Diversification efforts backed by government is a catalyst for growth

Raymond is a diversified group that is a leading name in the Textile & Apparel sectors, along with an established Engineering business and a rapidly growing presence in Real Estate sector. Amit Agarwal, Group CFO, Raymond, in this interview with Divya Shetty, discusses Raymond’s the future plans of the company as well as suggestions on how we can boost our exports.
What was the company’s performance in the calendar year 2023?

On a consolidated basis the financial year 2023 has been an accomplishing one with numerous milestones as Raymond delivered highest ever revenue of Rs 8,337 crore with an increase of 31 per cent compared to previous year. We also delivered the highest ever EBITDA of Rs 1,322 crore with a margin of 15.9 per cent which is a 50 per cent increase compared to the previous year. We also recorded the highest ever net profit of Rs 529 crore, doubling from Rs 260 crore in the previous year. In our B2C business of branded textiles we have successfully leveraged the core strength of our brand coupled with our wide distribution network across the country.

There was a strong demand for our product, especially for wedding celebrations as well as festivities. In the export markets adoption of China Plus One strategy and vendor consolidation by global brands continue to drive the performance of garmenting business. The engineering business performed well with resilient demand in the domestic markets while export orders were impacted due to significant challenges of global inflation Euro depreciation in the first half and devaluation of currencies in certain geographies.

Key highlights of the year in branded textile business: This business witnessed a strong growth achieved through higher volumes and realisations driven by consumer demand throughout the year in an inflationary environment. In addition to the higher demand during the wedding and festive season, innovative products launched for formal and daily wear boosted sales across primary channels and our pan-India retail network, with customers preferring our new innovative offerings.

• The suiting business witnessed growth across categories, including strong demand for wool blends at attractive price points, led by robust festive demand and wedding-related purchases.
• The B2C shirting business saw high volume growth, driven by robust performance across all channels and an increased demand for cotton, polyblend, and linen along with our unique casual wear offerings.

Key highlights of the year in branded apparel business: Branded apparel business showed healthy sales growth by 19 per cent to Rs 332 crore as compared to Rs 279 crore during fourth quarter of the previous year. The top line growth was driven by incremental customer conversions especially in EBOs and MBOs. In our apparel brand portfolio, the growth was led by ColorPlus, Park Avenue and newly launched Ethnix by Raymond. The segment also witnessed incremental healthy EBITDA margins of 15.8 per cent as compared to 11.0 per cent in the previous year.

We continue to further strengthen our retail footprint by opening about 50 new stores during the quarter led primarily by Ethnix by Raymond stores along with new EBOs for Raymond Ready To Wear, Park Avenue and ColorPlus. The expansion was across metros, Tier 1 and to Tier 3 towns on Pan India basis. In line with the strategy of enhancing our share in the ethnicwear category, we opened 16 stores during the quarter leading to a total of 61 stores of Ethnix by Raymond as on 31st of March 2023.

Key highlights of the year in garmenting business: Our Garmenting segment which reported a very strong revenue growth supported by higher demand from our existing and newly acquired global customers. Given our strong capability in manufacturing fabrics as well as garments increasingly, we have won new customers on account of vendor consolidation along with China Plus One strategy adopted by leading global brands who prefer integrated suppliers to be their core partners.

The business witnessed strong momentum in exports to US, UK and European markets.

• Leveraging the China+1 strategy adopted by global brands, along with the consolidation of suppliers there has been a growing preference to work with large vertically integrated players like Raymond. This has acted as a key catalyst to enable growth.
• With an increased focus on new customer acquisitions, we now have onboard marquee retail and apparel brands across Europe and US regions. High growth categories such as premium shirts, jacket are key demand drivers.
• During the year, we have forayed into new product categories – knit jackets, bomber, overshirt and jogger pants to cater to new-age demand.

Amid the global uncertainty, how can we boost our exports?

India, currently ranks fifth in the global textile and apparel market with a 4 per cent share in the staggering $ 840 billion industry, facing competition from neighbouring countries like China, Bangladesh, Vietnam, and Pakistan. However, amidst this competitive landscape, India commands a unique advantage—an extensive and diverse value chain encompassing fibre, yarn, fabric, and apparel.

