Textile industry of india case & analysis of siyaram silk mill ltd

21,017 views

Published on

Published in: Business, Lifestyle
  • Be the first to comment

Textile industry of india case & analysis of siyaram silk mill ltd

  1. 1. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 1 KANDIVALI EDUCATION SOCIETY’S B.K. SHROFF COLLEGE OF ARTS AND M.H. SHROFF COLLEGE OF COMMERCE Bhulabhai Desai Road, Kandivali (West), Mumbai – 400067 CERTIFICATE This is to certify that SURENDRA .C. SAROJ of TY.BMS has successfully completed a project on TO STUDY “TEXTILE INDUSTRY OF INDIA - CASE & ANALYSIS OF SIYARAM SILK MILL LTD.” for the semester under the guidance of the PROF. UMADEVI KOKKU during the Academic year 2011-2012. Project Guide Co-ordinator Principal Internal Examiner External Examiner College Seal
  2. 2. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 2 KANDIVALI EDUCATION SOCIETY’S B.K. SHROFF COLLEGE OF ARTS AND M.H. SHROFF COLLEGE OF COMMERCE Bhulabhai Desai Road, Kandivali (West), Mumbai – 400067 DECLARATION I SURENDRA .C. SAROJ from KES Shroff College Of Arts & Commerce and a student of T.Y. BMS here submit my project on TO STUDY “TEXTILE INDUSTRY OF INDIA - CASE & ANALYSIS OF SIYARAM SILK MILL LTD.” . I also declare that the project which has been in the partial fulfillment of the requirement of the Mumbai University is the result of my efforts.
  3. 3. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 3 KANDIVALI EDUCATION SOCIETY’S B.K. SHROFF COLLEGE OF ARTS AND M.H. SHROFF COLLEGE OF COMMERCE PROJECT REPORT ON “textile industry of india case analysis of siyaram silk mill ltd. SUBMITTED BY SURENDRA.C.SAROJ TY.BMS SEMESTER V SUBMITTED TO UNIVERSITY OF MUMBAI PROJECT GUIDE PROF. UMADEVI KOKKU Bhulabhai Desai Road, Kandivali (West), Mumbai – 400067
  4. 4. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 4 ACADEMIC YEAR 2011 - 2012 ACKNOWLEDGEMENT The joy of ingenuity!!! This is doubtlessly what this project is about. Before getting to brass tacks of things. I would like to add a heartfelt word for the people who have helped me in bringing out the creativeness of this project. To commence with things I would like to take this opportunity to gratefully and humbly thank Prof.Umadevi kokku, who has giving me an opportunity to undertake this project in textile industry of India. I also thank Mr. Sanjay patil to give knowledge on this topic My parents need special mentions here for their constant support and love in my life. I also thank my friends and well wishers, who have provided their whole hearted support to me in this exercise. I believe that this Endeavour has prepared me for taking up new challenging opportunities in future.
  5. 5. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 5 Table Of Contents Chapter No. Topic Pg. No. 1 INTRODUCTION 6-11 2 Indian Textile Industry 12-22 3 Global Scenario 23-27 4 GLOBAL TRADE VOLUME AND TRENDS 28-32 5 INDIA’S COMPETITIVENESS 33-37 6 INDIAN SUPPLY DEMAND SCENARIO 38-39 7 FASHION APPAREL INDUSTRY OVERVIEW 39-47 8 MAJOR PLAYERS 48-66 9 INDUSTRY AVERAGE 67-87 10 FUTURE SCENARIO 88-97 11 CHALLENGES FACED BY INDUSTRY 98-99 12 SIYARAM’S SILK MILL LTD 100-107 13 SWOT Analysis of textile industry 108-112 14 FUTURE PROSPECTS 113 15 CONCLUSION 114-115 16 Bibliography 116
  6. 6. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 6 CHAPTER – 1 INTRODUCTION
  7. 7. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 7 HISTORY OF TEXTILE No one knows when exactly the spinning and weaving of textile began. It has been said that people knew how to weave even 27000 years ago. This was even before humans were able to domesticate animals. The oldest actual fragment of cloth found was in southern Turkey. People used fibers found in nature and hand processes to make fibers into cloth. Even though high technology was not available, skilled weavers created a wide variety of fabrics. Dyeing of fabrics was done to satisfy the universal human need for beauty. Within time, more complex social and political organization of people evolved. With the growth of cities and nations, improvements in technology came into place and there was a substantial development in the international trade, both of which involved textiles. Chinese textile was considered to be the most significant in international trade. Historians have claimed that silk from China has reached ancient Greece and Rome along a trade route called the Silk Road in the latter part of the second century B.C. and Egypt in 1000 B.C. The Romans also imported cotton from nearby Egypt and from India. Archeologists have found facilities for dyeing and finishing cotton fabrics in settlements throughout the Roman world. During the middle ages, the production and trading of the plant called ‗woad‘, an important source of dye, was a
  8. 8. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 8 highly developed industry. During the fifteenth century, Trade Fairs in southern France provided a place for the active exchange of wools from England and silks from the Middle East. The economic activities surrounding these events gave rise to the first international banking arrangements. Even the discovery of America was a result of the desire of Europeans to find a faster route not only to the spices but also to the textiles of the Orient. Textile trade quickly took root in America, as colonists sold native dyes such as indigo and cochineal to Europe and bought cottons from India. Although advances were being made in the technology of textile production, the manufacture of cloth in Western Europe in 1700 was still essentially a hand process. Yarns were spun on a spinning wheel and fabrics were woven by hand-operated looms. A major reorganization of manufacturing of a variety of goods occurred during the latter half of the 1700s in Western Europe. These changes, known as the ‗Industrial Revolution‘, altered not only technology, but also social, economic, and cultural life. The production of textiles was the first area to undergo industrialization during the seventeenth and eighteenth centuries as the result of an economic crisis. Good quality textile products, produced inexpensively in India and the Far East, were gradually replacing European goods in the international market. In Britain, it became imperative that some means be found to increase domestic production, to lower costs, and to improve the quality of textiles. The solution was found in the substitution of machine or nonhuman power for hand processes and human power. Many important inventions, most importantly spinning machines, automatic looms, and the cotton gin, improved the output and quality of fabrics. These inventions provided the technological base for the industrialization of the textile industry. Each invention improved one step of the process. For example, an improvement that increased the speed of
  9. 9. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 9 spinning meant that looms were needed that consumed yarn more rapidly. More rapid yarn production required greater quantities of fiber. The growth of the textile industry was further hastened by the use of machines that were driven first by waterpower, then by steam, and finally by electricity. The textile industry was fully mechanized by the early part of the nineteenth century. The next major developments in the field were to take place in the chemist‘s laboratory. Experimentation with the synthesis of dyestuffs in the laboratory rather than from natural plant materials led to the development and use of synthetic dyes in the latter half of the nineteenth century. Other experiments proved that certain natural materials could be dissolved in chemical solvents and re-formed into fibrous form. By 1910, the first plant for manufacturing rayon had been established in the United States. The manufacture of rayon marked the beginning of the manufactured textile fibers industry. Since that time, enormous advances have been made in the technology for every field in the textile industry. Today, the textile industry utilizes a complex technology based on scientific processes and vast economic organizations. With the application of advanced technology to the textile field, textile use has expanded from the traditional areas of clothing and home furnishings into the fields of construction, medicine, aerospace, sporting goods, and industry. These applications have been made possible by the ability of textile scientists to utilize textile fibers, yarns, and fabrics for specific uses. At the same time that textile technology is making strides in new directions, the fabrics that consumers buy for clothing and household use also benefit from the development of new fibers, new methods of yarn and fabric construction, and new finishes for existing fibers and fabrics.
