1

Indian Textile Industry -

The Golden Decade
2011-2020
Presented by:
Alok Industries Limited
May 2012
2
Contents
Growing Global Textile Trade and trend
China Domination - Whether sustainable ?
Overview of Indian Textile Industry
Golden Decade for Indian Textile Industry 2011-2020
Yes India
Conclusion
Growing Global Textile Trade
and Trend
4
Global Textile Trade Has Grown Significantly Over
The Years And Expected To Grow Further
Quota Phase Out
Regime
Post Quota
CAGR : 5.6%
CAGR : 8.6%
Global
Slowdown &
Recovery
-1.2% Growth
CAGR : 5%
The Way Ahead.
In USD Billion
CAGR: 6%
E: Figures of 2010 have been estimated based on US & EU imports for 2010
P: Projections
Source: WTO, OTEXA, Eurostat, Technopak Analysis
CAGR : 5.5%
5
Major production hubs Major consumption hubs
Textile Production Has Gradually Shifted From Developed / Western
Countries to Developing / Asian Countries rapidly in the Last 10 Years
Asian countries like China and India apart from being production hubs have also emerged as
strong consuming base in the last 5 years
6
Source: WTO
Top Exporters & Importers of Textiles and Clothing
Top
Exporters
1990 1995 2000 2005 2010
Value % Value % Value % Value % Value %
China 28.3 13.3% 49.3 15.9% 78 22.0% 132.8 27.5% 216 35.9%
EU - 27 91.6 43.2% 110.7 35.7% 101 28.3% 148.3 30.7% 166 27.6%
India 4.7 2.2% 8.5 2.7% 10.2 2.9% 16.1 3.3% 24 4.0%
Turkey 4.8 2.3% 8.7 2.8% 10.2 2.9% 18.9 3.9% 22 3.7%
USA 7.6 3.6% 14 4.5% 19.6 5.5% 17.4 3.6% 17 2.8%
Others 75 35.4% 118.9 38.4% 137 38.5% 149.5 31.0% 157 26.1%
Total 212 100.0% 310 100.0% 355 100.0% 483 100.0% 602100.0%
Top
Importers
1990 1995 2000 2005 2010
Value % Value % Value % Value % Value %
EU - 27 107 50.6% 131 42.4% 129 36.3% 195 40.3% 237 39.4%
USA 33.7 15.9% 51.8 16.7% 82.1 23.1% 103 21.2% 105 17.4%
Japan 12.8 6.0% 24.7 8.0% 24.7 7.0% 28.4 5.9% 34 5.6%
China 5.3 2.5% 11.9 3.8% 16 4.5% 17.7 3.7% 20 3.3%
Canada 4.7 2.2% 5.9 1.9% 7.8 2.2% 10.3 2.1% 12 2.0%
Russia - - 1.4 0.5% 3.9 1.1% 10.5 2.2% 11 1.8%
Others 48.2 22.7% 82.9 26.7% 91.6 25.8% 119 24.6% 183 30.4%
Total 212 100.0% 310 100.0% 355 100.0% 483 100.0% 602 100.0%
7
Source: WTO
Top Exporters and Importers of Textiles and Clothing - 2010
Top 5 Exporters 2010 Textiles Clothing Total Amount Total %
China 87 129 216 35.9%
European Union 67 99 166 27.6%
India 13 11 24 4.0%
Turkey 9 13 22 3.7%
United States 12 5 17 2.8%
Others 63 94 157 26.0%
Total 251 351 602 100.0%
Top 5 Importers 2010 Textiles Clothing Total Amount Total %
European Union 73 164 237 39.4%
United States 23 82 105 17.5%
Japan 7 27 34 5.7%
China 18 3 21 3.3%
Canada 4 8 12 2.1%
Others 126 67 193 32.0%
Total 251 351 602 100.0%
8
World Cotton Scenario
World Cotton Production is about 24870 mn. Tonnes and world consumption of cotton is
about 24460 mn. Tonnes
Major Producer and consumption centre are as under
Country Production Consumption Exports Imports
China 6400 9600 30 2610
India 5770 4550 1170 85
USA 3940 850 3130 -
Pakistan 1910 2200 130 310
Brazil 1960 990 435 150
Turkey 450 1250 - 750
Sub-total 20430 19440 4895 3905
World 24870 24460 7600 7600
% of top 6
countries
82.2% 79.5% 64.4% 51.4%
Mn. tonnes
9
World per capita consumption of fibre
World all fibre per capita consumption in 2011 is estimated at 11 kg. of which cotton is
about 3.5 kg representing about 32% of the total consumption
Per capita consumption of North America is about 31 kg., West Europe is about 22
kg., China is at 17 kg. and India is about 7.5 kg.