Taking ahead Government’s agenda of Make in India, India is poised to leverage its strengths and elevate its positioning in the global market. Additionally, fostering favourable Free Trade Agreement (FTA) agreements with developed economies is envisioned as a crucial tool to level the playing field against competitors benefitting from duty-free access under EBA and LDC status.

Government-supported initiatives have paved way for India to explore expansive growth prospects, especially in home textiles, technical textiles, and man-made textiles. To fully capitalise on these opportunities, the Indian textile industry is aligning its capabilities ably supported by government-backed strategies to attract investments and scale up operations effectively.

Diversification efforts backed by government is a catalyst for growth for high-value segments like technical textiles, specialty fabrics, and trendsetting clothing bolstering India’s export portfolio. The collaborative approach between industry and government support extends to skill development initiatives aimed at enhancing the workforce’s technical prowess and managerial acumen. Simultaneously, the optimisation of supply chains, a crucial element supported by government directives, promises reduced lead times and costs, ensuring India’s responsiveness to surging global demands.

In this synergistic interplay between industry strategies and robust government support, lies India’s pathway to not just compete but flourish in the fiercely contested global textile and apparel market.

Raymond garmenting: Raymond is amongst the largest exporter of men’s tailored suits, jackets and trousers from India to the world. With exports to over 25+ countries, with US, Europe and Japan being the key markets. Raymond has enjoyed an advantage due to ‘China +1’ strategy and consolidation of suppliers by global brands in favour of integrated players like Raymond. India has signed a free-trade agreement (FTA) with Australia and UAE, and talks are underway for an FTA with UK, enabling market access for manufacturers like Raymond. The company has also expanded its product portfolio by venturing into newer categories, such as knit jackets, overshirt, jogger pants etc. Going forward, Raymond is further augmenting capacity by adding 35 per cent to the existing capacity.

What are the challenges before the Indian T&A manufacturers as they aim to expand their exports globally?

Expanding global exports for India’s Textile and Apparel (T&A) manufacturers is a promising yet challenging endeavour. Several key hurdles impede this growth trajectory:

Quality of raw material, scarcity and rising costs: Despite being a major contributor to global cotton production, India faces accounts for a significant production area but only a fraction of the total output. As a result there is a higher reliance on imports from countries like Kenya, Egypt, USA, and Peru thereby escalating costs. Additionally, pollution-driven disruptions in other global units elevate raw material prices, impacting overall production costs.

Overdependence on manual effort and infrastructure constraints: The textile industry, predominantly labour-intensive, struggles with slow technology adoption, especially in process automation and tracking. High reliance on manual labour leads to errors, downtime, and inefficient machine utilisation, hampering productivity. However, certain leading spinning mills in India are gradually embracing automation for enhanced control and efficiency.

• Lack of technological advancements: Persisting with traditional production methods stifles productivity and amplifies labor costs, creating a productivity gap compared to more technologically advanced global counterparts.
• Competition from other nations: Intense competition from countries like China, Bangladesh, and Vietnam, leveraging lower labour costs and advanced technology, poses a significant challenge to Indian T&A manufacturers.
• High import tariffs in foreign markets: Several countries have high import tariffs on textile and apparel products, creating barriers for Indian manufacturers attempting to penetrate these markets.
• Limited access to global markets: The Indian T&A industry grapples with an underdeveloped export infrastructure, hindering manufacturers’ access to international markets and constraining their export capabilities.
• Infrastructure and digital infrastructure challenges: Inadequate on-ground infrastructure, including transportation, ports, and logistics, poses challenges in timely and cost-effective export operations. Additionally, the absence of robust digital infrastructure, staggered connectivity, limited access to digital platforms, and technological integration across the supply chain, impedes the industry’s ability to leverage digital tools for efficiency and global market reach.

Addressing these challenges necessitates a multi-pronged approach involving technological modernisation, strategic partnerships, policy advocacy for tariff reductions, investment in infrastructure development (both physical and digital), and skill development initiatives. Collaborative efforts between industry stakeholders and government support are imperative to surmount these obstacles and bolster India’s position in the global T&A.

What are the policies / schemes the government can incorporate to encourage the industry?

