The Gurgaon-based home-grown apparel manufacturer and exporter, Pearl Global Industries Ltd. (PGIL) is undergoing capacity expansion in south India for a total investment of around Rs. 17-20 crores funded through internal accruals and a Technology Upgradation Fund Scheme (TUFS) loan.
“Creating direct employment for an additional 3,000 skilled workers, the expansion is in keeping with our long-term commitment to ‘Make in India’ as encouraged by Prime Minister Narendra Modi. We are readying ourselves for an improving demand flow of orders from leading brands in advanced markets. We aim to leverage our new ‘lean manufacturing’ capability over our existing fixed marketing and design overheads to further improve our EBITDA margins and return-on-capital ratios,” said Mr. Pulkit Seth, Vice Chairman and Managing Director of the company.
PGIL is a well-diversified garment manufacturing company with a de-risked manufacturing base in the leading sourcing nations of India, Bangladesh and Indonesia. The company is engaged in production and marketing of knits, woven and bottoms (basic and complex designs) across men, women and kids wear segments, providing a global supply chain solution for the fashion industry. The asset-light and highly scalable business model rightly places the company to quickly respond to the changing global apparel demand trends. PGIL is an approved vendor to the leading US, UK, European and Australian brands and retailers.
With south India fast emerging as the new garment manufacturing hub of India, the proposed capacity expansion is expected to help Pearl Global to reduce its geographic concentration risk by diversifying operations across north and south India. Another significant reason to move south is to gain a competitive edge to meet complex and diverse product design requirements of leading global retailers.
“The southern marketplace is known for certain special fabrics. Besides, it has skilled and disciplined labour, higher output, lower wage cost, low attrition levels, low rejection and special expertise in wovens,” Mr. Seth added.
The new facilities are expected to be instrumental in helping the company raise its cumulative production capacity by about seven per cent to 5.35 million pieces per month, through the addition of 1,250 machines to reach a total of 9,750 machines. “We are hopeful that this capacity increase, along with future ones, will significantly improve our industry ranking within the top 7 manufacturers out of India. With this capacity enhancement, we are poised to be a leading player amidst the exclusive club of market peers within the garment manufacturing space,” he pointed out.
Before this expansion, PGIL’s existing production capacity stood at five million pieces a month with 8,500 machines spread across India, Bangladesh and Indonesia. It plans to install 450 new machines in Bangalore, adding 1,50,000 garment pieces per month. Of these, 250 machines will become operational in February, while the remaining 200 will be made operational by May.
In Chennai, PGIL is installing additional capacity of 800 new machines, which will get commissioned by December next. The company has taken a 60,000 sq. ft. facility in Peenya, Bangalore, on long-term lease, while in Chennai it has acquired a contiguous land parcel admeasuring 4.72 acres, on which it has built a facility to manufacture an additional two lakh pieces a month.
The Chennai facility provides PGIL the ability to keep adding on capacity into the future with minimal investment. Benefits of the increased expansion in Bangalore are expected to positively impact the company’s books by FY2015-16, while the Chennai expansion benefits will reflect in FY2016-17. The capacities are expected to generate incremental revenues of Rs. 100-150 crores, which will further enhance its EBIDTA margin.
Global market trends are in favour of such a move by Pearl Global. With China’s advantage in the garment business gradually eroding due to escalating wages and overheads, apparel manufacturing units in South Asia stand to gain from a natural shift of business towards them. This provides India a good business opportunity to improve its share of the global garment manufacturing business.
Currently, India exports 25-30 per cent of its textile goods to the global market and enjoys only 3.7 per cent of the global apparel export marketshare.