The growth in per capita consumption of cotton fibre is more or less stagnant
With growth in world population and increase in consumption of textiles in the emerging
economies, the polyester fibre is likely to be the most cosuming fibre
China Domination Whether
sustainable ?
11
China Dominates
China is the leading sourcing base for textile and apparel with a majority share of about
35% of global exports
China
36%
EU
27%
Turkey
4%
India
4%
US
3%
Others
26%
Source : UN Comtrade
Country-wise Break up Global Textile and
Apparel Export Market Share (2010)
Source : Technopak Analysis
P
e
r
c
e
n
t
a
g
e
4
13
16
22
28
36
-
5
10
15
20
25
30
35
40
1980 1990 1995 2000 2005 2010
China's % Share Increase
12
China is the worlds 2
nd
largest economy with a GDP of USD 5.8 trillion and growing at a
CAGR of 10%+
As a natural transition to developed economy, China concentration on high end
industries is increasing and textile is not as focused industry as it was 20 years back
Textile is a energy consuming industry. China has started facing problems for generation
of power due to environmental concerns. China is a major contributor to CO2 emissions.
According to CDIAC (Carbon Dioxide Information Analysis Centre), Chinas CO2 emissions
reached 8.2 mn. tonnes almost 25% of world wide emissions. This has seriously impaired
Chinas ability to grow further in textiles
With rising per capital income, China is becoming self consuming economy. Huge
Domestic consumption growing at a CAGR of about 13% likely to impact Chinese ability
to export
China Transformation to Developed Economy
13
China - Present Challenges Labour Cost
Rising Labour Cost
Increase in Labor cost Chinese average wage cost is about USD 450
pm vis--vis India which is about USD 200 pm
Higher Ageing Population
As per World Bank study over 23% of Chinas population is expected to be over 65 years of
age by 2020. A fast ageing population and one child policy would cause wage inflation to
rise at an even brisker pace which is averaging about 18% p.a.
14
Chinese Yuan appreciated about 3.4% in the current fiscal as compared to rupee which
depreciated 24.70% - making Indian textile products more competitive
China - Present Challenges Yuan Appreciation
80.00
100.00
120.00
140.00
Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12
%

C
h
a
n
g
e
USD/INR USD/CNY
15
Chinas Exports May Be Constrained In
FutureCreating Opportunities For Others
USD Billion
China will remain
the biggest exporter
but with rising costs
and rising domestic
demand, it may
cede some export
opportunity
China T&A Industry Size Some Projections
China will add
~USD 315 Billion
to its domestic
apparel demand
by 2020
50
Chinas
Constraints
Source: National Bureau of Statistics
, China, Technopak Analysis
Overview of Indian Textile
Industry
17
Importance of Textile Industryto Indian economy
Second largest producer of textiles and garments after China
Second largest producer of cotton in the world
Second largest employer in India after agriculture Direct Employment to 35
mn. people
Constitutes about 12% of Indias exports
Contributes about 14% to Industrial production
Contributes about 4% to GDP
Investment made in Textile sector since launch of TUFs scheme is Rs. 208000
crores till June 2010
Indian Textile Industry Size - 2010
Source: Ministry of Textiles India/Technopack
USD bn.
18
Indias Strength & Weaknesses in Textiles
Strength
Long textile tradition
Large pool of skilled and cheap work force
Entrepreneurial skills
Efficient multi-fiber raw material manufacturing capacity
Large domestic market
Enormous export potential
Very low import content
Flexible textile manufacturing systems
Weaknesses
Use of outdated manufacturing technology
Huge unorganized and decentralized sector
Poor supply chain management
Power and other infrastructure constraints
Lack of Effective Labour Policies
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Source: Ministry of Textiles
The fabric production has steadily improved in the last decade. The fabric production has
grown at a CAGR of 5% over the last 10 years. Cotton fabric is constituting about 50% of
total fabric production
Indias Fabric Production
20
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1995-1996 1999-2000 2004-2005 2010-2011
Cotton Yarn
Blended
100% Non Cotton
Total
Sector Wise Production of Yarn (Qty. in Mn. Kgs)
Year Cotton Yarn Blended
100% Non
Cotton Total
1995-1996 1788 395 195 2378
1999-2000 2204 621 221 3046
2004-2005 2272 585 366 3223
2010-2011 3491 796 427 4714
74.06%
16.89%
9.06%
2010-2011
Cotton Yarn
Blended
100% Non Cotton
Indias Yarn Production
21
Government Incentives
Government policies have largely been favorable to the textiles industry. The
policies aim to ensure that the industry is internationally competitive in terms of
manufacturing and exports
Besides providing various schemes, there are various other statutes, including
fiscal policies (governing customs, excise, sales tax, etc.), rules, initiatives,
incentives, etc through which government extends support to the industry
Various government schemes for textiles
Technology Fund Upgradation Scheme (TUFS).