  10. 10. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 10 Today, a huge international industrial complex encompasses the production of fiber, spinning of yarns, fabrication of cloth, dyeing, finishing, printing, and manufacture of goods for purchase. Consumers purchase many different products made of textiles. The story of the journey that these products make as they progress from fiber to yarn to fabric to finished product is not just the story of spinning yarns, weaving or knitting fabric, or constructing the end product. It is also the story of a complex network of interrelated industries. HISTORY OF INDIAN TEXTILE INDUSTRY The history of textiles in India dates back to nearly five thousand years to the days of the Harappan civilization. Evidences that India has been trading silk in return for spices from the 2nd century have been found. This shows that textiles are an industry which has existed for centuries in our country. Recently there has been a sizeable increase in the demand for Indian textiles in the market. India is fast emerging as a competitor to China In textile exports. The Government of India has also realized this fact and lowered the customs duty and reduced the restrictions on the imported textile machinery. The intention of the government‘s move is to enable the Indian producers to compete in the world market with high quality products. The results of the government‘s move can be visible as Indian companies like Arvind Mills, Mafatlal, Grasim; Reliance Industries have become prominent players in the world. The Indian textile industry is the second largest in the world-second only to China. The other competing countries are Korea and Taiwan. Indian Textile constitutes 35% of the total exports of our country. The history of apparel and textiles in India dates back to the use of mordant dyes and printing blocks around 3000 BC. The foundations of
  11. 11. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 11 the India's textile trade with other countries started as early as the second century BC. A hoard of block printed and resist-dyed fabrics, primarily of Gujarati origin, discovered in the tombs of Fostat, Egypt, are the proof of large scale Indian export of cotton textiles to the Egypt in medieval periods. During the 13th century, Indian silk was used as barter for spices from the western countries. Towards the end of the 17th century, the British East India Company had begun exports of Indian silks and several other cotton fabrics to other economies. These included the famous fine Muslin cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was widely practiced between India, Java, China and the Philippines, long before the arrival of the Europeans. India Textile Industry is one of the largest textile industries in the world. Today, Indian economy is largely dependent on textile manufacturing and exports. India earns around 27% of the foreign exchange from exports of textiles. Further, India Textile Industry contributes about 14% of the total industrial production of India. Furthermore, its contribution to the gross domestic product of India is around 3% and the numbers are steadily increasing. India Textile Industry involves around 35 million workers directly and it accounts for 21% of the total employment generated in the economy. Strengths of Indian Textile Industry are as follows - Huge textile production capacity Efficient multi-fiber raw material manufacturing capacity
  12. 12. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 12 Large pool of skilled and cheap work force Entrepreneurial skills Huge export potential Large domestic market Very low import content Flexible textile manufacturing systems Weaknesses of Indian Textile Industry are as follows - Increased global competition in the post 2005 trade regime under WTO Imports of cheap textiles from other Asian neighbors Use of outdated manufacturing technology Poor supply chain management Huge unorganized and decentralized sector High production cost with respect to other Asian competitor INDIAN TEXTILE INDUSTRY INTRODUCTION The textile industry is the largest industry of modern India. It accounts for over 20 percent of industrial production and is closely linked with the agricultural and rural economy. It is the single largest employer in the industrial sector employing about 38 million people. If the employment in allied sectors likes ginning, agriculture, pressing, cotton trade, jute, etc. are added then the total employment is estimated at 93 million. The net foreign exchange earnings in this sector are one of the highest and, together with carpet and handicrafts, account for over 37 percent of total
  13. 13. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 13 export earnings at over US $ 10 billion. Textiles, alone, account for about 25 percent of India‘s total forex earnings. India‘s textile industry since its beginning continues to be predominantly cotton based with about 65 percent of fabric consumption in the country being accounted for by cotton. The industry is highly localized in Ahmadabad and Bombay in the western part of the country though other centers exist including Kanpur, Calcutta, Indore, Coimbatore, and Sholapur. The structure of the textile industry is extremely complex with the modern, sophisticated and highly mechanized mill sector on the one hand and the hand spinning and hand weaving (handloom) sector on the other. Between the two falls the small-scale power loom sector. The latter two are together known as the decentralized sector. Over the years, the government has granted a whole range of concessions to the non-mill sector as a result of which the share of the decentralized sector has increased considerably in the total production. Of the two sub-sectors of the decentralized sector, the power loom sector has shown the faster rate of growth. In the production of fabrics the decentralized sector accounts for roughly 94 percent while the mill sector has a share of only 6 percent. Being an agro-based industry the production of raw material varies from year to year depending on weather and rainfall conditions. Accordingly the price fluctuates too. The Ministry of Textiles under the Government of India has taken some significant steps to arrest these problems. It has framed "The National Textile Policy 2000" to address the aforesaid issues. This policy aims at negating these problems and increasing the foreign exchange earnings to the tune of US$ 50 billion by the year 2010. It includes rational road-
  14. 14. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 14 maps for the development and promotion of all the sectors involved directly or indirectly with the textile industry of India. Further, the policy also envisages to bring the unorganized decentralized textile sector (which accounts for 76% of textile production) at par with the organized mill sector. Furthermore, the policy also aims at introducing odern and efficient manufacturing machineries and techniques in the Indian textile sector INDUSTRY SUPPLY CHAIN The apparel industry supply chain can be broadly categorized into six major components - raw materials, textile plants, apparel plants, export chains, retail stores and customers. Diagram No: 4.1 Supply Chain of the Textile Industry CURRENT INDUSTRY SCENARIO: Close to 14% of the industrial output and 30% of the export market share is contributed directly by the Indian textile industry. Indian textile industry is also the largest industry when it comes to employment that generates jobs not just within but also in various support industries like agriculture. As per a recent survey the textile industry is going to contribute 12 million new jobs in India by 2010 itself.
  15. 15. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 15 Indian textile industry is as old as the word textile itself. This industry holds a significant position in India by providing the most basic need of Indians. Starting from the procurement of raw materials to the final production stage of the actual textile, the Indian textile industry works on an independent basis. The final phase-out of the Multi-fiber Arrangement (MFA) and the system of quotas that has governed the global trade in textiles and apparel for the last forty-two years has significantly altered the institutional rules of trade in the textile and clothing industry. With the elimination of all remaining quotas on apparel from January 1 2005, the textile and clothing sector is now fully integrated into the regulatory framework of the General Agreement on Tariffs and Trade (GATT) of the World Trade Organization (WTO). Buyers are now free to source textile and apparel in any amount from any country; suppliers are similarly free to export as much product as they are able, subject only to a system of national tariffs. As global competition intensifies under the new quota- free trading regime, countries are bracing for major changes in the structure of sourcing and apparel supply worldwide. With the removal of the quotas, it was expected that the developing countries, which have a major play in the textile industry will benefit themselves as they have stable supply network, experience in networking, capacities for scaling up and the ability to offer a full bundle of services. It was also expected that smaller countries, which enjoyed the restriction on trade will fall out from the picture. The textile sector has increased their investment in projects to upgrade their equipment amid fierce market competition and to meet the growing demand for more textile products. Total investment in the textile industry
  16. 16. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 16 between 2004 and 2008 was around Rs.65, 478 crore in India, which is expected to reach Rs.1,50,600 crore by 2012. This enhanced investment would generate 17.37 million jobs-- 12.02 million direct and 5.35 million indirect—by 2012. Investments in the textiles sector can be accessed on the basis of three factors: Plan schemes such as the Techno Up-gradation Funds Scheme (TUFS), Technology Mission on Cotton, Apparel Parks, etc. Under the TUFS scheme, a total of Rs 916 billion has been disbursed for technology up gradation. There are around 26 Apparel Parks in eight states in India, with a total estimated investment of Rs 134 billion Industrial Entrepreneurship Memorandums implemented from 1992 to Aug 06, amounting to Rs 263 billion Foreign Direct Investments inflows worth US$ 910 million have been received by the textile industry between Aug 91 and May 06, which account for 1.29% of total FDI inflows in the country. Though significant investments are being made in the textiles segment, the bulk of them are in the spinning and weaving segments. A cumulative total of US$ 6.67 billion in investment was done in 2008. Of this, more than two-thirds is in the spinning and weaving segments, while only 25% is in processing and garment units The elimination of global textile quotas is expected to drive garment production to China, benefiting consumers in North America and Europe at the expense of developing nations where apparel manufacturing has become a bridge to an industrial economy. Africa received record high foreign direct investment (FDI) inflows in 2005 of US$31 billion, but this
  17. 17. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 17 was mostly concentrated in a few countries and industries. The textile sector has increased their investment in projects to upgrade their equipment amid fierce market competition and to meet the growing demand for more textile products. The global fiber industry will continue to shift to the Asia/Pacific region, particularly China, South Korea and Taiwan. Textile trade in the world is estimated to be around US$ 300 billion currently. Industry experts predict that by 2014 the facilities in the west will close down and they will source their textiles from more efficient areas of the world resulting in the trade volume of around US$ 800 billion. The Indian textile industry, which has accelerated to an annual growth of 9-10 per cent, is expected to grow at a rate of 16 per cent in value terms and reach a level of USD 115 billion by 2012. With 8.6% growth rate, Turkey also recorded a very strong average annual growth rate of its textiles and clothing exports but from a much lower basis. It could increase its exports from 8.6 to 17.6 billion US- Dollars. Pakistan exports amounted to 9.9 billion US-Dollars in 2005 which translates into an average annual growth rate of 5.4%. As of now, the general impression any individual would get about the Indian textile industry leaders in the past few months is that it is in a major decline state. The following could be the reasons that attribute to this decline. Global recession Less export orders due to reductions in inventories by global retail giants like Wal-Mart Rising price of raw materials like cottons Infrastructure bottlenecks such as power, particularly in Tamil Nadu
  18. 18. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 18 In the times of adversity, like what we are facing right now, it is an immediate task for all stake holders to pause for a moment and take stock of the difficulties and chart plans for sustainability and growth of the Indian textile industry. With the opening of world markets and the abolition of textile quotas since 2005, there came a negative situation as well. But, hindsight is always 20-20. Indian textile industry should have focused on all major sectors right from fiber to fashion and planned for an organized growth across the supply chain so as to compete with China and even countries such as Pakistan, Vietnam and Thailand, which are also growing from the textile perspective. Instead, the industry had put majority of its stock in the spinning sector. This is clearly evident in the utilization of Technology Up gradation Fund Scheme effectively by the spinning sector. Although it is a positive outcome, the industry did not focus on many other value adding segments such as weaving and finishing. Indian power loom sector, which enables value-addition is a highly unorganized industry and needed major up gradation. As of now, the power loom segment is also picking up where in many of the unorganized power looms are becoming organized. Technical textiles sector is still in its infancy and a tangible growth will be highly visible by 2035 when the growth in this sector will be exponential. The weak links in the Indian conventional industry such as weaving and finishing have to be strengthened. There must be consolidated efforts by Indian Textile Machinery Manufacturers Association, end-users and the Government to undertake a major step and come-up with alternatives to European Machinery, which the Indian weaving sector can afford. This should be put into practice within the next five years, if dedicated efforts are undertaken with the financial support for R & D by the Government
