Most of the business stalwarts across the globe are firm believers in India’s growth story and a few global apparel giants like Brandix, MAS Holdings and CIEL Textile Group had realised India’s strength long back. This is the reason that they are successfully enjoying growth and expanding their manufacturing footprints in the world’s fifth-largest economy. This ‘Advantage India’ scenario is continuing as major apparel manufacturing groups like Jordan-based Classic Fashion Apparel Industry Ltd. Co., Hong-Kong-based EPIC Group and Korea-based Youngone are also focusing on India as an apparel manufacturing destination for them. Apparel Resources (AR) explores the elements that pushed international companies decades ago and are pushing other such companies now also to invest big time in India. In fact, apparel stalwart groups are now bullish about India in all ways.
Factors that pushed companies decades ago
For some, India’s growth story may seem to be a recent development taking place in the last 5-8 years, but as far as investment in apparel manufacturing is concerned, it’s almost 15-20 years since these giants stepped into India. Mauritius-based CIEL Textile entered India almost 20 years back, Sri Lankan apparel giant Brandix is completing almost 18 years in India, similarly, MAS Holdings is also in India for years. These manufacturers have made significant investments in India in recent years. With CIEL Textile’s wholly-owned subsidiaries, Aquarelle and Laguna India, total investments are likely to be US $ 100 million by the end of next year. The company has set up six facilities in Karnataka, which have a combined production capacity of over 14 million pieces of clothing per year. Aquarelle and Laguna India have also achieved LEED Platinum certifications for two of their six factories. Meanwhile, Brandix, also known for its many sustainable initiatives, has generated employment for nearly 22,000 people.
It is worth mentioning here that none of the companies reduced their international operations and India was/is their choice for expansion. Throughout the ups and downs that the market faced, these companies maintained a consistent pace of investment, which contributed significantly in making India a preferred destination for expansion. Despite facing challenges and uncertainties, these companies recognised the immense potential of the Indian market and continued to invest in it.
Their unwavering commitment to investing in India has not only helped to create employment opportunities but also fostered economic growth in the country. These companies have leveraged India’s vast pool of talent and resources to establish a robust foothold in the Indian market and expand their operations.
Brandix India Apparel City (BIAC), located in Atchuthapuram Mandal in Visakhapatnam (Andhra Pradesh) is one of the best examples of successful apparel operations in India by an overseas group as it has trained more than 80,000 people from the surrounding areas, with over 80 per cent of its employees being women.
Brandix had got the much-needed push with a combination of the State Government extending its fullest support and its customers seeing the early potential of ‘Made in India’ that triggered the group’s interest.
Location is a key aspect to be considered for apparel manufacturing as it includes one-factor costs; stability of power and water supply; availability and training of workers; access to markets; a customer’s need to de-risk and diversify their sourcing locations etc., to be taken into account. Keeping these points in mind, Brandix chose this location.
Suchira Surendranath, Director – Strategy and Investments, BIAC shared with AR, “The location we picked, a literal green field at that time, had plenty of people available and willing to try their hands with an apparel industry job – that is what motivated us the most. The Government agreed to take care of water, power and road infrastructure, and all we needed to do was take care of the rest. We knew that if we set up the right foundation, bring the right partners in to help make a start, the natural potential of India would help scale up the operation eventually – and we were right.”
Started in Mauritius, the CIEL Textile group later extended its operations to Madagascar and three decades ago, while the quota regime was being removed, the group did a detailed assessment of which countries they would like to diversify and India was the first choice.
Targeting mid to up-market customers, CIEL Textile found a unique atmosphere in setting up manufacturing operations in India with political and economic stability, vertically integrated textile chain across product categories, talent pool, cultural fit, a great alternative to China and ease in doing business.
And today, CIEL Textile group is one of the respected names in India with companies like Laguna, Aquarelle India (both in Bengaluru) and Tropic, Coimbatore.
Today these three companies are aggressively active on various fronts for talent and they have a partnership with NIFT, IGP. They also have a strong thrust on digitalisation including data-driven factories, automation, digital showroom and 3D and AI-driven design.
Route option works well for few joint ventures
The thrust of buyers to source more from India is pushing India’s manufacturing and this is the biggest reason why reputed companies like Classic Fashion, a Jordan-based manufacturer having a turnover of around US $ 954 million, are rapidly venturing into India. Classic Fashion is working with Walmart since 2006 which contributes almost 40 per cent of its total business. Walmart aims to purchase an overall US $ 10 billion worth of goods from India annually by 2027 and it motivated Classic Fashion to foray into India.