Scheme for integrated Textile Parks (SITP).
Group Workshed Scheme (GWS).
Group Insurance Scheme for development of Powerloom sector.
Integrated Scheme for Powerloom Cluster Development.
Marketing Development Programme for Powerloom Sector etc.
22
Raw Material Price Chart - Cotton
This year the cotton crop is likely to be at record level of 356 mn. bales (325 mn. bales in
previous season) due to the increase in the area under cultivation and better farm yield.
Also, the world production is likely to increase by about 8% to 26,879 mn. tons (24,879 mn.
tons in previous season). Hence, the prices of cotton are likely to be on a lower side during
this season
0
10000
20000
30000
40000
50000
60000
70000
(`/Candy)
Shankar 6 rate from April 2011 to May 2012
S - 6
23
Raw Material Price Chart PTA & MEG
Raw material prices of PTA and MEG were hovering around USD 1,400 and USD
1,200 per metric tons respectively during April 2011. PTA and MEG prices started to
taper down from September 2011 and reached a low of USD 1,065 and USD 966
per metric tons
0
200
400
600
800
1000
1200
1400
1600
(US$ per MT)
MEG Price (AVG) PTA Price(Avg)
24
The Indian textile industry is largely small and fragmented and organized players
constitutes only 5% of the industry
The smaller players (SMEs)have been badly impacted in the current scenario on account
of the following
Sudden drop in prices of cotton, for example Shankar 6 variety of cotton came down
from about Rs. 57,000 per candy to Rs. 33,000 per candy
Sudden depreciation of Indian Rupee vis--vis US$ from about Rs. 44.62 levels in
April 2011 to Rs. 53.62 levels in December 2011, thereby representing a fall of
20.17%
Slow down in Indias major export market viz. USA & Europe, resulting into
consolidation of sourcing; thereby affecting the smaller players in terms of loss of
business
In Coimbatore / Tirupur and other southern belt, the power supply from the grid is
erratic and most of the time the units have to run on DG sets; resulting in power cost
of Rs. 8 Rs. 9 per unit; making them unviable
Higher interest cost regime; thereby smaller units already impacted by the other
factors are not able to sustain such increase
Impact of Current Global Economic Scenario
Golden Decade for Indian Textile
Industry 2011-2020
26
26
Indian Textiles- Major Domestic Growth Drivers
Increasing retail penetration Textiles and clothing retail comprise 40% of organised
retailing in India. Share of organised retailing to increase from about 5% currently to about
24% by FY 2020
Higher disposable income The per capita income of the masses has been increasing
regularly and is estimated at USD 1200 p.a leading to consumption of Textiles increasing at
11% CAGR
Higher level of working women-Propensity to spend in the case of working women is
higher by around 1.3 times as compared to a house wife. It is estimated that the
population of working women has increased to around 32% in FY 2010 from 26% in FY
2001
Increase in nuclear families average hose hold size has decreased to about 5.0 in FY 2010
from 5.36 in 2001. As a result, per house hold consumption is increasing
Favorable demographic profile-The percentage of earning population (15-60 years) in the
total population is rising. This group is about 60% of the total population
27
27
Indian Textiles- Major Domestic Growth Drivers
Higher growth in urban population-The urban population is growing gradually. The
favorable demography coupled with rising urban population and income levels will act as
a key growth factor for the Indian textile and apparel Industry
Increased usage of credit cards
Sustainable real GDP growth outlook of around 8% p.a., increasing industrial output, rising
disposable income, vibrant construction activity etc., to drive demand for home textiles
Hotel room demand is expected to grow at 10% p.a. for next 5 years necessitating
addition of room capacity driving demand for home textiles
