Indian apparel industry is on growth track – thanks to companies’ resilience and adaptation to the global pace

India has held superiority in the textile and apparel industry since decades, but the sector experienced a temporary dent between 2020 and early 2021 due to the widespread pandemic. It only required a mere push for India amidst globally reviving economic conditions and the country made sure to catch hold of the positivity and healthy demand both in overseas and domestic markets. And, the same can be seen in the latest statistics released both by leading textile and apparel companies as well as official channels. Over the last few months, Apparel Resources (AR) has continuously reported the performance of Indian textile and apparel industry and the growth story continues even till the end of FY ’22.

As per the official data of Ministry of Commerce and Industry, India’s textile and apparel sector registered the highest ever growth of 40.55 per cent in its exports and reached US $ 43.44 billion in FY ’22 compared to US $ 30.90 billion in FY ’21. Of total figures, the exports of readymade garments during FY ’22 were US $ 16 billion with an increase of 30.40 per cent over FY ’21.

In fact, Q4 ’22 proved to be a driving period for the growth of Indian garment factories when they clocked US $ 4.81 billion export revenues, noting 18.11 per cent Y-o-Y growth. Coupled with buoyed domestic demand for textile raw materials, the growth is even bigger if the apparel and textile industries are combined!

Leading from the front, India’s public limited companies such as Arvind Ltd., Siyaram Silk Mill, KPR Mill, Gokaldas Exports and Welspun, along with other public limited entities such as PDS Ltd., Raymond and Maral Overseas, across the supply chain also showed positive results in the recently concluded Q4 of FY ’22, and complete financial year (see Tables 1, 2 and 3). And for some of the companies, the growth was phenomenal not only in terms of the top line but also the bottom line. The interesting aspect is that for a few vertically integrated companies, garment division performed extremely well.

Revenues clocked in FY ’22 and Q4 ’22 with Y-o-Y Comparison

• Export-oriented factories

Table 1
Revenue (Rs. crore)
Prepared by – Apparel Resources

• Vertical integrated and textile companies

Table 2
Revenue (Rs. crore)
Prepared by – Apparel Resources

• Indian retail segment

Table 3
Revenue (Rs. crore)
Prepared by – Apparel Resources

Buoyant demand in overseas markets is the growth driver for export–oriented factories

Revival in global apparel and textile retail market as well as flourishing Indian fashion retail market is one of the reasons that can be attributed to the remarkable growth of these companies in FY ’22.

• Consumers’ enthusiasm across the world

The major apparel retail markets in the world such as USA, Europe, Australia, Japan and South Korea, amongst others – from the export standpoint –have seen Y-o-Y surge in 2021 over 2020 and that has benefited Indian export-oriented factories.

Stores have opted for omnichannel retailing and witnessed great traction from consumers. Overall retail sales in USA during holiday season beat expectations to grow by 14.1 per cent to US $ 886.7 billion and clothing and clothing accessory store sales, reportedly, went up by 33.1 per cent during the period.

Results of various global brands and retailers have also shown quite positive results during the recent quarters. While substantiating that the USA continues to witness good demand,National Retail Federation (NRF) recently said that consumers accustomed to inflation continued to spend in April ’22.Consequently, clothing retail sales in the US overcame higher prices to show a monthly increase over March ’22.

Similarly, Australian retail sales beat forecasts again in February ’22. The department store and clothing sectors both climbed more than 11 per cent compared to the previous month (January). The Australian Bureau of Statistics (ABS) highlights that the overall Australian retail turnover rose by 1.6 per cent in March 2022, reaching a new record level.

Vertically integrated companies, with both export and domestic market, also got the advantage of good demand. Arvind Ltd. confirms the sameandsaysthe fabric and garment volumes remained strong across both domestic and export markets.The garment volumes in the quarter were at an all-time high and fabric volumes remained healthy.

• Enhanced portfolio

Few of the companies were also active to add their portfolio in many ways, which helped them grow well. Companies, such as PDS Ltd.,which acquired stake in UK’s Filkor Limited, saw their recent quarter and last fiscal create history, as they not only outperformed themselves, but also created a new benchmark for future growth.