  19. 19. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 19 through its various schemes. Technical textiles sector must transform from a non crawling phase to at least a crawling industry in the next three years. General awareness on nonwoven and technical sectors has been created with the recent marathon training workshops and conferences such as, "Advances in Textiles, Nonwoven and Technical Textiles", organized for the past five years in Coimbatore by Texas Tech University, USA and those such as the Texcellance and IIT's Technical Textiles conferences. These have put India on the international map in technical textiles. These conferences are of less use if they do not translate into investments and new projects. TEXTILE INDUSTRY BENEFITS OTHER INDUSTRIES TOO The pursuit of a better fiber and a better fabric is yielding products used in medicine, aeronautics, astronautics, seawater desalination, and construction of buildings and roads. The new kinds of textiles possess characteristics that make them useful in numerous formerly unexpected applications. Although textiles are still the major component of the clothes we wear and of many furnishings in our homes and offices, they are also used widely in medicine, aeronautics, astronautics, pollution abatement, and numerous other fields. Innovation in textile technology continues and more unusual products will almost surely emerge MEDICAL Certain fibres and textile materials are especially suitable for use in building synthetic body parts and medical scientists are steadily expanding the types of body parts whose function can be mimicked. The artificial kidney is made from 7,000 hollow fibres, each of which is about the size of a human hair. Patients whose kidneys no longer function
  20. 20. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 20 normally must have their blood freed by dialysis of metabolic wastes and excess water about every three days. This is accomplished by pumping the blood through a textile, hollow-fibre module while clean-sing solution rinses the blood free of urea. Patients with diabetes have a tendency to suffer from cholesterol blockage of arteries leading to their feet. If not corrected, poor circulation can lead to gangrene and loss of limbs. Artificial arteries that look like pencil diameters are surgically inserted to bypass the blockages, thus restoring circulation and saving limb functions. These implants require crucial textile technology to prevent clotting and rejection. It is estimated that more than 150,000 people in the United States have now had these artificial arteries for over five years. SPACE NASA space suits for launch and for space walks require zero-defect performance. The launch suits are made from PBI non-flammable high- performance fibres. The space-walk suits have different requirements. They require air-purifying, cooling, and pressurizing systems. Each suit is tailor-made for a particular astronaut and costs $1-1.5 million. Since the astronaut is under an oxygen pressure of eight pounds per square inch in this suit, special flexibility is needed to allow him or her to bend an elbow or grasp an article. Rocket exhausts and nose-cone covers for space shuttles are made of carbon and other high-performance fibres. These protect the vehicles from heat from air friction during launch and re- entry. The flames generated on the launch pad do not ignite the rocket because of the flame-resisting properties of graphite carbon-fibre-textile exhaust shields. Similarly on re-entry, the white-hot temperatures from atmospheric friction do not consume the shuttle because high- performance fibre and ceramic structures provide protection
  21. 21. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 21 AERONAUTICS Airplane parts, other than body construction, are also made of textiles. All U.S. commercial jets have brakes made from carbon composites. These are the only materials that can withstand the extreme high temperatures generated if takeoff is aborted. Stopping a plane weighing many tons in a short distance generates temperatures high enough to melt metals, making carbon brakes indispensable for heavy jets. Kevlar non-woven felt liners are now used as fire barriers to cover the urethane foam seats on all aircraft to prevent the production of highly toxic cyanide gases when such foams burn during airplane accidents. PURIFICATION OF WATER AND AIR Whole-body gas suits are required to protect soldiers from the chemicals used in gas warfare today. These chemicals can kill by absorption into the bloodstream through skin. The suits allow for transport of perspiration moisture to prevent soldiers from being overcome internally as would occur from a non-permeable film covering. It is well known to chemists that a cube of activated charcoal powder measuring one inch on each side has an adsorptive capacity equal to a football field. It was therefore believed that properly constructed porous carbon fibres could exhibit superior gas-adsorption capability. Drinkable sea water is now available through properly prepared hollow fibre reverse osmosis modules. Sea water is forced through these modules under a pressure of 400 pounds per square inch. Pure drinking water passes through the hollow fibre wall while concentrated salt water exudes out of the end. Concentration of liquids that normally deteriorate from heating is possible with reverse osmosis fibres and membrane systems. Many liquids, including orange juice and tomato juice, can be concentrated by pressure without heat to
  22. 22. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 22 preserve the thermally unstable flavour ingredients. Most orange-juice concentrate on the market today is prepared this way. Similarly concentration of gases can be achieved by proper use of membrane and fibre composition. Gas-separation systems are currently in use at most U.S. petroleum refineries. CONSTRUCTION MATERIALS Super domes and stadiums are being constructed with roofs of silicone- coated fibreglass. This is particularly important in northern areas where heavy snowfall has caused the collapse of heavy concrete roofs. At the Hubert Humphrey dome in Minnesota, 800,000 square yards of such material in two layers allow warm air to be circulated to melt the snow. At an air terminal in Saudi Arabia, a multi-funnel design allows circulation by convection of the air up through hollow top ports. Many shopping malls are turning to these flexible composites to allow for more freedom in architectural design, improved aesthetics, better air circulation, and better light transmission. Rapid technological advances in the textile industry have opened now opportunities for many technical disciplines, but have resulted in a shortage of textile chemists, textile engineers, and textile-management executives. Some U.S. colleges with textile-engineering programs report that they could place nearly three times as many students in well paying jobs as they are currently graduating. Together with a bright outlook for further rapid advances and new products with unusual but useful properties, this shows that textiles remain among the most dynamic contemporary sectors in technology.
  23. 23. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 23 GLOBAL SCENARIO The textile and clothing trade is governed by the Multi-Fiber Agreement (MFA) which came into force on January 1, 1974 replacing short-term and long-term arrangements of the 1960‘s which protected US textile producers from booming Japanese textiles exports. Later, it was extended to other developing countries like India, Korea, Hong Kong, etc. which had acquired a comparative advantage in textiles. Currently, India has bilateral arrangements under MFA with USA, Canada, Australia, countries of the European Commission, etc. Under MFA, foreign trade is subject to relatively high tariffs and export quotas restricting India‘s penetration into these markets. India was interested in the early phasing out of these quotas in the Uruguay Round of Negotiations but this did not happen due to the reluctance of the developed countries like the US and EC to open up their textile markets to Third World imports because of high labour costs. With the removal of quotas, exports of textiles have now to cope with new challenges in the form of growing non-tariff / non- trade barriers such as growing regionalization of trade between blocks of nations, child labour, anti-dumping duties, etc. Nevertheless, it must be realized that the picture is not all rosy. It is now being admitted universally and even officially that the year 2005 AD is likely to present more of a challenge than opportunity. If the industry does not pay attention to the very vital needs of modernization, quality control, technology up gradation, etc. it is likely to be left behind.
  24. 24. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 24 Already, its comparative advantage of cheap labor is being nullified by the use of outmoded machinery. With the dismantling of the MFA, it becomes imperative for the textile industry to take on competitors like China, Pakistan, etc., which enjoy lower labour costs. In fact the seriousness of the situation becomes even more apparent when it is realized that the non-quota exports have not really risen dramatically over the past few years. The continued dominance of yarn in exports of cotton, synthetics, and blends, is another cause for worry while exports of fabrics are not growing. The lack of value added products in textile exports do not augur well for India in a non-MFA world. Textile exports alone earn almost 25 percent of foreign exchange for India yet its share in global trade is dismal, having declined from 10.9 percent in 1955 to 3.23 percent in 1996. More significantly, the share of China in world trade in textiles, in 1994, was 13.24 percent, up from 4.36 percent in 1980. Hong Kong, too, improved its share from 7.06 percent to 12.65 percent over the same period. Growth rate, in US$ terms, of exports of textiles, including apparel, was over 17 percent from 1993-94 to 1995-96. It declined to 10.5 percent in 1996-97 and to 5 percent in 1997-98. Another disconcerting aspect that reflects the declining international competitiveness of Indian textile industry is the surge in imports in the last two years. Imports grew by 12 percent in dollar terms in 1997-98, against an average of 5.8 percent for all imports into India. Imports from China went up by 50 percent while those from Hong Kong jumped by 23 percent. CHINA:
  25. 25. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 25 China's investment spending in the textile industry slumped 20 percent in the first two months of this year from the same period in 2008, the National Bureau of Statistics said. Textile industry spending accounted for 0.9 percent of the nation's overall investment of 1.03 trillion Yuan, down 0.5 percentage point from a year earlier, the statistics bureau said. China's garment and textile exports tumbled 15 percent to $21.9 billion in the two months from a year earlier, customs data show. Exports of yarn, fabrics and textile products totaled $7.29 billion, down 21 percent, while apparel exports fell 11 percent to $14.6 billion, the Beijing-based Customs Bureau said on March 11. Textile firms, once an export engine of China, are fighting for their survival this year with rising costs and dismal overseas market hit by the subprime crisis. Those firms wooing foreign buyers at the 103rd China Import and Export Fair, the largest trade fair in the country also called the Canton Fair, felt the pinch. Few buyers visited their exhibition stall, and fewer still signed contracts. Chinese product competitiveness was not much as it was. The reduction in tax rebates and the devaluation of the dollar have made Chinese products 20 percent higher than what it was. The Chinese currency has ventured below the seven Yuan mark since the government loosened the unit‘s peg to the dollar in 2005. The Yuan has gained about 18 percent since then. This has made Chinese textile products more expensive and its price advantage has almost vanished compared with products from Vietnam and India. The Yuan appreciation, together with the rising material and labor costs, has driven some textile firms to the brink of bankruptcy. BANGLADESH: Swedish Firms have Expanded Outsourcing in Bangladesh. Swedish firm engaged in outsourcing home textiles and home furnishing items is
  26. 26. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 26 planning to expand its operations in Bangladesh. RMG Exports is expected to Surge despite global recession. The readymade garment sector, one of the pillars of the Bangladesh economy, is definitely in a positive mode despite global financial meltdown. The three-day Bangladesh Apparel and Textile Exposition (BATEXPO) wooed foreign buyers to buy apparel products. CAMBODIA: Cambodia's garment industry is the country's biggest industrial employer, and is now struggling against stiffer global competition and slowing demand. Many Chinese and Korean companies have established a presence in Cambodia for years. Now, more than 10 Chinese-owned factories have moved to cheaper markets, leaving hundreds of thousands of garment workers from the provinces facing destitution, reported Phnom Penh Times in early 2008.The garment industry earns 80 percent of Cambodia's foreign exchange earnings and employs an estimated 350,000 people in more than 300 factories. The industry began to grow after a the country passed a new labor laws encouraging labour unions and allowed the International Labour Organization (ILO) to inspect factories and publish its findings. In turn, the United States agreed to cut tariffs on Cambodian garment exports, buying 70 percent of all of the country's textiles in the 1990s. Cambodia maintained its higher working conditions after the deal expired in 2005, and garment-making has made the national economy one of the fastest growing in the region. The World Bank reported that the industry grew only 8.0 percent in 2007 compared to the growth of up to 20 percent previously. The Cambodia Ministry of Commerce said that the apparel exports had declined since October 2007, mainly due to the US economic slowdown. Exports to the
  27. 27. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 27 United States slipped 1.44 percent in the first quarter of 2008, compared with the same period in 2007. Predicted Trend .The Cambodia's Free Trade Union (FTU) said that the factory owners are looking abroad for greater productivity and lower costs. Kaing Monika, Manager at the Garment Manufacturers Association of Cambodia, commented that many manufacturers could move to Vietnam, Bangladesh or India if they could get lower costs. Production costs, oil and power, are high in Cambodia, and the demand for higher wages also put the country's garment industry in danger, he said. Factory owners are also facing a proliferation of labor unions and illegal strikes. Experts predict that in 2009 Cambodia would even see more competition when US restrictions on Chinese textile exports are scheduled to end. China and Vietnam are still Cambodia's direct competitors. Cambodia's labor ministry said that to counter this competition, Cambodia must increase productivity, quality and extend their reputation as having high labor standards. MAJOR MANUFACTURERS AND THEIR MARKET SHARE In 2006, the largest apparel manufacturers and exporters were countries from the Asia-Pacific region which included countries like China, Hong Kong, Philippines, Malaysia, Indonesia, Bangladesh, Srilanka, Pakistan, Thailand and India. The other major apparel manufacturing nations were USA, Italy, Germany and Mexico.
