BUSINESS PLANING AND STRATEGY ANALYSIS

TOPIC:- LEATHER INDUSTRY IN INDIA

SUBMITED BY:-ASHISH KUMARMBA(FINANCE)

3RD SEM. ROLL NO.06

GUIDED BY:-DR. J.K.SHARMA

INTRODUCTION oldest manufacturing industries catering to the

global market from the 19th century Over the years the Indian Leather Industry has

undergone drastic change from being a mere exporter of raw materials in the early 60's and 70's to an exporter of finished, value-added leather products.

Since 1991 as India adopted the globalization and liberalized economic policies, the leather industry has flourished consistently in several ways and has contributed heavily to the Indian exchequer

holding 10% of the global raw material, and 2% of the global trade.

biggest livestock producer in the world

•second largest producer next to China WITH capacity of 2.5 million employee•growth and exports, with the annual exports touching 2 billion USD.•The industry experienced a positive metamorphosis from being a transporter of raw materials to an established exporter of value added and finished leather products.•India has less than 3% share in the global trade in leather compared to China's 20%•an annual turnover of approximately US$ 5,000,000.

STRUCTURE OF INDUSTRY

Size of the IndustryIndian leather industry has capacity to produce l776 million pairs; 112 million pairs of Shoe Uppers; Non-leather footwear - 960 million pairs

Geographical distribution

Tamil Nadu - Chennai, Ambur, Ranipet, Vaniyambadi, Trichy, Dindigul ; West Bengal - Kolkata ; Uttar Pradesh - Kanpur, Agra & Noida ; Maharashtra - Mumbai ; Punjab - Jallandhar ; Karnataka - Bangalore ; Andhra Pradesh - Hyderabad ; Haryana - Ambala, Gurgaon, Panchkula and Karnal; Delhi

Output per annum Has an annual turnover of approximately US$ 5,000,000

Percentage in world market

Indian Leather Industry currently is one among the top 8 industries for export revenue generation in India, holding 10% of the global raw material, and 2% of the global trade

Market capitalization

India produces approx 700 million pairs of leather footwear every year and accounts for an 18% share of the total Indian leather export.

Overview, Export Performance and Prospects

•This sector is known for its consistency in high export earnings and it is among the top ten foreign exchange earners for the country•annual turnover of over US$ 12 billion, the export of leather and leather products increased manifold over the past decades and touched US$ 6.5 billion during 2014-15, recording a cumulative annual growth rate of about 13.10%•The leather industry is an employment intensive sector, providing job to about 2.5 million people•India is the second largest producer of footwear and leather garments in the world.

Top 10 leather export COMPANIES OF INDIA

S.NM. NAME OF COMPANY S.NM NAME OF COMPANY

1 Tata International Ltd. 6 T.Abdul Wahid & Company

2 Florind Shoes Ltd. 7 Hindustan Lever Ltd.

3 Punihani International 8 Super House Leather Ltd.

4 Farida Shoes Ltd. 9 RSL Industries Ltd.

5 Mirza Tanners Ltd 10 Presidency Kid Leather Ltd.

Strengths of Indian leather sector

Own raw material source – 2 billion sq ft of leather produced annually Some varieties of goat / calf / sheep skins command premium positionStrong and eco-sustainable tanning baseModernized manufacturing unitsTrained / skilled manpower at competitive wage levels World-class institutional support for Design & Product Development, HRD and R & D.         Presence of support industries like leather chemicals and finishing auxiliaries  Presence in major markets – Long Europe experience Strategic location in the Asian landmass

Highlights of Leather Product Segments:

•Tanning Sector – Annual production 2 billion Sq.ft. Accounts for 10% of world leather requirement•Footwear Sector – Second largest footwear producer after China. Annual Production 2065 million pairs. domestic retail market 1950 million pairs (95%) are sold in domestic market, Footwear export accounts for 45% share in India’s total leather •Leather Garments Sector – Second largest producer with annual production capacity of 16 million pieces. Third largest global exporter. Accounts for 9% share of India’s total leather export•Leather Goods & Accessories Sector including Saddler & Harness – Fifth largest global exporter. Annual production capacity – 63 million pieces of leather articles, 52 million pairs of Industrial gloves & 12.50 million pieces of Harness & Saddlery items. Accounts for 25% share of India’s total export

