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Cover Story | January 2018

2018 A Watershed Year?

Despite export posing problems, many in the textile industry see an uptick in the overall scenario in 2018.

The year 2017 had a few demons that the textile industry needed to exorcise: Demonetisation and GST, which tore into the fabric of the small sector, the after-effects of which are still lingering on. But towards the end of 2017, the industry’s whining by and large subsided, and many saw hopes for a resurgence in the New Year 2018. Is it so? Not exactly. The flood of cheaper fabric and garment import is the non persona grata in the scene today, and still the year 2018 could be a game-changer if the industry and the Government take the needed steps to shore up the sagging fortunes, many observers opine.

Though both the credit rating agencies – Moody’s and Standard & Poor’s – appreciated India’s strong GDP, there were concerns too. From where has the sudden optimism sprung up? “India’s retail market is growing in double digits and offers tremendous opportunities. Large fashion brands have shown unprecedented growth over the last five years indicating an increasing requirement of good suppliers for them. The large size & high growth of this segment will facilitate the development of scale in the textile industry which in turn will lead to growth of domestic market,” revealed Prashant Agarwal, Partner & Co-Founder, Wazir Advisors, in his theme presentation at a FICCI-organised textile meet in Mumbai recently.

Says RS Bachkaniwala, President of Surat Vankar Sahkari Sangh Limited: “For processing and weaving industries, 2017 has been moderate and little below our expectations. This was mainly due to a lot of expansions were put on hold due to demonetisation as well as GST related reforms. However towards end of the year we have seen upward movement which we will continue into 2018.

For the spinning segment,my unit “Vankar Spinners” has enjoyed a comfortable working condition in terms of production and sales of high quality yarn. The year 2018 looks promising as the demand for quality yarn is in upswing mode.”

Pratik Bachkaniwala of Palod Himson Machines Pvt Ltd, says that the industry’s and the company’s performance has not been very good in 2017. He adds, “The last two quarters have been very slow for us. GST and demonetisation have had an direct impact on our sales. Probably, the year 2018 will be good for us and the industry.” The area of major worry is the exports. India’s total textiles and apparel exports stood at $39.7 billion in 2016-17, which have grown at a CAGR of 2.6 per cent since 2012-13. However, the exports have remained almost stagnant in the last two years. However, according to the findings of the Confederation of Indian Industry’s 101st edition of quarterly Business Outlook Survey, reform measures such as the Goods and Services Tax (GST) have instilled optimism in India Inc with CII’s Business Confidence Index climbing to 59.7 during October-December 2017, against 58.3 in the previous quarter.

Recently, the Clothing Manufacturers’ Association of India (CMAI) hailed the Mid-term Review of the Foreign Trade Policy Announced by the Central Government on the December 6, 2017 as a Progressive Package to address several Issues relating to Policy as well as Procedures.

In a statement issued, Rahul Mehta, President, CMAI, stated that garment exports from the country have been declining steeply for several months and there are no sign of an early revival of overseas demand. In such a situation, the measures included in the review for facilitating exports and improving ease-of-doing business will be of great help.

The Southern India Mills Association (SIMA) thanked the Union finance and textile ministers and GST council for increasing the basic customs duty on imported polyester fabrics from 10 per cent to 20 per cent.

Since man-made fibre price in India cost 20 to 30 per cent more due to high incidence of duties and levies, there was a threat of cheaper imports especially from countries like China, SIMA Chairman P Natarajan said in a statement. The increase in basic Customs duty would reduce imports, he said adding that there was a need to increase the import duty on cotton fabric also on par with polyester fabric in the interest of powerloom and handloom sectors to sustain their competitiveness. Says NK Brahmachari, Managing Partner of Amritlakshmi Machine Works, “The year 2017 was a learning year for us, mainly because of demonetisation and GST. People were were finding their feet to do business. Last 50 years of method of working had to change. Change is always better, difficult but better. Once you learn how to change it makes a big difference in the future.”

However he was pretty optimistic about 2018.

He says, “The learning has been good in 2016-17, and I believe the year 2018 should be very good and 2019 should be better. As long as politics is stable and all the negativity gives away in the present political situations, the industry will be at ease.”

“I am looking forward to 2018, 2019 and 2020.

The next three years will be very important for the textile industry. We must not only focus on high quality machines, but the pricing should be steady too. You pay less then you get less, but if you pay a little more then you get much more. That’s the difference and this is what the approach should be. For Amritlakshmi, we are changing from one single product in 70s and 80s to a range of preparatory machines now. We work towards our slogan, – Any yarn, any loom, any width,” added NK Brahmachari.