  28. 28. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 28 Diagram No: 3.1 Country wise Market Share Source: www.fashionproducts.com (http://www.fashionproducts.com/fashion-apparel-overview.html) GLOBAL TRADE VOLUME AND TRENDS As the apparel manufacturing industry has become more labour intensive and requires less capital investment, its concentration is shifting more towards the developing countries and even constituting large amount of their exports. They are concentrating more on developing countries as the labour cost is very less in such countries. This can be analyzed by the fact that the apparel production in industrialized countries decreased between 1980 and 1996, where as the production increased in developing countries during the same period. Similar trend was seen in exports, the apparel exports of developing countries increased six times between 1980 and 1997, and that of developed economies rose by 150%. The global apparel industry‘s total revenue in 2006 was US$1,252.8 billion, which was approximately 68% of the overall industry value. Asia Pacific constitutes the largest amount of production and trade in the apparel industry worldwide.
  29. 29. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 29 Table No: 3.1 Region wise Share of Total Trade Revenue (2006) Region % Share Asia Pacific 35.40% Europe 29.40% USA 22.30% Rest of the world 12.90% Source: www.fashionproducts.com (http://www.fashionproducts.com/fashion-apparel-overview.html) China had captured 65% of the global market share towards the end of 2006 in total apparel exports. The other major apparel exporting nations include USA, Germany, Hong Kong, Italy, Malaysia, Pakistan, Thailand and India. Some of the apparel trade statistics are presented below. Table No: 3.2 Exports of Apparels in 2006 Country US $ Billion China 8,260.921 Hong Kong 1,723.210 Italy 1,353.586 Malaysia 1,255.069 Germany 669.130 Pakistan 618.830 Thailand 597.758 USA 595.171 India 522.463 Source: www.fashionproducts.com (http://www.fashionproducts.com/fashion-apparel-overview.html)
  30. 30. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 30 GLOBAL FACTORS INFLUENCING TEXTILE INDUSTRY The history of the textile and clothing industry has been replete with the use of various bilateral quotas, protectionist policies, discriminatory tariffs, etc. by the developed world against the developing countries. The result was a highly distorted structure, which imposed hidden costs on the export sectors of the Third World. Despite the fact that GATT was established way back in 1947, the textile industry, till 1994, remained largely out of its liberalization agreements. In fact, trade in this sector, until the Uruguay Round, evolved in the opposite direction. Consequently, since 1974 global trade in the textiles and clothing sector had been governed by the Multi-fibre agreement, which was the sequel to an increasingly pervasive quota regime that began with the Short-term arrangement on cotton products in 1962 and followed by the Long-Term arrangement. After the successful conclusion of the Uruguay Round in 1994, the MFA was replaced by the Agreement on Textiles and Clothing (ATC), which had the same MFA framework in the context of an agreed, ten year phasing out of all quotas by the year 2005. The section that follows takes a brief look at the history of these protectionist regimes as also a more detailed look at the MFA and the ATC.
  31. 31. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 31 CHAPTER-2 REVIEW OF LITERATURE
  32. 32. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 32 CONTRIBUTION TO ECONOMY: With 3.9 million handlooms, India is the highest handloom producing country in the World. 30% of the total export income is generated by textile alone; it is second largest Employer industry after agriculture. The textile industry constitutes approximately 14% of country's total industrial production. THE WORLD MARKET SHARE In spite of the Chinese dominance, India has a fair opportunity to grab a substantial stake in the projected garment market share. According to PHD Chamber of Commerce and Industry (PHDCCI), post-MFA, India's market share in the US is expected to go up to 15 per cent from the present 4 per cent. In the EU, the market share increase is expected to be 50 per cent from the current 6 per cent to 9 per cent Table showing the India’s Competitiveness with Other Country There is no denying India is competitive enough and will become even more competitive once its infrastructure issues are sorted out. China has probably already reached its peak and further improvements may not be as dramatic, henceforth
  33. 33. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 33 Table No: 5.1 Countries and their positive and negative aspects with regard to textiles Key countries / regions Key positives Key negatives China Efficient, low cost, vertically integrated Growth at the cost of profits India, Pakistan Vertically integrated, low cost Lacks economies of scale and infrastructure support Mexico (NAFTA), Turkey Proximity to market, duty and quota free Lack China and Indias degree of competitiveness ASEAN (Vietnam, Cambodia, Indonesia) Cheap labor No other cost or locational advantage AGOA (African) countries, Bangladesh Quota and tariff free, cheap labor Lacks integration and China and Indias degree of competitiveness Hong Kong, Korea, Taiwan Trading hubs proximity to China No cost advantage, protected currently by quotas USA and EU Non-quota barriers likely to prove irritant to imports US$ 400 bn trade loss likely ov Source - Industry, I-SEC Research
  34. 34. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 34 Indian Textiles targets- 11th Five year Plan (2007-2012) Market size of US$ 115 Billion Export target US$ 55 Billion Domestic market US$ 60 Billion India‘s market share in world textiles trade to grow from 3% to 8 % 12 Million additional jobs Investment Rs.150,600 Crs Table No: 5.2 Textiles Export Target (In Billions) Year ( April March) Target Achievement 2006-07 19.73 19.62 2005-06 15.565 17.80 2004-05 15.16 13.04 2003-04 16.31 13.16 2002-03 15.05 12.41 2001-02 13.72 10.76 Source: Textile India Progress
  35. 35. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 35 Top 10 Exporters (Textile) Country 1990 1997 Billion US$ % share Billion US$ % share Hong Kong 7.99 7.68 14.6 9.42 China 7.10 6.82 13.83 8.92 South Korea 6.04 5.81 13.35 8.61 Germany 14.00 13.46 13.05 8.42 Italy 9.80 9.43 12.9 8.32 Taiwan 6.13 5.90 12.73 8.21 USA 5.03 4.83 9.19 5.93 France 7.21 4.65 5.86 5.64 Belgium- Luxembourg 6.54 6.29 7.01 4.52 Japan 5.88 5.65 6.75 4.35
  36. 36. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 36 Top 10 Exporters (Apparel) Country 1990 1997 Billion US$ % share Billion US$ % share China 9.41 9.14 31.8 21.06 Hong Kong 15.37 14.92 23.11 15.30 Italy 12.07 11.72 14.85 9.83 USA 2.57 2.49 8.68 5.75 Germany 7.82 7.59 7.29 4.83 Turkey 3.44 3.34 6.7 4.44 France 4.65 4.51 5.34 3.54 UK 3.08 2.99 5.28 3.50 South Korea 8.11 7.87 4.19 2.77 Thailand 2.86 2.78 3.77 2.50 Total (top 10) 69.38 67.36 111.01 73.52 World 103.00 100.00 151.00 100.00
  37. 37. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 37 Multifibre Arrangement (1974-94) under which countries whose markets are disrupted by increased imports of textiles and clothing from another country were able to negotiate quota restrictions. The MFA was introduced in 1974 as a short-term measure intended to allow developed countries to adjust to imports from the developing world. The textiles and clothing industry was, until recently, the only major manufacturing industry that was not subject to the rules of the General Agreement on Tariffs and Trade (GATT). Instead, it was subject to extensive use of quotas by the major importing countries. The quota system started with the Long Term Agreement Regarding International Trade in Cotton Textiles (LTA) under the auspices of the GATT in 1962. In 1974 the LTA was extended to cover other materials than cotton, and became known as the Multi-Fiber Agreement (MFA). At the end of the Uruguay Round of negotiations it was agreed that t countries wishing to retain quotas would commit themselves to phasing them out gradually over a 10 year period, with the last quotas being lifted 1st of January 2005, as stated in the Agreement on Textiles and Clothing (ATC).Developing countries have a natural advantage in textile production because it is labor intensive and they have low labor costs. According to a World Bank/International Monetary Fund (IMF) study, the system has cost the developing world 27 million jobs and $40 billion a year in lost exports. At the General Agreement on Tariffs and Trade (GATT) Uruguay Round, it was decided to bring the textile trade under the jurisdiction of the World Trade Organization. The textiles and clothing (T&C) industry is considered to be an opportunity for the industrialization of developing countries in low value added goods. The industry is labor intensive and thus requires a large number of unskilled workers, including a high share of female workers. The end of the MFA in 2005 will change international trade significantly and lead to a restructuring of the sector worldwide. This
  38. 38. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 38 restructuring process will result in major employment shifts within and between countries. However, the last three decades have seen various changes in the clothing and textile sector, thus forcing many countries to adjust to a constantly altering environment. Now, a number of countries fear that a new wave of cheap textile and clothing products will flood their markets, threatening their domestic industries that are not adequately prepared to face the new challenge. There are also those countries that hope for new export opportunities as a result of a free quota trade environment and a third set of countries that will lose their preferential access to the US or EU markets, thus facing higher competition for their exports to them. However, large tariffs remain in place on many textile products. However, the last three decades have seen various changes in the clothing and textile sector, thus forcing many countries to adjust to a constantly altering environment. Now, a number of countries fear that a new wave of cheap textile and clothing products will flood their markets, threatening their domestic industries that are not adequately prepared to face the new challenge. There are also those countries that hope for new export opportunities as a result of a free quota trade environment and a third set of countries that will lose their preferential access to the US or EU markets, thus facing higher competition for their exports to them. INDIAN SUPPLY DEMAND SCENARIO Textile engineering enjoys good growth in the country. The business in 2004-05 amounted to Rs 1,650 crore, which was a Rs-250 crore increase from the year-ago level. Despite the Bull Run, textile industry is running short of machinery. Today, textile companies have to wait one or two year for delivery of machines, whereas, orders are completed within 10-12 months. This growing demand is a tough challenge to cope with for Lakshmi Machine