India’s Export of Leather and Leather products for Five years

AREA VOLUE IN MILLIONS2010-11

11-12 12-13 13-14 14-15

FINISHED LEATHER

841.13 1024.69

1093.73 1284.57 1329.05

FOOTWEAR 1758.67

2079.14

2066.91 2557.66 2945.15

LEATHER ARMENTS

425.04 572.45 563.54 596.15 604.25

Leather Goods 855.78 1089.71

1180.82 1353.91 1453.26

Saddlery & Harness

87.92 107.54 110.41 145.54 162.70

Total 3968.54

4873.53

5015.41 5937.97 6494.41

% Growth 22.80%

12.91% 18.39% 19.37%

Share of Leather & Leather Products (2014-15)

%

MARKET CAPITLISATION

•These 12 countries together accounts for nearly 75% of India’s total leather& leather products export. European Union accounts for 56% of India’s total export of leather and leather products.

•The major markets for Indian Leather & Leather Products are Germany with a share of 12.32%, USA 11.83%, U.K. 11.57%, Italy 7.76%, France 5.72%, Hong Kong 6.50%, Spain 5.41%, Netherlands 3.46%, China 2.99%, Denmark 1.29%, UAE 4.3%, Belgium 1.68%,

India’s Export of leather & leather products to different countries – 5 years

COUNTRY 2010-11 2011-12 2012-13 2013-14 2014-15% Share 2014-15

Germany 575.38 731.00 631.23 765.56 800.20 12.32%Italy 455.76 528.35 438.53 518.04 504.26 7.76%UK 505.20 543.00 606.02 664.92 751.33 11.57%

USA 348.13 439.54 526.13 680.22 768.06 11.83%Hong Kong 325.20 359.47 441.45 471.56 422.11 6.50%

Spain 247.99 296.06 267.17 308.07 351.27 5.41%France 280.04 303.84 320.81 354.72 371.75 5.72%

Netherlands 155.43 198.70 189.74 218.55 224.92 3.46%U.A.E. 74.27 109.28 126.52 180.54 281.07 4.3%

Portugal 39.62 46.55 38.35 51.84 68.39 1.05%Belgium 80.89 113.06 92.97 95.73 108.88 1.68%

China 75.48 124.75 124.36 153.57 194.26 2.99%Australia 51.81 67.84 74.16 78.31 84.66 1.30%Denmark 57.75 74.18 89.65 89.37 83.90 1.29%Sweden 31.36 44.33 45.91 50.61 46.48 0.72%Canada 29.32 40.02 45.71 51.43 59.24 0.91%

Korea Rep. 29.04 31.31 38.21 46.77 58.17 0.98%South Africa 32.14 41.18 36.07 48.16 55.04 0.85%Switzerland 25.02 33.54 30.30 32.82 37.05 0.57%

Austria 27.01 38.43 36.46 40.06 35.48 0.55%Greece 10.05 10.96 8.41 12.01 14.22 0.22%

Saudi Arabia 22.14 41.68 42.37 38.67 47.42 0.73%Japan 21.74 33.04 38.70 48.73 56.21 0.87%Russia 19.99 33.04 28.54 51.57 49.96 0.77%

Indonesia 20.15 25.24 26.82 27.17 28.95 0.45%New Zealand 5.98 7.29 7.23 9.66 12.11 0.19%

Others 399.45 521.14 572.69 725.25 968.72 15.75%Total 3968.54 4873.53 5015.41 5937.97 6494.41 100.00%

EXPORT AREA% share of various countries in India’s Leather & Leather Products Exports (2014-15)

Region-wise Export of Leather & Leather Products 2014-15 in (%)

EMPLOYMENT OPPORTUNITIES IN INDUSTRY

•Indian leather industry is set to boom with bright career opportunities in both technical and designing areas.•The Indian corporate together with foreign multinationals in this industry have made it possible to look forward to exciting employment options.•There are opportunities as designers, human resources and all the finance & marketing related jobs. The industry employs 2.5 million persons presently. •Direct and indirect employment of the industry is around 2 million•The skilled and semi-skilled workers constitute nearly 50% of the total work force.