The company crossed US $ 1 billion in topline and Pallak Seth, Vice Chairman of the company, sharing the efforts behind this achievement, avers, “This year we have witnessed long-term association with leading brands and retailers, offering them ‘Sourcing as a Service’ for exclusive territories including Hanes Brands in Bangladesh and S.Oliver in India. Further, we are also witnessing sourcing opportunities that are unfolding with retailers and brands increasingly seeking to partner with integrated supply chain players like PDS.”

The company is mainly into sourcing, but its manufacturing operations saw a major turnaround and going forward this segment is expected to contribute to the bottom line. The manufacturing segment reported a growth of 92 per cent with a topline to Rs. 547 crore versus Rs. 285 crore in the last financial year.

Strong recovery in Indian retail sector

Apparel remains a growing category, even with regard to domestic retail industry, and the Indian fashion retailers have been experiencing better sales revenues, especially since the second half of CY ’21, which is pushing these retailers to go ahead with held up plans of store openings. This trend has benefited the domestic apparel and textile factories as they continue to see better margins in their businesses. Take Raymond Ltd., for instance, that achieved the highest-ever revenue and profitability during Q4 of FY ’22 both in its textile and apparel businesses. Gautam Hari Singhania, CMD,Raymond Ltd., confirms, “We have witnessed demand recovery across all our businesses to pre-Covid levels and with our effective cost management, we have delivered the highest profitability for the quarter and the year.”

• Tier–2 and Tier-3 cities led the growth

Companies having completely different segments like AJIO (fashion e-commerce platform of Reliance Retail), ABFRL and Siyaram Silk Mills, etc., have witnessed impressive sales revenues from Tier-2 and Tier-3 cities. While nearly two-thirds of AJIO’s orders are placed from Tier-3 and below towns, ABFRL has also, reportedly, seen its business expand into smaller town markets. More on the same lines, Siyaram Silk Mills focused on Tier-2 and Tier-3 cities and its positioning amongst aspiring Indians has made the brand more reachable and acceptable amongst the masses.

• Store additions

From retail giants like Reliance Retail to growing brands, store opening has also been instrumental to companies’ growth. During FY ’22, Reliance continues to scale rapidly in small towns, and crossed a milestone of 600 stores with an addition of more than 100 stores during the Q4 ’22. Similarly, Pantaloons doubled down on its aggressive network expansion agenda by opening 18 stores during Q4 of FY ’22, whereas Go Fashion (India) Ltd. added 54 Exclusive Brand Outlets (EBOs) and crossed the 500th store milestone during the last quarter of FY ’22.

Gautam Saraogi, CEO, Go Fashion (India) Ltd., substantiates their store opening plan, by saying – “We continue to invest in expanding our store footprint across geographies by adding around 120-130 new stores every year. Our focus is also on omnichannel engagements for a seamless consumer experience, building on a technology-driven growth strategy to reach consumers across all cities, and investing in brand-building initiatives which will help us gain visibility and also focus and grow our online sales channels to benefit from evolving customer trends in our market.”

Supply chain growth, diversified product portfolio and better efficiencies contribute to textile companies’ growth

Textile companies also gained from the exceptional performance of apparel factories on export and domestic fronts, while for few companies, there were individual reasons as well. The textile business of Century Textiles and Industries Limited (CTIL)achieved peak capacity utilisation because the company witnessed strong uptick in demand in apparel manufacturing segment. Buoyed by domestic demand, the company also launched home textile products for the Indian market under the brand name ‘Hill & Glade’.

Some companies like Sutlej Textiles and Industries Limited remained cautiously positive amidst increasing geological risk, higher inflation, interest rates and raw material prices and are looking forward to future demand in the spinning sector. “We remain committed to future growth plans with a focus on enhancing our product portfolio, geographical reach and improving efficiencies to deliver better financial results,” comments C. S. Nopany, Executive Chairman, Sutlej Textiles.

As business is growing, the factories aren’t shying away to invest in expansions

Since business is booming, companies across the supply chains are pushing their expansion plans (many of them were on hold due to Covid) and going for capacity expansion, opting for modernisation of business infrastructure, improving operational efficiencies, increasing efficiencies and strengthening portfolio by continually adding new product categories.