  39. 39. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 39 Works (LMW), Coimbatore. It takes 18 months to fulfill new orders, but R. Rajendran, spokesperson for LMW, expects the delivery time to be cut down to 10-12 months in 2006-07 with its new capacities. Two reasons forwarded for the delay in delivery of machines: textile companies are expanding capacities rapidly and pace of supply of machinery not in tune with the current demand. Second reason is the Technology Up gradation Fund Scheme (TUFS) of the Textile Ministry is likely to end by March 2007. As a result, textile companies wishing to make the most of the scheme are rushing to place orders for the machines, says C V Radhakrishnan, Advisor, Textile MachineryManufacturersAssociation. Considering the development of textile industry, India would need 12 million spindles in the next five years, whereas only 10 million spindles would be provided by domestic textile engineering industry. In 2008, the Indian textile industry suffered from overcapacity. There was talk that a consolidation in the local industry would inevitably have to take place if India is to remain competitive in textiles, but there was also talk that the government may offer a U.S.-styled bailout of the Indian textile industry in order to keep employment levels high. These conflicting signals continue to make an assessment of the Indian textile sector difficult to make. FASHION APPAREL INDUSTRY OVERVIEW The global fashion apparel industry is one of the most important sectors of the economy in terms of investment, revenue, and trade and employment generation all over the world. Apparel industry has short product life cycles, tremendous product variety, volatile and unpredictable demand, long and inflexible supply processes. The industry
  40. 40. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 40 has been in a transition over the last 20 years. Some of the major contributors are significant consolidation in retail, increasing use of electronic commerce in retail and wholesale trade. The clothing and apparel industry produces finished clothing products made from both natural and manmade fibers like cotton, silk, wool, linen, polyester, rayon, Lycra and denim. The important segments covered in apparel industry includes children clothing, men‘s clothing, clothing for women, bridal wear, men‘s wedding wear and intimate apparel. The apparel is sold through three major channels, which are brick & mortar, catalog and through internet. Table No: 7.1 Apparel Sales by Channel Category Sales in $ Billion Market Share (%) Brick and Mortar 169.256 92.9 Catalog 7.177 3.9 Online/ Internet 5,873 3.2 Total 182.306 100.00 Source: www.fashionproducts.com (http://www.fashionproducts.com/fashion-apparel-overview.html) INDUSTRY CHALLENGES: The Apparel Industry is growing at a very high rate but still there are some barriers, which are hindering the growth of this industry. Some of them are: • Though the demand for garments is increasing day by day but the production rate has still not been able to match with the ever rising demand. More production facilities are needed to meet the demand
  41. 41. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 41 • Most of the raw material needed for apparel manufacturing is available in the developing or under developed countries and these countries do not have enough resources and manpower to explore them. These countries also do not have finance to set up factories for clothing and garment production • Globalization has helped the trade in many ways but due to globalization the competition has increased and so it is not very easy for the firms to cope up with so much competition, as they have to meet the deadlines and also maintain quality • The importers of developed economies are facing very stiff competition as countries like China are producing good quality products in low prices due to availability of very cheap labour • Some trade laws still are very much in favor of developed countries and they need to be reviewed, to facilitate imports from the developing countries • As apparel industry is fashion driven, and fashion keeps changing, the firms have to cope with the changing apparel industry trends and still complete orders in time. Thus they usually have to work under pressure National Textile Policy 2000: ON NOVEMBER 2, the Government announced the New Textile Policy (NTP), outlining measures to make India a global player in textiles and readymade garments by raising exports from $11 billion to $50 billion by 2010. Of this, the share of readymade garments will be half. The Government has decided to de reserve the garment industry from the SSI category to make the former internationally more competitive. Till now, the garment sector was under SSI reservation, with an investment ceiling
  42. 42. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 42 of Rs 3 crore, and the maximum foreign direct investment limit of 24 per cent. There are two more modifications. First, the FDI limit of 24 per cent has been removed, and foreign companies will be able to make 100 per cent investments through the Foreign Investment Promotion Board (FIPB) route. Second, the 50 per cent export obligation on firms with foreign equity has been done away with. The Government intends to implement, in a time-bound manner, the Technology Up gradation Fund Scheme covering all manufacturing sectors of the industry. According to the Textiles Minister, Mr. Kashiram Rana, response to this scheme is improving, and proposals worth Rs 11,000 crore were received. According to the RBI, exports of readymade garments in the 11 years from 1987-88 to 1998-99 rose from $1,430 million to $4,444 million -- more than threefold. The annual average growth rate readymade exports during this period were 10.9 percent, against the overall export growth rate of 9.7 percent. Exports of readymade to the developed countries are improving. Against exports of $427 million to the US, in 1987-88, they touched $1,503 million -- again, more than threefold-- in 1998-99. There have been similar increases in dispatches to the UK, Germany, France, Canada, Italy, Japan and the Netherlands. There was a decline in exports to the Commonwealth of Independent States (CIS) because of the unstable conditions. India was also able to capture markets in developing countries, especially the UAE. The rising trend of readymade garment exports, even to the
  43. 43. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 43 most developed countries, proves beyond doubt the competitive ability of the small sector. TECHNOLOGY UPGRADATION FUND SCHEME (TUFS): Government of India, Ministry of Textiles has launched a Technology Up gradation Fund Scheme (TUFS) for the Textile and Jute Industries, which is in operation since 01.04.1999 for 5 years i.e. up to 31.03.2004. There is no cap on funding under this scheme. It is an open-ended scheme depending on the capacity of the industry to absorb funds in bankable and techno-economically feasible proposals. The main features of the TUFS are given below: - i) The scheme provides a reimbursement of 5% point on the Interest charged by the lending agency on a project of Technology Up gradation in conformity with the scheme. ii) The identified sectors in the textile industry viz. Cotton ginning and pressing, spinning/silk reeling and twisting/wool scouring and combing/ synthetic filament yarn text rising, crimping and twisting, manufacturing of viscose filament yarn (VFY) / Viscose Staple Fiber (VSF), weaving/knitting including non woven and technical textiles, garments/made-ups, Jute industry are eligible to avail of these concessional loan for their technology up gradation requirements. Investments in common infrastructure or facilities owned by the association, trust or co-operative society of the units participating in the TUF Scheme and other investments specified are also eligible for funding under the scheme.
  44. 44. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 44 iii) Technology levels are benchmarked in terms of specified machinery for each sector of the textile industry. Machinery with technology levels lower than that specified will not be permitted for funding under the TUF Scheme. iv) General eligibility condition and sector specific eligibility conditions have also been specified in the scheme. v) Nodal agencies for the scheme are as follows: - For the Textile Industry (excluding SSI sector) – IDBI For the SSI Textile Sector (Cotton Ginning & Pressing, Weaving, Knitting, Processing & Garmenting Manufacturing) - SIDBI For Jute Industry - IFCI vi) The interest @5% would be reimbursed to the respective nodal agency through the budget (plan) provisions of the Ministry of Textiles. vii) The functioning of the scheme is being periodically monitored by TAMC Chaired by Textile Commissioner and Inter-Ministerial Steering Committee, Chaired by Secretary (Textiles). viii) A special cell has been set up in the financing institutions for expeditiously processing loan application received under the scheme. ix) All the 18 SFCs, 17 SIDCs and 11 Twin function IDCs, EXIM Bank and NCDC have been co-opted by SIDBI and IDBI. Further SIDBI has co opted 81 commercial banks, 12 coop. banks and NSIC and IDBI has co-opted 36 commercial banks, 1 co-operative bank and 4 AIFIs (IFCI, ICICI, IIBI and LIC) have also been co-opted by IDBI. IFCI has co-opted 3 SFCs, 1 SIDC, 6 commercial banks, 3 AIFIs and Exim Bank for financing jute industry under the scheme.
