Overall view of garment industry

1. Export - Readymade Garments
- By Manasa S.
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2. Business Model & Understanding
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3. Business Model
• Indian Ready Made Garment players employ a number of business
models.
• The two key differentiating factors with regards to these models are the
strategy to
– manufacture
or
– procure
• i.e. (purchase or outsource) apparel and the strategy to distribute it.
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4. Process Flow
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Customer Vendor
Sampling
Merchendiz
ing
Raw
materials
Production
Inspection,
Shipping
Job worker

5. Process Flow
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Job work Units
Composite Units
CMT Units (Cut Mark
Trim)
Processing Units
(Spinning, Knitting,
Dyeing, Printing, etc)

6. Export - Ready Garments 6

7. Organization Structure
CEO
Purchase
Raw Material
Stores
Admin &
Finance
Elct. Data
Process
Accounts
Export
Documents
Manager
Operation
Planning
Process
Control
Merchandizing Production
Fabric
Sewing
Sampling
QC
Marketing
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8. Statutory Benefits / Obligations
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9. Taxes, Export/Import benefits -
• Service Tax -
The Central Govt. grants rebate of service tax on the taxable services which are
received by an exporter of goods and used for export of goods, subject to the
extent and manner specified in the notification. Form A-1, A-2 are to be filed for
this purpose
– http://www.servicetax.gov.in/notifications/notfns-2012/st41-2012.htm
• Duty Drawback -
Hike in duty drawback rates by the Government would help boost the garment
sector’s exports, exporters body AEPC said on Tuesday. Duty drawback status can
be checked at the following link.
– https://www.icegate.gov.in/DocEnquiry/dbkEnq/inputCredentialsForPendingA
ction
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10. • http://www.cbec.gov.in/customs/dbk-schdule/dbk2011-12/dbk-sch-2011-12.pdf
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11. • EPCG -
Zero duty EPCG scheme allows import of capital goods for pre-production,
production and post-production at zero Customs duty,
- subject to an export obligation equivalent to 6 times of duty saved on capital
goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from
Authorization issue-date.
– http://dgft.gov.in/Exim/2000/NOT/NOT13/not0113.htm
• Fixed exchange rates -
The Central Board of Excise and Customs hereby determines that the rate of
exchange of conversion of each of the foreign currency specified in column (2) of
each of Schedule I and Schedule II annexed hereto into Indian currency or vice
versa shall, with effect from 21st March, 2014 be the rate mentioned against it in
the corresponding entry in column (3) thereof, for the purpose of the said section,
relating to imported and export goods.
– http://www.cbec.gov.in/customs/cs-act/notifications/notfns-2014/cs-
nt2014/csnt47-2014.htm
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12. Export - Ready Garments 12

