China – Present scenario and its impact on Indian Textile Presented by Prashant Agarwal Co-Founder & Partner Wazir Advisors

2  Wazir is a management consulting firm which advises clients in strategy, investment, alliance and implementation projects. Apart from working with private sector clients, Wazir has also supported Government and development bodies in sector evaluation, scheme / policy recommendation, policy formulation & evaluation and attracting investment in the sector.  Wazir advises clients which offer products or services in sectors of Textile, Apparel, Technical Textile, Retail and Consumer products. With the right mix of textile graduates and MBAs, Wazir team is in best position to offer services to all companies in fiber to fashion retail value chain.  Having worked with leading Indian and International private companies, public sector organization, Government departments, development bodies, trade bodies, etc. Wazir team has developed an overall understanding of the Global dynamics of textile ecosystem and the right connect with the people who matters. This body of knowledge and contacts are extremely useful in delivering values to clients. Our strategic partners are present in key global regions and help us in delivering the International projects. Wazir: Your Trusted Advisor

3 Our Services Strategy Corporate Strategy Market Opportunity Assessment Market Entry Strategy Location Analysis Business Performance Enhancement Product Diversification Marketing and Distribution Strategy Sector Mapping and Growth Strategy Policy Formulation Support Government Scheme Evaluation Implementation Project Management and Monitoring Re-modelling of Manufacturing Plant Process Re- engineering Productivity Improvement Supply Chain Optimization Detailed Project Reports (DPR) Techno-Economic Viability (TEV) Studies Investment Promotion Cluster and Industrial Parks Development Alliances Company Due- diligence Joint Ventures Marketing Tie-ups Technology Transfer M&A Execution Strategic and Financial Funding Skill Development Skill Gap Assessment Course and Methodology Mobilization & Screening Training Assessment & Certifications Placement Tracking and Handholding

4  Wazir regularly brings out sector whitepapers / knowledge papers addressing the current topics impacting the textile, apparel, technical textiles and retail sector. Thought Leadership – White Papers

5  Wazir has been a knowledge partner for several conferences organised by various industrial and trade bodies. Thought Leadership – Knowledge Partner for Conference FICCI Federation of Indian Chambers of Commerce and Industries Technotex , 2015 & 2016 TAG – 2014, 2015 & 2016 CII Confederation of Indian Industries Texcon , 2015 & 2016 IAAI Intimate Apparel Association of India Galleria Intima , 2015 & 2016 OGTC Okhala Garment and Textile Cluster International Conference on Home and Textiles , 2015 & 2016 TAI Textile Association of India National Textile Seminar, 67th All India Conference, 2016 CMAI Clothing Manufacturer’s Association of India Fashion Retail Summit -2014, 2015 & 2016 Denim Club of India Indigo 2014 Vibrant Gujarat T & A Seminar – 11 th January 2017

6 Presentation Flow Overview of Global Textile & Apparel Market Global Trends and China’s Changing Manufacturing Landscape Competitive Positioning of the Contenders India: Present Scenario and Opportunities

Global Textile & Apparel Market

8 Global textile & apparel trade in 2015 is approx. USD 775 Bn. The trade has grown at a CAGR of 4% from 2005 to 2015 Further expected to grow at 5% CAGR and will reach approx. USD 1,250 Bn. by % of the trade is into apparel while the remaining 44% is textiles Global trade of T&A products stand at US$ 775 bn.

9 Global apparel market size is expected to grow at CAGR of 4.4% to reach US$ 2.6 trillion by 2025 Values in US$ Bn. Projected Apparel Market Size and Break-up Projected market share 2025 Source: Wazir Advisors Region2015 Projected CAGR 2025 EU %390 USA3152%385 China23710%615 Japan931%105 India5912%180 Brazil565%90 Russia404%59 Canada252%30 RoW5104%746 Total1,6854.4%2,600 India and China are expected to grow faster than other countries.