  45. 45. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 45 x) An option has also been provided to the Small Scale Textile and Jute Industries to avail of either 12% Credit Linked Capital Subsidy (CLCS) or the existing 5% interest reimbursement under the TUFS. CLCS-TUFS will be in operation from 1st Jan., 2002 to 31st March, 2004. There is no distinction between public sector, co-operative sector or private sector mills under the scheme, if project proposal is bankable and techno economically feasible. Indian textile industry should have focused on all major sectors right from fiber to fashion and planned for an organized growth across the supply chain so as to compete with China and even countries such as Pakistan, Vietnam and Thailand. Instead, the industry had put majority of its stock in the spinning sector. This is clearly evident in the utilization of Technology Up gradation Fund Scheme effectively by the spinning sector. Although it is a positive outcome, in my opinion, the industry turned a blind eye on value-adding sectors such as weaving and finishing TEXTILEWORKERS’REHABILITATIONFUNDSCHEM E (TWRFS): Textile Workers‘ Rehabilitation Fund Scheme came into force with effect from 15th Sept. 1986.The objective of TWRFS is to give interim relief to the workers rendered jobless due to permanent closure of the mills. Another reason also was to curtail the widespread disguised employment in the textile industry. Relief under the scheme is available only for 3 years on a tapering basis, 75% of the wage equivalent in the first year, 50% in the second year and 25% in the third year. The government has established various research associations for the textile industry like
  46. 46. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 46 Ahmadabad Textile Industry Research Association, Ahmadabad Bombay Textile Research Association, Mumbai South India Textile Research Association, Coimbatore Northern India Textile Research Association, Ghaziabad Silk and Art Silk Mills Research Association, Mumbai It has a few export promotion councils also like o Handloom Export Promotion Council, Madras o Apparel Export Promotion Council, New Delhi o Cotton Textile Export Promotion council, Mumbai o The Synthetic and Rayon Textiles Export Promotion Council, Mumbai o Indian Silk Export Promotion Council, Mumbai o Wool and Woollens Export Promotion council, New Delhi o Carpet Export Promotion Council, New Delhi o Export Promotion Council for Handicrafts o Power loom Development & Export Promotion Council
  47. 47. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 47 CHAPTER -3 Research methodology
  48. 48. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 48 COLLECTION OF data The research method which I had chosen to collect information is the case study method I had choose one company related to this topic the company is siyaram silk mill ltd I had collected the information by referring many magazines newspaper and so on Objective: The objective is to get a brief knowledge on this topic and related that information to the siyaram‘s. As there is also a disadvantage that on the basis of one company I cannot give brief knowledge about the textile industry. MAJOR PLAYERS India being one of the fastest growing economies of the world, which has both positively and negatively, affected the Indian apparel industry. On one hand it has become a major retailing hub and a host for various multinational companies on the other hand this has a negative effect on the domestic players. The emergence of mall, brand slavery, fashion awareness, rise in the income level has further reinforced the competition among the multinationals and the domestic players and has lead to opening of number of retail outlets in India. The introduction of VAT and the growth of organized retail industry are also likely to push up growth in the textiles and apparel sector
  49. 49. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 49 domestically too. While the garments business will pose its own set of challenges in terms of providing flexibility in operations and dealing with labor productivity issues, an increasing contribution to revenues from the garments business, which is less capital-intensive and margins-accretive, would augur well for earnings growth. GOKALDAS EXPORTS Incorporated in 1979, based in Bangalore, it‘s one of India's largest manufacturers and designer of garments for men, women and children and caters to the needs of several international fashion brands and retailers. Gokaldas Exports has been a major player in the readymade garment industry across the globe. In the present Indian fashion retailing, Gokaldas has grabbed a distinguished place for itself in the form of "The Wear house" catering to the specific fashion needs of the people. The Wearhouse has high profile outlets in Bangalore, Chennai, Hyderabad and Coimbatore. An ISO 9001:2000 Certified Company has a capacity to produce and export 2.5 million garments a month. The Group's products include coats, suits, jackets, parkas, windcheaters, ski wear; warm-ups, surf wear, swim wear; trousers, shorts; casual wear shirts, ladies blouses and dresses for customers in international market. It mainly operates in India but exports its products to countries like the United States of America, Canada, Mexico, United Kingdom, Germany, Austria, Spain, Italy, France, Netherlands, Middle East, South Africa, Japan, Denmark, Taiwan and Hong Kong. A few of the manufacturing units are 100% export units with capabilities of mass production. They have the license to import duty-free fabrics and accessories from all over
  50. 50. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 50 the world for re-export. It has over 48,000 employees who work in around 48 fully equipped, modern, manufacturing factories. ARVIND BRANDS Arvind Mills Ltd. was incorporated in 1931 with share capital Rs.2525000 ($55000) in Ahmadabad by the Lalbhai group. The Company's operations are divided into the Textile Division, telecom division and garments division. We will be majorly concentrating on the garments division. Products manufactured are dhotis‘, sarees, mulls, dorias, crepes, shirtings, coatings, printed lawns & voiles cambrics, twills gabardine etc. Arvind Brands is part of the Lalbhai Group, which holds licenses for leading international brands such as Arrow, Lee, Wrangler, Gant and Tommy Hilfiger for retail and wholesale sales in the local market. Its mainstream brands are Excalibur and Flying Machine. In addition, it owns an array of casual sportswear and denim brands marketed in India, including Flying Machine, Newport and Ruf & Tuf jeans and Excalibur shirts along with licensed relationship with various international brands like Nautica, Jansport, Kipling, Hero by Wrangler, Lee Riders and Tommy Hilfiger, and joint ventures with VF Corporation and Diesel. But the company is facing severe competition from major brands like Louis Philippe, Park Avenue and small brands like Trigger and Blackberry‘s. It produces about 110 million meters of denim every year and the garment section is doing extremely well because of the customer loyalty it enjoys. The demand for jeans, in particular, is expected to rise, as manufacturing companies in the US have shut operations.
  51. 51. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 51 KOUTONS The winner of ― best retailer leadership award 2008‖ organized by retail congress, Mumbai, Koutons Retail India Limited engages in the design, manufacture, and retail of men‘s wear and integrated apparel in India. It currently sells its apparel using the ―Koutons‖ and ―Charlie Outlaw‖ brands. Mr. Kohli along with his brother in law Mr. Sawheny partnered to set up Charlie's Creation. In 1997 the Company diversified its business by introducing non-denim trousers in the existing product range of denim apparel. The company has inaugurated its 89th family Store in Hyderabad, which it claims to be its largest store in the country. Koutons India has an annual finishing and manufacturing capacity of 22.92 million pieces and 12.36 million pieces of apparel, respectively. The capacity utilization for the same was 41.21% and 21.99% respectively at the end of FY2007.Koutons has 18 manufacturing/finishing units and 14 warehouses spread across various locations in and around Gurgaon. The company's strategy is to have small, but more stores. This helps to save costs and at the same increase reach of the company. The company has a phenomenal growth record. ZODIAC Zodiac Clothing Company Ltd manufactures, exports and imports garments, textiles accessories etc. Zodiac has been in the apparel business for a period of 50 years by now and is known for its quality shirts. Zodiac, is today, the largest selling shirts & tie brand at Shopper's Stop according to Brand Equity (The Economic Times) The Company started business in 1954 and export of readymade garments to Europe started in early '60s, which included mainly ties and shirts. For many decades, Zodiac has been synonymous with ties. The business of
  52. 52. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 52 ties is a high fashion business and Zodiac has taken this to new highs in India and across the globe. In fact, one can say that in India Zodiac is generically associated with ties. Following Zodiac's huge success with ties, the company entered the arena of men's accessories with Cuff links, Belts, Wallets and Handkerchiefs. In 1973, Zodiac had a stand-alone exclusive shirt shop in Hotel Taj in Mumbai. The company then entered the domestic shirt segment in late '80s.It employs around 3500 people in 7 manufacturing units in 16 offices located in UK, US, Germany, UAE etc. Each manufacturing unit is spread over 35000 sq.ft and has modern equipment to spread 60 yards of cloth at a time. All the manufacturing units are same in design and layout. Quality is maintained throughout the 40 stages of assembly line. All the units have their own power generating units in order to be efficient. It has its own 80 exclusive outlets and around 2000 multibranded outlets. Its continuously showing profit and has a consistently growing export business. HOUSE OF PEARL House of Pearl Fashions Limited is a multinational ready to wear apparel manufacturing company. The company also provides supply chain solutions for the fashion industry globally along with warehousing & distribution networks in the UK & US. It operates in 11 strategic locations in six continents. It has two brands Kool hearts, DCC in the United States of America. The brand Kool hearts focuses on the young fashion, where as the focus of DCC is more towards the Missy segment It basically deals with 3 streams which are manufacturing to Retailers, souring solutions for retailers, Marketing, Distribution & Branding for Retailers. It takes care of the whole process from design & development, manufacturing or sourcing till offering a range of pre retailing services,
  53. 53. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 53 warehousing to delivering at the door step on a call off basis. It manufactures a broad range of products comprising of knits, woven, sweaters and bottoms in basic as well as complex designs. It has a good manufacturing capacity; the present in-house manufacturing capacity of the company is twenty million pieces. Per annum spread over more than 725,000 sq feet of built up area with efficiently designed layouts to ensure smooth flow of materials. The company is planning to double the capacity by expanding the operations in Chennai, Bangladesh & Indonesia. It intends to have a capacity of 30million pieces by the end of 2009. The company adopts integrated marketing techniques and has merchandising teams in Canada, Europe, HK, UK, and US, closely interacting with existing and potential customers at their doorstep. The Company shares were listed on the stock exchanges first time in Feb, 07. It recently went for a joint venture with LERROS, a premium apparel brand from Germany. HARIA EXPORTERS Haria Exports Ltd. is a leading garment exporter in the country for the last twenty four years. It is a Star Trading Company and has won the golden status certificate in the year 1999. This company occupies a unique place in the industry of the by its contribution to Industrial output, employment generation and Foreign exchange earnings. Even though the textile industry has the distinctive advantage in respect of raw material and skilled labor, the industry is suffering from technology obsolescence which in turn affects the quality, productivity and cost effectiveness. The high capital cost is impeding the process of Hi- Tech up gradation. Therefore, the Government of India, Ministry of Textile