Health care delivery market to grow at 13% p.a. over next few years, creating demand for
more hospitals ( to boost demand for home textiles and work wear
Rising disposable income in the hands of rural consumers due to rising agriculture income
and increased employment generation to drive the demand of basic textile products
28
Therefore Indias Domestic Market Will Grow Substantially
USD Billion
Indias USD 52 Billion Domestic Textile and Apparel industry has the potential
to grow @ 11% CAGR to reach USD 140 Billion by 2020
CAGR 11%
Source: Technopak Analysis
E: Estimated
P: Projected
29
29
Total
US$ 30 bn
INR cr 1,39,330
Total
US$ 47 bn
INR cr
2,18,570
Total
US$ 52 bn
INR cr
2,46,000
Total
US$ 89 bn
INR cr 4,18,670
Total
US$ 140 bn
INR cr
6,56,6000
Apparel
US$ 22bn
INR Cr
1,01,000
Apparel
US$ 33 bn
INR cr
1,54,000
Home Textile
US$ 2 bn
INR Cr 10,000
Home Textile
US$ 3.5 bn
INR cr 15,570
Technical
Textiles US$ 6
bn INR Cr
28,330
Technical
Textiles US$
10.5 bn
INR Cr 49,000
Apparel
US$ 36 bn
INR cr 1,70,900
Apparel
US$ 61bn
INR cr 2,88,,800
Apparel
US$ 100bn
INR cr
4,70,,000
Home Textile
US$ 4 bn
INR cr 17,000
Technical
Textiles US$ 12
bn
INR Cr 58,100
2005 2009 2010(E)
Technical
Textiles US$ 22
bn
INR Cr 1,03,140
Home Textile
US$ 6 bn
INR cr 26,650
2015(E) 2020(E)
Home Textile
US$ 9 bn
INR cr 40,000
Technical
Textiles US$
31 bn
INR Cr
1,46,000
Indian Textiles- Domestic Growth
30
30
Indian Textiles- Export Growth Drivers
Textile manufacturing continues to shift to low cost Asian countries
Increasing cost of labor, scarcity of raw material and other key resources like
power, rising domestic demand is restricting Chinas ability to further increase
its share in the world trade thereby making it as fourth largest importer of
textiles
Buyers need to diversify sourcing risk
Availability of raw materials, especially cotton, integrated operations and design
skills in India
Favorable demographics, rising income and population levels, and rising retail
penetration in other developing countries (other Asia countries, Latin America
etc.)
31
HenceGood Opportunity for India to Increase
Exports
4.60
11.40
15.00
20.40
24.12
45.00
80.00
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
1990 2000 2005 2008 2010 2015 (P) 2020 (P)
India Textile &Apparel Export Trend & Future Potential
USD Bn
Source: Ministry of Textiles , Technopak Analysis
E: Estimated
P: Projected
Yes India
33
Strong Economic Fundamentals
Politically stable
Fast paced infrastructure development
High growing economy average 8%
Skilled and qualified manpower
Increasing technology adoption
34
Integrated Textile Set Up
Garmenting
Knitting
Weaving
Processing
Technical
Textiles
Spinning
Converting
Unit
Cotton / Man
Made Fibre
Fibre Yarn
Manufacturing
Fabric Manufacturing /
Technical Textiles
Garment
Manufacturing
India is amongst the few countries in the World which has presence across the
textile value chain
35
Availability Of Raw Material
One of the largest producer of raw cotton
One of the largest producer of cotton yarn
One of the largest producer of cellulosic fibre / yarn
One of the largest producer of silk
One of the largest producer of synthetic fibre / yarn
One of the largest producer of jute
India is amongst the largest producer of fibres
36
Emergence of Large Organised Players
Indian companies are growing and adding scales
Values in USD Mn
2005 (India) 2012 (India) 2011 (China)
Arvind
Vardhman
Alok Ind.
Raymond
RSWM
362
436
329
301
221
Company Turnover
Alok
Vardhman
SKNL
Arvind
Trident
1,716
755
677
674
531
Company Turnover*
Welspun 500
Weiqiao
Fountain Set
Texwinca
2,325
975
1,523
Company Turnover
SKNL 199
Gokaldas Ex 195
Abhishek 169
Nahar Ind 155
BRFL
RSWM
Sutlej
435
385
305
Mandhana 161 Welspun 147
Source: Technopak Analysis * Reported turnover for the financial year 2011-12 considering
1 $ = ` 51.85 as on March 31, 2012
37
Indias Exports and Imports vis--vis other competing
countries
USD bn.
