Year 2009: the year many textile majors would prefer to let go. Year 2010: the year many thought would never come... and it did! a future check of a sector that has started showing clear signs of a strong revival... by Angshuman Paul
Desperados – that’s what you’d call players in the Indian textile industry, whose lot has stood witnessed to an extremely disappointing three-year period leading to 2008-09, post a scintillating 10.9% growth in 2006-07. When asked about the reasons behind this sad tale, industry experts have one word on their lips – slowdown! With exports dwindling and consumer spending falling, the textile giants have indeed felt the poisonous sting of the global slowdown. To give you one particular example, on our visit to the Bangalore campus of the country’s largest wholesale supplier of garments, the Blackstone Group-controlled Gokaldas Exports Ltd (GEL), during a recession-struck July 2009, we could clearly see signs of slowdown painted across the lush green landscape spread across two acres. The stretch looked more like a sylvan oasis of tranquillity, with people moving about in a sloth-embarrasing & mystifyingly unhurried pace; a sight which stood in great contrast to the maddening mid-city rush in the metropolitan. And not to forget, three of their manufacturing plants were peacefully taking a nap... That was then.
Today, five months later, as 2010 kicks off with high expectations and great optimism prevails, with Indian exports hitting a 15-month high in December 2009, the still-sprawling location seems to have been caught in the throes of a ‘wake-up’ metamorphosis. As far as developments in the boardroom is concerned, today, the company is quickly ramping up its act and crafting bold strategies to meet the rising demand of the global apparel market, which seems to have retraced the right road to prosperity. In fact, this exporter is all set to increase its production capacity to three million garments per month with plans to invest more than Rs.1 billion by 2010.
“The global market for Indian textile has started changing and matters are definitely improving now. We anticipate a rise in orders by atleast 20% during the first quarter of 2010,” explains Rajendra J. Hinduja, MD, Gokaldas Exports Ltd. However, this export house is not the only one celebrating the homecoming of overseas demand, for there are many like the Ludhiana-based Nahar Group and other leading apparel exporters and manufacturers in the country, who are also gearing up for a busier tomorrow, with recovery and better opportunities blipping on their radar.
Some industry watchers may judge the situation sceptically, labelling all hopefuls as ‘over-optimistic’, but the truth remains – currently, with demand from key export markets like US & EU having fallen to alarming levels, there is only ‘rich’ growth likely to happen over the next 3-4 quarters! Talking about one such market, US, a hopeful D. K. Nair, Secretary General, Confederation of Indian Textile Industry (CITI) exclaims, “The rise in demand will mainly come from US (and it has already started), which is still the largest apparel market for India. And even over the coming few months, we will be controlling this market like we have been doing it in the pre-recession days...” About three years back, this industry, which had generated a mind-boggling $19 billion in revenues, had persuaded rating agencies like CRISIL to project a terrific $110 billion in revenues by 2012 – a dazzling absolute growth of 479% compared to the present figure. On the other hand, precisely a year back, CITI had estimated the exports to escalate to a breathtaking $50 billion by 2010. The question therefore is – will projections be met, considering that the wounds inflicted by the slowdown have still not healed completely? When asked, Nair shoots back: “We might not achieve this target as the slowdown affected exports in a big way. But going by the growth that we achieved by the end of 2009, we can surely achieve at least 60% of the export figures forecasted for 2010.” Sounds great, but it is also not to be forgotten that there are many in the name of global competition that will scramble to capture precious parts of this pie...
Then there is another part to the tale – the slowdown has also taken its toll on India’s arch rival in the trade, China, which also registered a dip of 20% in the annual growth rate of apparel export (as per CII). But that is where the similarity ends. Unlike China, which trade analysts feel has substiantial amount of funds in its kitty to increase production capacity to fill any form of backlog, India as per CITI, falls short by around Rs.15 billion to even meet the backlogs accumulated during July-December 2009 backlog. Worse, in order to be able to comfortably meet export requirements for 2010 , the country needs an additional Rs.30 billion – in all Rs.45 billion too short of being in the comfort zone...
Today, five months later, as 2010 kicks off with high expectations and great optimism prevails, with Indian exports hitting a 15-month high in December 2009, the still-sprawling location seems to have been caught in the throes of a ‘wake-up’ metamorphosis. As far as developments in the boardroom is concerned, today, the company is quickly ramping up its act and crafting bold strategies to meet the rising demand of the global apparel market, which seems to have retraced the right road to prosperity. In fact, this exporter is all set to increase its production capacity to three million garments per month with plans to invest more than Rs.1 billion by 2010.
“The global market for Indian textile has started changing and matters are definitely improving now. We anticipate a rise in orders by atleast 20% during the first quarter of 2010,” explains Rajendra J. Hinduja, MD, Gokaldas Exports Ltd. However, this export house is not the only one celebrating the homecoming of overseas demand, for there are many like the Ludhiana-based Nahar Group and other leading apparel exporters and manufacturers in the country, who are also gearing up for a busier tomorrow, with recovery and better opportunities blipping on their radar.
Some industry watchers may judge the situation sceptically, labelling all hopefuls as ‘over-optimistic’, but the truth remains – currently, with demand from key export markets like US & EU having fallen to alarming levels, there is only ‘rich’ growth likely to happen over the next 3-4 quarters! Talking about one such market, US, a hopeful D. K. Nair, Secretary General, Confederation of Indian Textile Industry (CITI) exclaims, “The rise in demand will mainly come from US (and it has already started), which is still the largest apparel market for India. And even over the coming few months, we will be controlling this market like we have been doing it in the pre-recession days...” About three years back, this industry, which had generated a mind-boggling $19 billion in revenues, had persuaded rating agencies like CRISIL to project a terrific $110 billion in revenues by 2012 – a dazzling absolute growth of 479% compared to the present figure. On the other hand, precisely a year back, CITI had estimated the exports to escalate to a breathtaking $50 billion by 2010. The question therefore is – will projections be met, considering that the wounds inflicted by the slowdown have still not healed completely? When asked, Nair shoots back: “We might not achieve this target as the slowdown affected exports in a big way. But going by the growth that we achieved by the end of 2009, we can surely achieve at least 60% of the export figures forecasted for 2010.” Sounds great, but it is also not to be forgotten that there are many in the name of global competition that will scramble to capture precious parts of this pie...
Then there is another part to the tale – the slowdown has also taken its toll on India’s arch rival in the trade, China, which also registered a dip of 20% in the annual growth rate of apparel export (as per CII). But that is where the similarity ends. Unlike China, which trade analysts feel has substiantial amount of funds in its kitty to increase production capacity to fill any form of backlog, India as per CITI, falls short by around Rs.15 billion to even meet the backlogs accumulated during July-December 2009 backlog. Worse, in order to be able to comfortably meet export requirements for 2010 , the country needs an additional Rs.30 billion – in all Rs.45 billion too short of being in the comfort zone...
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Prof. Rajita Chaudhuri's Website
domain-b.com : IIPM ranked ahead of IIMs
Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