  54. 54. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 54 has launched Technology Up gradation Fund Scheme for Textiles & Jute Industries of Rs.25000.00 crores at a concessional rate of interest of appx.5%. In order to compete with the outside world, the company is paying attention to the application of technology, closely following up the fashion trends and improved product quality. In order to be more cost efficient the company has acquired latest machinery which ascertained exact material consumption depending upon the style and pattern. The Government policies, interest rates, export incentives etc may also affect the overall performance of the company, but even then the company is optimistic about its revenue and growth. EVINIX The company started in 1996 with the manufacture of headgears, baseball caps and high altitude jackets, using cotton textile and leather, mainly for exports. The company was incorporated on 1st May 1996 as Evinix Fashion Accessories Private Limited under the Companies Act, 1956. Mr. Sanjay Taneja, brother of Mr. Raujeev Taneja (the original promoter of the company) joined the Company as a Promoter replacing Mrs.Anuradha Taneja, who disassociated herself from the company. The name of the company was changed to Evinix Accessories Private Limited from Evinix Xsesryz and a fresh Certificate of Incorporation dated 20th March 2003 was taken. In March 2005, M/s Ambrose Exports Private Limited took equity stake in the company. The apparel category constitutes men and women‘s shirts, trousers, skirts and tops, kids wear and nightwear. Organic cotton wear for expecting mothers and infants is an additional strength. They use Organic cotton and its products through its brand name ―Othentix‖- Authentic
  55. 55. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 55 Sustainable Textiles, lends a unique personality to each garment manufactured and supplied by Evinix. The company came out with a principle of Rapid Retail suggesting that every merchandise has a limited shelf life at CUT stores; CUT is an acronym for Comfortable, Urban and Trendy. Evinix is setting up CUT stores (averaging 4000-5000 sq feet) in fast urbanizing young Indian towns. It recently launched the CUT youth style store in Rajkot. The Rapid Retail business concept embraces the e.t.o.a.d concept i.e. the exact time of awaited departure when the product will move out to the next best price bracket. PEARL GLOBAL Pearl Global Limited was incorporated on 23rd October, 1979 under the name Pearl Agencies Private Limited. The Company became a Deemed Public Company with effect from 1st July, 1991 The name of the Company was change to PEARL GLOBAL LIMITED (PGL) on 2nd September, 1993 in terms of Section 21 of the Companies Act, 1956 as per fresh Certificate of Incorporation issued by the Registrar of Companies, Delhi & Haryana. PGL manufactures, sells, and exports ready to wear apparel in India. The company primarily produces garments in woven and knitted fabrics. Its products include casual wear dresses, ladies‘ blouses, and bottoms. The company is based in Gurgaon, India. PGL is a subsidiary of House of Pearl Fashions Limited. BANG OVERSEAS LTD Bang Overseas limited‘s principal activity is to manufacture and market textiles and apparels. The Group's textile includes readymade garments, under garments and hosiery. It markets with a brand name of Thomas
  56. 56. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 56 Scott. The Group operates only in India. It was incorporated in the year 1992 and is presently providing fashion fabrics and meeting ready to wear requirements of the customers in apparel, textile and Retail segment. The company started the business from trading in textile and since 1998, they are conceptualizing and designing fashion fabrics and outsourcing the manufacturing process of the same from countries like Turkey, Portugal, Mauritius and other European Countries. In the same year, they launched our seasonal fabric collections in textile under the name "Body waves", marketed through their own distribution channel to different brands and retailers. They have ventured into ready-to-wear men‘s' segment in 2000 by outsourcing manufacturing process and in turn selling to various international brands. They launched ready-to-wear men‘s' garments under our brand name "Thomas Scott" in 2002. They started their own first apparels manufacturing unit in Bangalore in the year 2005 in the name of Reunion Clothing Company with an installed capacity of 350,000 pieces per annum and in the year 2006 then they started the second manufacturing unit in the name of Formal Clothing Company with an installed capacity of 360,000 pieces per annum. At present they have installed capacity of 720,000 and 540,000 pieces per annum at their Reunion Clothing Company and Formal Clothing Company. Their products are presently retailed through 157 point of sales comprises of our own Retail outlets, Large format stores (LFS) like Shoppers' Stop, Pyramid, Globus, the LOOT, SAGA and Multi Brand Outlets (MBO) spread all over India. They cater to the demand of various other apparel manufacturer and brands also. They have centralized warehousing and logistics centre at Kalher Village near Bhiwandi to facilitate our supply chain management as well. BCG MATRIX
  57. 57. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 57 BCG Matrix is also called the Boston Matrix because it was created by Bruce Hendeson for the company Boston Consulting Group in 1970. The BCG matrix method is based on the product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit. Star The high growth and high market share brands that exist in Indian market and are the market leaders. This category consists of the companies like Zodiac, Du Pont etc. These companies are regularly investing in R&D and gaining market share as time passes. These stars try to become the cash cows of the future and want to remain in the market. Cash Cows The companies which have low business growth and high market share are the cash cows that generate milk continuously with the small investment to be as the mature company in the market. Question marks (also known as Problem Childs) The companies that have high growth rate and lower market share are the question mark as they could be new ventures started or they are companies that do not have liquidity enough to increase their share in the market. But these companies have potential to be the star in the market due to good growth rate and thus they could invest more into their business to expand as the star and then becoming the cash cows. Dogs
  58. 58. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 58 The dogs are more charitable pets that exist in the market and have the low market share and low growth rate so these companies are better to get out of the market or much cash is required to set them up. These companies have the cash traps which ties up the money in a business with the lower potential. GOKALDAS In the present Indian fashion retailing, Gokaldas has grabbed a distinguished place for itself in the form of "The Warehouse" catering to the specific fashion needs of the people. It mainly operates in India but exports its products to countries like the United States of America, Canada, Mexico, United Kingdom, Germany, Austria, Spain, Italy, France, Netherlands, Middle East, South Africa, Japan, Denmark, Taiwan and Hong Kong. This means the company has a high growth rate since its inception. Therefore we put it in star. ARVIND BRANDS Arvind Brands is part of the Lalbhai Group, which holds licenses for leading international brands such as Arrow, Lee, Wrangler, Gant and Tommy Hilfiger for retail and wholesale sales in the local market. Its mainstream brands are Excalibur and Flying Machine. In addition, it owns an array of casual sportswear and denim brands marketed in India, including Flying Machine, Newport and Ruf & Tuf jeans and Excalibur shirts along with licensed relationship with various international brands like Nautica, Jansport, Kipling, Hero by Wrangler, Lee Riders and Tommy Hilfiger, and joint ventures with VF Corporation and Diesel. Its enjoys good market share as its customers are loyal to it. But its rate of growth is not significant. So we put it in cows.
  59. 59. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 59 KOUTONS The winner of ― best retailer leadership award 2008‖ organized by retail congress, Mumbai, Koutons Retail India Limited engages in the design, manufacture, and retail of men‘s wear and integrated apparel in India. The company's strategy is to have small, but more stores. This helps to save costs and at the same increase reach of the company. The company has a phenomenal growth record. Its market share is excellent. So we put it in stars. ZODIAC Zodiac Clothing Company Ltd manufactures, exports and imports garments, textiles accessories etc. Zodiac has been in the apparel business for a period of 50 years by now and is known for its quality shirts. Zodiac, is today, the largest selling shirts & tie brand .The company then entered the domestic shirt segment in late '80s.It employs around 3500 people in 7 manufacturing units in 16 offices located in UK, US, Germany, UAE etc. Its continuously showing profit and has a consistently growing export business.Market share is not that significant as it is famous only in tie and shirt.So we place it in question mark. HOUSE OF PEARL It operates in 11 strategic locations in six continents. It has two brands Kool hearts, DCC in the United States of America. The company adopts an integrated marketing technique and has merchandising teams in Canada, Europe, HK, UK, and US, closely interacting with existing and potential customers at their doorstep. Both its growth and market share is high. Therefore it is placed in stars. HARIA EXPORTERS
  60. 60. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 60 It is a Star Trading Company and has won the golden status certificate in the year 1999. This company occupies a unique place in the industry of the by its contribution to Industrial output, employment generation and Foreign exchange earnings. Even though the textile industry has the distinctive advantage in respect of raw material and skilled labor, the industry is suffering from technology obsolescence which in turn affects the quality, productivity and cost effectiveness. In order to be more cost efficient the company has acquired latest machinery which ascertained exact material consumption depending upon the style and pattern. Considering these it is placed in dog. EVINIX The apparel category constitutes men and women‘s shirts, trousers, skirts and tops, kids wear and nightwear. Organic cotton wear for expecting mothers and infants is an additional strength. Evinix is setting up CUT stores (averaging 4000-5000 sq feet) in fast urbanizing young Indian towns. It recently launched the CUT youth style store in Rajkot. The Rapid Retail business concept embraces the e.t.o.a.d concept i.e. the exact time of awaited departure when the product will move out to the next best price bracket. But market share is not that significant. So we put it in question mark. BANG OVERSEAS LTD The company started the business from trading in textile and since 1998, they are conceptualizing and designing fashion fabrics and outsourcing the manufacturing process of the same from countries like Turkey, Portugal, Mauritius and other European Countries. In the same year, they launched our seasonal fabric collections in textile under the name "Body waves", marketed through their own distribution channel to different