13. Industry specific funds
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14. Technology Up gradation Fund Scheme - TUFS
• The Scheme mainly provides for reimbursement of 5% (4% in respect new
standalone/replacement/modernization of spinning machinery) interest charged
by the financial institutions/banks for technology up gradation projects
• The total budget outlay for continuation of the scheme will be about Rs.11,900
crore, out of which Rs. 2,400 crore have been allocated for the financial year 2013-
14.
– http://www.ministryoftextiles.gov.in/faq/faq_tuf.pdf
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15. Scheme for Integrated Textiles Parks
- SITP
• To provide the industry with world-class infrastructure facilities for setting up their
textile units, the Scheme for Integrated Textile Park (SITP) was approved in July
2005 to create new textile parks of international standards at potential growth
centers.
• Primary objective of the SITP is to provide the industry with world-class
infrastructure facilities for setting up their textile units. The scheme would
facilitate textile units to meet international environmental and social standards
– http://www.aepcindia.com/files/itp.pdf
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16. Integrated Processing Development Scheme -
IPDS
• The Scheme will facilitate the textiles industry become globally competitive using
environmentally friendly processing standards and technology and create new
processing parks. This scheme will support the up gradation of existing processing
clusters/centers specifically in the area of water and waste water management and
also encourage research and development work in the textiles processing sector.
• It is to establish four to six brown field projects and three to five green field
projects addressing the environmental issues faced by Textile Processing Units.
– http://pib.nic.in/newsite/erelease.aspx?relid=%2098910
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17. Governing Body
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18. Apparel Export Promotion Council
• Incorporated in1978, AEPC is the official body of apparel exporters in India that
provides invaluable assistance to Indian exporters as well as
importers/international buyers who choose India as their preferred sourcing
destination for garments
• In recent years AEPC has worked tirelessly in integrating the entire industry -
starting at the grass root level of training the workforce and supplying a steady
stream of man power to the industry, etc.
• Official website –
– http://www.aepcindia.com
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19. Ministry of textiles
• The Ministry of Textiles is responsible for policy formulation, planning,
development, export promotion and trade regulation of the Textiles Industry
• The Ministry has the vision to build state of the art production capacities and
achieve a pre-eminent global standing in manufacture and export of all types of
textiles .
• Various policies, schemes, initiatives have been provided by the government
through its 'ministry of textiles' which are available in the link below –
– http://texmin.nic.in/policy/policy_scheme.htm
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20. Tirupur exporters association
• Tirupur Exporters Association – popularly known as TEA - was established in the
year 1990.
• This is an Association exclusively for exporters of cotton knitwear who have
production facilities in Tirupur. From the modest beginning TEA has grown into a
strong body of knitwear exporters.
• Today, TEA has a membership of 913 Life members and 155 Associate Members. It
offers several services, for example –
– Helps in Locating suitable suppliers.
– Helps in resolving disputes.
• Official Website -
– http://www.tea-india.org/
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21. State-specific sops, concentration &
opportunities
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22. Tirupur - A case study by ICRIER
• Tirupur’s direct exports started with Italy.
• Verona, a garment importer from Italy came toTirupur in 1978 through Mumbai
exporters to buy white T-shirts. A lot of job workers were manufacturing garments
for merchant exporters. He realized the potential and came to Tirupur the
following year. Verona was the man who brought European business to Tirupur.
• On seeing the quality, others soon followed suit. In 1981 European retail chain
C&A came. A handful of manufacturer exported garment worth Rs. 15 crore was
exported in 1985.
• The next couple of year was windfall for Tirupur as exports touched Rs. 300 crore
in 1990. Thus it was in the 1980s,the export market began to expand and
subsequently Tirupur emerged as the largest exporter of cotton knitwear from the
country, accounting for roughly 80 % of the total cotton knitwear.
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23. • Tirupur Industrial Cluster development & characteristics
A cluster can be defined as sectoral and geographical concentration of enterprises
facing common opportunities and threats.
The presence of MSMEs (Medium and Small Manufacturing Enterprises) in a
cluster give rise to external economies like emergence and growth of specialized
supplier of raw material, component and machinery, sector specific skills etc
• Challenges
One of the most significant challenges for the Tirupur textile industry today is
water. Textile production, particularly dyeing and bleaching, can be water intensive
and can generate large quantities of effluent. Tirupur is in a dry, water-scarce
region, and the rapid expansion of the textile industry has taken place in an
unplanned manner,
– http://www.econ-jobs.com/research/52329-The-Emergence-of-Tirupur-as-
the-Export-Hub-of-Knitted-Garments-in-India-A-Case-Study.pdf
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24. Competition
Major market players, and their competitors are -
• KPR Mill
• Zodiac Clothing Ltd.
• Page Industries Ltd
• Lovable Lingerie
• Gokaldas Exports Ltd
• Bhandari Hosiery Exports Ltd
Comparable Financials of these companies are liked below -
“Financials”
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25. Recent deals, Trends, M&A, PE, VC
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26. Recent deals
Bangladesh the next hot spot in apparel sourcing
• As per mckinsey's survey, it was found that European and US companies that
focus on the apparel market’s value segment plan to expand the share of their
sourcing from Bangladesh to 25 to 30 percent by 2020, from an average of 20
percent now.
– http://www.mckinsey.com/insights/consumer_and_retail/bangladesh_the_ne
xt_hot_spot_in_apparel_sourcing
Exports revive at tirupur
• The Union ministry has already raised the annual export target to $43 billion (Rs
25,750 crore) from $36 bn (Rs 21,500 crore) last year for the apparel industry, as
part of a plan to leverage the sharp rupee depreciation to lift textile exports.
– http://www.business-standard.com/article/companies/exports-revive-at-
tirupur-113071200624_1.html
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27. Trends
• As China begins to lose its competitive advantage, manufacturing starts moving
to India.
– http://businesstoday.intoday.in/story/india-benefits-china-begins-to-lose-
manufacturing-edge/1/203040.html
• Gurgaon has been added as Towns of Export Excellence (TEE) for Textiles.
– http://pib.nic.in/newsite/erelease.aspx?relid=74069
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28. M&A/ PE/ VC
• A high-fashioned readymade garment industry will be established in Karnaphuli
Export Processing Zone by a Netherlands-Bangladesh joint venture with an
investment of US$ 4.10 million.
• The Bangladesh Export Processing Zones Authority (BEPZA) and Denim Expert Ltd
signed an agreement on the new venture on November 8, an EPZ release said here
on November 9.
• Prashanta Bhushan Barua, BEPZA member (Engineering) and Denim Expert Ltd
Managing Director Md Mostafiz Uddin signed..
– http://www.bharattextile.com/newsitems/2002056#ixzz2xAB9D5W2
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29. FDI
• ‘FDI in Textiles Sector’
• Department of Industrial Policy & Promotion, Ministry of Commerce and Industry,
Govt. of India.
– http://pib.nic.in/newsite/erelease.aspx?relid=%2098910
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Financial Year
Total (All Sector)
In Rs. In US$
2010-11 885.2 19.43
2011-12 1739.46 36.5
2012-13 (Apr-Jun) 238.2 4.43

