Perspective on Indian Textile and Apparel Industry

Arvind Singhal
Chairman & MD

Technopak Leadership Forum, Mumbai

6th October, 2009
Contents

Current status of Indian textile & apparel market

Evolving domestic consumption scenario

Yet Untapped opportunities in domestic apparel market

Strategies to develop competitive and sustainable business

|2
India’s large textile & apparel industry…

Indian Textile and Apparel Market

US $ 62 Billion
INR 265,500 Crore

Domestic Market Exports

US $ 40 Billion US $ 22 Billion
INR 172,000 Crore INR 93,500 Crore

Textiles Apparel Textiles Apparel

US $ 10 Billion US $ 30 Billion US $ 12 Billion US $ 10 Billion
INR 43,500 Crore INR 128,500 Crore INR 50,000 Crore INR 43,500 Crore

• In last 5 years, total market size has grown 10% Year on Year.
• India’s share in global trade is 4%.
Source : Technopak Analysis
|3
 Is growing despite the slowdown…

Exports market Domestic apparel market

25 60
50
20 22 23 48

US$ Billion
40
US$ Billion

15 18 19
30 36
10 14 30
20 26
22
5 10
0 0
2006 2007 2008 2011 2014

Source : Ministry of Textiles, Technopak Analysis

(values rounded off)

|4
…. Driven by the growing consumption scenario
 Consumerism is growing …

~ 500 Million consumers (excluding

BPL families) across Urban and
Rural India (18+ years)
Favorable demographics
~ 270 Million in Rural India
Dropping dependency ratio
~ 230 Million in Urban India Rising education levels
~ 80 Million in the top 100 cities Increasing urbanization
~ 75 Million in the top 70 cities Rising Incomes

~ 45 Million in top 30 cities

~ 30 Million in the top 8 cities

|6
Hence… increasing discretionary expenditure

2003 2008 2013

27% 30% 32% 32%

40% 36%

4%
4%
9% 10% 5%
20% 20% 11% 20%

Source : India Consumer Trends, Technopak analysis

Food & Grocery
Rent, Utilities & Education
Fuel, Transport &
Communication
Savings & Investment
Discretionary Expenditure
The share of food and grocery in the
consumer’s wallet will continue to drop –
releasing more money for discretionary
expenditure

|7
and…widening consumption basket
1991 2009 2015
1. Food and Grocery
1. Food and Grocery
1. Food and Grocery 2. Clothing
2. Clothing
2. Clothing 3. Footwear
3. Footwear
3. Footwear 4. Consumer durables
4. Consumer durables
4. Consumer durables 5. Expenditure on DVDs and VCD’s
5. Home linen
5. Expenditure on DVDs and 6. Home linen
6. Movies and theatre
VCD’s 7. Home accessories
7. Eating out
6. Home linen 8. Gifts
7. Home accessories 9. Take-away/ RTE meals
8. Accessories 10. Movies and theatre
9. Gifts 11. Eating out
10. Take-away/ RTE meals 12. Entertainment parks
11. Movies and theatre 13. Mobile phones and services
12. Eating out 14. Household help
13. Entertainment parks 15. Travel packages
14. Mobile phones and services 16. Club membership
15. Household help 17. Computer Peripherals &
16. Travel packages Internet
17. Club membership 18. Beauty and Spa
18. Computer Peripherals & 19. Gaming
Internet 20. Personal transport
19. Personal transport 21. Coaching / training / learning
22. ?
|8
A new way of classifying consumption ?
Need based Aspiration based

Food & Grocery •Home? Home décor

Prepared food / food services

Textiles and apparel

Footwear

Medicine & healthcare services

Air travel / public transport

Consumer durables

Consumer electronics

Kitchen appliances

Mobile telephone handsets
•Education for children
•Personal transport
•Jewelry & wrist-wear (both for women and
men)
•Accessories (handbags, pens, others)
•Grooming
•Well-being
•Coaching & learning
•Leisure & recreation
•Socializing & other lifestyle

500 million consumers – decision takers

|9
 Hence, textile &
apparel industry needs
to gear up and shift
gears to this fast
changing consumption
scenario

|10
Many not fully tapped opportunities in the
domestic apparel market
Women's wear …

2008 Women's Wear Urban Women’s Wear Market

Market of SEC A& B is INR INR 7 11 0.7 1 1.5 1 1.5 0.8 4 0.7 1.6 1.5
25,300 Crore ‘000 14%
Ethnic Crore 52% 51% 50% 47%
Wear 64% 61% 62% 67% 64%
47% 95% 95%
86%
Nightw
ear 48% 49% 50% 53%
Formal 36% 39% 38% 33% 36%
17% Casual
Wear 5% 5%
Party Wear 13%
Wear 22%
1%

Urban-Branded Urban-Unbranded

Source : Technopak Analysis

|12
 Fast / affordable fashion for youth ….

Casual Wear Market

(INR ‘000 Crore)

Children 6 10-15% growth

Women 5

Men 12

Source : Technopak Analysis

More than 50% of the clothes in this category are bought by youth (age 13-30)

Increase of buying frequency of casual wear is spurred by:-

Preference for more comfort wear

Increase in employability

Acceptance of Casual wear in work places

|13
 Kids wear : still very few established players

Market size 300 3250 950 1800 2600 950 3000

Rs Crores
100%
80%
60%
40%
20%
0%
I-Body I-T-shirts Frocks T-shirts Lowers Jeans Ethnic
Suits wear
Low Economy Medium Premium Super Premium
Source : Technopak Analysis

|14
 Innerwear ….

