Home Textiles & Furnishings: Does India Home Textiles & Furnishings: Does India stand adequately invested to tap the stand adequately invested to tap the

opportunity?opportunity?

Sunil O. KhandelwalChief Financial Officer

2

2009

Global trade in textiles and clothing increased to US$ 510 bn from US$ 355 bn. in 2000 - CAGR of 4.63%

2020

Global trade expected to grow to US$ 1000 bn from US$ 510 bn in 2009 - CAGR of 6.3%

Source: - UN Comtrade, OTEXA, Eurostat & Technopak Source: - UN Comtrade, OTEXA, Eurostat & Technopak AnalysisAnalysis

Top Exporters Amount US$ BN. %

Europe 162 31.76%

China 189 37.06%

India 23 4.51%

Others 136 26.67%

Total 510 100.00%

USD bn.

BIG Picture - Global Textile BIG Picture - Global Textile IndustryIndustry

Global Textile & Approval Trade

220 240 250 200300 350

309346 362

310

500

650

0

200

400

600

800

1000

1200

2006 2007 2008 2009 2015 (E) 2020 (E)

Years

US

$ in

Bill

ion

s

Textile Apparel

CAGR 5%

529586

612

510

800

1000

3Source: - TechnopakSource: - Technopak

The domestic textile market in India is projected to grow from USD 52 bn. in 2010 to USD 140 bn. by 2020 at a CAGR of 10.5%

The export market in textiles is projected to grow from USD 26 bn. in 2010 to USD 80 bn. by 2020 at a CAGR of 12%

The total Indian Textile Industry is projected to grow from USD 78 bn. in 2010 to USD 220 bn. by 2020 at a CAGR of 11%

In order to meet the additional estimated demand (US$ 150 bn) created for Textile and Apparel by 2020,investments to the tune of Rs.320,000 Crores (US$ 68 bn) across the Textile supply chain will be required.

India has the potential to increase its export share in world trade from the current 4.50% to 8.00% by 2020.

The high growth for Indian exports is possible due to increased sourcing shift from developed countries to Asia and India’s strengths as a suitable alternative to China for global buyers.

30 47 5289

140

1623 26

45

80

2005 2009 2010 (E) 2015 (E) 2020 (E)

Domestic Market Exports

Projections

134

220

7870

46

CAGR 11 %

BIG Picture - Indian Textile BIG Picture - Indian Textile IndustryIndustry

BIG Picture - Global Home Textile BIG Picture - Global Home Textile IndustryIndustry Global Home Textile Industry

35.10 37.90 39.7833.15

64.00

90.00

2006 2007 2008 2009 2015 (E) 2020 (E)

Years

US

$ in

Billio

ns

CAGR 7%

Year 2006 2007 2008 2009 2015(E) 2020(E)

China 34.28% 35.88% 36.52% 39.21% 45.31% 44.45%

India 6.55% 6.07% 6.28% 6.94% 10.00% 10.00%

Pakistan 9.12% 8.44% 8.04% 9.05% 7.81% 8.89%

Source: -Company Estimates and Technopak Source: -Company Estimates and Technopak AnalysisAnalysis

  Home Textiles

China 250%

Pakistan 200%

India 72%

Germany 48%

Turkey 38%

% Growth in Exports 2000 to 2007Going forward India’s share expected to rise from 7% to 10% . Expected to be biggest beneficiary as Chinese Industry reaching its peak

2.30 2.30 2.50 2.30 6.40 9.00 2.00 3.00 3.50 4.00

6.00

9.00

-5.00

10.00 15.00 20.00

2006 2007 2008 2009 2015 (E) 2020 (E)US $

in Bi

llions

Years

Indian Home Textile Industry

Export Domestic

BIG Picture - Indian Home Textile BIG Picture - Indian Home Textile IndustryIndustry

CAGR 11%

4.3 5.36.00 6.3

12.40

18.0

Source: -Company Estimates and Technopak Source: -Company Estimates and Technopak AnalysisAnalysis

What's happening in the What's happening in the IndustryIndustry• US and EU which are the main consumption centers are gradually but

steadily coming out of a recessionary phase. Buyers are back in stores. Apparel and Home Textile consumption picking up

• Shifting of production capacities from the West to the Asian continent. China, India and Pakistan make up 70% of total home textiles imports by US- the largest market.

• Chinese industry touching its peak as buyers looking at diversifying their sourcing. Strong domestic demand outstripping supply leaving lesser export surplus. Rising wages and environmental concerns restricting further investment in textiles in China.

• Global price rise in cotton has been fuelled by a combination of factors including stronger than anticipated demand in major emerging economies such as China and India, and lower than expected cotton crop yields in some countries.

• Currency fluctuations affecting export competitiveness of the industry thereby compelling industry to work on product development and sustain margins.

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• The global textile and apparel industry is reviving after the recent global recession with increasing consumer demand. With the positive outlook the global home textile trade has the potential to grow up to USD 64 bn. by 2015 and USD 90 by 2020

• The Indian home textile industry is expected to grow to USD 12.4 bn. by 2015 and to USD 18 bn. by 2020 from present size of USD 6.3 bn.

• The Ministry of Textiles is also encouraging investments through increasing focus on schemes like, TUF scheme. cluster development activities etc.

• Ministry is also looking to attract foreign investments through promotional visits to countries like Japan, Germany, Italy, France, etc.

