Tiruppur a miracle !!!

Vinodrai Engineers Pvt. Ltd.,Vinodrai Engineers Pvt. Ltd.,Vinodrai Engineers Pvt. Ltd.,Vinodrai Engineers Pvt. Ltd., 12 Km. Stone, Jalna-Aurangabad Road,

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Pursuing excellence in rotational moulding.

A miracle called Tirupur!

By: Shobha Warrier in Tirupur

One look at the unruly traffic, the noise, the pollution and the dusty, dug-up roads and

you could be forgiven for wondering if you are in one of the many such small towns that

dot the Indian landscape. But you couldn't be more wrong.

This place is pretty special, although there is no

indication to the fact that it is one of the largest

foreign exchange earners for India. Or that the

biggest global brands get their garments made in

this small city and that the garments made here are

sold in the largest retail stores across the world.

Welcome to Tirupur (occasionally spelled

Tiruppur), a city of around 600,000 people in Tamil

Nadu. It has a population of over a million in the

urban agglomeration and has been registering an

annual growth of 30 per cent since 1998.

This city exports knitwear worth Rs 11,000 crore (Rs billion) (Rs 110 billion) a year but

it has no airport -- the nearest one is in Coimbatore (50 km away) and the nearest seaport

is in Chennai.

The first stop for any international buyer of Indian

garments is Tirupur. Buyers from 35 countries

frequently visit Tirupur. Tirupur can deliver

customised samples in less than 12 hours; half a

million pieces in a matter of days.

There is a nondescript railway station at Tirupur and

all the trains that go to Coimbatore stop here for less

than 10 minutes. However, there is an inland rail

container depot at Tirupur.

How it all began

The amazing growth of Tirupur as the Indian hub of garment exports started only in the

late seventies. Before that, this small town was the manufacturing hub of white knit inner

wear (the first knitwear unit in Tirupur was set up in 1925 and it emerged as the




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prominent centre for knitwear in South India in the 1940s) thanks to the Noyyal river and

the cotton belt all around the city. With the Manchester of India -- Coimbatore -- next to

Tirupur, it was only natural that the city should evolve as the garment manufacturing

powerhouse of the country.

Initially, knitwear from Tirupur went to suppliers and exporters in Kolkata and Mumbai.

But in the late seventies, Italian garment importer Verona chose to go directly to Tirupur

to buy white T-shirts, and that was the beginning of the rise of a new Tirupur.

In short, Verona was the man who brought European business directly to Tirupur. In

1981, European retail chain C&A also came to Tirupur. In no time, other international

stores too started approaching the garment manufacturers in Tirupur.

Only a handful of manufacturers exported garments

then and the total garment export turnover was

about Rs 15 crore (Rs 150 million) in 1985. By

1990, exports had shot up to Rs 300 crore (Rs 3

billion). Today, almost 80 per cent of India's cotton

knitwear exports happen from Tirupur. There are

6,250 units involved in various operations of the

textile industry here. And the exports stand at Rs

11,000 crore (Rs 110 billion)!

Initially, direct garment exports from Tirupur were only to Europe. The market in the

United States always demanded huge volumes which most of the exporters in Tirupur

were scared to touch. The European market was more fashion-conscious and demanded

goods in only thousands of pieces that Tirupur could comfortably serve.

Those who made Tirupur the export hub

The yarn going around the town is that the very air in Tirupur turns everyone into, first, a

garment manufacturer and then an exporter.

Take for example, Rajan of Rajsujee International, who was a banker once. The success

of many exporters that he dealt with while being in the bank made him set up his own

unit in 1995 with only Rs 200,000 by way of capital and 20 employees. In the first year,

his turnover was Rs 650,000. Today it is Rs 20 crore (Rs 200 million) and 450 people

work for him now. This is not an isolated case; there are many, many such amazing

transitions and rags-to-riches stories in Tirupur.

S Dhandapani of Sreenidhi Apparels Pvt Ltd, a native of Tirupur, decided to start the

company in 1991 because he saw 'everyone' getting into garments exports! "So I also

jumped into this," he reminisces.




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He started operations with Rs 400,000, 15

employees and 10 machines. He was first a garment

supplier to an exporter and then began exporting

directly to Canada, France, Spain and the United

States. Today, his turnover is Rs 20 crore (Rs 200

million) and 300 employees work for him.

Raja Shanmugam, another native of Tirupur, started

Warsaw International in 1989 with a capital of Rs

500,000 and 20 people. In the first year, he did not go for direct exports. And the turnover

after the agent's cut was Rs 20 lakh (Rs 2 million). Next year, he doubled his turnover. In

1993, he decided to venture into the European market directly and the turnover grew to

Rs 2 crore (Rs 20 million). Today, Warsaw International has a turnover of Rs 60 crore

(Rs 600 million) and employs 1,500 people.

According to Shanmugam, there is no way a manufacturer cannot turn in a profit. "This is

the only industry which has a 60- to 90-day cycle. So we can turn our investment over

four to six times a year."