Ketan Sanghvi, Partner-Director at Laxmi Textile Stores, divides his business in two parts – shuttle looms and shuttleless looms.

Speaking on shuttle loom business, Sanghvi says, “The shuttleloom business is doing a downturn since the last probably 1.5 to 2 years.

With demonetisation and GST, I think the industry has taken a turn for the worse. A lot of shuttle looms have been scrapped, and a lot of customers are have decided to get out of the business. I think the shuttle loom business are in a very bad shape. Primary markets like Surat, Varanasi and Bhiwandi are also in bad shape.”

On shuttleless loom business, he says, “I think the industry is doing just about fine. I thinks again demonetisation and GST acted as a speed breaker.

Simply because even if the customer or weaver agrees, the entire supply chain has to settle down. Everybody was in no mood to do business probably till September-October of this year. Things have started to pick up now because people have resigned the fact that GST is here to stay. Earlier the tax chain was broken at the weaver level, which was causing a lot of issues.”

However for the company, Sanghvi sees a better period now after a a few months of dull. He adds, “I think, probably things should start moving from 1st and 2nd quarter of 2018. We are looking at a few options in terms of product launches to try and figure out customised solutions for the specific markets.

That’s what will keep us busy in the next year.”

Sanghvi even provides a solution: “I think, the industry should stop resisting GST and move on with the things. Resisting will not help them. One needs to accept it and move on. The earlier they do this it will be better for the industry. You will see some marginal cost reduction also. Right now people are in the wait-and-watch mode. We are a bit hesitant because of the uncertainties and disturbance in the market.

Once things settle down, I think the industry should definitely improve.”

Chandrasekaran PS, CEO, Nestling Technologies, thinks that the smiles are returning back in the textile industry after a period of lull. He says, “Things have started to move on.

Our entire team is enjoying the success of the company. ‘The World of infinite Possibilities’ and ‘Providing Healthy Experience’ are two themes for us at Texfair 2017. We have to showcase that Nestling has the capacity to make all possibilities. We have orders which will make us fully engaged for the next one year.”

“India is a very important market for us, says Fritz Legler, Vice President - Marketing/ Sales & Services, Staubli Sargans AG.

He added, “We have been here for a long time, and have a well-established company here. We are witnessing a good business development from India.”

Legler says, “The year 2017 was a very good year for Staubli in general, and this is from the fact that every important weaving machine in the country has our technology. I think, we sold around 2500-3000 machines this year, and I think it will going to be the same next year too. India has a predictable and stable market. We have to support our customers and we are pleased with our latest developments.”

“Innovations is our biggest drive. Every year, we plan to bring in new technologies for the weaving sector.

We may try to customise our existing products or try to bring in new products to the market. At ITMA Asia, next year, we plan to bring in new technologies,” added Legler.

G Radhaakrishnan, Managing Director of Skaat Machine Works India Pvt Ltd, says, “In terms of performance, the year 2017 was a fantastic year for Skaat. We got a lot of new orders after GST and demonetisation. We got orders from the northern part of India from companies like Birlas, to name a few.

“The company plans for 10 per cent growth in 2018, and want to develop newer products to establish Skaat’s name in the foreign countries, says the SKaat MD.

According to Christian Straubhaar, Group Sales and Marketing Director at Itema S.p.A.: “We had an excellent 2017 in all the markets, India included. Not only we accomplished our targets but we were able to do even better. This is the best business card for our products. If we look at India in detail, we experienced a great success of our rapier R9500, that we can name as the star of the Indian rapier market in 2017. Not only our trusted Customers confirmed their confidence in the Itema machines, but we have been appointed as weaving machine supplier partner in important new investments from leading companies, such as Welspun and Shahi just to name a few.”

Straubhaar expects a very good 2018 for the company. He adds, “Looking at 2018, even if we know to operate in a volatile and unstable market, we are confident and excited. We see many opportunities to create new business relationships and to further establish Itema as the weaving partner par excellence.”

Snehal Shah, Chairman, Moksha Thermoplastics Pvt Ltd, says that Moksha has always equipped itself with the latest machinery. He adds, “We have always modernised our machines and disposed of the old ones. We have a new machine, which are more efficient and can provide higher productivity. We have also focused on automation of our plants.”

“If you speak about the industry in general, I can say that the industry has not done very good. But our growth at Moksha has been reasonable. In fact, Moksha has grown 10 per cent over the previous year. In 2018, we plan another 10 per cent growth and we are already headed towards this target, adds Shah.

