The domestic RMG industry is highly fragmented in nature. There are more than 7,500
exporters registered with the Apparel Export Promotion Council (AEPC). Of these, the
turnover of more than 4,000 exporters is less than Rs.5 million. The strength of apparel
manufactures is estimated to be more than 100,000 in organized and unorganized
sectors.
Domestic Ready Made Garments market size to cross Rs 1,600 billion by 2014. India's
domestic RMG salesis expected to grow at a CAGR of 7.4 per cent to touch Rs 1,649 billion
in 2014, from Rs 1155 billion in 2009, primarily due to increasing income levels. Also the rising
preference for readymade garments vis-a-vis tailored garments will add to the
opportunities for domestic apparel manufacturers. The growth in organised retailing,
growing urbanisation and changing consumption pattern will further support the growth
of the readymade garment industry. E-=Commerce will change the outlook of textile
industry.
Garment exports to cross Rs 500 billion ($ 11.3bn) by 2014
CRISIL Research expects the exports to grow at a CAGR 3.5 percent (in rupee terms) from
Rs.427 billionin 2009 to Rs.507 billion by 2014. With the revival expected in the economies of
US and EU from 2010, exports are expected to pick up and grow at a CAGR of 4.6 per cent.
However, India faces stiff competition from other countries having low cost of production,
especially China, Bangladesh and Vietnam. Intense price competition will continue to
exert pressure on margins of exporters.
(CRISIL Research Readymade Garments Annual Review -2007)
Growth Factors for the Ready Made Garments segment
Risingincome levels - key drifvore trhe domestic apparel market:
Rising incomes have resulted in higher disposable incomes, thereby enhancing the
purchasing power of the average consumer. Also the trend of rising preference for
readymade garments vis-a-vis tailored garments, the growing liking for branded apparels
and the increasing penetration of organised retail have supported the growth of the
domestic readymade garments industry.
Increasing retail penetration - driving sales of apparels
India's organised retail is expected to grow by 15-20 per cent per annum in the next 5-6
years. Rising disposable incomes, demographic changes, change in the perception of
branded products and growing number of retail mallls, online shopping and availability of
cheap finance are providing a fillip fo the industry. Within the retail market, apparels,
footwear and consumer durables are segments with highest organised retail penetration.
This vertical also has the highest brand penetration. Of the organised retail of Rs 852 billion,
clothing and textiles have the largest share at 27 per cent.
Growing share of private labels
Organised retailers, who initially stored national brands for attracting footfalls and
generating astable revenue stream, have now begun to increase the shelf-space for their
in-store labels, also known as private labels. These own-labelled garments are
manufactured either by the retailer himself or on a job-work basis. This helps attract
footfalls over the years, which is important, especially for formats such as departmental
stores.
Increasing proportion of working females
The proportion of working females to the total female population is growing. A working
female in the house would mean higher disposalble income for the entire household. This
franslates into higher consumption expenditure, including clothing and apparel. The
working females also purchase additional garments in the form of formal dresses or officewear,
besides regular householdwear and leisure-wear.
Rising preference forready-to-wear apparels against tailored garments
The consumption pattern of Indians is shifing gradually from tailor-made garments
(stitched by a tailor out of fabrics or cut-piece purchased/chosen by the customer) to
ready-to-wear garments. The transition is primarily driven by the increasing availability of
RMG, increasing number of shopping malls. Furthermore, the consumers' aspiration to
own branded garments has also contributed to the shift from tailor-made garments to
ready-to-wear apparel.
Distribution channelsin Indian RMG industry
A distribution channel is a network of outlets through which a product is sold. The
company can sellits products through one or more distribution channels. The selection of
adistribution channel or channelsis one of the management strategies on which the costs
and revenues of the company are dependent. Apparel manufacturers either sell their
garmentsin India or export them.
Investment trends
Foreign direct investment (FDI) inflows in textiles (including dyed, printed) from April
2000 to January 2012 stood at 5,036.27 crore (US$897.79 million). Cotton Industry Cotton
accounts for more than 75% of the total fiore consumption in the spinning mills and
more than 54% of the total fibre consumption in the textile sector. Acreage under
cotton cultivation increased by 10% to 121.91 lakh hectares in 2011-12 from 111.42 lakh
hectaresin the previous season when cotton farmers got good prices. However, arise in
domestic and global cotton production and a fall in consumption due to high
inventories led to a correction in cotton prices in 2011-12. Cotton yarn prices were 30-
35% lower year-on-year by March end. However, according to a recent Fitch Ratings
report, the cotton textiles industry still faces the challenges of slower demand pick up
and loss of margins before an anticipated recovery from the fallin cotton prices. Indiais
fifth largest producer of synthetic fioer and yarn in the world. Polyester, nylon, acrylic
and polypropylene are the major synthetic fibers. Viscose, whichis cellulosic fiber, is also
included in the man-made fibers basket. MMF has beaten cottonin global textile trade,
constituting 68% of it. But India accounts for only 3% of the global manmade textile
exports as cotton dominates the Indian textile industry. Raw material prices and
availability are crucial in the MMF industry with raw materials contributing 75-85% to the
total operating cost. key raw materials used are purified terephthalic acid (PTA) and
mono-ethylene glycol (MEG) for Polyester, caprolactam for nylon, and rayon-grade
wood pulp for viscose. The prices of raw materials used for synthetic MMFs are affected
by the crude oil prices and move in tandem with the global prices. As of end 2011, India
had total capacity of 1.76 million tons of synthetic fibers and 2.19 million tons of
synthetic yarn. Polyester dominates the MMF sector with 67% share in the fiber capacity
and 94% share in the yarn capacity, followed by viscose which has 24% share in the
fibers capacity and 3% share in yarn capacity. While globally per capita consumption
of man-made fibre is around 12 kg, in Indiaiitis 3.5 kg per annum.
Advantage MMFindustry
The Fitch Ratings report said synthetic textiles benefit from substitution of higher-priced
cotton products, and a greater demand for blended textiles, although margins can turn
volatile in sync with crude oil price volatility. Fitch outlook for Indian synthetic textiles is
stable while the outlook for cotton textilesin negative to stable.
CRISIL Research expects PV yarn to grow above industry growth rate between 2011-12 to
2016-17 due to increasing application and supply constraints of cotton yamn. The agency
expects the demand for blended and non-cotton spun yarns to grow at 5.5-6.0% CAGR
during the five-year period, marginally higher than the 5.0-5.5% CAGR expected for
cofton yarn. Similarly, for blended and non-cotton fabrics, demand growth will be around
5.5-6.0% CAGR vis-a-vis 5% CAGR for cotton fabrics over the next five years.
Look around you and you can see the change taking place. India is getting younger.
Economy is witnessing robust and sustainable growth. The world is coming to India.
Average per capita income is rising. Disposable income is increasing. The great Indian
consumer revolution is strengthening its foothold throughout the country. According fo a
recent survey by Reuters and Ipsos, Indians are the world's best dressed office-goers. India
is dressing up, and how! Work wearis no longer casual. And casual wearis no necessarily
party wear. All party wear need not be solely for special occasions. Suits are no longer for
limited to special occasions. Everyday dressing is in. The trends are changing. India is
getting fashion conscious. The average lifecycle of each garment is shrinking. In such
interesting times, we have been satiating India's aspiration to dress up and look good
through an integrated world class fabric and readymade garments. Owing to our
expertise in delivering affordable and superior quality in each of our product verticals, we
believe that the opportunities are endless. In fact, there is opportunitiyn every thread.