TEXTILE INDUSTRY ANALYSIS

Prepared By:

Kalyani Joshi

Satish Jewani

Dwayne Menezes

Yash Trivedi

AGENDA

Industry Introduction & Overview

Company Overview

Porter’s Five Forces

PEST Analysis

RATIO Analysis

SWOT Analysis

Strategic Recommendations

References

Indian Textile Industry - Introduction

The Indian textile industry is one of the largest

in the world.

Currently contributes to 27% of India`s total

foreign exchange and to around 4% to the

GDP of the country.

The industry employs more than 35 million

people directly

The textile is the largest single industry in

India, accounting for 20% of the industrial

production.

Broader Classification of textile industry :-

OBSERVATION :-

Total global textiles exports was to the tune of

US$ 772 billion in 2013, with India’s textiles

exports at US$ 40 billion (5.2% market share)

The country's textile industry, is currently

estimated at US$ 108 billion

The current industry size comprises domestic

market of US$ 68 billion and exports of US$ 40

billion

GLOBAL TRADE IN TEXTILE & CLOTHING SECTOR

VALUE CHAIN AND MAJOR SUPPLIERS

•Raw material

Fiber

•Spinning & Twisting

Yarn

•Weaving & Knitting

Grey Fabric

•Bleaching Dyeing, Printing

Finished Fabric

•Designing(Make up)

Garment

•Retailing

Final Consumer.

Values in Billion US$

Country 2012 2013 % CHANGE

China 97.83 108.97 11.39%

EU(28) 30.26 31.87 5.31%

India 19.94 22.14 11.06%

United States 21.77 21.78 0.04%

Germany 15.44 15.97 3.43%

Italy 13.65 13.97 2.38%

South Korea 13.66 13.81 1.11%

Turkey 11.65 12.77 9.57%

Taiwan 11.05 10.93 -1.06%

Hong Kong 10.66 10.87 2.03%

Pakistan 8.19 8.24 0.58%

WORLD 323.34 337.73 4.45%

OBSERVATION :-

The world export trade in Textiles

reported a marginal growth of 4.45%

rising from US$ 323.34 Bn to US$

337.73 Bn.

COMPANY BUSINESS AREAS

Welspun India Ltd Home Textile, Bathrobes, Terry Towels

Vardhman Group. Yarn, Fabrics, Sewing Threads, Acrylinc Fiber.

Raymond Ltd. Suiting ,Tailored Clothing, Denim, Shirting, Woolen

Outwears

Alok Industries Ltd. Home Textiles, Woven and Knitted apparels Fabric,

Garments and Polyester yarn

Arvind Mills. Spinning, Weaving , Processing and garment

production (denims, shirting, khakis, knitwear)

Bombay Dyeing & Manufacturing Company Ltd. Bed linen, Towels, Furnishings, Fabric for suits,

shirts ,dresses & Saris in cotton and polyester

blend.

Garden Silk Mills Ltd. Dyed and Printed Fabric.

Mafatlal Industries Ltd. Shirting, Poplins, Bottom wear Fabrics, volies.

Aditya Birla Nuvo, a diversified conglomerate of

Aditya Birla Group, comprising Three divisions—

Madura Garments, Jayashree Textiles & Indian

Rayon.

Madura Garments- Lifestyle market (Louis Philippe,

Van Heusen, Allen Solly, The collective)

Jayashree Textiles- Domestic linen and worsted

yarn

Indian Rayon- Viscose filament yarn.

ITC Lifestyle Lifestyle Market

Reliance Industries Ltd Fabric and formal wears.

Key Players in the Textile Industry

Raymond Apparel Ltd - Introduction

Recognized as the most respected textile company of India, Raymond limited is amongst the first three fully integrated

manufacturers of worsted suiting in the world.

As the flag-bearer of the multi-product, multi-divisional Raymond group, it enjoys over 60% share of Indian worsted suiting

market.

