India’s apparel export for last seven years has been quite stagnant as it is revolving around US $ 16 billion and few of the recent news are also indicating down sentiments like rating agency Fitch downgraded the US rating to ‘AA+’ from AAA, later Moody’s downgraded credit ratings for 10 US banks. And the impact is visible on India as leading apparel manufacturing hub Tirupur’s units are facing closure due to declining orders. The situation is almost similar in North India also. But at the same time, there are some positive aspects too and interestingly some of the companies are quite hopeful about the growth. They are investing within their existing infrastructure, going for massive expansion.
Why are companies expanding despite export downtrend?
Investment in backward operations (to become cost-effective and serve the clients better); saving through sustainability; thrust on automation; exploring new markets (participating in more sourcing events); support by the Government to expand; optimism for future are some of the major factors pushing companies for investment. Few companies have invested in machines in good numbers but it is not expansion but rather reaching to their pre-Covid level like Gurgaon-based SAN International invested in 800 machines to have the same capacity it had before Covid.
A few of the companies are comparatively less impacted by low market sentiments as their set strategy is ensuring continuous growth for them. Having operations in Delhi-NCR, Paramount Products has invested in fresh capacity enhancement as it is strategising to continuously add more buyers and not to have more than 10 to 15 per cent of business with one particular brand of retailer. The export house also keeps on adding new clients and around 70 per cent of its work/collection is design-specific.
“We have more than 20 regular clients from Europe, Australia and South Africa. Working with such large and diverse client-base helps us to get regular business. Our business with Australia has also grown well and we have added new buyers also, so expansion was natural development for us,” says Dharmendra Singh, Senior VP, Operations of the company.
Investing during this scenario sounds risky but companies are taking this risk as they have expectation of market recovery. Echoing similar views, Vishnuprabu KS, JMD, KM Group (KM Knitwear), Tirupur says, “We have taken a risk of investing in the lows and now we are fully equipped when the market is reviving. Moreover, our strong association with our buyers will help us achieve our targets ethically and sustainably. All our expansion projects are nearing completion and we hope that the industry is also getting back to the new normal now.” The company, offering kidswear, womenswear and menswear, works mainly with brands of UK, US and Norwegian brands.
|Automation is focus for companies in Bengaluru
Laj Exports, Yorker, Wonder Blues and Aditya Birla Fashion Retail are few more such companies which are expanding by adding capacities.
Better future projection by buyers is also a reason for companies like Kapoor Enterprises (KBL Textiles), having operations in Sonipat and Noida, to triple their garment manufacturing capacity and enter into backward integration (fabric production). Overall the company is investing Rs. 75 crore.
“The way global buyers are looking towards India, they want to come and join and be part of the Indian growth story. We are expanding due to this strong belief,” states Saurabh Kapoor, Director, Kapoor Enterprises.
Presently manufacturing 15,000 garments per day (denims and T-shirts) and setting up a big plant in Jewar (Noida), Vamani Overseas, the Faridabad-based leading apparel exporter, has invested in 900 machines on the basis of good projection.
Strong optimism factor is further strengthened by Government support as Union Government has come up with several initiatives like FTAs with significant markets, schemes like PLI, PM MITRA. Along with such steps of the Union Government, various states too have lucrative subsidies and incentives to attract manufacturers.
“There is a lot of potential in apparel export business and it’s time for the manufacturing industry now as the Government is supporting the industry with initiatives,” says Bikash Kejriwal, VP Finance, SAPL Industries.
Working with many top brands and retailers, SAPL Industries currently has a set-up of 2000 machines in Bengaluru and by investing Rs. 70 crore, it is going to come up with two units each with 1,000 stitching machines in MP and Odisha.
|Working with many prestigious brands and retailers like Gerber, George Asda, Carters, Walmart, Target, Next, Kmart, Primark, H&M, Landmark, First Steps Baby Wear’s Odisha plant is also planning to have an integrated apparel manufacturing facility along with 1.2 MW rooftop captive solar power plant.|
The company is optimistic that since buyers are looking for capacity in India, there will be good orders coming up in the near future, so it is high time to create capacity. The construction of its units have started in Odisha while in MP, things are also in progress and it will be a plug-and-play model.
Another leading exporter, Bengaluru-based First Steps Baby Wear, the second largest babywear manufacturer in India, is investing significantly (over Rs. 200 crore) in Odisha.
Though the company has not replied to the queries of Apparel Resources, it is being said that the company’s thrust continues to be on kidswear. Apart from exports, the company also has a domestic brand Miniklub which is doing well. It is present across India with 55 EBOs and 450 MBOs. As of now, the company’s monthly production capacity is almost 10 million pieces.
The primary reason behind choosing these locations for new units is manpower availability as Bengaluru is saturated especially for new factories while people in MP and Odisha want to work in the apparel industry and they just need training. Secondly, production in these states is going to be of low cost compared to what the companies are spending in Bengaluru.
There are companies operating in domestic market and venturing to far off areas like Bihar, Odisha and MP to strengthen their supply chain and reduce cost as these State Governments are offering good subsidies. Taking these things into consideration, V2 Retail Ltd., is coming up with a garment manufacturing unit in Muzaffarpur (Bihar) and hiring for the same is in process. Out of its total 101 stores, the retailer is having around 26 stores in Bihar which is the highest after Uttar Pradesh (24).
Sustainability – key area for investment
Apart from capacity enhancement, sustainability (solar energy and ZLD mainly) is the thrust area for companies when it comes to investment. Companies want to save resources and want to present themselves as cost-effective and concerned for the environment too. KM Knitwear is further investing to support its goal of having a sustainable environment by focusing on each of its factories to have their own energy and by targeting to increase solar power capacity from 3 MW to 6-7 MW. The approximate investment would be around Rs. 7 crore for a MW of solar projects. While the payback is expected to be for 8 years.
Kapoor Enterprises is putting up zero liquid discharge (ZLD) facility too. Working with many prestigious brands and retailers like Gerber, George Asda, Carters, Walmart, Target, Next, Kmart, Primark, H&M, Landmark, First Steps Baby Wear’s Odisha plant is also planning to have an integrated apparel manufacturing facility along with 1.2 MW rooftop captive solar power plant.
|Company||Existing turnover||Future Expectation|
|KM Knitwear||750 crore||1000 crore by 2025|
|SAPL Industries||260 crore||Three-fold growth in long run|
|Kapoor Enterprises (KBL Textiles)||150 crore||300 crore in next 2-3 years|