The estimated employment in different sectors of leather industry is as

follows: Sector EmploymentFlaying, Curing & Carcass Recovery

800000

Tanning & Finishing 1,25,000Full Shoe 1,75,000Shoe Uppers 75,0000Chappals & Sandals 4,50,000Leather Goods & Garments

150000

LAST YEAR PERFORMANCE OF INDUSTRY, the export of Leather and Leather products for the financial year April-March 2014-15 touched US$ 6494.41 million as against the performance of US$ 5937.97 mn in the corresponding period of last year, recording a positive growth of 9.37%. In Rupee terms, the export touched Rs. 397091.55 mn in April-March 2014-15 as against the previous year's performance of Rs. 359246.15 mn registering a positive growth of 10.53%.

    (Value in Million Rs) Category April-mar April-mar % Variation

  2013-14 2014-15   FINISHED LEATHER 77724.70 81262.67 4.55%

LEATHER FOOTWEAR 123144.36 139255.74 13.08% FOOTWEAR COMPONENTS 19369.28 22085.68 14.02%

LEATHER GARMENTS 36067.17 36945.77 2.44% LEATHER GOODS 81911.00 88857.54 8.48%

SADDLERY AND HARNESS 8804.99 9948.29 12.98%NON-LEATHER FOOTWEAR 12224.65 18735.86 53.26%

TOTAL 359246.15 397091.55 10.53% Source: DGCI&S    

    (Value in Million US$)  

          CATEGORY APRIL-MAR APRIL-MAR % VARIATION % Share

  2013-14 2014-15    

FINISHED LEATHER 1284.71 1329.05 3.45% 20.46%

LEATHER FOOTWEAR 2035.45 2277.52 11.89% 35.07%

FOOTWEAR COMPONENTS 320.15 361.21 12.82% 5.56%

LEATHER GARMENTS 596.15 604.25 1.36% 9.30%

LEATHER GOODS 1353.91 1453.26 7.34% 22.38%

SADDLERY AND HARNESS 145.54 162.70 11.80% 2.51%

NON-LEATHER FOOTWEAR 202.06 306.42 51.65% 4.72%

TOTAL 5937.97 6494.41 9.37% 100.00%

Performance of last year in USD$

INDIAN LEATHER INDUSTRY AT A GLANCE IN 2014-2015

•The Indian leather industry occupies a place of prominence in the Indian economy in view of its substantial export earnings and growth•besides the fact that it employs around 2.5 million people. India’s leather industry has witnessed robust growth in recent years.•Almost 50 per cent of India's leather business comes from international trade.•The major markets for Indian leather products are Germany, the US, the UK, Italy, France, Hong Kong, Spain, the Netherlands and UAE. In the period April—November 2014, India's leather exports recorded a growth rate of 17.18 per cent

High Growth Ready availability of highly skilled

and cheap manpower Large raw material base Policy initiatives taken by the

Government

Lack of warehousing support from the government

International price fluctuation Huge labor force resulting in high labor

charges Unawareness of world’s fashion trend

•Major part of the industry is unorganized•Stricter international standards•High competition from East European countries and other Asian •GOVERNMENT NORMS IN TERM OF ENVIRONMENT AND WAST MANAGEMENT

•Use of e-commerce in direct marketing•Rising potential in the domestic market•Growing fashion consciousness globallyUse of information technology and decision support software

WEAKNESSES

STREANGTH

OPPORTUNITIES

THREATS

Porter’s five forces model on glance of Indian leather industry

THREAT FROM POTENTIAL INTRENCE:-•Government policies and regulations.•Required heavy investment in this industry.•Having competencies BARGANING POWER OF

SUPPLER•Limited sources of row material supply•Effective existing player•Supplier concentration fragmented.