It produces 25 million meters of high value pure wool, wool blended and premium polyester viscose suiting in addition to

half a million blankets and shawls, all marketed under the flagship brand “Raymond”-a worldwide trusted name since

1925.

It also produces and markets plush-velvet furnishing fabric in wide array of design and colors including carpeting for the

niche markets of India and Middle East.

Fashion Brands:

Pioneer in creating and building homegrown

Fashion brands

Raymond Apparel Ltd-Introduction

The company has a diverse product range of nearly 20,000 designs and color of suiting fabric.

They export there product to over 55 countries including USA, Canada, Europe, Japan and the Middle East.

The company has a revenue of more than US$ 230million (2013).

Their suiting`s are available in India in over 400 towns through 3,000 retailers as well as over 500 exclusive

retail shop.

Raymond was ranked 23rd among India's most trusted brands according to the Brand Trust Report 2014 .

Porter’s Five Forces

Competitive Rivalry –High

Supplier Power - Low

Threat of Substitution

- High

Buyer Power - Low

Threat of New Entry -Moderate

Porter’s Five Forces

Threat of New Entrants:

• Low barriers in the domestic market.

• Economies of scale are high.

• Brand identity of a company in this industry is high.

• Capital requirements to establish a regional or a

national level operation are high.

• This industry is not lucrative.

• The companies operating at the national level do

manage to make economic profit but entry barriers at

this stage are very high.

• High capital requirement is not an issue for the

international players and thus the entry of strong

international brands in the domestic market is inevitable.

• Thus the threat of new entrants is moderate.

Bargaining Power of Buyers:

• High demand for apparels and home textiles in Us

and Eu markets.

• Product differences and brand identity are quite

high.

• Buyer concentration is very low.

• Buyer volume is generally low.

• Buyer information is high.

• Ability to backward integrate is very low.

• Thus the bargaining power of buyers are low.

Porter’s Five Forces

Bargaining Power of Suppliers :

• High availability of cotton.

• Low cost of labour.

• Differentiation of input is pretty low.

• Presence of substitute inputs to cotton like polyester ,

wool, lycra etc are present.

• Importance of volume to suppliers is very high.

• Cost relative to total purchases in industry is low.

• Thus bargaining power of suppliers is low.

Threat of Substitutes:

• Competition from low cost producing nations like

Pakistan and Bangladesh.

• The threat of substitution from the garments

provided by the unorganized sector is high.

The Degree of Rivalry :

• Fixed costs are high in this industry.

• Product differences are high.

• Brand identity is high.

• Exit barriers are also high for the national level

operations.

• Thus the degree of rivalry in this industry is high.

PEST Analysis

Political

• The Government has announced the release of a subsidy of US$ 533.87 million for the textile industry.

• Removal of trade related tariffs and non-tariff barriers in 2005

• The government has extended 10% capital subsidy and 5% interest subsidy on installation of machineries and for processing machinery.

• A 41-member Working Group has also been announced to be set up with a National Fiber Policy, to ensure self-sufficiency in fiber consumption and export requirements in India.

Economic

• Indian textile industry contributes about 14% to industrial production, 4% to the country's gross domestic product (GDP) and 16.63% to export earnings.

• Nearly 40% of the textiles produced in the country is exported and the textiles sector is the biggest employment generator after agriculture

• The sector is expected to generate 12 million new jobs

• Indian textiles and apparel exports, which is worth US$ 22 billion, is expected to register a four-fold increase to touch US$ 90 to 100 billion in the next 25 years.

PEST Analysis

Social

• The market for textile is growing as a whole as India’s population grows at about 1-2% annually.

• Along with that, Raymond’s market segment of upper middle class and the high class segment is also growing due to higher disposable incomes.

• The textile industry is mainly a labor intensive industry as it provides livelihood to the huge population, mainly consists of unskilled workers, and thus plays a pivotal role in the development of any economy.