Haresh N Badani of Paras Apparels was one who

entered the fray as early as in 1989. He started his

company with Rs 200,000, six sewing machines and

20 workers. The market was so good that he had a

turnover of Rs 30 lakh (Rs 3 million) in the first

year. In ten years, he grew at a rate of 70 per cent

annually, and by 2008, his turnover had touched Rs

8.5 crore (Rs 85 million).

Another success story is that of Vijaya Kumar, who

started CBC Fashions. He started his company in

2004 with Rs 1 crore (Rs 10 million), 50 machines

and 60 employees as an exporting unit though his

father's parent company had been manufacturing

and supplying innerwear to some of the major

brands in India for 34 years.

His first customer was an importer from Belgium, and in the first year, his turnover was

around Rs 4 crore (Rs 40 million) which grew to Rs 6 crore (Rs 60 million) the next year.

Today, CBC Fashions deals directly with retailers in seven countries in Europe and also

in the United States. The current sales are Rs 40 crore (Rs 400 million). Almost 600

people work for the company.




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Since there are many manufacturers in Tirupur,

there also are many trading agents who act as

intermediaries between the importers and the

manufacturers. Vishal Kumar of International

Trading Inc has seen only growth ever since he

came from Delhi to Tirupur to start his trading

office 14 years ago.

Soon after college, he decided to shift base to

Tirupur because "it was the place where the last

word in textiles was." If it was 20-25 per cent annual growth till recession hit the global

economy; it has been moderated down to 5-10 per cent now.

V S Balraj, managing director of Lea Cool India, has been a buying agent in Tirupur for

the last 20 years. His clients are based in Finland, Sweden, Germany and a few

Scandinavian countries.

The US market and the recession

If Tirupur was growing at 30 per cent every year, the exporters too were growing at an

annual rate of 20-25 per cent. Then recession hit the global economy and exports

earnings to the tune of Rs 11,000 crore in 2007 dropped to Rs 9,500 crore (Rs 95 billion)

the next year, a drop of more than 10 per cent. Almost 40 per cent of Tirupur's exports

are to the US, 30 per cent to Europe and the rest to other parts of the world.

Unlike the fashion-conscious European market, the

US market is voluminous and imports cheap

garments in millions of units. However, the margin

from the European market is double that of the US

market. Buying agent Balraj says that the US

market is as big as Europe and the United Kingdom

together.

With exports dropping, many a textile unit in

Tirupur started to gasp for survival. Thousands of people lost their jobs and returned to

their native places. Those who decided to remain had to work on sharply reduced salaries,

and production was down in many units by almost half.

There is unanimity in the opinion is that units that suffered the most were the companies

that exported only to the US as compared to those who had European customers.




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Shaktivel, president, Tirupur Exporters Association (TEA), corroborates that recession in

the global economy affected exports from Tirupur by around 30 per cent. "There were

huge job losses and there were few enquiries from the US. But now, slowly, we are

getting queries for garments. Things are getting better."

But one man's poison is another man's meat. So it was with Tirupur and the global

economic slowdown as well. Take, for example,

people like Rajan of Rajsujee International. Rajan

benefited a great deal from the recession. As he was

exporting mainly to a discount store in the UK, his

turnover actually went up as during a recession

times, people prefer to shop in discount stores!

Rajan believes that the global market has recovered

by 40-45 per cent already.

Another exporter who saw his turnover increase by as much as 50 per cent, when many

other units were facing closure due to the recession, was Badani of Paras Apparels. As he

was involved in supplying cheap garments to the US, he never felt the impact of

recession. "Because my garments were as cheap as two to three dollars apiece, they were

in real demand. Recession was a good time for me. The US market is huge and the price

is low. If you don't achieve the target, you are finished, but business with the US can bail

you out. That's for sure!"

On the other hand, Dhandapani's business profits went down by 25 per cent during the

recession although his turnover grew.

Two years ago, 40 per cent of the turnover of Raju

Shanmugam's CBC Fashions was from one

customer in the US market. If he had exported

700,000-800,000 pieces annually in the last two

years, the orders came down to 500,000 last year.

There was a more than 20 per cent dip in the

revenues in 2008-09. "Now business has slowly

started to pick up. Enquiries are coming in but what

is worrying the exporters is the strengthening of the

rupee and the weakening of the Euro and the

Dollar," said he.

Cheap goods demand, but Tirupur is getting costly

Although the recessionary trend is now abating and things have begun to look up, what is

worrying the exporters in Tirupur most is the spiralling cost of production. With the hike




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in prices of yarn, electricity and the dyeing cost, the huge increase in the labour cost has

made the garments from Tirupur costlier.

Vijayakumar of CBC Fashions admits that the orders are coming from the US but the

rates they offer are very low which do not offer him, and others like him, much profit

margin.

While the cost of making a garment in India has doubled, the US importer offers the

same price that he had offered three years ago! Even the buyers in Europe who were not

bothered about the price till recently and looked only for quality and fashion want only

cheap goods now.

Badani's advice to those eyeing the US market is,

"Innovate on cheap garments and you will be a

winner."

