The denim capacity build-up in India is often in “Steep -Steps”, with large capacities added in a short period of time. Significantly, the capacity build-up in the last two years has been in the region of 150 million metres at a growth rate of 12 percent year-on-year with the current installed denim fabric capacity being about 900 million metres per annum. This is expected to increase to about a billion metres an annum by 2014. It’s a glut situation, compounded by the European and US slowdown…but in no way is it reflected in the industry growth…
Among the leading manufacturers of denim fabrics in the world, the Indian industry is well developed with all levels of denim fabric being made in the country, catering to the mass market as well as boutique and designer denim brands. Though Indian denim is comparable with the best in class, as of now Indian denim has not evolved a unique signature like Japanese or Italian denim. However, it is very likely that the future will see an Indian denim signature based on a rich heritage of crafts, as R&D in this direction is on by many players.
[bleft]The host of innovations in denim also include indigo jacquards. Indian fabric manufacturers feel that colourful denim has a significantly good future. A more comfortable and softer feel for ladies, lighter weights, with super stretch are in vogue. [/bleft]
Ahmedabad, a major denim market, currently contributes 40 percent to India’s denim production with Arvind Ltd alone providing the major chunk of the share. Some of the Ahmedabad-based players like Arvind, Nandan Exim Ltd and Aarvee Denims, to mention the prominent ones, have now strategically diversified into shirtings or non-denims to stay afloat. “There is a lot of denim in the market and one would either have to control denim production or diversify,” says Ashish Shah, MD of Aarvee Denims and Exports Ltd.
Admitting the fact that there is a glut in the market today, Aamir Akhtar, CEO, Arvind Denim, is worried about the oversupply of denim in the Indian market. “This is on account of very large capacity addition in the last two years in India,” says Aamir, with Arvind capable of producing 120 million metres per annum. Corroborating the same, Vinod Mittal, Managing Director, Vinod Denim Ltd, Ahmedabad, shares, “There is some truth in saying that there is a glut caused by production capacity exceeding the demand; however, I feel that the changed preferences of people is equally responsible for this slowdown than just excess production capacity. I have noticed that the latest trend is non-denim – Khakis and these kinds of cyclical changes will go on. It is also a fact that there is falling demand caused by financial tightening leading to fewer sales at the retail level.”
However, there a few companies which do not agree that there is a glut in denim fabrics. Shri Niwas Modani, Managing Director, Sangam India, a relatively new player in denim with an installed capacity to produce 38 million metres/annum says, “It would be immature to say there is a glut without considering the global economy meltdown. Production capacities in the country have increased but at the same time demand in the domestic as well as the export market is growing at 10 to 12 percent and this evens it out. A small spike will put the industry back on the growth path. I firmly believe that the Indian denim industry has a bright future and good demand ahead.” Sangam’s denim turnover in nine months of FY 2012-13 is Rs 290 crore, while the group turnover during the same period is Rs 1,200 crore.
Similar positive views came from Neeraj Saluja, Managing Director, SEL Manufacturing Co. Ltd., Ludhiana, which is soon starting its denim manufacturing. He strongly feels that the denim industry has bright prospects in India. If the denim capacities have increased so has the demand, especially in the domestic sector. “The denim consumption per person is still low in India in comparison to its western counterparts and the consumption is expected to catch up fast. Moreover, denim is a fashion statement and on this account also, demand for denim is ever increasing and hence, prospects are bright,” points out Saluja, who has set up a Greenfield Mega Integrated Textile Park at Panjava, District Muktsar, Punjab and is soon going to commission the yarn spinning section with a capacity of nearly 2 lakh spindles. The plant is slated for forward integration in denim, with capacities of 40 million metres per annum in denim fabric and eight million pieces of denim garments per annum. With this venture, SEL should mark its presence in denims.
[bleft]“The Indian domestic market is estimated to be about 500 MMA in 2013-14, while exports of denim fabric from India are around 200 MMA. This implies that the capacity utilization in the country will be 80-85%,” [/bleft]
Giving a somewhat balanced view, Paritosh Agarwal, Managing Director, Suryalakshmi Cotton Mills Ltd, Secundrabad, feels that the current scenario may continue for some more time, perhaps the next 12-18 months. “In the long run, the industry will thrive as the expansion will stop seeing the current scenario before the industry sees growth again. What is important to note is that the capacity has grown mostly in the bottom most segment of the market and the mills in the lowest business segment are gravely affected. We are in the mid and high segment of the business and face the lowest impact of this situation. We are continuously moving up the value chain and are increasingly selling our products to brands and direct buyers to counter any negative fallout of this situation,” stresses Agarwal.