Most of the competing countries are importing textiles and exporting clothing. India is the
least importer of textiles implying self sufficiency in textiles
38
Segment Additional
Production
Additional Capacities Required Investment required
In Rs, Crores In US$ Bn.
Spun Yarn 3.9 Bn. kg New Spindles 13.6 million
Modernized Spindles 8 million
42,000 9
Filament yarn 5.8 Bn. Kg Production from modernized capacity 0.5 Bn.
Kg
Production from brownfield expansion 4.2 Bn.Kg
Production from greenfield projects 1.1 Bn.kg
31,000 7
Weaving 50 Sq. m. New Shuttleless Looms 77 thousand
Second hand Shuttleless Looms 65 thousand
Semi-automatic 2 Lakhs
Plain 2.35 Lakhs
37,000 8
Knitting 76 Bn. Sq.
m.
New Machines 84 thousand
Second hand Machines 56 thousand
25,000 5
Processing 95 Bn. Sq. m 90,000 19
Garment and Made-
ups
38 Bn. Pcs Machines required 21 lakhs (for 2 shift working) 65,000 14
Technical Textiles 30,000 6
Total 3,20,000 68
In order to capture the additional market (US$ 150 Bn) created for Textile and Apparel by 2020, investments to
the tune of Rs. 3,20,000 crores (US$ 68 Bn) across the textile supply chain will be required
Investments Required in the Textile Supply Chain by 2020
Source: Technopak
39
Expected Future Trend in Indian Textiles
Traditionally Indian Textile Industry is mainly cotton textiles due to cotton surplus
situation of India and governments attempt to promote cotton textiles to protect farmers
and accordingly the government levied heavy duty on polyester
The government also supported small and medium players in segments such as
weaving, garments and knits for creating job opportunities. This led to growth of small
and fragmented units
However, the textiles scenario has changed significantly in the last decade and more after
removal of quota from December 2004. Government has liberalized the textiles sector
and has taken several measure like TUFs, to promote large and integrated textile units
The future growth in textiles would be driven by organised players and their share is
expected to increase from the present 5-6% to about 15-20% by 2020
Similarly, the government has softened their stand on polyester and duties in polyester
have been brought down to 12%
In the last two years, cotton prices have increased considerably from about Rs. 17,000 per
candy to about Rs. 35,000 per candy. As a result typical cotton yarn of 40s count ( Rs.
215/ kg) is more than twice of typical polyester yarn of 80 denier texturized yarn( Rs. 100/
kg)
40
Expected Future Trend in Indian Textiles
Moreover, Indias cotton surplus situation is likely to be over in next 3- 4 years with rising
domestic consumption and exports
As a result cotton prices are likely to move further and people by force would move
towards blended fabrics
This would lead to considerable growth in polyester segment
Sector Asset Turnover Net Working
Capital days
ROCE
Integrated Cotton Textile Mill 0.4 times 100 days 12.0-13.0%
Integrated Polyester Yarn
manufacturer
2.25 times 60 days 27.0-30.0%
Further in terms of return on investments, polyester is more desirable as indicated below:
0
500
1000
1500
2000
2500
2007-08 2008-09 2009-10 2010-11 (E) 2011-12 (P) 2012-13 (P) 2013-14 (P) 2014-15 (P) 2015-16 (P)
M
i
l
l
i
o
n

K
g
POY demand forecast
Domestic Export
1510
1560
2360
41
Conclusion
India has unique position in global textile industry due to strong manufacturing
base and is now emerging as a strong consumption base as well
Domestic consumption would be major driving force for textiles backed by strong
economic growth prospects and growing per capita income
Indias inherent strengths like a strong textile infrastructure along with high
service capabilities makes it a preferred sourcing destination
The traditional players like China are getting stagnated and other major player
Europe is on a decline. Other competing nations are at a far distance, thus clearly
giving India a superior platform to grab additional market share
The organized sector is all poised to play major role in making India a leading
textile hub
Indian Textile Industry is all set to witness almost 3 times growth in the next
decade from USD 78 bn. to USD 220 bn.
Indeed this decade promises to be the best ever decade for Indian Textile
Industry and therefore may be regarded as the golden decade