent in the first year,

50% in the second year and 25% in the third year.

The government has established various research associations for the

textile industry like



Ahmadabad Textile Industry Research Association,

Ahmadabad

Bombay Textile Research Association, Mumbai

South India Textile Research Association, Coimbatore

Northern India Textile Research Association, Ghaziabad

Silk and Art Silk Mills Research Association, Mumbai

It has a few export promotion councils also like

o Handloom Export Promotion Council, Madras

o Apparel Export Promotion Council, New Delhi

o Cotton Textile Export Promotion council, Mumbai

o The Synthetic and Rayon Textiles Export Promotion

Council, Mumbai

o Indian Silk Export Promotion Council, Mumbai

o Wool and Woollens Export Promotion council, New Delhi

o Carpet Export Promotion Council, New Delhi

o Export Promotion Council for Handicrafts

o Power loom Development & Export Promotion Council



CHAPTER -3

Research methodology



COLLECTION OF data

The research method which I had chosen to collect information is the case

study method

I had choose one company related to this topic the company is siyaram

silk mill ltd

I had collected the information by referring many magazines newspaper

and so on

Objective:

The objective is to get a brief knowledge on this topic and related that

information to the siyaram’s.

As there is also a disadvantage that on the basis of one company I cannot

give brief knowledge about the textile industry.

MAJOR PLAYERS

India being one of the fastest growing economies of the world, which has

both positively and negatively, affected the Indian apparel industry. On

one hand it has become a major retailing hub and a host for various

multinational companies on the other hand this has a negative effect on

the domestic players. The emergence of mall, brand slavery, fashion

awareness, rise in the income level has further reinforced the competition

among the multinationals and the domestic players and has lead to

opening of number of retail outlets in India.

The introduction of VAT and the growth of organized retail industry are

also likely to push up growth in the textiles and apparel sector



domestically too. While the garments business will pose its own set of

challenges in terms of providing flexibility in operations and dealing with

labor productivity issues, an increasing contribution to revenues from the

garments business, which is less capital-intensive and margins-accretive,

would augur well for earnings growth.

GOKALDAS EXPORTS

Incorporated in 1979, based in Bangalore, it’s one of India's largest

manufacturers and designer of garments for men, women and children

and caters to the needs of several international fashion brands and

retailers. Gokaldas Exports has been a major player in the readymade

garment industry across the globe.

In the present Indian fashion retailing, Gokaldas has grabbed a

distinguished place for itself in the form of "The Wear house" catering to

the specific fashion needs of the people. The Wearhouse has high profile

outlets in Bangalore, Chennai, Hyderabad and Coimbatore.

An ISO 9001:2000 Certified Company has a capacity to produce and

export 2.5 million garments a month.

The Group's products include coats, suits, jackets, parkas, windcheaters,

ski wear; warm-ups, surf wear, swim wear; trousers, shorts; casual wear

shirts, ladies blouses and dresses for customers in international market. It

mainly operates in India but exports its products to countries like the

United States of America, Canada, Mexico, United Kingdom, Germany,

Austria, Spain, Italy, France, Netherlands, Middle East, South Africa,

Japan, Denmark, Taiwan and Hong Kong. A few of the manufacturing

units are 100% export units with capabilities of mass production. They

have the license to import duty-free fabrics and accessories from all over



the world for re-export. It has over 48,000 employees who work in

around 48 fully equipped, modern, manufacturing factories.

ARVIND BRANDS

Arvind Mills Ltd. was incorporated in 1931 with share capital

Rs.2525000 ($55000) in Ahmadabad by the Lalbhai group. The

Company's operations are divided into the Textile Division, telecom

division and garments division. We will be majorly concentrating on the

garments division. Products manufactured are dhotis’, sarees, mulls,

dorias, crepes, shirtings, coatings, printed lawns & voiles cambrics, twills

gabardine etc. Arvind Brands is part of the Lalbhai Group, which holds

licenses for leading international brands such as Arrow, Lee, Wrangler,

Gant and Tommy Hilfiger for retail and wholesale sales in the local

market. Its mainstream brands are Excalibur and Flying Machine.

In addition, it owns an array of casual sportswear and denim brands

marketed in India, including Flying Machine, Newport and Ruf & Tuf

jeans and Excalibur shirts along with licensed relationship with various

international brands like Nautica, Jansport, Kipling, Hero by Wrangler,

Lee Riders and Tommy Hilfiger, and joint ventures with VF Corporation

and Diesel.

But the company is facing severe competition from major brands like

Louis Philippe, Park Avenue and small brands like Trigger and

Blackberry’s.

It produces about 110 million meters of denim every year and the

garment section is doing extremely well because of the customer loyalty

it enjoys. The demand for jeans, in particular, is expected to rise, as

manufacturing companies in the US have shut operations.



KOUTONS

The winner of “ best retailer leadership award 2008” organized by retail

congress, Mumbai, Koutons Retail India Limited engages in the design,

manufacture, and retail of men’s wear and integrated apparel in India. It

currently sells its apparel using the “Koutons” and “Charlie Outlaw”

brands. Mr. Kohli along with his brother in law Mr. Sawheny partnered to

set up Charlie's Creation.

In 1997 the Company diversified its business by introducing non-denim

trousers in the existing product range of denim apparel. The company has

inaugurated its 89th family Store in Hyderabad, which it claims to be its

largest store in the country. Koutons India has an annual finishing and

manufacturing capacity of 22.92 million pieces and 12.36 million pieces

of apparel, respectively. The capacity utilization for the same was 41.21%

and 21.99% respectively at the end of FY2007.Koutons has 18

manufacturing/finishing units and 14 warehouses spread across various

locations in and around Gurgaon. The company's strategy is to have

small, but more stores. This helps to save costs and at the same increase

reach of the company. The company has a phenomenal growth record.

ZODIAC

Zodiac Clothing Company Ltd manufactures, exports and imports

garments, textiles accessories etc. Zodiac has been in the apparel business

for a period of 50 years by now and is known for its quality shirts.

Zodiac, is today, the largest selling shirts & tie brand at Shopper's Stop

according to Brand Equity (The Economic Times)

The Company started business in 1954 and export of readymade garments

to Europe started in early '60s, which included mainly ties and shirts. For

many decades, Zodiac has been synonymous with ties. The business of



ties is a high fashion business and Zodiac has taken this to new highs in

India and across the globe. In fact, one can say that in India Zodiac is

generically associated with ties. Following Zodiac's huge success with

ties, the company entered the arena of men's accessories with Cuff links,

Belts, Wallets and Handkerchiefs.

In 1973, Zodiac had a stand-alone exclusive shirt shop in Hotel Taj in

Mumbai. The company then entered the domestic shirt segment in late

'80s.It employs around 3500 people in 7 manufacturing units in 16 offices

located in UK, US, Germany, UAE etc. Each manufacturing unit is

spread over 35000 sq.ft and has modern equipment to spread 60 yards of

cloth at a time. All the manufacturing units are same in design and layout.

Quality is maintained throughout the 40 stages of assembly line. All the

units have their own power generating units in order to be efficient. It has

its own 80 exclusive outlets and around 2000 multibranded outlets. Its

continuously showing profit and has a consistently growing export

business.

HOUSE OF PEARL

House of Pearl Fashions Limited is a multinational ready to wear apparel

manufacturing company. The company also provides supply chain

solutions for the fashion industry globally along with warehousing &

distribution networks in the UK & US. It operates in 11 strategic

locations in six continents. It has two brands Kool hearts, DCC in the

United States of America. The brand Kool hearts focuses on the young

fashion, where as the focus of DCC is more towards the Missy segment

It basically deals with 3 streams which are manufacturing to Retailers,

souring solutions for retailers, Marketing, Distribution & Branding for

Retailers. It takes care of the whole process from design & development,

manufacturing or sourcing till offering a range of pre retailing services,



warehousing to delivering at the door step on a call off basis. It

manufactures a broad range of products comprising of knits, woven,

sweaters and bottoms in basic as well as complex designs.

It has a good manufacturing capacity; the present in-house manufacturing

capacity of the company is twenty million pieces. Per annum spread over

more than 725,000 sq feet of built up area with efficiently designed

layouts to ensure smooth flow of materials. The company is planning to

double the capacity by expanding the operations in Chennai, Bangladesh

& Indonesia. It intends to have a capacity of 30million pieces by the end

of 2009.

The company adopts integrated marketing techniques and has

merchandising teams in Canada, Europe, HK, UK, and US, closely

interacting with existing and potential customers at their doorstep.

The Company shares were listed on the stock exchanges first time in Feb,

07. It recently went for a joint venture with LERROS, a premium apparel

brand from Germany.

