Indian Apparel Industry

Market Size
6.5 lakh crore in FY18

Exports
1.1 lakh crore in FY18

Market Structure
38% Organized, 62% Unorganized

Industry Median EV/EBITDA
19.1x

Indian Apparel Industry

The Apparel industry or the Ready-Made Garments (RMG) Industry is the largest segment of the Indian Textiles and Apparel (T&A) Industry accounting for approximately 50% of the total industry. Given that apparel manufacturing is economically viable at any scale, the industry is characterized by several small participants and is dominated by the unorganized segment. 

The apparel industry (domestic + exports) in India grew at a CAGR of 13% from Rs. 2.4 lakh crore in FY10 to Rs. 6.5 lakh crore in FY18. 

With an expanding retail infrastructure and the proliferation of e-commerce, the Indian fashion retail market is projected to grow at a promising CAGR of 9.7% to reach INR 7.48 lakh crore (USD 115 billion) by 2026 growing from a size of INR 2.97 lakh crore (USD 46 billion) in 2016 [1]

 

The Indian apparel industry is the second largest segment of the Indian retail industry and is currently witnessing some major shifts. Entry of international brands, changes in preferences from non-branded to branded, a fast-growing economy, large young consuming population in the country has made India a highly lucrative market. India has the world’s largest youth population, which is becoming fashion conscious owing to mass media and social media penetration. This has opened unprecedented opportunities in the retail space. The metro cities of Mumbai, Delhi/NCR, Bangalore, Chennai and Kolkata are the biggest markets for apparel. These markets together contribute 23% to the Indian apparel market. These cities have the presence of almost all the national and international brands operating in the country owing to their high number of employed youth population, working women and growing economic activities that propel the apparel market.

 

The apparel industry also constitutes over 70% of the total consumer fashion products industry in the country and with the implementation of the GST tax system, there has been significant grown in the organized segment.

India is the second largest exporter of textiles and apparel globally, accounting for 5% of global exports [2] and allows 100% FDI through the automatic route in the textile sector through the ‘Make in India’ initiative. The textiles and apparel industry today employs over 4.5 crore people directly and another 5.5 crore people indirectly 

The main markets for Indian textile and apparel exports are: United States, European Union, Parts of Asia and the Middle East. The Apparel Export Promotion Council (AEPC) is the official body of apparel exporters that provides assistance to Indian exporters, as well as to importers/international buyers choosing India as their preferred sourcing destination for garments.

 

Top Players 

Company Name

Key Brands

Tata Group

Westside, Fashion Yatra, Sisley, Gia, Lov

Shoppers Stop

STOP, Haute Curry, Life, Kashish, Vettorio Fratini, Rocky Star, Desigual

Private Equity and M&A Activity

Year

Acquirer

Target

EV (₹ crore)

Target/Transaction – Note

Type

2014

Future Lifestyle Fashions

Unico Retail

-

Unico sells handbags, belts and wallets under the brand “Peperone”

M&A

2016

Aditya Birla Fashion

Forever 21 (India)

175.52

Forever 21 is among the fastest growing fashion retailers in the world with a network of more than 700 stores worldwide

M&A

 

Listed Players

Company Name

Description

EV (in INR hundred crore)

Revenue

(in INR hundred crore)

EV/Revenue

EV/EBITDA

Aditya Birla Fashion & Retail[i]

Key brands include Louis Philippe, Van Heusen, Allen Solly, Peter England, Pantaloons, People, Ralph Lauren, Forever 21 (India)

177

81

2.2x

33.2x

Arvind Limited[vi]

Diversified conglomerate with a strong presence in the fabric and apparel manufacturing space

41

72

0.6x

5.0x

Raymond Ltd.[iii]

Key brands include Raymond, Park Avenue, Parx, and ColorPlus.

68

66

1.0x

11.2x

Future Lifestyle Fashions[ii]

Key brands include Scullers, John Miller, Lee Cooper, Indigo Nation, Clarks, Converse, Spalding, Umbro, Buffalo, Giovani, Peperone

95

57

1.7x

20.2x

Arvind Fashions Limited[ix]

Key brands include Arrow, Flying Machine, Tommy Hilfiger, USPA, New Port, Mega Mart, The Arvind Store, Ed Hardy and Calvin Klein

48

47

1.0x

18.1x

Page Industries[v]

Key brands include Jockey, Speedo

229

29

8.0x

37.4x

Bombay Rayon Fashions Limited[vii]

Vertically integrated textile company engaged in the manufacture of fabrics and garments

2

10

0.2x

NA

Indian Terrain Fashions Ltd.[iv]