Labour shortage

Apart from the rising costs, the biggest challenge

Tirupur faces today is labour shortage. On lamp

posts, tree trunks, gates, walls, almost everywhere,

you see handwritten posters asking for people to

work in garment factories.

Perhaps you see these images only in Tirupur and

nowhere else in India. There is a labour shortage of

almost 40 per cent, which is alarming!

Textiles is one industry that is so labour-intensive

that to make one garment, you need the services of

ten people. After agriculture, the textile sector is

the second largest employer in India.

On the gate of the S Dhandapani's Sreenidhi

Apparels, you can see a board asking for people to

join as workers. "Now we have a 20 per cent labour

shortage which will go up to 30-40 per cent once

the recession gets over fully," says Dhandapani.

Most of the exporters feel that a majority of their

workforce who used to come from the southern part

of Tamil Nadu have gone back to their villages

because of the NREG scheme and the Re 1 pre kilo rice that the ruling Dravida Munnetra




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Kazagham government offers. "With free TVs given to all, most of them have become

lazy," S Dhandapani adds.

Bangladesh, the competitor

The next formidable challenge facing Tirupur is Bangladesh which is snatching away

most of the bulk orders from the US. India faces tough competition from Vietnam and

Cambodia, too. Almost 60 per cent of the world's cotton garment market has been taken

over by Bangladesh as their products are 30 per cent cheaper and qualitatively, they are

as good as what India produces!

The underdeveloped tag of the country gives them the additional advantage of the waiver

of import duty in Europe.

Van Raffaini, sales manager of MCS Group of Italy,

has been doing business with Tirupur for the last ten

years. His job is to supply dyeing and finishing

machines. He also does business with Bangladesh.

"There is a quality difference in the machines that

India and Bangladesh use. They (Bangladesh) use

better, technologically advanced machines. So they

produce more garments faster. They have the desire

to get new machines unlike many in India."

Balraj, who also buys goods from Bangladesh, has seen the changes that have taken place

in 20 years. "The golden period for India was the nineties. At that time, we were

exporting mainly to Europe, and we had only China as our competitor. There was no talk

of Bangladesh then. Almost 60 per cent of world's cotton garments were exported from

India, while China dominated the synthetic garment scene. Nobody was price-conscious

then; quality was more important. But price is the major factor today, and India's

dominance is over. Every country now prefers to buy from Bangladesh."

Sensing the importance of Bangladesh, Vishal

Kumar of International Trading Inc has opened an

office there and started sourcing from there too.

"Labour is cheap. Energy is cheap. All the machines

are run by gas. They have advanced technology

because the government concentrates on textiles

exports."

Unless Indian companies add more value to their

products, it will be tough for them to survive, Vishal Kumar feels.




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"Textile exports being the major industry in the Bangladesh, the government there has

given all the facilities to exporters by technologically upgrading all the machines and

setting up huge establishments. Though textile is the second-largest job provider in India

after agriculture, we don't get focussed attention from the government as textiles exports

is only one of the many businesses in India," he adds.

Cost of cotton

Although India is the second largest producer of cotton in the world, the country has less

than 3 per cent share in the textile market internationally. Indian textiles also account for

38 per cent of the country's total exports, but Bangladesh which is dependent on India for

cotton has 6 per cent market share. China, meanwhile, enjoys a 26-28 per cent in the

world market.

Many people feel that if India had worked on its strengths, it could have had a 10-12 per

cent share in the international market. They also

complain that the Indian government exports most

of the cotton that is produced in the country and that

the minimum support price of cotton has gone up by

30 per cent in the last two years.

Consequently, the manufacturing price of yarn too

went up by 30 per cent and dyeing costs went up by

20 per cent. On the whole, there is a 20 per cent

increase in the cost of a garment.

Another problem that exporters face is the firming up of the Indian rupee against the US

Dollar and the Euro.

Future of Tirupur

So is the future of Tirupur bleak? Yes, according to some exporters like Vijayakumar.

"Tirupur will be wiped out if the cost in producing garments increases like this," he says.

According to Badani, "Tirupur grew because of the hard working skilled labour force and

if the labour shortage continues like this, I see the importance of Tirupur waning."

Dhandapani and S Sreethar add their support to this view.

But Tirupur Exporters Association chief Shaktivel sees no challenge to the supremacy of

Tirupur in the near future as he expects exports of around Rs 10,000-20,000 crore (Rs

100-200 billion) this year too, despite the competition from China and Bangladesh, the

dearth of workers, and the escalating costs of making garments.




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Raja Shanmugam and Vishal Kumar also see only growth for Tirupur. "Tirupur is only

going to grow. There is no doubt about it. Products coming from here will change; value-

added items with stress on fashion will become Tirupur's strength."

Like Rajan says, the recession has filtered the all-and-sundry in the field and only the

toughest survived. "So I see only bright future for Tirupur."

For India's sake, one hopes the miracle of Tirupur continues to dazzle the world in

the future too.

Tiruppur a miracle !!!

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Transcript of Tiruppur a miracle !!!