HARIA EXPORTERS

Haria Exports Ltd. is a leading garment exporter in the country for the

last twenty four years. It is a Star Trading Company and has won the

golden status certificate in the year 1999. This company occupies a

unique place in the industry of the by its contribution to Industrial output,

employment generation and Foreign exchange earnings. Even though the

textile industry has the distinctive advantage in respect of raw material

and skilled labor, the industry is suffering from technology

obsolescence which in turn affects the quality, productivity and cost

effectiveness. The high capital cost is impeding the process of Hi- Tech

up gradation. Therefore, the Government of India, Ministry of Textile



has launched Technology Up gradation Fund Scheme for Textiles &

Jute Industries of Rs.25000.00 crores at a concessional rate of interest

of appx.5%. In order to compete with the outside world, the company is

paying attention to the application of technology, closely following up the

fashion trends and improved product quality. In order to be more cost

efficient the company has acquired latest machinery which ascertained

exact material consumption depending upon the style and pattern. The

Government policies, interest rates, export incentives etc may also affect

the overall performance of the company, but even then the company is

optimistic about its revenue and growth.

EVINIX

The company started in 1996 with the manufacture of headgears, baseball

caps and high altitude jackets, using cotton textile and leather, mainly for

exports. The company was incorporated on 1st May 1996 as Evinix

Fashion Accessories Private Limited under the Companies Act, 1956.

Mr. Sanjay Taneja, brother of Mr. Raujeev Taneja (the original promoter

of the company) joined the Company as a Promoter replacing

Mrs.Anuradha Taneja, who disassociated herself from the company. The

name of the company was changed to Evinix Accessories Private Limited

from Evinix Xsesryz and a fresh Certificate of Incorporation dated 20th

March 2003 was taken. In March 2005, M/s Ambrose Exports Private

Limited took equity stake in the company.

The apparel category constitutes men and women’s shirts, trousers, skirts

and tops, kids wear and nightwear. Organic cotton wear for expecting

mothers and infants is an additional strength. They use Organic cotton

and its products through its brand name “Othentix”- Authentic



Sustainable Textiles, lends a unique personality to each garment

manufactured and supplied by Evinix.

The company came out with a principle of Rapid Retail suggesting that

every merchandise has a limited shelf life at CUT stores; CUT is an

acronym for Comfortable, Urban and Trendy. Evinix is setting up CUT

stores (averaging 4000-5000 sq feet) in fast urbanizing young Indian

towns. It recently launched the CUT youth style store in Rajkot. The

Rapid Retail business concept embraces the e.t.o.a.d concept i.e. the exact

time of awaited departure when the product will move out to the next best

price bracket.

PEARL GLOBAL

Pearl Global Limited was incorporated on 23rd October, 1979 under the

name Pearl Agencies Private Limited. The Company became a Deemed

Public Company with effect from 1st July, 1991 The name of the

Company was change to PEARL GLOBAL LIMITED (PGL) on 2nd

September, 1993 in terms of Section 21 of the Companies Act, 1956 as

per fresh Certificate of Incorporation issued by the Registrar of

Companies, Delhi & Haryana. PGL manufactures, sells, and exports

ready to wear apparel in India. The company primarily produces

garments in woven and knitted fabrics. Its products include casual wear

dresses, ladies’ blouses, and bottoms. The company is based in Gurgaon,

India. PGL is a subsidiary of House of Pearl Fashions Limited.

BANG OVERSEAS LTD

Bang Overseas limited’s principal activity is to manufacture and market

textiles and apparels. The Group's textile includes readymade garments,

under garments and hosiery. It markets with a brand name of Thomas



Scott. The Group operates only in India. It was incorporated in the year

1992 and is presently providing fashion fabrics and meeting ready to

wear requirements of the customers in apparel, textile and Retail segment.

The company started the business from trading in textile and since 1998,

they are conceptualizing and designing fashion fabrics and outsourcing

the manufacturing process of the same from countries like Turkey,

Portugal, Mauritius and other European Countries. In the same year, they

launched our seasonal fabric collections in textile under the name "Body

waves", marketed through their own distribution channel to different

brands and retailers. They have ventured into ready-to-wear men’s'

segment in 2000 by outsourcing manufacturing process and in turn selling

to various international brands. They launched ready-to-wear men’s'

garments under our brand name "Thomas Scott" in 2002. They started

their own first apparels manufacturing unit in Bangalore in the year 2005

in the name of Reunion Clothing Company with an installed capacity of

350,000 pieces per annum and in the year 2006 then they started the

second manufacturing unit in the name of Formal Clothing Company

with an installed capacity of 360,000 pieces per annum. At present they

have installed capacity of 720,000 and 540,000 pieces per annum at their

Reunion Clothing Company and Formal Clothing Company. Their

products are presently retailed through 157 point of sales comprises of

our own Retail outlets, Large format stores (LFS) like Shoppers' Stop,

Pyramid, Globus, the LOOT, SAGA and Multi Brand Outlets (MBO)

spread all over India. They cater to the demand of various other apparel

manufacturer and brands also. They have centralized warehousing and

logistics centre at Kalher Village near Bhiwandi to facilitate our supply

chain management as well.

BCG MATRIX



BCG Matrix is also called the Boston Matrix because it was created by

Bruce Hendeson for the company Boston Consulting Group in 1970. The

BCG matrix method is based on the product life cycle theory that can be

used to determine what priorities should be given in the product portfolio

of a business unit.

Star

The high growth and high market share brands that exist in Indian market

and are the market leaders. This category consists of the companies like

Zodiac, Du Pont etc. These companies are regularly investing in R&D

and gaining market share as time passes. These stars try to become the

cash cows of the future and want to remain in the market.

Cash Cows

The companies which have low business growth and high

market share are the cash cows that generate milk continuously

with the small investment to be as the mature company in the

market.

Question marks (also known as Problem Childs)

The companies that have high growth rate and lower market share are the

question mark as they could be new ventures started or they are

companies that do not have liquidity enough to increase their share in the

market. But these companies have potential to be the star in the market

due to good growth rate and thus they could invest more into their

business to expand as the star and then becoming the cash cows.

Dogs



The dogs are more charitable pets that exist in the market and have the

low market share and low growth rate so these companies are better to get

out of the market or much cash is required to set them up. These

companies have the cash traps which ties up the money in a business with

the lower potential.

GOKALDAS

In the present Indian fashion retailing, Gokaldas has grabbed a

distinguished place for itself in the form of "The Warehouse" catering to

the specific fashion needs of the people. It mainly operates in India but

exports its products to countries like the United States of America,

Canada, Mexico, United Kingdom, Germany, Austria, Spain, Italy,

France, Netherlands, Middle East, South Africa, Japan, Denmark, Taiwan

and Hong Kong. This means the company has a high growth rate since its

inception. Therefore we put it in star.

ARVIND BRANDS

Arvind Brands is part of the Lalbhai Group, which holds licenses for

leading international brands such as Arrow, Lee, Wrangler, Gant and

Tommy Hilfiger for retail and wholesale sales in the local market. Its

mainstream brands are Excalibur and Flying Machine.

In addition, it owns an array of casual sportswear and denim brands

marketed in India, including Flying Machine, Newport and Ruf & Tuf

jeans and Excalibur shirts along with licensed relationship with various

international brands like Nautica, Jansport, Kipling, Hero by Wrangler,

Lee Riders and Tommy Hilfiger, and joint ventures with VF Corporation

and Diesel. Its enjoys good market share as its customers are loyal to it.

But its rate of growth is not significant. So we put it in cows.



KOUTONS

The winner of “ best retailer leadership award 2008” organized by retail

congress, Mumbai, Koutons Retail India Limited engages in the design,

manufacture, and retail of men’s wear and integrated apparel in India.

The company's strategy is to have small, but more stores. This helps to

save costs and at the same increase reach of the company. The company

has a phenomenal growth record. Its market share is excellent. So we put

it in stars.

ZODIAC

Zodiac Clothing Company Ltd manufactures, exports and imports

garments, textiles accessories etc. Zodiac has been in the apparel business

for a period of 50 years by now and is known for its quality shirts.

Zodiac, is today, the largest selling shirts & tie brand .The company then

entered the domestic shirt segment in late '80s.It employs around 3500

people in 7 manufacturing units in 16 offices located in UK, US,

Germany, UAE etc. Its continuously showing profit and has a

consistently growing export business.Market share is not that significant

as it is famous only in tie and shirt.So we place it in question mark.