The government has made significant strides to stimulate product development and attract investments. Notably, the Production Linked Incentive (PLI) Scheme and PM- MITRA have been introduced to bolster the ‘Make In India’ initiative. These initiatives are poised to create a favorable environment for domestic and foreign investments.

Furthermore, in a visionary move, the government has charted a comprehensive roadmap to realise the ambitious goal of achieving $ 250 billion in domestic textiles production and $ 100 billion in exports by 2030. This forward-looking approach demonstrates a commitment to fostering growth of the textile industry and establishing India as a global textile powerhouse in the coming years.

Another step taken by the Ministry of Textiles towards positioning India as a global leader in technical textiles manufacturing by inviting research proposals for funding for design, development and manufacturing of machinery, tools, equipment, and testing instruments under NTTM.

Textile exports

• Textile exports can be scaled up substantially as India is self-reliant in terms of various fibres like Fibres, cotton, Viscose, polyester etc.
• Abundant skilled Manpower with median age of 28 years age group, currently catering less than 4 per cent of total demand.
• Government initiatives in promoting local industries with flagship like Make in India in key sectors supported by enabling schemes like PLI, PM mitra parks and various subsidies offered by state government make it conducive for industries to scale up with export market in target. This will be seen as an alternate to China, Vietnam, Bangladesh etc.

Additionally

• Tariff modifications: Reducing import duties on wool and imposing additional duties on Chinese fabric can safeguard domestic production and encourage the utilisation of local resources, fostering growth within the Indian textile industry
• Labour law streamlining: Given the high labour-intensive nature of the Textile & Apparel industry, streamlining labour laws can enhance operational efficiency and facilitate smoother workforce management.
• Export boosting measures: Offering export benefits and a special PLI scheme dedicated to the textile sector can incentivise increased exports, driving the industry’s global competitiveness.
• Concessional interest rates: Providing a concessional special rate of interest on working capital can alleviate financial burdens and facilitate the industry’s growth trajectory.
  Implementing key strategic reforms to significantly fortify the textile industry’s position, fostering innovation, bolstering exports, will aid in augmenting India’s standing as a global leader in the textile and apparel.

What are your suggestions in achieving the $ 100 billion exports target?

Achieving the $ 100 billion export target in the textile and apparel sector in India requires a concerted effort and a strategic approach. Some of the key action areas include;
Expand beyond traditional textile products and focus on high-value segments like technical textiles, specialty fabrics, and innovative fashion lines. Diversifying product range can aid in attracting niche markets and boost export revenues.
Embracing advanced manufacturing technologies, automation, and digitalisation to enhance productivity, improve product quality, and reduce production costs. Innovation in design, materials, and processes can give a competitive edge in global markets.
Identify and capture new markets by investing in market research, participating in international trade shows, and fostering strategic partnerships. Strengthening diplomatic ties and trade agreements with target markets can facilitate market access and reduce trade barriers.
Embracing sustainability in manufacturing processes, including using eco-friendly materials, reducing waste, and adhering to international sustainability standards. This aligns with global trends and appeals to environmentally conscious consumers.
Continuously investing in skill development programs to enhance the capabilities of the workforce. Training initiatives focused on technological advancements, product design, marketing, and management can enhance competitiveness.
Enhancing infrastructure related to transportation, ports, and logistics to ensure efficient supply chain management. Streamlining logistics can reduce lead times and costs, making exports more competitive.
Advocating government policies, incentives, and schemes aimed at promoting exports in the textile sector such as export incentives, tariff revisions, and financial support for technology adoption and market expansion.
Fostering collaboration among industry stakeholders, research institutions, and government bodies can drive innovation, R&D, and address industry challenges collectively.
Enhancing the appeal of brand India as a preferred sourcing destination for Indian textiles and apparel. Leveraging digital marketing, influencer collaborations, and e-commerce platforms can amplify global visibility.
Continuously monitor market trends, consumer preferences, and global trade dynamics. Flexibility and adaptability in strategies are crucial to respond swiftly to changing market demands.
By adopting a holistic approach encompassing innovation, market diversification, sustainability, skill development, and strategic partnerships, India can work toward achieving the $ 100 billion export target in the textile and apparel sector. Collaboration between industry, government, and other stakeholders is key to realising this ambitious goal.