BARGANING POWER OF BUYER •Price differentiation among companies•Many brands available for customer•Seasonal sales and discount available

THREAT FROM SUBSTITUTE PRODUCT:-•ALL MOST SUBSTITUTE PRODUCT AVAILABLERIVALRY AMONG EXIISTING PLAYER

•Brand image and customer loyalty is huge in this industry, which leads to the brand competition in advertising•Firms instead try to increase their range of products to capture more of the market

SEVERAL AGENCIES TO LOOKOUT THE INDUSTRYFOOTWEAR DESIGN AND DEVELOPMENT AGENCY(FDDI)

established under the aegis of ministry of commerce and industry, government of India is rated amongst the premier lather product, footwear , fashion, design and retail institute in the world has established his footprint worldwide by playing a pioneering role in the enhancing the skill, competency and performance of the industries globally.

COUNCIL FOR LEATHER EXPORT (CLE)the council for leather export is the single largest and apex trade promotion organization of the strong and rapidly growing Indian leather and leather products industry. CLE is committed to words the overall development of Indian lather sector.

CENTRAL LEATHER RESEARCH INSTITUTE(CLRI)the world’s largest leather research institute was founded on 24 April 1948.CLRI made an initiative with foresight to link technology system with both academy and industry

FUTURE OUTLOOKThe Government of India had identified the Leather Sector as a Focus Sector in the Indian Foreign Trade Policy in view of its immense potential for export growth prospects and employment generation. Special Focus Initiatives under the Foreign Trade Policy for the growth of leather sector.

On base of past performance industry’s inherent strengths of skilled manpower, innovative technology, increasing industry compliance to international environmental standards, Indian leather industry aims to augment the production, thereby enhance export, and resultantly create additional employment opportunitiesThe projection for export of garment has been worked based on the share it holds in the total exports of India is estimated for next 3 year is 11%, 12% and 13%

Environmental impact

In addition to the other environmental impacts of leather, the production processes have a high environmental impact, most notably due to: the heavy use of polluting chemicals in the tanning processAir pollution due to the transformation process (hydrogen sulfide during derailing and ammonia during deliming, solvent vapors).

In Kanpur, the self-proclaimed "Leather City of World" and a city of 3 million people on the banks of the river Ganges, pollution levels were so high that, despite an industry crisis, the pollution control board has decided to seal 49 high-polluting tanneries out of 404 in July 2009 In 2003 for instance, the main tannery's effluent disposal unit was dumping 22 tones of chromium-laden solid waste per day in the open.

SEVERAL AGENCIES TO LOOKOUT THE INDUSTRY 

FOOTWEAR DESIGN AND DEVELOPMENT AGENCY(FDDI) FDDI established under the aegis of ministry of commerce and industry, government of India is rated amongst the premier lather product, footwear , fashion, design and retail institute in the world has established his footprint worldwide by playing a pioneering role in the enhancing the skill, competency and performance of the industries globally.

COUNCIL FOR LEATHER EXPORT (CLE) the council for leather export is the single largest and apex trade promotion organization of the strong and rapidly growing Indian leather and leather products industry. CLE is committed to words the overall development of Indian lather sector.

CENTRAL LEATHER RESEARCH INSTITUTE(CLRI) the world’s largest leather research institute was founded on 24 April 1948.CLRI made an initiative with foresight to link technology system with both academy and industry

Conclusion

India's export of Leather and Leather products for the financial year April-March 2014-15 touched US$ 6494.41 milion as against the performance of US$ 5937.97 milion in the corresponding period of last year, recording a positive growth of 9.37%. Export of different categories of Footwear holds a major share of about 45% in India's total leather & leather Products exports with an export value of US$ 2945.15 milion. This is followed by Leather Goods & Accessories with a share of 22%, Finished Leather 21%, Leather Garments 9% and Saddlery & Harness 3%.

hart showing the Product wise Percentage Share in total exports