HOUSE OF PEARL

It operates in 11 strategic locations in six continents. It has two brands

Kool hearts, DCC in the United States of America. The company adopts

an integrated marketing technique and has merchandising teams in

Canada, Europe, HK, UK, and US, closely interacting with existing and

potential customers at their doorstep. Both its growth and market share is

high. Therefore it is placed in stars.

HARIA EXPORTERS



It is a Star Trading Company and has won the golden status certificate in

the year 1999. This company occupies a unique place in the industry of

the by its contribution to Industrial output, employment generation and

Foreign exchange earnings. Even though the textile industry has the

distinctive advantage in respect of raw material and skilled labor, the

industry is suffering from technology obsolescence which in turn

affects the quality, productivity and cost effectiveness. In order to be

more cost efficient the company has acquired latest machinery which

ascertained exact material consumption depending upon the style and

pattern. Considering these it is placed in dog.

EVINIX

The apparel category constitutes men and women’s shirts, trousers, skirts

and tops, kids wear and nightwear. Organic cotton wear for expecting

mothers and infants is an additional strength. Evinix is setting up CUT

stores (averaging 4000-5000 sq feet) in fast urbanizing young Indian

towns. It recently launched the CUT youth style store in Rajkot. The

Rapid Retail business concept embraces the e.t.o.a.d concept i.e. the exact

time of awaited departure when the product will move out to the next best

price bracket. But market share is not that significant. So we put it in

question mark.

BANG OVERSEAS LTD

The company started the business from trading in textile and since 1998,

they are conceptualizing and designing fashion fabrics and outsourcing

the manufacturing process of the same from countries like Turkey,

Portugal, Mauritius and other European Countries. In the same year, they

launched our seasonal fabric collections in textile under the name "Body

waves", marketed through their own distribution channel to different



brands and retailers. They started their own first apparels manufacturing

unit in Bangalore in the year 2005 in the name of Reunion Clothing

Company with an installed capacity of 350,000 pieces per annum and in

the year 2006 then they started the second manufacturing unit in the name

of Formal Clothing Company with an installed capacity of 360,000 pieces

per annum. At present they have installed capacity of 720,000 and

540,000 pieces per annum at their Reunion Clothing Company and

Formal Clothing Company. Their products are presently retailed through

157 point of sales comprises of our own Retail outlets, Large format

stores (LFS) like Shoppers' Stop, Pyramid, Globus, the LOOT, SAGA

and Multi Brand Outlets (MBO) spread all over India. They cater to the

demand of various other apparel manufacturer and brands also. Taking

into account their market share and growth, we put it in stars.

Government Regulations:

Historically the textile industry in India has been reserved for the

small scale sector, which has been exempted from taxes, thus

discouraging investments in increasing scale

The government, through its various Budget announcements has

sought to rationalize taxes

Budget 2002-03: Textiles brought under the ambit of Cenvat

(credit for duties paid on inputs or capital goods) and

introduced on all yarns

Budget 2003-04: Cenvat extended across the entire textile

chain to include fabrics, made-ups and apparel; excise duty

exemptions on many sectors and processes, specially SSI

removed; excise duty rates reduced



Budget 2004-05: Cenvat made optional - every manufacturer

allowed to choose between a complete exemption from

payment of excise duty or adopt the Cenvat route; excise

duties lowered to 4% on cotton textiles and 8% on non

cotton textiles (except manmade fibers, polyester filament

yarn, nylon filament yarn) for those claiming Cenvat credit

Always government regulations aimed at improving competitiveness of

industry to face a post quota regime

Several government initiatives targeted to attract

investments:

Technology up gradation fund scheme:

Scheme launched in 1999 to provide firms access low interest

loans for technology up gradation and setting up new units with

state-of-art technology

Scheme has disbursed INR 91.61 bn till 31st December 2005

Policy related to foreign investment:

Up to 100% foreign direct investment allowed in textile and

apparel manufacturing industry, with approval of the Foreign

Investment Promotion Board (FIPB)

USD 1.02 bn of FDI in the sector approved between 1991 and 2004

Companies free to set up fully-owned sourcing (liaison) offices, as

well as marketing operations

Upgrading Infrastructure:



“Scheme for Integrated Textile Parks” (SITP), based on public-

private partnership model to build world class infrastructure

facilities

Product specific “Cluster Approach” targeting development of 100

additional clusters in textiles

Technology Mission on Cotton (TMC), focusing on cotton R&D,

dissemination of technology to farmers, improvement of market

infrastructure and modernization of ginning and pressing sector

I. The extent of rivalry among established firms

1. Industry competitive structure:

Since this industry is highly fragmented there is always high probability

during the boom phase that many new players could enter this industry

which would lead to a price war and ultimately end up with the

bankruptcy of some players or consolidation of industry. So, this is a treat

to the existing players.

But also the existing players work a lot on cost efficiencies therefore the

treat of new entrant is negated by the cost efficiencies of existing players

2. Industry Demand:

In the current scenario textile exports have declined drastically and even

in domestic demand there is a little slowdown. Due to which textile

companies are working on reducing cost by ways of reducing the work

force, decrease in operation cost etc. Also this will evoke more rivalry

among the existing players as they all will like to maintain their market

share in spite of the slump in industry

3. Exit Barrier:



This is not just a labour intensive industry but even the cost involved in

plant setup is very high along with that with the invent of many new

technologies many companies have adapted to modern techniques to

remain competitive in industry as well as to produce better products for

their customers in lesser time and with lesser cost.

Therefore because of high involvement and emotional attachment with

the business as it has been a traditional business for generations for many

companies they still prefer to stick and continue with the business. But in

the current scenario many textile mills have closed down because of deep

cut in demand and high operational cost due to severe global crisis

II. The bargaining power of buyers

Indian textile companies are facing a tough competition from

Chinese, Brazilian and South Korean companies as they are able to

produce at a lower cost compared to Indian companies

This industry is fragmented and there are large number of players

in the industry, therefore buyer get the option of choosing from

many suppliers

Indian textile industry is no more just a mass producer of textile

rather it has moved into niece segment and has developed

capability to produce finest quality of fabric which provides them

distinctive competencies against other countries as well as small

players who could cater to mass consumers only.

Therefore overall buying power of buyer will defer from company to

company. Companies like Arvind mill, Raymond, aditya Birla group

have achieved certain degree of distinctive competencies therefore with

them buying power of buyer is negated to large extent against their

competencies.



But many small companies who are mass producer of textile face a strong

buying power of buyer.

III. The bargaining power of supplier

Here again bargaining power of supplier dictated by the segment that they

are targeting to, for a niece players and companies who have achieved

operational excellence can dictate terms to buyers but for small players

who just produce for mass consumption do not have much say in the

business deal and the prices are mostly dictated by the buyer.



IV. The threat of substitute product

Textile itself is a very broader term and is a solution to a very basic need

of any human being therefore there is as such no substitute to this but

within the textile industry there are many substitutes to different category

of textiles. In India there are various types of textile produced from

cotton, silk, synthetic etc.

There is always a risk of substitution of one type with the other type also

there is constant research carried out to develop new types of textiles but

combining different textiles in different proportion. But in broader

perspective there is no substitute to textile.



Chapter -4

INDUSTRY AVERAGE



The textile readymade and apparel industry has been increasing its

operating revenues year on year at a brisk rate. The number of companies

that are in this industry has increased three folds from around 33

companies in 2008 to around 90 companies recently. This increase in the

number of companies can be attributed to the rise in the sales revenue.

Table No 9.1 Industry Average various Financial Indicators

(Rs in Crs)

Year Latest 2008 2007 2006 2005 2004

Companies No. 90 33 44 47 53 48

Sales Turnover7,419.8

9 5,606.93 5,050.624,235.8

4 2,837.85 2,235.28

Operating Profit1,026.9

1 834.69 780.71 611.91 272.65 184.65

Reported Net Profit 416.8 361.08 361.1 299.76 100.88 54.17

Source: Capitaline Database

The industry average of the key financial ratios is as follows

Table No 9.2 Industry Average of ratios

Year Latest 2006 2005 2004

Debt-Equity Ratio 1 0.99 1.19 1.02

Current Ratio 1.58 1.43 1.64 1.83

Fixed Assets Turnover Ratio 2.95 2.54 3.16 2.15

Inventory Turnover Ratio 4.44 3.77 4.54 3.35

Interest Coverage Ratio 3.97 5.56 2.97 2.77


We find that the capital Structure of the Industry has reached a position

wherein the companies are raising capital through debt and equity in the

same ratio of 1:1 the current ratio is also moving slowly up recently

despite the fall in 2006 towards the optimum ratio of 2:1. At present it is



at 1.58:1 the two turnover ratio’s namely Fixed Assets Turnover Ratio

and the Inventory Turnover Ratio are becoming high. This is a positive

sign if the turnover ratio is high. The interest coverage ratio has dropped

notably but this can be attributed to the expansion plan of companies.