Women’s Innerwear Market Innerwear Market Men’s Innerwear Market

(8,500 Crore) 14,000 Crore (5,500 Crore)

Super Premium
1% Premium Super Premium
Low 2%
5%
Low 34% Premium
Men's
Medium 8%
34% Innerwea
23% Women's Medium
r 5500
Innerwea Economy 11%
Economy 45%
37% r 8500

Source : Technopak Analysis

Super premium and premium segment for men’s Innerwear is around Rs 500 Crores, very
few players are present in India in this market segment (untapped opportunity)

|15
Plus size apparel …..

Plus size % of Indian population

Plus
Rest size
92% 8%

Potential market for plus size is 8% of

Indian apparel market

Global players:

However currently only 0.15% of

apparel market consists of plus size

Source : Technopak Analysis

|16
Active wear /sportswear ….

Growth in Store
Major sportswear brands in India
Numbers of major
sportswear brands
Turnover Share of
In 800 675
Apparel
Retailer India (Rs in Total
Since Crores) 600 505
Sales
400 360 325
Reebok 1995 1148 50%
180 165 200
200 70
Adidas 1996 518 45% 7 14 36
0
Nike 1995 293 40%
2005 2006 2007 2008

Puma 2002 158 30% Reebok Adidas Puma

Source : Technopak Analysis

|17
International retailers likely to expand firmly in the
next 5 years ….

|18
 Value retail : a growing phenomenon
% share of retail presence across various cities –
many retailers already present in smaller cities
Hypermarket Department stores / Exclusive stores
s large format stores

No. of stores 10 11 27 37 18 45 40 ~140 41 10

3 2 0 4
No. of cities 7 58 9 19 8 22 18 ~500 18 38
4
10% 8% 11% 10% 15%
5% 7%
35% 33% 39% 9%
45% 12%
50% 41% 31% 32%
9% 78% 29%
9%
30%
67% 20%
61%
46% 49% 51% 44%
40% 8%
26% 25% 10%
4%
Central Big Shoppers Westside Lifestyle Pantaloon Raymond Koutons Wills Fab India
Bazaar Stop Lifestyle

Top4 Top15 Top 35 Others

Source : Technopak Analysis
|19
Strategies to develop competitive &
sustainable businesses
Service orientation Partnering for growth

One stop solution

Forecasting
Manufacturers

Supply chain partnership

Designing
Retailers /
Manufacturing brands

Warehousing IT linkages

Logistics

|21
Niche positioning : customized solutions e.g.

Value added Jeans supplier

Formal shirts manufacturer

Value fashion supplier

Private label supplier

Kids wear manufacturer

Lingerie manufacturer

Etc..

|22
Innovating to “survive”

Examples in Textile and apparel

Planning to make denim salwar-kameez to expand in the
Arvind
rural market
Producing 'novel' garments using mineral fibre, soya bean
RBR Garments
fibre etc.
Levi's Selling Jeans on EMI scheme

Examples in other industries

Price & Design ….....Tata Nano, G.E.

Supply Chain ……….ITC, Suguna

Manufacturing ……. Dynamatics, Jain Irrigation

|23
Adopting global best practices

Examples in other industries

Six sigma Rs 20 crores savings -

100% increase in Capacities

Lean manufacturing > Rs 100 crores savings

Six sigma

Productivity
Six sigma
enhancements, improved
customer satisfaction

|24
 Developing and attracting manpower

Industry – academia collaboration in other industries

Company Industry Collaboration with Academic Institute

NASSCOM IT & ITES Collaborating with Ministry of HRD to set up

new IIIT’s
TESCO Retail Runs a Retail Certification course with IIM-
Bangalore
Airtel Telecom Has tied up with NMIMS to train its staff in the
latest marketing techniques
Bharat Forge Aviation Has Partnered with BITS, Pilani to help its
employees attain degrees in manufacturing
management
Patni Computers IT Have developed specialized courses in supply
chain management along with SP Jain Institute
of Management

Source : Technopak Analysis

|25
Environmental sustainability Non - negotiable

|26
 Leveraging FTA’s…

India’s major trade agreements

Benefits… Country Status
ASEAN Concluded
Sri Lanka Concluded

Decreased sourcing costs of Thailand Concluded
key products included in the S. Korea Concluded
Singapore Concluded
agreements Chile Concluded
SAFTA Concluded
Afghanistan Concluded

Availability of larger variety of Bhutan Concluded
products for the domestic Mercosur PTA Concluded
Turkey Negotiating
market Australia Negotiating
New Zealand Negotiating
GCC Negotiating
Taiwan Negotiating
EU Negotiating
US Negotiating

Source : Ministry of commerce |27

Conclusion

The Indian domestic apparel market offers enormous
opportunity going forward due to various consumption
growth drivers inherent in the Indian economy

A scan of the apparel market throws out some

important opportunities that companies need to look
more closely

To tap the opportunities and sustain businesses in this

changing consumption scenario, companies need to
align themselves with the market requirements and
develop required competencies
|28
Thank You !
For Further Dialogue, Please Contact :

Arvind Singhal
Technopak Advisors
Fourth Floor, DLF Tower 8-A
DLF Cyber City, Phase II
Gurgaon 122 002 (National Capital Region of Delhi)
Haryana, India

Tel : (91-124) 454 1111, 288 1111

Fax : (91-124) 454 1198, 454 1199
Email : arvind.singhal@technopak.com
Web : www.technopak.com