For example, in FY 2022, Gokaldas Exports has incurred capital expenditure of Rs. 84 crore on expansion and infrastructure improvement. Few of the expansion plans of leading companies were completed on time and commissioned in FY ’22. KPR Mill commissioned its garmenting facility of 42 million pieces and had a robust order booking of Rs. 900 crore during the last fiscal. The company’s garmenting division reported record high volumes in Q4 of FY ’22, driven by capacity expansion and sales of previous quarter stock, which was not delivered in Q3 of FY ’22 due to lack of availability of container.

And it will not be wrong to say that the growth will continue as the expansion plan, announced by these companies, is set to get executed in near future. It’s not just garment factories, even the textile companies are also quite aggressive in their expansion plans.

Sutlej Textiles and Industries Limited has announced to start a mega unit of 89,184 spindles, comprising cotton mélange yarn and PC grey yarn along with a dye house at J&K at an estimated project cost of Rs. 914 crore. As of now, the company has 420,240 spindles.

Just four months back, Nitin Spinners also announced capacity expansion at a total project cost of Rs. 950 crore. The expansion, covering spinning as well as knitted and woven fabric segments, is targeted to be completed over the next 20 months. The aim is to strengthen the company’s market position and capture the benefit of the growing market opportunity in international as well as domestic markets.

BSL Ltd., a textile company, has announced a multi-faceted exponential plan as it is working to double its sales to over Rs. 900 crore by 2023-2024 from the current Rs. 440 crore.

Future outlook is challenging but optimistic

April has remained very enthusiastic, and the Government of India data substantiates it strongly. The month saw the exports of RMG of all textiles– which were US $ 1,297.68 million in April 2021–record a growth of 21.44 per cent on yearly basis to reach US $ 1,575.86 million in April 2022.

Similarly,the export of cotton yarn/fabrics/made-ups, handloom products, etc., also saw a growth of 8.72 per cent in the same period to export US $ 1,158.08 million.

The domestic retail market also started well in the new fiscal. Retailers Association of India (RAI)’s 27th Retail Business Survey says that April 2022 saw the apparel sector sales grow by 23 per cent compared to April 2019 (pre-pandemic level). Notably, when compared to April 2021, the growth is 42 per cent.

However, despite growth, no certainty can be stamped, especially looking at the overall scenario. The export demand is expected to stay affected as inflation, rising interest rates, high fuel rates and geo-political disturbances reduce demand visibility. At the same time, pressure on input costs is likely to remain strong at least until November when new crop arrival may soften cotton prices moderately.

But companies across all the product and market segments are enthusiastic about the future. Few companies have planned to overcome the future challenges by laying out a proper growth plan and they are ready to come up with more offerings, exploring new geographies to increase their presence.

PDS Ltd. is actively exploring avenues for expanding and strengthening its footprint in key geographies like Egypt, Vietnam, Jordan and India, which benefit from nearshoring and China+1 opportunities, respectively.

Exploring some of these options, CTIL would be focusing on blending with man-made fibres which can fit into the price bracket and at the same time is acceptable to the buyers. It will also explore new markets like Australia, Saudi Arabia and Russia.

BK Goenka, Chairman, Welspun Group says against this backdrop, “This demonstrates the ability of scaled-up, quality-led and highly differentiated players to maintain an edge even during challenging times. The recently announced free trade agreements with Australia and Middle East countries would bring in additional advantages for the Indian home textiles industry and players like Welspun.”

There is no doubt that cotton and cotton yarn price are forcing industry to bleed but as industry is expanding and few stakeholders are doing their best to bring the price down, the stage is all set for India to achieve massive growth in textile and apparel trade, for export as well as domestic market.

Latest development on the expansion front

Apparel:

• Construction of Shahi Exports’ new factory started in Karnataka
• Construction of Kitex’ fibre-to-apparel cluster started in Telangana
• Youngone has submitted its final design and is expected to commence work on its factory in the next one or two months

Textile:

• Sutlej Textiles and Industries will set up a greenfield project at a cost of Rs. 914 crore in Jammu & Kashmir
• BSL Ltd. plans Rs. 200 crore of Capex, for cotton spinning unit of 30,000 spindles and will be capable of generating 700 tonnes of cotton yarns every month
• Ganesh Ecosphere Company’s new factory has been inaugurated in Telangana

Retail

Classic Polo (the brand from Royal Classic Mills) to add 60 stores this fiscal