Ratio Industry Average

0

1

2

3

4

5

6

Debt-EquityRatio

Current Ratio Fixed AssetsTurnover Ratio

InventoryTurnover Ratio

InterestCoverage Ratio

LATEST

2006

2005

2004


ARVIND BRANDS

Arvind Brands which is the largest producer of Denim clothing is one of

the most famous names in the apparel industry the company is known for

its huge expansion plans in future



Table No: 9.3Arvind Clothing Financial Performance

(Rs in Crs)

ARVIND CLOTHING 2004 2003 2002 2001 2000

Sales Turnover 64.71 61.2452.41 49.13 47.45

Operating Profit -1.91 2.68 0.75 5.38 6.3

Adjusted Net Profit -4.51 -0.18 -1.45 1.69 3.39


Arvind Clothing Faced a loss in the year 2004 this led to the company

deciding to sell one of its Business Units in 2006. Arvind Clothing

expansion plans and the launch of Denim products for the Indian market

can be quoted as reasons for this loss.

Table No 9.4 Arvind Clothing Cash Flow Statement

(Rs in Crs)

ARVIND CLOTHING Mar-04 Mar-03 Mar-02 Mar-01

Cash Flow Summary

Cash and Equivalents at Beginning of the year 1 0.94 0.75 1.76

Net Cash from Operating Activities 2.69 2.56 2.41 -1.54

Net Cash Used in Investing Activities -2.24 -1.21 -0.32 -0.79

Net Cash Used in Financing Activities -0.07 -1.29 -1.92 1.32

Net Inc/(Dec) in Cash and Cash Equivalent 0.38 0.06 0.17 -1.01

Cash and Cash Equivalents at End of the year 1.38 1 0.92 0.75


The cash flow clearly indicates that the loss in the year 2004 is mainly

due to the heavy cash outflow for investing activities. Company’s



accounts revealed that approximately 2.38 crores worth of fixed assets

were purchased as a part of the expansion plan.

Table No 9.5 Arvind Clothing Key Financial Ratios

ARVIND CLOTHING LTD Mar-04 Mar-03 Mar-02 Mar-01 Mar-00

Debt-Equity Ratio 2.62 1.89 1.59 1.35 0.91

Current Ratio 1.54 1.31 1.22 1.47 1.35

Fixed Assets Turnover Ratio 3.78 3.92 3.54 3.45 3.54

Inventory Turnover Ratio 2.95 2.7 2.54 2.74 3.43

Interest Cover Ratio -1.1 1.01 -0.03 1.71 3.39


The company has a very high debt ratio. This is dangerous as the

company is also spending a lot on the procurement of fixed assets. The

current ratio is however 1.58 and shows that the company has good

liquidity. The fixed assets turnover has reduced in 2004 this is

understandable as the company has purchased a lot of new assets. The

Inventory turnover however is growing at a stable pace. The interest

coverage ratio is in the negative as the company is facing losses. The

company has to depend on reserves for interest payment.

Arvind Clothin Key Financial Ratios


Surendra .c. saroj

Debt-Equity Ra-tio

Current Ratio Fixed Assets Inventory Interest Cover Ratio

-2

-1

0

1

2

3

4

5

ARVIND CLOTHING LTD

2004

2003

2002

2001

2000

71


BANG OVERSEAS LTD

Bang Overseas is a company which depends on high specialization. It

also recently issued an IPO for raising the required capital. It only

manufactures and exports men’s formal and casual wear to a restricted

number of clientele. As it depends on the business with a few clients the

company has been hit hard by recession lately. Delayed payments on

credit deliveries have eroded the operating profits of the company.

However the other non-operating income has provided some relief to

their share holders.

Key Financial Indicators of Bang Overseas LTD

Table no. 9.6

Latest Results (Rs Cr)

Period-Ended Dec-08 Dec-07 Variance [%]

Sales 28.98 29.88 -3.01

Other Income 2 0.74 170.27

PBIDT 2.13 4.02 -47.01

PBDT 0.83 2.65 -68.68

PBIT 1.59 3.72 -57.26

PBT 0.29 2.35 -87.66


It is pretty evident from the above financial indicators that the company is

facing the brunt of recession. The sales have come down by about 3% and

this has pulled the profit before tax (PBT) by around 87%. This is very

huge considering the company’s interest to expand by way of issuing

shares through its IPO. A look at the cash flow statement in Table No:

will provide an insight about the liquidity position of the company. Cash

Inflow is prominent only from financing activities and that is because of

the IPO. These are not good signs for the share holders because the



company is failing to raise cash from the operating activities and is

dependent on financing activities for its needs.

Table No9.7 Cash Flow of Bang Overseas LTD

Bang Overseas LTD

(Rs in Crs)

ParticularsMar-08

Mar-07

Mar-06

Mar-05

Mar-04

Cash Flow Summary

Cash and Cash Equivalents at Beginning of the year 1.13 1.04 0.3 0.41 0.33

Net Cash from Operating Activities -1.5 1.54 -1.58 -2.54 0.39

Net Cash Used in Investing Activities -14.73 -5.72 -7.24 -0.23 -0.12

Net Cash Used in Financing Activities 70.99 4.27 9.56 2.66 -0.19

Net Inc/(Dec) in Cash and Cash Equivalent 54.76 0.09 0.74 -0.11 0.08

Cash and Cash Equivalents at End of the year 55.89 1.13 1.04 0.3 0.41

Souce: Capitaline Database

Share market Woes

The inability to provide positive signs to the shareholder has reflected in

the share prices of Bang Overseas LTD. The share value pummeled down

along with the sensex due to recession.

However recently the company due to its high quality products is

recuperating well and the stock prices are going up.

Bang Overseas Scrip Performance Details



Source: http://money.rediff.com/companies/bang-overseas-ltd/16070099

Key Financial Ratios

The key financial ratios of Bang Overseas are given below. The Debt

Equity ratio has gone down notably because of the IPO issue in Jan 2008.

The company current ratio is well above the 2:1 ratio and is at a

comfortable 2.83:1 ratio. The liquidity position is very favorable. The

Fixed ratio is also becoming better and the fixed assets which were

purchases by the company are useful in earning operating income.

Table No 9.8 Key Financial Ratios of Bang Overseas

BANG OVERSEAS LTD Mar-08Mar-07 Mar-06

Mar-05 Mar-04


Current Ratio 2.83 2.2 3.14 3.35 3.19



Interest Cover Ratio 4.54 5.11 3.03 2.73 1.73


The inventory turnover ratio has gone down this is also understandable as

the company is design specific company which purchases goods only on



demand or on order. The interest coverage ratio has come down because

of the decrease in sales during 2008.

GOKALDAS EXPORTS

The vision of Gokaldas exports is to set a precedent in the global garment

manufacturing industry through continuous innovation, exceptional

products, focused services and enhanced customer satisfaction. In the

First Quarter of 2008-09 (Q1), Gokaldas Exports Ltd. has achieved total

revenue of Rs.272 crores which is 12% higher than the Q1 of last year

(2007-08). The stand alone EBIDTA achieved in this Quarter is Rs.30

crores as against last year’s of Rs.25.96 crores. An increase in EBIDTA

of 16% is achieved in spite of the fact that Rs.8.30 crores of Foreign

Exchange notional losses. The PAT stands at Rs.11.05 crores as against

Rs.10.52 crores of last year thereby showing the increase of 5%. This

increase in PAT could have been much higher but for the impact of Forex

volatility which have been accounted to the extent of Rs.18 crores (loss).

Both the EBIDTA and the PAT would have been much higher if the

performance would have not been impacted by the rupee volatility.

The apparel industry as a whole went through a challenge in the first

quarter of 2008 due to the thrust of recession in our major markets, rising

crude prices and unfavorable economic environment across the world.

The rising cotton prices and chemical dyes prices pose a big threat to

India’s competitiveness, in addition to the impact of inflation on wages.



Gokaldas despite being the largest exporter of garments in the country

has been impacted.