Bharat Beams has been into manufacturing high-quality warper beams and weaver beams for a wide range of industries including textiles. Bharat Beams’ Director, Snehal J Panchal, says, “The technical textiles segment, where we are actually present, is still in the nascent stage. We have some solutions for the technical textiles industry, and we are coming up in a big way. Next year, probably, you will see huge investment pouring in.”

R Balakrishnan, CEO of Techno Electronics & Instruments, says, “Techno has performed extremely well in 2017 especially in the second half of the year despite setbacks from GST and demonetisation. With observation from the mills about the demands in 2018 for our products, we strongly believe Techno will have a growth more than 20 to 30 per cent in 2018 when compared to 2017.”

Gowtham VV, Vice President – Operations at Genn Controls India Private Limited, feels that Gujarat market was very good for Genn as far as 2017 was concerned. “We were more or less able to achieve the target that was set for this year. Genn Controls had a target of Rs 30 crore, and we reached around Rs 25 crore, which is around 90 per cent of the target,” he added.

Gowtham was very optimistic about the market for their products in 2018. He says, “For the next year, our target is to touch Rs 30 crore in sales, and I think we will definitely touch that figure.”

Bhadresh Bhatt, Director of Deep Pneumatics Pvt Ltd, feels that 2017 was not very good for the industry where they serve. “But for our company it was a very fruitful year, he says. “We got a lot of new orders. In fact, the entire cooling for ITMACH exhibition is done by Deep Pneumatics. We expect that 2018 should be even better than this year,” added Bhatt.

S Shivaram, Marketing Manager, Pranav Industries, says “We have a huge scope for SMS-based service. In fact, we are in talks with some companies for collaboration, but I cannot divulge more details on this. Our focus next year will be on the GSM SMS-based model.”

“The year 2017 was a good year for us. The first half was very good was Geratex, but things slowed down a bit in the second half. We have a lot of inquiries from India as well as abroad. Hopefully, we get a lot of new orders in the coming months, added Saurabh Sinha, Manager - Marketing, Geratex Machinery Pvt Ltd.

Globally, the fashion industry is turning a corner. Looking towards 2018, there is a new sense of optimism in an industry plagued by uncertainty. And while “uncertain” and “challenging” remain the most common words that executives in the BoF-McKinsey Global Fashion Survey have used to describe the state of the industry this year, right behind them in third place is “optimism”.

The McKinsey Global Fashion Index forecasts industry sales growth to nearly triple between 2016 and 2018, from 1.5 percent to between 3.5 to 4.5 percent. But the rebound is not being felt evenly across the globe. In fact, 2017 signals the end of an era. The West will no longer be the global stronghold for fashion sales. In 2018, an important tipping point will be reached when, for the first time, more than half of apparel and footwear sales will originate outside of Europe and North America, as the main sources of growth are emerging market countries across Asia-Pacific, Latin America and other regions. Not surprisingly, this is also reflected in fashion executives’ sentiments, as respondents from emerging markets are more optimistic about the industry’s outlook in 2018.

This outlook varies across value segments too. The ongoing polarisation of the industry with consumers trading up or down from mid-market price points continues to create headwinds for mid-priced fashion players while those operating in the luxury, value and discount segments further pick up speed. What is new is that the absolute luxury segment is accelerating alongside affordable luxury.

These developments take place at the same time as the fashion industry is undergoing other transformative shifts. Alongside consumers’ adoption of digital are raised expectations of customer experience and a higher scrutiny on convenience, price, quality, newness and a personal touch. Leading players are therefore creating innovative business models, using granular customer insights as a source of differentiation and pushing the limits of their end-to-end product development process. The performance gap between frontrunners and laggards continues to widen: from 2005 to 2015 the top 20 percent of fashion companies contributed 100 percent of the economic profit, while in 2016 the top 20 percent contribution had increased to 144 percent.

The challenges of operating in a fundamentally changing industry and an unpredictable macroeconomic environment has led fashion players to “toughen up.” Industry players are coming to accept unpredictability as the new normal, and fashion executives will respond by focusing their energy on improving what is within their control. We expect to see several themes emerge as defining features of 2018, from Asian fashion players asserting their power on the global stage to personalisation at scale and cutting-edge deployment of artificial intelligence. For those leaning forward and willing to help design the new features of the modern fashion system, the opportunities at hand to truly connect with fashion consumers across the globe have never been greater.

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