30. Reporting / GAAP
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31. Significant differences
• Inventory Valuation Conventions
• The most frequently discussed difference between IFRS and U.S. GAAP is in the
treatment of inventory costing.
• U.S. GAAP allows the LIFO assumption, As prices tend to rise in most industries,
this practice results in a high cost of goods sold expense, thereby depressing
profits .
• Under IFRS, LIFO is not allowed at all While the result will be increased net income,
it will ultimately be a disadvantage to stockholders because companies will be
charged more corporate taxes.
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32. • Discretion in the Valuation of Assets
• Under U.S. GAAP, writing assets down due to “impairment” (i.e., permanent
decreases in value), is a one-way process. Once written down, there is no way that
an asset can be written back up.
• IFRS, on the other hand, does allow write-ups, and allows them to benefit income.
• Moreover, under U.S. GAAP, an acquired asset can never be increased in value as a
result of market appreciation. In contrast, based on a long-lived but rarely used UK
GAAP convention, IFRS allows assets to be written up in line with market values, as
long as the revaluation is carried out with regular frequency.
– http://www.ey.com/Publication/vwLUAssets/US_GAAP_versus_IFRS:_The_bas
ics_November_2012/$FILE/US_GAAP_v_IFRS_The_Basics_Nov2012.pdf
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33. SMC exemptions
• Accounting standards which are not mandatory for compliance to SMCs are :
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AS Name of the AS
AS 3 Cash-flow statements
AS 15 Employee benefits
AS 17 Segment reporting
AS 21 Consolidated financial statements
AS 23
Accounting for investments in associates in
consolidated financial statements
AS 25 Interim financial reporting
AS 27 Financial reporting of interest in joint ventures

34. Other Specifics -
• A lot of Compliances are to be adhered to. For example -
– Needle policy
– Safety policy
– Canteen hygiene certificate
– Pest control agreement
– municipality license
• Special magazines -
– http://indiantextilejournal.com/ (Since 1890!)
– http://www.textileworldasia.com/
– http://www.bharattextile.com/
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35. Bibliography -
• Servicetax.gov.in
• icegate.gov.in
• dgft.gov.in
• cbec.gov.in
• aepcindia.com
• bharattextile.com
• moneycontrol.com http://www.mckinsey.com
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36. Thanks for your Attention
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