Table No.9.9 Key Financial Indicators Gokaldas Exports


Period-Ended Dec-08 Dec-07 Var [%]

Sales 273.56 281.13 -2.69

Other Income 17.18 10.53 63.15

PBIT -2.24 27.52 -108.14

PBT -15.28 19.31 -179.13


Share Market Situation

The share market position is very grim because of the huge forex losses it

suffered due the strengthening of the rupee against the dollar the scrip

value has pummeled notably in the last six months to one year because of

recession

Table No: 9.10 Cash Flow Statements of Gokaldas Exports (Rs Cr)

Gokaldas Exports LTD 2008 2007 2006 2005 2004

Cash and Cash Equivalents at Beginning of the year 3.66 1.63 19.6 28.49 4.15

Net Cash from Operating Activities 8.66 27.6 -11.83 -6.02 33.35

Net Cash Used in Investing Activities -34.08 -81.32 -145.09 -65.76 -22.02

Net Cash Used in Financing Activities 21.99 55.75 138.95 62.89 8.5

Net Inc/(Dec) in Cash and Cash Equivalent -3.43 2.03 -17.97 -8.89 19.83

Cash and Cash Equivalents at End of the year 0.23 3.66 1.63 19.6 23.98




The company is generating cash from operating sources despite forex

woes; the company has however taken a lot of debt to finance its

purchase of fixed assets. Unlike other exporters Gokaldas depends on mass

production and so is in direct competition with the Chinese counterparts. The

company is forced to invest in fixed assets to maintain its clientele as

their mission is to make deliveries on time.

Key Ratios

The key financial ratios of Gokaldas denote that the company’s capital

structure is depended more on equity rather than debt. For a company

which depends on foreign exchange and which is prone to exchange rate

fluctuations having less debt is very helpful.

Table No 9.11 Key Ratios of Gokaldas Exports

Key Ratios 20082007 2006

2005 2004





Current Ratio 1.51 1.6 1.73 1.36 1.31


The Fixed asset turnover has also reduced due to the purchase of fixed

assets. The inventory turnover is decreasing the company is making bulk

orders rather than small orders to avoid rupee fluctuations. The interest

coverage ratio is low as the company at present is at losses. The current

ratio is reducing as the company cannot recuperate its debts from its

clients.



Key ratios of Gokaldas Exports

0

1

2

3

4

5

6

7

8

Debt-EquityRatio

Fixed Assets Inventory Interest CoverRatio

Current Ratio

Key Ratios of Gokaldas Exports

2008

2007

2006

2005

2004


EVINIX ACCESSORIES LTD

Evinix Accessories is a company which was started with an aim of

exporting sports bags to the US market later it diversified and started its

own retail outlets apart from exporting apparel to the foreign markets. Its

key financial indicators state that the company despite a reduction in sales

is able to generate profits from the operating activities. Unlike other

companies it is not dependent on other income for posting profits.



Table No 9.12 Key Financial Indicators of Evinix Accessories



Sales 25.32 28.18 -10.15

Other Income 0.35 0.46 -23.91

PBIDT 1.9 5.72 -66.78

PBDT 1.31 5.02 -73.9

PBIT 1.56 5.51 -71.69

PBT 0.97 4.81 -79.83



The scrip value is recovering thanks to the retail business of Evinix Accessories

Evinix Scrip’s Performance Details

Source: http://money.rediff.com/money/jsp/company.jsp?companyCode=16490229

Unlike other players of the fashion apparel industry who are dependent

heavily on foreign clients, Evinix has its own retile outlets and this

flexibility of gaining from domestic production has helped the company

to not face the plight of huge losses due to recession which other

companies are facing.



Chart No 10.14 Evinix Scrip’s Performance at BSE for the last one year

Source:http://money.rediff.com/money/jsp/company.jsp?companyCode=16490229

Key Ratios

The key financial ratios of Evinix are given below. Thanks to the equity

capital raised in 2007 by the way of an IPO the Debt equity ratio is

coming down such a capital structure will ensure that the risk is shared by

all the share holders. This is utmost necessary in the times of downturn.

The current ratio and interest coverage ratio are favorable to the

shareholders and the return on assets has also considerably increased over

the previous years. The company however is going back to bulk orders

and so inventory turnover is reducing

Table No 9.13 Key Ratios of Evinix Accessories

EVINIX 2008 2007 2006 2005 2004


Current Ratio 2.31 2.62 1.28 0.89 1.2

Interest Cover Ratio 7.71 7.73 14.59 6.98 -2.46

Fixed Assets 5.69 5.45 7.21 9.14 1.86

Inventory 4.03 6.26 9.66 8.98 1.84

Source: Capitaline Databas


http://money.rediff.com/money/jsp/company.jsp?companyCode=16490229


HARIA EXPORTS

Haria Exports comparatively is a small player in the apparel industry. The

impact of recession is quite evident in the key financial indicators of the

company. The sales have come down by around 75% and have almost

come to one fourth of the previous year.

The company has recorded a profit of just 7 lacs in the last year and this

profit also was due to the earnings from the non operating activities.

Table No 914 Key Financial Indicators of Haria Exports



Sales 0.42 1.69 -75.15

Other Income 0.27 0.19 42.11

PBIDT 0.22 -0.38 -157.89

PBDT 0.21 -0.71 -129.58

PBIT 0.09 -0.58 -115.52

PBT 0.08 -0.91 -108.79



In February 2008 the company issued a notice to its shareholders about

the rights issue of shares. This increased the share prices in that month

but later the share prices came down drastically. Haria Exports Ltd has

informed the market that the ratio for the issue of Equity Shares on Rights

Basis is “3 : 2 shares”



Scrip Performance of Haria Ex


Key Ratios

The key ratios of Haria suggest that the capital structure is on dependent

on Thick equity. The current ratio is however only 1.83 but the ideal ratio

is 2:1. The Asset turnover is also very less and this is not a good sign.

The Inventory turnover ratio is very less which indicates that the

company buys supplies at once a not when required. The interest

coverage is at 7 and has improved thanks to the company’s increased

income from non operating income



Table No 9.15 key Financial ratios of Haria Exports LTD

Haria Exports 2008 2007 2006 2005 2004


Current Ratio 1.83 1.25 1.17 1.23 1.35

Fixed Assets 0.13 0.02 0.03 0.69 4.1

Inventory 0.4 0.04 0.06 1.22 7.58

Interest Cover Ratio 7 0 -18.85 -4.3 -0.96

KOUTONS

Koutons Retail India Ltd is the leading retailer of readymade and stylish

fashion wear brand in the country today. A company which is not only

dependent on foreign clients but is also dependent on domestic

consumption and hence the company has recorded good profits and also

an increase over the last year. Arguably this is one of the best performers

in the industry despite recession and other apparel manufacturers

suffering.



Table No 9.16 Koutons Financial Indicators



Sales 228.96 173.1 32.27

Other Income 13.35 1.7 685.29

PBIDT 43.79 31.19 40.4

PBDT 23.78 21.51 10.55

PBIT 40.14 26.95 48.94

PBT 20.13 17.27 16.56


Share Market Position

Koutons has its retail logistics in place appropriately to suit the market

needs and track the key areas which are future business opportunities.

Therefore the share market has also reacted positively to the Koutons

scrip the percent increase is more than that of the Sensex. These are

positive signs for a company in an industry plagued with falls in scrip

prices.



Chart No 10.5 Scrip Performances of Koutons at BSE


Key Ratios

The company relies more on debt rather than equity capital. The company

being in the retail business has very good liquidity as the customers in the

retail shops provide CASH ON DELIVERY (COD), this is quite evident

as the current ratio is almost ideal at 1.96:1. The company has a return on

assets ratio at around 12.7:1 and hence the company is making very good

use of the assets that it has procured.

Table No 9.17 Koutons Key Financial Ratios

Koutons 2008 2007 2006 2005 2004


Current Ratio 1.96 1.54 1.37 1.38 1.31

Fixed Assets Turnover 12.7 12.7 16.93 21.72 10.88

Inventory Turnover 1.73 1.71 2.71 5.69 2.96





ZODIAC CLOTHING COMPANY

Zodiac Clothing is another company which has notched an increase in the

sales due to the domestic orientation. But unlike Koutons due to the high

expenses that the company has zodiac has made profits only to the tune of

4.39 crores before taxation despite making a sales of approximately 72

crores. The rest 68 crores are operational and non operational expenses of

the company. It is very interesting that the company has notched up 20

percentage increase in sales. The company has to apply cost cutting

measures and it will become a leader in the fashion apparel industry.

Table No 9.18 Key Financial Indicators of Zodiac Clothing Company


Period-Ended Dec-08Dec-07 Var [%]

Sales 71.86 59.42 20.94

Other Income 5 5.62 -11.03

PBIDT 5.86 9.99 -41.34

PBDT 5.53 9.57 -42.22

PBIT 4.72 9.11 -48.19

PBT 4.39 8.69 -49.48




Share Market Position

The zodiac scrip is valued at around 192 Rs and the scrip has been

moving quite incessantly in the BSE. The stock is frequently traded one

and the volatile movements can be attributed to this reason. Feb 08 was a

time when investors expected a lot from the company when the quarter

FY1 results showed that the sales increased despite slowdown.