  61. 61. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 61 brands and retailers. They started their own first apparels manufacturing unit in Bangalore in the year 2005 in the name of Reunion Clothing Company with an installed capacity of 350,000 pieces per annum and in the year 2006 then they started the second manufacturing unit in the name of Formal Clothing Company with an installed capacity of 360,000 pieces per annum. At present they have installed capacity of 720,000 and 540,000 pieces per annum at their Reunion Clothing Company and Formal Clothing Company. Their products are presently retailed through 157 point of sales comprises of our own Retail outlets, Large format stores (LFS) like Shoppers' Stop, Pyramid, Globus, the LOOT, SAGA and Multi Brand Outlets (MBO) spread all over India. They cater to the demand of various other apparel manufacturer and brands also. Taking into account their market share and growth, we put it in stars. Government Regulations:  Historically the textile industry in India has been reserved for the small scale sector, which has been exempted from taxes, thus discouraging investments in increasing scale  The government, through its various Budget announcements has sought to rationalize taxes  Budget 2002-03: Textiles brought under the ambit of Cenvat (credit for duties paid on inputs or capital goods) and introduced on all yarns  Budget 2003-04: Cenvat extended across the entire textile chain to include fabrics, made-ups and apparel; excise duty exemptions on many sectors and processes, specially SSI removed; excise duty rates reduced
  62. 62. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 62  Budget 2004-05: Cenvat made optional - every manufacturer allowed to choose between a complete exemption from payment of excise duty or adopt the Cenvat route; excise duties lowered to 4% on cotton textiles and 8% on non cotton textiles (except manmade fibers, polyester filament yarn, nylon filament yarn) for those claiming Cenvat credit Always government regulations aimed at improving competitiveness of industry to face a post quota regime Several government initiatives targeted to attract investments: Technology up gradation fund scheme:  Scheme launched in 1999 to provide firms access low interest loans for technology up gradation and setting up new units with state-of-art technology  Scheme has disbursed INR 91.61 bn till 31st December 2005 Policy related to foreign investment:  Up to 100% foreign direct investment allowed in textile and apparel manufacturing industry, with approval of the Foreign Investment Promotion Board (FIPB)  USD 1.02 bn of FDI in the sector approved between 1991 and 2004  Companies free to set up fully-owned sourcing (liaison) offices, as well as marketing operations Upgrading Infrastructure:
  63. 63. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 63  ―Scheme for Integrated Textile Parks‖ (SITP), based on public- private partnership model to build world class infrastructure facilities  Product specific ―Cluster Approach‖ targeting development of 100 additional clusters in textiles  Technology Mission on Cotton (TMC), focusing on cotton R&D, dissemination of technology to farmers, improvement of market infrastructure and modernization of ginning and pressing sector I. The extent of rivalry among established firms 1. Industry competitive structure: Since this industry is highly fragmented there is always high probability during the boom phase that many new players could enter this industry which would lead to a price war and ultimately end up with the bankruptcy of some players or consolidation of industry. So, this is a treat to the existing players. But also the existing players work a lot on cost efficiencies therefore the treat of new entrant is negated by the cost efficiencies of existing players 2. Industry Demand: In the current scenario textile exports have declined drastically and even in domestic demand there is a little slowdown. Due to which textile companies are working on reducing cost by ways of reducing the work force, decrease in operation cost etc. Also this will evoke more rivalry among the existing players as they all will like to maintain their market share in spite of the slump in industry 3. Exit Barrier:
  64. 64. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 64 This is not just a labour intensive industry but even the cost involved in plant setup is very high along with that with the invent of many new technologies many companies have adapted to modern techniques to remain competitive in industry as well as to produce better products for their customers in lesser time and with lesser cost. Therefore because of high involvement and emotional attachment with the business as it has been a traditional business for generations for many companies they still prefer to stick and continue with the business. But in the current scenario many textile mills have closed down because of deep cut in demand and high operational cost due to severe global crisis II. The bargaining power of buyers Indian textile companies are facing a tough competition from Chinese, Brazilian and South Korean companies as they are able to produce at a lower cost compared to Indian companies This industry is fragmented and there are large number of players in the industry, therefore buyer get the option of choosing from many suppliers Indian textile industry is no more just a mass producer of textile rather it has moved into niece segment and has developed capability to produce finest quality of fabric which provides them distinctive competencies against other countries as well as small players who could cater to mass consumers only. Therefore overall buying power of buyer will defer from company to company. Companies like Arvind mill, Raymond, aditya Birla group have achieved certain degree of distinctive competencies therefore with them buying power of buyer is negated to large extent against their competencies.
  65. 65. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 65 But many small companies who are mass producer of textile face a strong buying power of buyer. III. The bargaining power of supplier Here again bargaining power of supplier dictated by the segment that they are targeting to, for a niece players and companies who have achieved operational excellence can dictate terms to buyers but for small players who just produce for mass consumption do not have much say in the business deal and the prices are mostly dictated by the buyer.
  66. 66. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 66 IV. The threat of substitute product Textile itself is a very broader term and is a solution to a very basic need of any human being therefore there is as such no substitute to this but within the textile industry there are many substitutes to different category of textiles. In India there are various types of textile produced from cotton, silk, synthetic etc. There is always a risk of substitution of one type with the other type also there is constant research carried out to develop new types of textiles but combining different textiles in different proportion. But in broader perspective there is no substitute to textile.
  67. 67. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 67 Chapter -4 INDUSTRY AVERAGE
  68. 68. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 68 The textile readymade and apparel industry has been increasing its operating revenues year on year at a brisk rate. The number of companies that are in this industry has increased three folds from around 33 companies in 2008 to around 90 companies recently. This increase in the number of companies can be attributed to the rise in the sales revenue. Table No 9.1 Industry Average various Financial Indicators (Rs in Crs) Year Latest 2008 2007 2006 2005 2004 Companies No. 90 33 44 47 53 48 Sales Turnover 7,419.89 5,606.93 5,050.62 4,235.84 2,837.85 2,235.28 Operating Profit 1,026.91 834.69 780.71 611.91 272.65 184.65 Reported Net Profit 416.8 361.08 361.1 299.76 100.88 54.17 Source: Capitaline Database The industry average of the key financial ratios is as follows Table No 9.2 Industry Average of ratios Year Latest 2006 2005 2004 Debt-Equity Ratio 1 0.99 1.19 1.02 Current Ratio 1.58 1.43 1.64 1.83 Fixed Assets Turnover Ratio 2.95 2.54 3.16 2.15 Inventory Turnover Ratio 4.44 3.77 4.54 3.35 Interest Coverage Ratio 3.97 5.56 2.97 2.77 Source: Capitaline Database We find that the capital Structure of the Industry has reached a position wherein the companies are raising capital through debt and equity in the same ratio of 1:1 the current ratio is also moving slowly up recently despite the fall in 2006 towards the optimum ratio of 2:1. At present it is at 1.58:1 the two turnover ratio‘s namely Fixed Assets Turnover Ratio
  69. 69. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 69 and the Inventory Turnover Ratio are becoming high. This is a positive sign if the turnover ratio is high. The interest coverage ratio has dropped notably but this can be attributed to the expansion plan of companies. Ratio Industry Average Source: Capitaline Database ARVIND BRANDS Arvind Brands which is the largest producer of Denim clothing is one of the most famous names in the apparel industry the company is known for its huge expansion plans in future 0 1 2 3 4 5 6 Debt-Equity Ratio Current Ratio Fixed Assets Turnover Ratio Inventory Turnover Ratio Interest Coverage Ratio LATEST 2006 2005 2004
  70. 70. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 70 Table No: 9.3Arvind Clothing Financial Performance (Rs in Crs) ARVIND CLOTHING 2004 2003 2002 2001 2000 Sales Turnover 64.71 61.24 52.41 49.13 47.45 Operating Profit -1.91 2.68 0.75 5.38 6.3 Adjusted Net Profit -4.51 -0.18 -1.45 1.69 3.39 Source: Capitaline Database Arvind Clothing Faced a loss in the year 2004 this led to the company deciding to sell one of its Business Units in 2006. Arvind Clothing expansion plans and the launch of Denim products for the Indian market can be quoted as reasons for this loss. Table No 9.4 Arvind Clothing Cash Flow Statement (Rs in Crs) ARVIND CLOTHING Mar-04 Mar-03 Mar-02 Mar-01 Cash Flow Summary Cash and Equivalents at Beginning of the year 1 0.94 0.75 1.76 Net Cash from Operating Activities 2.69 2.56 2.41 -1.54 Net Cash Used in Investing Activities -2.24 -1.21 -0.32 -0.79 Net Cash Used in Financing Activities -0.07 -1.29 -1.92 1.32 Net Inc/(Dec) in Cash and Cash Equivalent 0.38 0.06 0.17 -1.01 Cash and Cash Equivalents at End of the year 1.38 1 0.92 0.75 Source: Capitaline Database The cash flow clearly indicates that the loss in the year 2004 is mainly due to the heavy cash outflow for investing activities. Company‘s accounts revealed that approximately 2.38 crores worth of fixed assets were purchased as a part of the expansion plan.
  71. 71. Textile industry of India case &analysis of siyaram silk mill ltd Surendra .c. saroj 71 Table No 9.5 Arvind Clothing Key Financial Ratios ARVIND CLOTHING LTD Mar-04 Mar-03 Mar-02 Mar-01 Mar-00 Debt-Equity Ratio 2.62 1.89 1.59 1.35 0.91 Current Ratio 1.54 1.31 1.22 1.47 1.35 Fixed Assets Turnover Ratio 3.78 3.92 3.54 3.45 3.54 Inventory Turnover Ratio 2.95 2.7 2.54 2.74 3.43 Interest Cover Ratio -1.1 1.01 -0.03 1.71 3.39 Source: Capitaline Database The company has a very high debt ratio. This is dangerous as the company is also spending a lot on the procurement of fixed assets. The current ratio is however 1.58 and shows that the company has good liquidity. The fixed assets turnover has reduced in 2004 this is understandable as the company has purchased a lot of new assets. The Inventory turnover however is growing at a stable pace. The interest coverage ratio is in the negative as the company is facing losses. The company has to depend on reserves for interest payment. Arvind Clothin Key Financial Ratios Source: Capitaline Database BANG OVERSEAS LTD Bang Overseas is a company which depends on high specialization. It also recently issued an IPO for raising the required capital. It only -2 -1 0 1 2 3 4 5 Debt-Equity Ratio Current Ratio Fixed Assets Inventory Interest Cover Ratio ARVIND CLOTHING LTD 2004 2003 2002 2001 2000

×