10 Global apparel trade and major categories US$ Bn CAGR: 5% CAGR: 6% Global apparel trade is estimated at US$ 425 Bn in 2015 growing at rate of 6% over the last five years. Sweaters, jeans, T-shirts are biggest traded categories Dresses and Jackets are fastest growing categories Source: UN Comtrade Categories China Share India Share CAGR ( ) Sweaters %1%5.5% Jeans & Others %2%5.3% T-Shirts %6%6.2% Trousers %2%7.9% Jackets %1%8.9% Dresses %6%20.6% Blouses %10%3.4% Woven Shirts %7%4.8% Overcoats %1%9.3% Others %2%6.1% Grand Total % Top global apparel categories exported US$ Bn

11 China is the largest exporter, and India a distant second Country2015 Exports China & Hong Kong301 India37 Germany32 Italy32 Bangladesh31 Turkey26 Viet Nam26 USA25 Spain16 France15 Belgium14 UK13 Pakistan13 Netherlands12 Largest T&A Exporting Nations (In US$ Bn) Source: UN Comtrade Data Source: UN Comtrade

12 Source: UN Comtrade 5% 10% 5 year CAGR 15% US$ 20 Bn US$ 300 Bn 2015 Export Value US$ 40 Bn CAGR ( ) Asian countries are the fastest growing exporters CHINA VIETNAM BANGLADESH INDIA SPAIN FRANCE ITALY GERMANY TURKEY USA Data Source: UN Comtrade

Global Trends and China’s Changing Manufacturing Landscape

14 Global Trends China And India: Most Attractive Markets Major growth centers for apparel consumption by 2025 High economic growth will be the major factor Combined Size of Chinese & Indian Apparel Markets will become bigger than that of USA & EU China And India: Most Attractive Markets Major growth centers for apparel consumption by 2025 High economic growth will be the major factor Combined Size of Chinese & Indian Apparel Markets will become bigger than that of USA & EU China to vacate space in global trade Domestic demand, Wage growth, Value added segments etc. other apparel exporting nations will compete like India, Vietnam, Kenya etc. China to vacate space in global trade Domestic demand, Wage growth, Value added segments etc. other apparel exporting nations will compete like India, Vietnam, Kenya etc. Market Arrangements to drive Trade & Investments Not all countries / regions could effectively leverage their preferential market access in past FTAs are gaining vital importance in global textile and apparel sector Mega FTAs: TTIP, TPP and RCEP Market Arrangements to drive Trade & Investments Not all countries / regions could effectively leverage their preferential market access in past FTAs are gaining vital importance in global textile and apparel sector Mega FTAs: TTIP, TPP and RCEP Growing fibre demand and stagnant cotton output Cotton will struggle to fulfill the growing fibre demand while manmade fibres, specifically polyester, will gain share. By 2025, share of polyester in global fibre consumption will become 55% from current level of 51% whereas that of cotton will decline to 28% from current level of 31%. Growing fibre demand and stagnant cotton output Cotton will struggle to fulfill the growing fibre demand while manmade fibres, specifically polyester, will gain share. By 2025, share of polyester in global fibre consumption will become 55% from current level of 51% whereas that of cotton will decline to 28% from current level of 31%.

15 In 2014, Chinese apparel exports reached US$ 193 billion, growing almost 4-folds from the level in 2001 In last few years the apparel exports growth has decelerated, a trend that is expected to continue in future China & HK's Apparel Trade (US$ billion) Period of high growth acceleration Growth slowdown Data Source: UN Comtrade Chinese apparel export growth is slowing down

16 Growth slowdown is because of a number of reasons  Growth of domestic demand: Addition of US$ 377 billion in domestic market by 2025 will put high pressure on exports  High wage growth : Wages in China have grown in double digits which is expected to grow further. Current wages in China are US$ / month compared to US$ 100 in Bangladesh and US$ 180 in Vietnam  Movement of manufacturing towards more value added segments  Relocation of manufacturing to neighboring countries: China’s regional trade agreements will support investment in neighboring nations to cater to its own domestic market As a result, share of China in global apparel exports is expected to reduce from 42% in 2015 (US$ 179 bn. out of US4 425 bn.) to around 35% by This will create a vacuum of US$ 50 billion in apparel exports by 2025

Competitive Positioning of the Contenders

18 ChinaIndiaVietnamEthiopiaKenyaMyanmarBangladesh Raw Material Labor Cost Labor Skill Manufacturing Cost Infrastructure Service Levels Technology Gov. Policy Integrated Value Chain FTA Weakness Strength Competitive Positioning of the Strongest Contenders