Zodiac has 16 offices across the world in USA, UK and Germany apart

from India. It is not only a mere exporter but it sells its brand of products

in various countries with self outlets.

Scrip Performance of Zodiac Clothing at BSE


Key Ratios

Zodiac has one of the best interest coverage ratios in the industry at

around 13:1. The capital structure however is on thick equity and debt

forms a small portion of the capital this enables the company to payback

interest. The fixed assets turnover ratio and the Inventory turnover ratio

have reduced this is something the company management has to look out

for and maintain according to the interest.



Table No 9.19 Key Financial ratios of Zodiac Clothing

Zodiac 2008 2007 20062005 2004


Current Ratio 1.6 1.57 1.45 1.33 1.39

Fixed Assets 4.13 4.22 4.42 5.48 7.37

Inventory 5.52 5.81 5.6 6.16 6.11

Interest Cover Ratio13.95 10.59 6.61 7 7.13




Chapter-5

FUTURE SCENARIO



Despite not being the market leader there are a few advantages that India

has over its competitors. These strategies will help India gain Supremacy

over other countries in specific exports.

DESIGN

Design has emerged as a source of competitive advantage in Indian

apparel exports in recent years—especially given the relatively ‘young’

export history of Indian apparel and the general image of low quality

often associated with some Indian apparel exports. As one firm who is a

major supplier for several European and US specialty stores such as Nike

explained, “When items have complicated designs with complex patterns,

many fabrics, a variety of colours -- you have to break them down. Many

different operations and techniques are required; you have to figure them

out” (Gokuldas Exports Interview 2005). When buyers have such items,

many of them tend to come to India, this firm said, rather than going to

Bangladesh or China. “A Chinese firm would probably refuse the order.

In their system, the more complicated the design, the more complicated

the line gets, and lower the efficiency. This complicates the bottom line.

It is not worth their while” – especially if the volumes are small

(Gokuldas Exports, Interview, 2005). The Chinese produce similar

products and try to exploit the economies of scale that it achieves through

mass production.

According to experts this is mainly because of the legacy of the sector’s

industrial organization—the historically small average scales of operation

in Indian apparel created the conditions for the preservation of generalist



skills—of the master tailor—at the heart of the Indian apparel industry.

These general purpose skills allow complexity to be handled cost-

effectively and flexibly given that the rigidities of too narrow a division

of labour are absent The firm mentioned above explained that Indian

firms are used to handling small-runs, and “In India We have skilled

manpower available cheaply, we have tailors who have the ability and the

willingness to do complex designs. They have been doing it for years. In

China the line workers are industrial workers – not tailors, their

production line needs relatively simple designs that can be easily broken

down and mass produced” (Interview, Gokuldas, 2005). The flatter

division of labour associated with small operations, short runs and

variable designs, has both, created a demand for general-purpose skills at

the core of the work organization, as well helped maintain craft-like skills

and a generalized design sensibility within a key segment of the apparel

workforce. (Meenu Tewari, Working Paper 2005) This is the reason why

high customization is possible in designs. In the future most of the

apparel industry will be ruled by customized products so India has a

chance to gain supremacy.

SCALING

A growing number of Indian textile and apparel firms are leveraging their

traditional capacity to handle small runs and variable designs to move

toward the flexible production of higher value, customized products, does

not mean that Indian textile and apparel firms are not scaling up, or

producing for volume-buyers like Wal Mart, or facing the growing

pressure on margins by ramping up production volumes. Despite the

assumed reluctance of Indian textile and apparel firms to scaling up in the

face of India’s rigid labour laws and lack of an exit policy, they have

invested over $700 million in new equipment, new mills and products



and expected to spend $2.5 billion more by the end of 2005 (Business

Week Online, 2004).

The average scale of production in the Indian textile and garment industry

has been rapidly inching upward in the decade leading up to the removal

of quotas. Three features are striking in this regard: (Meenu Tewari,

Working Paper 2005)

First, it was aided by the progressive liberalization of restrictions on

capacity increases by the government starting in the mid-1980s and

continuing through the 1990s and early 2000s.

Second, there has been significant forward integration by yarn-makers

and spinning mills into garments. For example, Arvind Mills, the largest

producer of blends and denim in the country and the 3rd largest denim

producer globally till recently supplied fabric to virtually every major

clothing brand in the world – Levis, Gap, Dockers and so on. Three years

ago it, integrated forward into jeans and T-shirts, investing more than $30

million in 10 new factories to increase its apparel sales (Interview,

Ahmadabad 2005, Business India 2005). The firm has set up several joint

ventures in the area of blended fabrics, and has introduced its own brands

in the domestic and export market including ‘Ruf-and-Tuf’ jeans for the

mass domestic market. Raymond’s, a Mumbai-based firm, and one of the

oldest and largest producers of suiting and shirting fabric in the country,

invested in two large, highly sophisticated, state of the art formal suit and

bottom’s factories in Bangalore in 2003-4. Even before the plants were

fully commissioned, Japanese retailers had placed orders for their entire

capacity for two years (an unusual development given the low levels of

penetration of India’s suppliers in the Japanese apparel marker).

Third, there is a growing trend of backward integration by small and

medium knitwear and garment exporters into yarn making, and



significant investments in the adoption of new technologies by firms at

every segment of the value chain. For example, Tirupur, which has been

celebrated for the past two decades as a vibrant small-firm based knitwear

export cluster can no longer be considered a predominantly small scale

cluster, as the Chairman of the Tirupur Exporters Association once noted.

“Firms have been aggressively modernizing in the last five years,

investing in the latest stitching, pattern making, cutting, embroidery, and

dyeing machines. If I buy one CAD machine today it costs me Rs.12.5

million; this itself is me well beyond the investment limit for small scale

units. At least 30 garment exporters have set up their own yarn-making

mills. The equipment is state of the art, and costly. None of the mills are

small in scale. So, Tirupur is no longer a town of small scale producers –

except perhaps some job-working garment converters.” (Interview, Mr.

Subramanian, Tirupur Exporters Association, April 25, 2005).

Finally, firms are investing in what some have called “manufacturing

services” (Berger et. al. 1997). Many firms are adopting IT-driven

production process control systems, as well as productivity enhancing

audits—particularly energy audits. Noting that energy costs generally add

up to 11-12% of total production costs, compared with 6-7% in direct

labour costs, many firms reported in field interviews that the

rationalization of energy consumption was often the first, and most

important step to cutting costs (Interviews by Meenu Tiwari, Bangalore

2005, Tiruppur 2002, 2005). Some firms reported savings of up to 30-

40% in energy costs as a result of these measures (Interview Precot Mills,

2002). Many firms have turned to captive gas-fired plants (especially the

larger firms such as Gokuldas, Karle, Orient Crafts, Raymond’s,

Interviews by Meenu Tiwari, 2005) while clustered firms such as in



Tiruppur, especially in industrial parks, have set up captive and dedicated

sources of power.

Rationalization of energy use and attempts to lower energy costs are

closely related to automation. Automation, and the deployment of

extensive electronic production tracking systems as well as statistical

process control systems to monitor work flows, is associated with efforts

by apparel and textile firms to raise productivity and lower wastage, cut

down-time, reduce rejection rates, as well as to ensure consistency.

Automation seems to be as important to firms that produce high volumes-

low-margin customers as to those who are investing in design-intensive

operations (Meenu Tiwari, 2005)

CUSTOMIZED MASS PRODUCTION

Customised mass Production has crept slowly into the Indian textile

Industry. Arvind Mills for example is the largest producer of Denim

materials. There are two famous examples of customised mass production

according to Meenu Tiwari they are

Himmatsingka Seide Limited and Welspun India Limited.

HSL has a narrow focus – it focuses predominantly on home furnishings

(curtains and upholstery) of silk for the high end export market. It is

almost entirely vertically integrated - apart from filament yarn and silk

waste which are imported from China, every aspect of the production

process – from the processing of the yarn, to designing and weaving and

finishing of the fabric is carried out in-house in a two-million-meters-per-

annum capacity plant with 115 computerized looms (the largest silk

manufacturing facility in India). It is almost entirely vertically integrated

- apart from filament yarn and silk waste which are imported from China,

every aspect of the production process – from the processing of the yarn,

to designing and weaving and finishing of the fabric is carried out in-



house in a two-million-meters-per- annum capacity plant with 115

computerized looms (the largest silk manufacturing facility in India). The

design and rapid delivery of small batches of highly customized home-

furnishing fabric that fetches high realization rates.

