2. AGENDA
Ready Made Garments Industry
Business Model
Distribution Channels
Demand In India
Industry Financial
Exports
Manufacturing Process
Policies for the Industry
Competitiveness Framework
World Market
Crisil Analysis
Conclusion
2
3. READY MADE
GARMENTS
India is the fourth largest manufacturer of garments after
China
Indian Garment Industry earned a reputation
Durability
Quality
Beauty
Changing consumer preferences - buying branded
apparel
Approximately 45% of India's total textile exports.
Indian consumer is increasingly taking to ready-mades.
3
5. Own Manufacturing - Own
Brand - Own/Other Stores
Own Manufacture - Purchased
brand - Own/Other Stores
Own manufacture
Sell to other brands
Outsource Manufacture -
Own brand - Own/Other
Outsource Manufacture
Purchased brand
Own/other Stores
5
6. DISTRIBUTION
CHANNELS
A network of outlets through which a product is
sold.
one or more distribution channels.
key strategies – decides the costs and revenues
Types of channels
Own stores
Retailers
Shopping malls or MBOs
Distributors
Factory outlets
Exports
Distributio
n
Own stores
Retailers
Discount
stores
Distributo
rs
Factory
outlets
Multi-brand
outlets
Exports
Direct exports
Overseas buying
office
6
8. INDUSTRY FINANCIAL
Garment industry players can be classified into
Manufacture garments for the domestic market.
Manufacture for the export market.
Domestic players enjoy better operating & net margins.
Exporters face intense competition from other Countries.
Growth in the domestic market was driven by rural
demand.
Key cost components of companies
Material costs – 55% (Domestic) 60% (Exporters)
Employee costs – 12% - 13%
Selling and distribution expenses – 6% (Domestic) 1%
(Exporters)
Power costs -
Other operating costs – 15% (Operating Income)
8
Raw Materials
54%
Other Operating Costs
15%
Employee Costs
13%
Tax provision and
Depreciation
10%
Others
8%
Domestic Cost Structure
Raw Materials
68%
Other Operating Costs
18%
Employee Costs
2%
Tax provision and
Depreciation
8%
Others
4%Exporters Cost Structure
14.8
16.3
17.1
15.9 16.6 17
-11.1
7.4 7.9 8.2 8.5
10.7
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Operating Profit margins
Domestic Margin Exporter Margin
8.1
9.7 10 10 9.6 9.7
-17.5
0.4
-3.7
1.6
2.7
5.6
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Net Profit Margin
Domestic Margin Exporter Margin
26.1
16.2 17
19.5 20.3
23.2
-14.7
7.4
1.8
12.7
10.4
17.3
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Return On Capital Employed
Domestic Margin Expoters Margin 3.9
1.6
1.3 1.2 1.1 1.1
3.7
2.3
1.9
3.5
2.7
3.1
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Asset Turnover Ratio (times)
Domestic Margin Expoters Margin
9. EXPORTS
EU imports growing at 8 per cent y-o-y in first half of 2014
India's exports to EU expected to grow by 9-10 per cent y-
o-y,
India's export are expected to grow by 7-8 per cent in 2015
US imports expected to grow by about 3 per cent in 2014
India's exports to US are projected to grow by 5 per cent y-
o-y
Economic recovery resulting in demand growth in US and
EU
9
26
20
5253
36
32
21
43
10
2009 2014 2019(p)
Break up of Exports(%)
US EU Others
8.6 9.5
-3.6 1.7
6.5 5.5
2.8
10.3
-13.6
2.6
9
8
2010 2011 2012 2013 2014e 2015p
Imports vs Exports (EU)
EU's Imports India's Exports
13.1
8.8
-1.1 3.9 3
3.5
9.3
6.6
-8.3
5.6
5.1
5
2010 2011 2012 2013 2014e 2015p
Imports Vs Exports (USA)
US's Imports India's Exports
11. POLICIES FOR THE
INDUSTRY
Foreign trade policy for the period 2015 to 2020
1st April 2015 for the period 2015 to 2020.
A framework for increasing exports of goods and services.
Provides a framework for increasing exports of goods and services.
Policy introduced two new schemes :
Services Exports from India Scheme (SEIS)
Merchandise Exports from India Scheme (MEIS)
Granted duty scrips of 2 % for cotton textile and 5 % for
handloom.
2% inc.entive for man-made fiber yarn and woven and knitted
fabric.
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12. COMPETITIVENESS
FRAMEWORK
CRISIL Research has identified and analysed 10
factors.
Broadly divided into three broad parameters:
Policy parameters.
Market parameters.
Efficiency parameters.
Garmenting is a labor intensive process.
Second largest cost head.
Exports also depends on factors
Market diversification.
Product diversification.
Factors Considered and weights assigned
Weightage
Policy Parameters 25
FTA and other access policies 15
Supportive govt policies 10
Market Parameters 25
Export markets' diversification 5
Product diversification 10
Growth in key markets 10
Efficiency Parameters 50
Labour cost 20
Scale of operations 10
Infrastructure 10
Availability of raw material 10
Total 100
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13. WORLD MARKET
Indian exporters have not benefited from quota
elimination
55 per cent of overall readymade garments
China
Bangladesh
Vietnam
India
Indonesia
Turkey
Cambodia
475.8
177.5
22.9 18.7 15.4 14.6 7.7 5.8
Country - Wise exports (2013)
Exports($ billion)
13
14. CRISIL ANALYSIS
China leads RMG trade export trade – 1/3rds of exports
India's market share has stagnated
Competitive cost structures
Labour costs
Preferential trade agreements
Labour cost, preferential trade agreements are key factors
India less competitive than Asian peers
Does not have free trade agreements
Small scale of operations is a big drawback
Archaic labour laws prevailing in the country
Not able to cater to varying demand through the seasons
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15. CONCLUSION
India is blessed with ample raw materials
Only garment exporter in the world that is cotton surplus.
India has gained exposure to some of the growing markets.
In 2013 and 2014, orders shifted from Bangladesh to India.
Enabled a 12 per cent recovery in India's exports.
India should focus on the following
Diversify its products across fabrics.
Expand the scale of operations.
Improve labour cost structure.
Reform labour laws.
Entering into favorable trade agreements with its major export
markets.
15