“We started our joint venture with three of the manufacturing facilities in Tirupur almost 20 months back, with greater push by Walmart for the same as the global retail giant wanted to increase sourcing from India and our organisation has a strong long-term relationship with Walmart,” said Sanal Kumar, CMD of the company who is expecting to add 5,000 fresh jobs in India.
Having sourcing of around US $ 15 million from India last year, which includes knitted garments, Classic Fashion will increase its revenue from India to US $ 20 million in the current fiscal.
Rather than investing in a new capacity, Sanal Kumar decided to opt for a joint venture as he found good capacity here. It helped him to save huge fresh investment and he supported already running facilities in terms of financing projects for using better technology and fabric procurement.
India – an incredible experience
All overseas companies are content with their working in India and term it as incredible.
“Our operations in India have been very successful and have far exceeded the initial expectations of the group. Laguna and Aquarelle are witnessing exponential growth and have been rapidly adding manufacturing capacities. New factories, set up close to Bengaluru, are amongst the best in the world. Top international brands are increasing their production from these factories and Tropic is a relatively younger business and is showing great promise,” informed Sarbajit Ghose, Member Board of Directors, CIEL Textile and MD, Laguna Clothing.
For Brandix also, India proved to be an incredible experience and the group is proud of its journey as what started as a single apparel plant has now grown into a fully integrated vertical textile and apparel ecosystem.
“Our manufacturing operations have evolved significantly over the years, with a focus on automation, digitisation and sustainability. Automation has led to higher productivity and better quality of output, while digitisation has enabled us to speed up processes and better integrate across the value chain. Sustainability has always been a key priority for us and we’ve made significant progress towards our goal of becoming a Net-Zero Carbon Park by 2030. We’re proud to be a zero hazardous waste-landfill park,” said Suchira
BIAC is the first industry in the state to have installed a solar sludge drying process unit that avoids the landfill of hazardous waste. Over the past 15 years, Brandix has seen its extended ecosystem beyond the boundaries of BIAC. Small junctions have transformed into bustling townships, with improved education and health facilities grooming and enticing a new generation of local candidates who can take up management roles in the company and lead it to even greater heights.
New players on their toes to explore opportunities
Youngone Corporation and Epic Group are the two globally known players who have committed to starting operations in India in the next 12-18 months. There are a few more companies that are considering to start operations in India as they are in discussion with various State Governments.
Jayesh Ranjan, Principal Secretary, Government of Telangana, Industries and Commerce (I&C) Department and Information Technology, Electronics and Communications (ITE&C) told AR, “While discussions are ongoing with more than one apparel-based overseas companies, we believe this is not the right time to get into the details as the discussions may be preliminary and/or confidential.”
The quick support of Telangana to interested investors is a perfect example of how states should support prospective investments on the ground level. And as now, PM MITRA Park is approved in the state, there are enough chances that the state will attract more investments.
Apart from the reasons which also motivated Brandix, CIEL Textile and MAS Holdings, constant improvement in the organised Indian apparel retail market is another reason for new entrants to have a strong manufacturing footprint in India. Exploring the fast-growing domestic market as an opportunity, two years ago, Laguna Clothing launched Aldeno – a luxury premium brand that celebrates fine Italian heritage and craftsmanship.
And a more recent and perfect example is MAS Holding’s JV with Tata Group’s Trent Ltd. setting up an entity in India for the joint development of the business into intimatewear and other apparel products. This partnership further aligns with MAS’ long-term intent to scale business and expand its presence in India. MAS’ design and manufacturing span across 17 countries.
About this JV, Desamanya Mahesh Amalean, Chairman, MAS Holdings said, “The significance of our partnership with Tata lies in our shared sense of values and an appreciation of the enormous business opportunities that the Indian market affords. This will help leverage our combined capabilities, connecting MAS’ expertise in product creation and manufacturing with Tata Trent’s expertise in Indian retail.”
Talking to AR, Roger Guy Young, Chief Strategy Officer, Epic Group said, “India is a good opportunity as many big retailers have their retail operations in India and they are growing, those which are still not in India will sooner or later become a part of it. Factors like huge young population and disposable income, stable Government, strong and constantly improving infrastructure are in India’s favour.”
Epic’s team is exploring various schemes of the Union Government. The group will produce both knits and woven garments in India and is expected to start operation in the second half of 2024. The focus will be to export from India as well as to cater to the Indian domestic market.