With typical runs of 120m to 150m per customer, HSL’s unit

values of its custom-designed products are about $US 20 per meter on

average – about 60% higher than the industry mean (Interview, HSL,

2005 and HSL company documents). These $20/m products are retailed

at $100-$120 by its clients in the EU and US. Ninety percent of these

designs are done in-house in what the firm calls its highly technically

sophisticated “design kitchen” where the company uses sophisticated

process control systems and computerized facilities to mix and match and

develop its finely detailed and finished products. The company, with 650

employees, and huge market capitalization of $160 million (nearly 5

times its annual sales of $34 million) HSL has a portfolio of 20,000

products, and introduces 2000 new products per year, on average.

(Interview by Meenu Tiwari, HSL, Bangalore, 2005) HSL strenuously

distinguishes itself from the Wart Mart model Their Philosophy “we

don’t sell to Wal Mart; we sell to Ralph Lauren Home”

Another vertically integrated company is Welspun India Limited

(WIL) Asia’s largest, and the world’s fifth largest, Terry towel producer.

WIL’s aim is to be the largest mass manufacturer of made-ups. It wants to

“replace US home-textiles giants Pillowtex and West Point Stevens as the

largest home-furnishing manufacturers” and is committed to making the

investments that it will take to do so (Asian Textiles Journal, 2005). It is

already one of Wal Mart’s largest Indian suppliers. A supplier to 12 of the

top 20 retailers of the world, its primary buyers are Wal Mart, K-Mart,

Target, J.C. Penny, Tommy Hilfiger, Shopko, Calvin Klein



The niche markets are where large volume producers like China

and Bangladesh are not threats. The theme of leveraging small production

runs, incorporating design, and technology, especially IT-based

production services, while scaling up are some of the patterns that cut

across the emerging firm strategies in the textile and apparel industry

today.

To sum up several common patterns run across the recent

trajectories of top performers in Indian textiles and apparel exports: (a) a

background in textiles, (b) recent forward integration into value added

apparel or value added fabrics (technical textiles), (c) strong use of

technology, especially software based systems monitoring protocols, and

other production and process tracking systems to streamline production,

(d) an emergent focus on design (and in some cases product

development), (e) and institutional investments in western markets—

especially in the strategic purchase of small design and distribution

networks in the major markets in the US and EU.



GROWTH JOURNEY WELLSPUN INDIA LTD



CHALLENGES FACED BY INDUSTRY

Textile supply chains compete on low cost, high quality, accurate

delivery and flexibility in variety and volume. Several challenges stand in

the way of Indian firms before they can own a larger share of the global

market (Pankaj Chandra, 2005)

Cycle Time: Cycle time is the key to competitiveness of a firm as it

affects both price and delivery schedule. Cycle time reduction is strongly

correlated with high first pass yield, high throughput times, and low

variability in process times, low WIP and consequently cost. Indian firms

have to dramatically reduce cycle times across the entire supply chain

which is currently quite high (Chandra, 2004). Customs must provide a



turnaround time of ½ day for an order before Indian firms can they expect

to become part of larger global supply chains. Indian firms need a strong

deployment of industrial engineering with particular emphasis on cellular

manufacturing, JIT and statistical process control to reduce lead times on

shop floors. Penetration of IT for improving productivity is particularly

low in this sector.

Innovation & Technology: A review of the products imported from

China to USA during January–April 2005 reveals that the top three

products in terms of percentage increase in imports were Tire Cords &

Tire Fabrics (843.4% increase over the previous year), Non-woven

fabrics (284.1% increase) and Textile/Fabric Finishing Mill Products

(197.2% increase) (FICCI, 2005). None of these items, however, figure in

the list of imports from India that have gained in these early days of post-

MFA. Entry into newer application domains of industrial textiles, nano-

textiles, home furnishings etc. becomes imperative if we are to grow

beyond 5–6% of global market share as these are areas that are projected

to grow significantly. Synthetic textiles comprise about 50 per cent of the

global textile market. Indian synthetic industry, however, is not well

entrenched. The Technology Up gradation Fund of the government is

being used to stimulate investment in new processes. However, there is

little evidence that this deployment in technology has accompanied

changes in the managerial regimes – a necessary condition for increasing

productivity and order winning ability (Chandra, P, 2004)

Domestic Market: The Indian domestic market for all textile and apparel

products is estimated at $26 bn and growing. While the market is very

competitive at the low end of the value chain, the mid or higher ranges

are overpriced (i.e., ‘dollar pricing’). Firms are not taking advantage of

the large domestic market in generating economies of scale to deliver cost



advantage in export markets. The Free Trade Agreement with Singapore

and Thailand will allow overseas producers to meet the aspirations of

domestic buyers with quality and prices that are competitive in the

domestic market (FICCI, 2005). Ignoring the domestic market, in the

long run, will peril the export markets for domestic producers. In

addition, high retail property prices and high channel margins in India

will restrict growth of this market. Firms need to make their supply chain

leaner in order to overcome these disadvantages.

Institutional Support: Textile policy has come long ways in reducing

impediments for the industry – sometimes driven by global competition

and, at other times, by international trade regulations. However, few

areas of policy weakness stand out – labour reforms (which is hindering

movement towards higher scale of operations by Indian firms), power

availability and its quality, customs clearance and shipment operations

from ports, credit for large scale investments that are needed for up

gradation of technology, and development of manpower for the industry.

These are problems facing several sectors of industry in India and not by

this sector alone.

In conclusion, competitive strategies are developed by sector level firms

and it’s their individual and collective initiatives that secure higher

market share in global trade. While one has to be ever vigilant of non-

tariff barriers in the post MFA world, the new market will be won on the

basis of capabilities across the supply chain. Policy will need to facilitate

this building of capabilities at the firm level and the flexible strategies

that firms will need to devise periodically.

SIYARAM’S SILK MILL LTD.



The Company manufactures synthetic fibers. The Company was

incorporated on 29th June, 1978 as a Private Limited Company and was

converted into a Public Limited Company on 16th April 1980. It was

promoted by Mahabir Prasad Poddar, Dhara Prasad Poddar and

Purushottamdas S.Mahasaria.

The Company commenced manufacturing activities in November, 1978.

Siyaram Finance Limited is a subsidiary of the company. 2000 -

Oxemberg, the readymade garment division of Siyaram Silk Mills Ltd,

the flagship company, Siyaram Poddar group, has set up a research and

development laboratory equipped with state-of-art technology and

imported machinery.

- The Board has approved the issue of 11,20,368 No. of equity shares at

Rs 49 per share aggregating Rs 5.48 crore on preferential allotment basis

to the promoters, their relatives, friends and their group as per the SEBI

guidelines and subject to the approval of members.

2001 - The Company has opened 216 fashion galleries in the Telangana

region of Andhra Pradesh.

2009 - Siyaram Silk Mills Ltd has informed BSE that the Board of

Directors of the Company at its meeting held on January 30, 2009, inter

alia, has appointed Shri. Dileep H Shinde and Shri. Pramod Jalan as

Additional Directors of the Company in the capacity of Non Executive

and Independent Directors



Products & Brands of siyarams

Surendra .c. saroj

SSML

DomesticSiyara

msDyed

& fancy yarn Suitin

g & Shirti

ng Fabri

c

Readymad

e GarmentsFabri

csHome

Furnishing

s

J Hamps

tead

Premium

Shirting & Suitin

g

MSDReady to

wear garments

Oxemberg

Ready to

wear garments

F2FRetail outle

ts

Institutional Sales

Exports

Fabrics

Ready made Garments

Home Furnishing

102


PRODUCTS



HOME FURNISHING

Vishal Furnishing is complete home furnishing div. Of Siyaram Silk

Mills Ltd. Yarn Dyeing, Weaving, Processing and Made-UPS units are

under one roof for better productivity and quality control.

100% Polyester, Poly-cotton, Jacquards, dobby and upholstery fabrics are

the strength of the company. We can supply furnishing fabrics as well as

made-up as per the design required by the customer.

Surendra .c. saroj

Suit, Trouser and Shirt FabricsManufacturing capacity of over 50 million metres annuallyLargest manufacturer of poly-viscose fabric in India

One stop100% Wool, woolen blends, linen, and cotton blendsSpecialized in custom finishes for Uniform FabricsSingle and bi-way stretch fabrics (Lycra ® approved)

GarmentsFormal and casual shirts and trousers Uniforms

104


Home Textiles

• Specialize in the Design and Manufacture of

– Yarn Dyed and Piece Dyed Curtain and Upholstery

Fabrics

– Jacquard, Dobby and Embroidered designs

– Available in wider width (up to 3.2 meters’)

– Flame-retardant and water-repellent finishes

• Supplier to over 300 retail stores across the country

• Regular exporter to Europe and Middle East

• Sourcing partner for Grand Hyatt, Ramada, The HNI

Corporation (U.S.A.)