Ready-made garment retailers with men’s and boy’s wear, shirts, trousers, jeans, shorts, etc, and fashion accessories like belts, bags, wallets, socks, etc

4

4

1.0x

8.4x

VIP Clothing Limited[viii]

Manufacture innerwear under the VIP and feelings brand

2

2

1.1x

40.0x

Median 

 

 

 

1.0x

19.1x

All data as of 27 June 2019

Growth Drivers

Private consumption remains the primary driver of India’s growth story. Urbanisation across various parts of the country backed by a rising middle class with higher disposable incomes and rapidly growing consumer spending has led to an expanding retail market, presenting a lucrative opportunity for both domestic and international brands

Increased penetration of organised retail, favourable demographics and rising income levels to drive demand in the apparel industry

Younger India: About 50% of the Indian Population is below 20 years and 65% below 35 years. By 2020, India will be the youngest country in the world

Income Growth: By 2020, the average household income would have grown to 3 times that of 2010

Urbanization: About 40% of the Indian Population will live in urban cities in 2020. Up from 31% in 2010

Growing Work Force: Around 137 million people would be added to the Indian workforce by 2020. A large share of this increment will constitute women

 

Supply Drivers
India enjoys a comparative advantage in terms of skilled manpower and in cost of production relative to major textile producers

Growing Demand:
1. Rising demand in exports

  • 2. Increasing demand in domestic market due to changing taste and preferences
  • 3. Growing population driving demand for textiles
  •  

Policy Support:

  • 1. Growing domestic and foreign investments
  • 2. Government setting up SITPs and Mega Cluster Zones
  • 3. Increasing disbursement of loans under TUFS (Technology Up-gradation Fund Scheme)
  •  

Increasing Investment:

  • 1. 100% FDI in textile sector
  • 2. USD 140 billion of foreign investments are expected
  • 3. Government investment schemes (TCIDS and APES)
  •  

Growing Demand  -> (Inviting) -> Policy Support -> (Resulting in) -> Increasing Investments

 

Key Trends
Continued rise of ‘organised retail’ with increased penetration into Tier - 2 & Tier - 3 cities, towns and rural areas

Growing demand for smart casuals which are replacing formal corporate formal wear

Emerging focus on sustainable and eco-friendly manufacturing

Increased inclination towards technological integration both in manufacturing and product design (wearable technology)

Increasing volume of apparel sales through e-commerce. Biggest impact of online retailing is on tier 2 and 3 towns where e-commerce has enabled customers to buy online, even if the brand doesn’t have a retail presence in these towns

Women moving to Western Wear

Rise of the Value Customer

Shift towards Casualwear

Growing International Competition

Luxury/Super-Premium Accelerating

Integration of e-commerce with regional retail stores 

Evolving from the traditional brick-and-mortar model to multi-channel retailing that includes e-tailing, direct selling and home shopping

Micro-segmentation of the market by brands and retailers to cater to the heterogeneous requirements of the customers

 

Opportunities:
Large and growing domestic market with rise of middle class in small cities and towns. 

Growth of organized retail would increase the consumption of apparel  

Increasing presence of international brands and retailers in India  

Slow-down in China’s economy will provide additional opportunities to Indian exporters 

Increasing support from Government to garment sector is expected to increase garment exports from India

Implementation of GST will help the company in realizing better supply chain efficiencies

 

Notes
Exchange Rate: 1 USD = 65 INR = 0.75 GBP = 0.85 Euro

Disclaimer: This information has been collected through secondary research and SMERGERS is not responsible for any errors in the same

Figures
[a] https://www.indiaretailing.com/2017/10/15/fashion/indian-fashion-apparel-market-2016-beyond/

[b] https://www.sebi.gov.in/sebi_data/attachdocs/mar-2018/1519903826256.pdf [TCNS DRHP]

[c] http://www.arvind.com/sites/default/files/field_annual_reports_file/Annual%20Report%202017-18.pdf

[d] https://martjackstorage.blob.core.windows.net/in-resources/7232d1d6-e56f-49de-8ffa-2c58ed3ac3f7/Images/userimages/corporate_info/annual%20report/AnnualReport_2017-18.pdf

[e] https://static05.jockeyindia.com/uploads/investordocuments/annualgrowth/1d4a1d62-69a0-4b3b-8afa-804892bdd9b5/jockey_annual_report_201718.pdf

[f] https://www.moneycontrol.com/news_html_files/news_attachment/2018/Aditya-Birla-Fashion-and-Retail_140918.pdf

[1] https://www.indiaretailing.com/2017/10/15/fashion/indian-fashion-apparel-market-2016-beyond/

[2] http://www.citiindia.com/statistics/global-textile-and-apparel-trade/