For Youngone, the push to invest in India came from Telangana’s industrial policies. Three years ago, Youngone Corporation announced to invest more than Rs. 900 crore in the Kakatiya Mega Textile Park (KMTP) in Warangal (Telangana) producing knitted and woven garments for outdoorwear and creating around 12,000 direct jobs.
It was supposed to start its operation in the state in January 2023 but couldn’t. Jayesh confirmed that the operations will commence in phases with the first unit commencing operations by the end of the year.
The company has established its Indian subsidiary and has applied for and been approved under PLI Scheme. Youngone’s Indian team as well as project management consultants are in place and they will be finalising the contractors shortly. The company intends to set up eight manufacturing units for garments and technical textiles and other value-added products.
No major challenges
Along with plenty of advantages, India does have challenges that vary from company to company. Whatever the challenges, these companies are not worried and are optimistic to overcome them.
Brandix has faced its fair share of obstacles, but thanks to the support of its stakeholders and communities, it has been able to succeed over them. One major challenge it encountered is the deterioration of the SEZ scheme it set up in India. The Minimum Alternative Tax and Dividend Distribution Tax have significantly reduced the value of the tax holidays that were initially offered and the SEZ Sunset Clause has eliminated the incentive. Furthermore, regulatory changes like the withdrawal of the MEIS scheme and the exclusion of SEZs from the RoDTEP/RoSCTL schemes have put Brandix at a disadvantage, not just in India but also internationally.
“However, we’re optimistic that the DESH bill or similar regulatory interventions will be implemented soon. We’ve had positive discussions with the Ministry of Commerce, and we believe that together, we can find solutions to these challenges and continue to grow sustainably,” said Suchira.
Sarbajit feels that the availability of workers in cities is becoming a challenge, and the group has overcome this by setting up factories in rural areas.
He also adds that the absence of duty-free access to major markets has been another challenge, but the group is confident that this will happen soon.
In the last 20 months, Sanal Kumar has not seen any major challenge in India and similarly Roger Guy Young is also confident that as overall ease of doing business is improving in India, he doesn’t see any significant challenge in the country.
Expansion plans in place
Whatever hurdles are there in India including the unpredictable global scenario, overseas companies are geared up to expand their existing operations in India. Several FTAs on the horizon and disruptions in the global supply chain are also factors pushing them to expand.
Agreeing with this, Suchira said, “As we continue to work with regulators to address SEZ-related issues, we’re also exploring opportunities for growth within the Domestic Tariff Area of the park. The textile and apparel sector in India is poised for rapid expansion.”
He further added that at BIAC, we’re well-positioned to facilitate this growth, thanks to our established integrated textile park with scalable, plug-and-play infrastructure. We have a 60MLD design capacity state-of-the-art water treatment facility, a 56MLD design capacity effluent treatment facility, a 200 MW power substation, a fully connected internal road network and BTS partners who are eager to welcome new tenants.
BIAC has two approved PLI projects in the park. Teejay India expanded its weft-knit synthetic fabric capacity as a PLI-approved project and is already in commercial production. It has also shared its learnings with the teams looking at the MITRA scheme. “Rather than looking at it as competition, we see immense potential in being able to collaborate and network with an ever-expanding ecosystem which can unleash the true potential of apparel manufacturing in India, providing unmatched value to the world in terms of speed and scalability,” said Suchira.
Laguna Clothing and Aquarelle India plan to reach the capacity level of 10 million pieces of high-end shirts, each, in the next 3 to 4 years, from the current volume of 6-7 million shirts while Tropic plans to utilise its existing capacity in the next two years, before expanding further.
“If the current demand continues, the sky is the limit in terms of further expansion,” said Sarbajit.
Sanal Kumar also states that Classic Fashion is increasing its footprint in India as so far it was supplying from India to Walmart only and now similar discussions are on with Target, a US-based retailer. In future, apart from knits, woven may also be started for India. The company’s headquarter and core production hub in Jordan manufactures just 20 per cent of woven products of the overall product basket.
He further added that it is good that working with a long-term vision, Indian Government has a strong focus on improving overall as well as textile and apparel industry-specific infrastructure. But at the same time to grow at a global level, factories have to be data-driven as still the majority of Indian factories are working in traditional ways.
“India is shaping up as a destination that most business enterprises should look upon. The country has human resources, natural resources, financial resources and most importantly India has intellectual resources. So there is absolutely nothing that can stop India and the way, Indian Government is working for the past few years, I hope that this would continue for a long while and will be a win-win for India as well as for all those investing in India,” Sanal concluded.