Technological

• Since the textile industry is more labour intensive, technological factors do not affect it too much, however since the government extends 10% capital subsidy and 5% interest subsidy on installation of machineries and for processing machinery under the TUFS, the textile industry can easily make advancements in technology if it needs to.

• Basic advancements in technology for the textile industry include improvements in machinery for computerized flat knitting and embroidering.

RATIO Analysis

Management Efficiency

Leverage and Liquidity

Profitability

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

InventoryTurnover

DebtorsTurnover

CurrentRatio

QuickRatio

Debt toEquity

Raymond 3.93 5.05 1.63 0.75 1.13

Bombay Dyeing 2.65 12.88 0.77 0.18 0.73

Vardhama 4.80 7.64 2.35 0.60 0.92

Arvind 4.51 7.78 1.43 1.76 1.08

Axis

Tit

leManagement Efficiency, Liquidity and Leverage

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Return OnEquity

Return OnAssets

OP Margin NP Margin

Raymond 6.47% 3.03% 12.89% 2.36%

Bombay Dyeing 1.66% 0.96% 9.20% 0.92%

Vardhama 24.44% 12.70% 23.68% 12.41%

Arvind 11.00% 5.28% 14.38% 4.14%

Axis

Tit

leProfitability

Raymond – SWOT Analysis

• Strong R&D for product innovations like dress shirts, shirting's, jeans wear, tailored clothing.

• Loyalty of customers and high product quality

• Loyalty of employees due to decentralization

• Being MNC company, it has ability to attract large customers as compared to local companies

• Owns 550 stores across 200 cities in India and overseas.

Strengths

• Global penetration is limited as compared to other international brands

• Switching cost is low for customers since Indian and international firms offers large to customers

• Weak supply chain management

• Inconsistent execution

Weaknesses

• Collaboration with foreign players because of a national brand

• Special offers for corporates and business institutions

• Global expansion would give more opportunity for brand to grow Opportunities

• Changing rules and regulations in the fabric industry

• Increase in competition in domestic market due to large number of formal wear brands coming up

• Regional trade alliances – All major players in the industry are competing with each other not only on low price but better quality.

• Increase in social and ecological awareness , company will be in constant pressure to follow labor laws and environmental laws

Threats

Strategic Recommendations

Women segment is relatively new, which is 35% of the total domestic market, this part of

market should be focused upon.

Focus on accessories.

To expand to international markets-starting with areas with a sizable indian population.

To eliminate the philosophy that only the quality of the product will create demand and start

brand building exercises for all the Raymond App ltd brands.

To increase the consistency of advertising and also increase the number of brands for which

ads are run.

References

1. http://en.wikipedia.org/wiki/Raymond_Group.

2. http://economictimes.indiatimes.com/raymond-ltd/directorsreport/companyid-13214.cms

3. http://en.wikipedia.org/wiki/Textile_industry

4. textile-exports_650a_060214042527

5. textilesandapparel-august2013-130926012711-phpapp01

6. ANNUAL REPORT OF 2013-2014 OF TEXPROCIL.

7. REPORT BY CORPORATE CATALYST INDIA PVT LTD. http://pib.nic.in/newsite/erelease.aspx?relid=:105349

http://www.textileworld.com/Articles/2014/October/India_The_Next_Big_Influence_In_Global_Textiles

http://texmin.nic.in/sector/note_on_indian_textile_and_clothing_exports_intl_trade_section.pdf

http://zeenews.india.com/business/news/economy/indian-textile-sector-has-potential-to-cross-500-bn-by-2025_112606.html

http://www.entrepreneurindia.com/news/Indian-Textile-Industry-to-generate-35-million-jobs-by-2025-5679/

http://texmin.nic.in/Reports/Vision%20Strategy%20Action%20Plan%20for%20Indian%20Textile%20Sector.pdf

8.www.equitymaster.com

9. www.moneycontrol.com