• Chinese announcement to allow more flexibility to its currency Yuan vis-a-vis USD shall most likely appreciate the Yuan from their current levels thereby giving better level playing field and benefitting the Indian Textile Exporters

• China has become fourth largest importer of textiles after Europe, USA and Japan

• Indian Home Textile players have to invest in R&D and develop special finishes to create their own niche. Institutional branding of products will differentiate players to capture market share. Eg Wrinkle free bed sheets became an overnight hit with the US consumer and emerged as the largest selling bedsheet

Home Textile OpportunityHome Textile Opportunity

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Particulars Amount(Rs. Per Kg)

Cost as % of sales

Raw Material Cost – Cotton 132.00 14.04%

Conversion Cost 123.00 13.09%

Additional Processing Cost for Wrinkle Free Finish

15.00

1.60%

Cost 270.00 28.72%

Add: Wastage 5% 14.00 1.49%

Total Cost per Kg. 284.00 30.21%

Conversion (1 Kg = 2.75 mtrs) 103.00

Total Fabric Cost per sheet set (1Sheet set = 5.6 mtrs.)

577.0

61.38%

Sticthing and Packing Charges per sheet 70.00 7.45%

Cost 647.00 68.83%

Add: Wastage about 2.5% 16.00 1.70%

Total Cost 663.00 70.53%

Average Selling Price USD 21.00 per sheet set – 300 TC

940.00

100.00%

Contribution 277.00 29.47%

Contribution as a % of Sales 29.47%

Contribution from Cotton to Bed sheet Set – 300 TC Wrinkle Free

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Particulars Production Cost Rs. in Crores

Sales 100,000 mtrs. i.e. 18000 sets X 336 days X Rs. 940 per sheet set (300TC)

568.00

Investment – Capacity 100,000 mtrs/day

- Spinning – 80000 Spindles (60s cunt) 40000 kgs / day Rs. 30,000 / spindle 240.00

- Weaving – 400 looms 250 mtrs. / day/ loom

Rs. 50 lakhs/ loom 200.00

- Processing - 1 continuous line 100,000 mtrs/day Lot 150.00

- Stitching - 1000 machines 18000 sets / day Lot 30.00

Sub-total 620.00

Working Capital (100 days) 155.00

Total 775.00

Sales

EBITDA assumed @ 30% 170.0

ROCE (Capex + Working Capital) 21.9%

Asset Turnover (Sales / Net Block) 0.92

Typical Investment – Integrated Bed Sheet Sets

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Particulars Amount(Rs. Per Kg)

Cost as % of sales

Raw Material Cost – Cotton 95.00 34.5%

Conversion Cost (Cotton to Terry Towel) 115.00 41.9%

Total Cost per Kg. 210.00 76.4%

Average Selling price 275.00 100.00%

Contribution 65.00 23.6%

Contribution as a % of Sales 23.6%

Contribution from Cotton to Terry Towel

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Particulars Production Capacity Rs. in Crores

Sales 40 tons X 336 days X Rs. 275 per kg. 370.00

Investment – Capacity 40 tons per day

- Spinning –

Open End 15 tons/ day 1632 rotors 45.00

Ring Frame 25 tons/ day 40800 spindles 150.00

- Weaving – 100 looms 400 kgs / day/ loom Rs. 60 lakhs/ loom 60.00

- Processing - 1 continuous line 40 tons/day Lot 100.00

Stitching 40 tons/day Lot 30.00

Sub-total 385.00

Working Capital (100 days) 100.00

Total 485.00

Sales

EBITDA assumed @ 23.6% 87.00

ROCE (Capex + Working Capital) 18.00%

Asset Turnover (Sales / Net Block) 0.96

Typical Investment – Terry Towel

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Investments Required in Textile Investments Required in Textile IndustryIndustrySegment Additional Capacities Required Investment Required by

Indian Textile Industry

In Rs. Crores

Indian Textile Industry

In US $ Billions

Indian Home Textile

In US $ Billions

Spun yarn New Spindles-13.6 Million

Modernized Spindles-8 Million

42,000 9 1

Filament Yarn

Prod. from modernized capacity-0.5 Bn kg

Prod. from Brownfield expansion-4.2 Bn kg

Prod. from Greenfield projects-1.1 Bn kg

31,000 7 -

Weaving New Shuttleless Looms- 77 thousand

Second hand Shuttleless Looms- 65 thousand

Automatic looms- 1 Lakhs

Semi automatic-2 Lakhs

Plain-2.35 Lakhs

37,000 8 1.5

Knitting New Machines- 84 thousand

Second hand machines-56 thousand

25,000 5 0.5

Processing 90,000 19 3

Garment and Made-ups

Machines required- 21 Lakhs (for 2 shift working) 65,000 14 1

Technical Textiles

30,000 6 0.5

Total 3,20,000 68 7.50

Concluding RemarksConcluding RemarksFor Indian textiles, an era of unprecedented growth has set in. Its our privilege and responsibility to capitalise on this opportune time by building scale, integration and technology

So far the industry has not been able to capitalise on this opportunity and investments made so far is not in proportion to the size of the opportunity available

However, now Indian Home Textile Industry is getting ready to grab this immense opportunity and capture at least 10% of global market share

Domestic markets are equally promising and offers great opportunity to grow

TUF scheme continues till FY 2012 and expected to be continued for the hole of next decade as players take maximum advantage of opportunity offered

Investments will be made across the value chain as demand no longer an issue and industry enters a supplier’s market

Happy Investing!!!

Indian Textile Industry Ki Picture Abhi Baki Hai !

The Great Indian Textile Story is yet to unfold!