Domestic and African Markets offer sustained growth opportunities…
Since the Indian denim garmenting capacities have grown, denim fabric supplied within India for garment manufacturing has also increased. In fact, the domestic consumption of denim is increasing and for all denim manufacturing companies, the domestic market is a very attractive proposition. “The domestic market is growing at a rapid pace, the current market ratio of 0.35 pairs of jeans per Indian is expected to reach to 1 pair of jeans per person,” reasons S.N Modani. Moving further, Saluja of SEL says, “In the case of domestic markets, sales are expected to increase because of the shift towards casual and comfortable dressing, rapidly increasing incomes and penetration of brands into smaller towns and cities. So, there will a great potential for Indian manufacturers to convert fabric to garment and ultimately more opportunities to export as well.”
Besides supplying denim fabric to local converters, India is also exporting its fabric to other garmenting destinations like Vietnam, Cambodia, China, Bangladesh and South America. Despite the fact that Turkey, which was a good market for India, has dried up after the imposition of anti dumping duty on India, mills in the country still have good export orders due to its competitive edge in denim fabric manufacturing brought in by availability of raw material (cotton and manmade fibre), technology and latest equipment. Also, denim fabric exports from China have reduced as they are focussing on garmenting and high value-added textiles. Rajiv Dayal, CEO Mafatlal Denim, manufacturing value-added and fashion denim fabrics with an annual capacity of 20 million metres adds, “Bangladesh is aggressively increasing its garment manufacturing capacity and even though their domestic denim fabric capacity is increasing, there are still significant Indian exports into Bangladesh, especially of value-added fashion denim fabrics.”
[bleft]Post 2000, the capacity of Indian denim manufacturing has increased significantly and is sustained due to quality raw material and adaptation of best global technology. India has a sustainable global competitive advantage for denim – cotton, technology, efficient manufacturing, manpower, management, all are available. The challenge is in product development and innovation. S. N Modani, Sangam India [/bleft]
Producers like Suryalakshmi, who work with large global customers on nominated fabrics, will not face any significant loss of volume in any production centres. “Turkey is slowly becoming an expensive garment producer and their significant capacities are moving into Egypt, other African countries and other regions. Therefore, it is no more imperative to sell big volumes in Turkey. Again, the dynamics of capacity and cost are specific to the business segment one operates in,” reflects Paritosh, with his company producing 40 million metres per annum, going to clock a turnover of Rs 700 crore in the year 2012-13 and geared to increase business in the next financial year.
Talking about the new potential markets for Indian denim manufacturers, Y.C Gupta, CEO, LNJ Denim, says, “The new emerging markets for us are South African countries, where they still have very good scope for imports. Fundamentally, apart from USA, it will be only developing countries which will be the market for exports.” With an annual turnover of Rs 310 crore, LNJ’s present denim fabric production capacity is 18 million metres per annum and the expansion has already been put in place for spinning of cotton yarn. In denim, the first phase to double the spinning to a production of 1500 MT per month was initiated during 2012 – 2013. The company is also looking at putting up more looms, dyeing and finishing machines, during the year 2014 – 2015 for doubling production capacity.
Direction of Denim Developments
The global demand for denim is moving towards more refinement and subtle fashion. Fabrics are becoming finer with superior shades, finishes and some value-additions like printing and hand painting. Innovations are coming from blends, technical stretch denims, organic denims and green recycled denims. Fabrics are being developed with many blends like cotton with viscose/ modal / linen / bamboo fibre / soya fibre / hemp fibre, / milk fibre /Sorona fibre and may other manmade and natural fibres.
Product development and innovation are now quite critical so that the denim fabric comes up to the aspirations of dynamic fashion trends right from the stage of manufacturing fibre, spinning, weaving to dyeing and garmenting. New washing / finishing techniques are being used to create a range of denims …from a soft handle to raw feel and look. Sustainability is a very strong direction; we see this theme becoming important across the spectrum- fibre, dyeing, processing, washing, recycling, etc.
[bleft]There is some truth in saying that there is a glut caused by production capacity exceeding the demand; however, I feel that changed preferences of people is equally responsible for this slowdown than just excess production capacity. I have noticed that the latest trend is non-denim – Khakis and this kind of cyclical changes will go on.Vinod Mittal, Vinod Denim Ltd, [/bleft]
Denim garment washing is very important to bring out the character of the denim fabric, in the right way, by over dyeing, tinting, enzyme wash, stone wash, bleach wash, potassium permanganate spray, pigment spray, resin padding, laser printing, ozone wash, crunching and grinding, etc.
However, it must be mentioned that there are a lot of value-additions done at the fabric stage also, which are developed by surface washing techniques. Washes are becoming greener with sustainable washing methods, waterless washing and new fashion is based on laser prints and laser designs, etc. The host of innovations in denim also include indigo jacquards. The Indian fabric manufacturers feel that colourful denim has a significantly good future. A more comfortable and softer feel for ladies, lighter weights, with super stretch are in vogue. Tighter constructions and finer yarns are being used to construct denims. Sateen weaves are popular in the Indian markets. Denim fabrics with different colours, tints and coated denims are increasingly being used by “Lifestyle” brands.