India: Present Scenario and Opportunity

20 Total Market Size US$ 120 billion Domestic Consumption US$ 80 bn. Apparel US$ 59 bn. Technical Textiles US$ 15 bn. Home Textiles US$ 6 bn. Exports US$ 40 bn. Textiles* US$ 23 bn. Apparel US$ 17 bn. Values in US$ Bn. India’s textile and apparel industry is large and growing 2015 Source: DGCIS & Wazir Analysis Values in US$ Bn. Indian T&A Domestic MarketIndian T&A Exports +10% +11% +7% +11% CAGR ( ) +18% +2% +3% CAGR ( ) +12% +1.4% +8% * Includes textile and others - home textiles/ made-ups and handicrafts, technical textiles

21 India’s apparel exports and major categories Categories India Share in World CAGR ( ) T-Shirts %10.4% Blouses %1.9% Dresses %17.3% Woven Shirts %3.6% Babies Garments %16.7% Shawls %12.1% Trousers %12.4% Jeans & Others %5.1% Knitted Shirts %4.7% Suits %11.2% Others %7.4% Grand Total % Top Indian apparel categories exported CAGR: 5% CAGR: 12% India’s apparel exports stood at around US$ 17 Bn in 2015 growing at 12% CAGR over the last five years. T-shirts, Blouses, dresses are the biggest export categories Dresses, babies garments trousers are fast growing Source: UN Comtrade US$ Bn

22 Top Synthetic Apparel Categories Traded Globally Synthetic apparel trade – 2014 (US$ Bn) India's share in global exports China's share in global exports Vietnam’s share in global exports Sweaters220.3%58.2%3.2% Trousers181.3%54.8%8.9% Dresses154.7%49.3%3.5% Overcoats140.1%55.2%9.1% Jackets14 0.6%78.2%3.3% Brassieres101.0%52.7%1.5% Protective wear80.1%53.2%4.3% Ski jackets80.01%66.9%5.2% Blouses89.7%20.6%4.1% Lingerie70.4%49.7%1.0% Others364.2%58.2%3.5% Total1702.2%56.1%4.4% Indian companies need to invest and develop capabilities in MMF textile and apparel products to tap the large market India’s share in MMF based apparel categories is comparatively low and offers large market potential Source: UN Comtrade & Wazir Analysis India has huge potential to increase presence in synthetic based apparel trade

23 Probable Investment Areas for Growth Fabrics Existing Areas  Woven Fabric, Knit Fabric, Warp Knit Fabric  Core and Value added Fabric with variety of fibre mix and finishes  Woven Fabric, Knit Fabric, Warp Knit Fabric  Core and Value added Fabric with variety of fibre mix and finishes New & Emerging Areas  Combination of Fabric, Technology and Finishes  Performance Fabric that is end use specific like sweat soaking fabric, temperature control etc.  Combination of Fabric, Technology and Finishes  Performance Fabric that is end use specific like sweat soaking fabric, temperature control etc. Investment/Turnover RatioMin. Investment 1:1.5Rs.100Cr. (Knits) Rs.200 Cr. (Woven)

24 Probable Investment Areas for Growth Garments Existing Areas  Polo Shirts and T-shirts  Shirts  Dress, Woven Top and Bottoms  Polo Shirts and T-shirts  Shirts  Dress, Woven Top and Bottoms New & Emerging Areas  Denim Garments  Suits  Active wear  Sportswear  Lingerie  Denim Garments  Suits  Active wear  Sportswear  Lingerie Investment/Turnover RatioMin. Investment 1:4Rs.20Cr.

25 Manufacturing Excellence FTA Advantage with Key Markets Investments & Scale of Manufacturing Service and Product Design & Development Focus Areas Innovation Key Success/ Differentiating Factors Sample Development & Lead Time

26 Representative Calculation for Garment Factory Product – Synthetic Track pant No of machines – 250 Sale Price – Rs.350/pc Total Investment: Rs Cr Investment in Plant & Machinery: Rs.7.5 Cr (incl. MFA) Turnover (at 90% utilization & 60% operational efficiency) = Rs.32 Cr. EBITDA: 21.0 % IRR: 32%

27 For Further details please contact: Prashant Agarwal Joint Managing Director Wazir Advisors Pvt. Ltd 3rd Floor, Building #115, Sector 44 Gurgaon Haryana Tel : Thank You

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