INFRASTRUCTURE

AND TECHNOLOGY

. YARN DYED



• Expanding capacity to dye up to 8500 Tonnes

per annum from existing 4000 T.p.a.

• Specialized in Fancy and

Space Dyed Yarns

• Multi-fiber processing

capabilities

• Machines from Fong’s,

Weavetex and Pilot

WEAVING

• Largest weaving infrastructure in India

• Capacity to weave over 50 million metres annually

• Over 500 looms from Japan and Europe

– Somet Rapiers, Toyoda Airjets, SulzeDornier,Picanol

– Somet and Dornier

machines equipped with

Staubli Jacquards

PROCESSING

• Dying and processing capacity of

50 million metres annually

• The most versatile process house in

India

– Multi-fiber processing capability



– Capable of providing the widest variety of finishes

• DuPont accredited Lycra® testing lab

• Certified Effluent treatment facility

• Ultra modern machines including -

– Mezzera® open width scouring

– Biancalani® AIRO Quattro

– Lafer® Peaching and Sueding

– Biella® and TMT® Kier Decatising

– M.Tech® Super Finish

– Remmish® Klanwaffer and Gurnerri Calendering

– Purbang® Open Width Tumble Dryer

– Airflow®, ATYC® and Dilmenler® Jet Dyeing machines

QUALITY

• Highly trained team for Quality Control at every stage

– Yarn testing at procurement

– Grey fabric checking

– Midway process checking



– Finished fabric checking

• Follow the international 4 point checking system

• Modern yarn and fabric checking labs

• Live by the culture of Kaizen® for lean operations

• Workflow management through SAP®

Commitment to Environment

• Heavy preference on physical processes

– Minimize use of water and effluents

– Use only environmentally safe chemicals and dyes

• Certified Effluent Treatment facilities

SWOT Analysis of textile industry

Strengths

Removal of quota restrictions to give a major boost to

the exports.

Export target in textiles in 2010 at USD is 50 billion.



Low per capita consumption of textiles in India as the

world consumption is 6.8, India only consume 2.8 of it.

That’s why there is large scope of manufacturing and

exports.

Availability of the cheap labour in India would help the

development of the textiles at the lower cost.

Cost competition is not much in India as majority of

Indian population is not dependent on the big brands like

Armani, United Colours of Benetton etc, so India itself

does not hold much competition with these brands.

The large cotton production in India would lead to the

development of the textile mills in the better way, as

India does not have to import the raw material from

outside.

There are well established production bases for made

ups export as well as for domestic purpose.

Weakness

The most serious problem of the industry is the lack of

adequate processing facilities; there is over-dependence

on hand processors and traditional items.

The Indian textile industry is fragmented. Most of the

SMEs are tiny and cottage type units without sufficient

capital back-up.

The government policies in India for the textile

industries are traditional as they are not upgraded like

the up gradation of the policies for the IT industries.



The quality of wider-width fabrics for meeting the

export demand is lacking in many respects, which is

acting as a disadvantage to the growth of the industry.

The technology used in the most of the textile mills is

old enough that they can’t be modified, but there have to

be new machineries imported to give the edge in

technological advancements in this sector.

Opportunities

As per available information, the market for processed

cotton fabric will increase in the European and other

markets and, therefore, the power loom industry may

benefit and expand substantially. Further the growth in

the export segment will be mainly from cotton made-ups

and garments along with processed fabrics.

Grey fabric export is continuing to grow and will show

increasing trends.

Value added products will have greater demand and,

therefore, processing will play an important

role.

India with traditional designs and craftsmanship can

command a greater market share for niche products in

made-ups and garments.

Indian companies need to focus on the product

development and this could easily be possible as there is

the greater scope in the Indian Market.

As the new generation is keen towards the western

culture the training for especially textiles could be

provided to them and they could be encouraged to

develop the efficient sector of India.



Increased use of computer aided designing to develop

the designing capabilities of the textile. Using new

technologies and software’s ease the use of virtual

design on the computer and then choosing from various

alternatives.

Threats

Increased competition in the domestic market yield to

the development of the more SMEs which invest more to

survive in the market.

The working area of most of the industries in the textile

industries is not hygienic enough to give the workers

more comfortable area to work in. so this condition has

to be improved.

Need to revamp consumer consciousness

Chinese goods are cheap as well as the machinery

provided by them is also cheap. So the threat for the

export and designing is the Chinese Aggression over the

International market.

Continuously quality improvement is needed to make

sure that people would rely on Indian goods not on the

foreign goods.

Traditional items like terry towels are manufactured in

EOUs all over the country with superior quality. This

has been eroding the traditional markets for power loom

and handloom products forcing them to go for product

diversification.





CHAPTER 6

CONCLUSION&SUGGESTION

FUTURE PROSPECTS

The global apparel manufacturing industry is expected to grow more than

ever in times to come. According to an estimate, the global apparel

industry will reach a value of US$ 1,781.7 billion by the end of 2010. The

apparel manufacturers are now adopting new techniques to increase their

trade. New business models and competitive strategies are used to

enhance profits and growth. The consumer is more aware and more



demanding with the development of media like television and Internet.

They have more choices in quality, price and design. This is the reason

why apparel chains all over the world are focusing more on improving the

quality of the product and offering in varied range of fashion designs.

Apparel manufacturers are developing methods to keep up with the pace

of change like offering on wholesale prices to survive in the global

competition.

Though the above trends show a very positive picture but according to

some experts, the dilution of MFA (Multi Fiber Agreement)1 will make a

lot of apparel workers to loose their jobs, in many regions of USA, Asia,

Central and Latin America and these jobs will shift to China. The World

Bank report says, this will be one of the largest short-term transfers in

history. Despite these developments the apparel industry is estimated to

grow at very high pace and will provide employment to a large number of

people all across the world.

The Textiles Ministry headed by Union Textile Minister Shankersinh

Vaghela has set an ambitious cumulative annual growth rate (CAGR) of

over 20 percent to be achieved by the year 2010. This will be achieved

through aggressive exports of textile from $50 billion to $130 billion.

CONCLUSION

India is now a fast emerging market inching to reach half a billion middle

income population by 2030. All these factors are good for the Indian

textile industry in the long run. Even though the global economic crisis

seams to be worsening day-by-day, as long as economies are emerging

and growing as those in South and South East Asia, textile industry is

here to grow provided it takes competition and innovation seriously.



India has been repeatedly cited as a major potential beneficiary of the

post-quota regime. The implementation of the ATC, meant as a transition

period to full integration of the T&C sector, occurred in a back-loaded

fashion. Before the ATC took effect, a significant portion of textile and

clothing exports from developing countries to the industrial countries was

subject to quotas under a special regime outside normal rules of the

General Agreement on Tariffs and Trade (GATT). These former Multi-

Fiber Agreement (MFA) quotas, when carried over into the ATC on

January 1, 1995, represented the starting point for an automatic

liberalization process. Liberalization was to be in four stages, with half of

the integration to take place in the first three stages (1995-2005) and the

second half to take place in the final phase in 2005.Famously inward-

looking till the 1980s, the Indian textile and clothing industry has become

increasingly integrated into global markets since the late-1980s and

1990s, emerging as one of the top ten global exporters of textiles and

clothing after 1998. India’s apparel exports grew at an average compound

rate of 22% per year throughout the 1980s (Chatterjee and Mohan 1993),

and by about 13% in the 1990s (United Nations Statistical Division,

2005). By 2003, India exported more than $13.5 billion worth of textile

and apparel, up fifteen-fold from the $0.9 billion it exported in 1985,

when apparel exports were just taking off (United Nations Statistical

Division, 2005). This export growth, though slow in comparison to

exporters like China, is impressive because it occurred despite the

persistence of many of the factors that observers have cited as shackling

Indian productivity in textiles and apparel: technological obsolescence,

fragmented capacities, low scales of operation, lack of an exit policy, and

rigid labor laws. The domestic reforms of the mid-1980s were critical in

triggering growth in the apparel and textile sector. Their initial focus on

investment and technical upgrading in the textile and apparel sector



created a tier of strong domestic firms in the spinning and apparel sector

that increased investment, modernized their technical base, diversified

their product mix and over time emerged as leading exporters. Trade

liberalization of the 1990s deepened the processes that had the process of

deregulation had already begun in 1985 and thus India’s textile and

apparel industry went through many transitions and in the present context

is impressive.

Bibliography

WWW.Fiber fushicn.com

WWW.Siyaram.com

WWW.Hindustan timesnews.com

Magazine: hrm review
