Transcription

1

2

3

4

5

6 SME Cluster Series 2016: Coimbatore Published in India by Dun & Bradstreet Information Services India Pvt Ltd. Registered Office ICC Chambers, Saki Vihar Road, Powai, Mumbai CIN: U74140MH1997PTC Tel: , / 92 / 94 Fax: DNB_India-corporatepublication@DNB.com URL: New Delhi Office 1 st Floor, Administrative Building, Block E, NSIC - Technical Services Center, Okhla Industrial Estate Phase - III, New Delhi Tel: /01 Fax: Ahmedabad Office th Floor, Shapath V, Opp. Karnavati Club, S. G. Highway Ahmedabad Tel: /59 Fax: Kolkata Office 166B, S. P. Mukherjee Road, Merlin Links, Unit 3E, 3 rd Floor, Kolkata Tel: Fax: Bengaluru Office No. 7/2 Gajanana Towers, 1 st Floor, Annaswamy Mudaliar Street, Opp. Ulsoor Lake, Bengaluru Tel: Fax: Chennai Office New No: 28, Old No: 195, 1 st Floor, North Usman Road, T. Nagar, Chennai Tel: /75 Fax: Hyderabad Office 504, 5 th Floor, Babukhan s Millennium Centre, /1100, Somajiguda, Hyderabad Tel: , Fax: Director Pawan Bindal Research and Analysis Naina R Acharya, Rohit Singh, Yogesh Jambhale, Agnel Peter, Mihir Shah, Christopher D Souza, Omesh Kandalkar, Yash Kavi, Nishita Lali, Aakanksha Sawant, Rohit Pawar, Amol Lad Sales Head Jayesh Bahadur Sales Team Suhail Aboli, Ajith Alex George, Sunena Jain, Tanya Bedi, Keerthi Madhu, Apoorwa Tyagi, Sushmita Nigam, Nehal Khosla, Manjula Dinakaran, Aditya Balachander Operations Team Nadeem Kazi, Prem Kumar, Ankur Singh, Sumit Sakhrani, Rajesh Gupta, Parth Desai, Parmeshwar More Design Team Mohan Chilvery, Shilpa Chandolikar, Tushar Awate, Sonal Gangnaik All rights reserved Except for any fair dealing for the purpose of private study, research, criticism or review as permitted under the Copyright Act, no part or portion of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher. DISCLAIMER This publication is circulated by Dun & Bradstreet to the select recipients and at Dun & Bradstreet s sole discretion. The publication shall neither be reproduced, republished, publicly circulated, disclosed nor shall be copied, modified, redistributed, or otherwise made available to any person or entity, in any form whatsoever including by way of caching, framing or similar means, whether in part or whole, without the prior written consent of authorized representatives of Dun & Bradstreet. This publication is meant for the fair and internal use of the recipients. Dun & Bradstreet provides no advice or endorsement of any kind through this publication. This publication does not constitute any recommendation by Dun & Bradstreet to enter into any transaction or follow any course of action. All decisions taken by the recipients shall be based solely on the recipient s evaluation of circumstances and objectives. Dun & Bradstreet recommends that the recipient independently verify the accuracy of the contents of the publication, upon which it intends to rely. This publication contains information compiled from various sources over which Dun & Bradstreet may not have control and / or which may not have been verified by Dun & Bradstreet, unless otherwise expressly indicated in the publication. Dun & Bradstreet, therefore, shall not be responsible for any accuracy, completeness or timeliness of the information or analysis in this publication. Dun & Bradstreet thus, expressly disclaims any and all responsibilities and liabilities arising out of the publication or its use by the recipient or any person or entity. SME Cluster Series 2016: Coimbatore

7 Contents Executive Summary...1 Research Methodology...3 Overview of MSMEs in India Coimbatore Cluster Overview Industry Overview Engineering Textiles & Garments Coimbatore Cluster Insights

8

9 Executive Summary Dun & Bradstreet India, in association with Corporation Bank, reinforces its commitment towards the development of Small & Medium Enterprises (SMEs) in India. As a sign of this commitment, we feel immense pride in launching the cluster based report, Dun & Bradstreet Corporation Bank SME Cluster Series 2016: Coimbatore. To gain deeper insights about the Coimbatore cluster, Dun & Bradstreet conducted the financial analysis of SMEs based in Coimbatore for the period FY13-FY15. SMEs from varied sectors such as engineering, textiles and pharmaceuticals among others were a part of this study. The study is based on SMEs in Coimbatore whose total income is less than ` 1,000 million in FY15. Key findings from our study are as under:- SMEs in the Coimbatore cluster witnessed an aggregate income growth from ` 8,799 million in FY13 to ` 9,828 million in FY15 - registering a growth of 5.7% CAGR during the period The aggregate total income of the Engineering sector grew at a CAGR of 8.7% during FY13 FY15. On the other hand, the textile sector showed flat growth for the same period The debt to equity ratio for the SMEs in the Coimbatore cluster increased from 1.8 in FY13 to 2.6 in FY15. This increase can be attributed to the rising debt coupled with the consistent aggregate net loss reported by the SMEs in the Coimbatore cluster The aggregate exports reported by SMEs in the Coimbatore cluster witnessed an increase from ` 768 million in FY13 to ` 1469 million in FY15, registering a growth of 38.3% CAGR for the same period The share of exports to total income of the SMEs in the Coimbatore cluster increased from 8.7% in FY13 to 15% in FY15 SMEs in the textiles and engineering sectors, collectively accounted for more than 50% share of the cluster s total exports In CAGR terms, SMEs in the Coimbatore cluster witnessed 18% decline in net worth from ` 3,251 million in FY13 to ` 2,169 million in FY15 The SME segment promises to emerge as one of the key growth engines for the Indian economy. Dun & Bradstreet India will continue to keep track of developments in the SME segment. We are confident that this report will serve as a reliable source of reference to SMEs. As always, we welcome your feedback and comments. Naina R Acharya Deputy Leader - Operations Economic Analysis Group Dun & Bradstreet India 1

10 2

11 Research Methodology Objective of the Report The objective of SME Cluster Series 2016: Coimbatore is to develop a one-point reference document, which will provide the socio-economic and industrial scenario of Coimbatore including the financial trends of the businesses in the cluster. Methodology 1. Desk Research A detailed review of relevant literature for the Coimbatore cluster was conducted at this stage. 2. Financial Analysis For the purpose of the analysis, SMEs whose financials were available from FY13 to FY15 in the public domain were considered. An analysis of SMEs has been done on the various parameters such as total income, net profit, debt and net worth. 3. Eligibility criteria Companies based in Coimbatore with a total income of less than ` 1,000 mn in FY15 were selected for the purpose of financial analysis. Companies involved exclusively in trading activities were excluded from this study. 4. Collation of Information The data and information was collated from the secondary sources available in the public domain. 5. Analysis of data The information collected was scrutinized and analyzed to explore the cluster dynamics. 6. Report Writing The outcome of the project including the key analysis and results were written in the form of the current report. 3

12

13 Overview of MSMEs in India

14 6 Overview of MSMEs in India Introduction Micro, Small and Medium Enterprises (MSMEs) play a pivotal role in the overall industrial and economic development of a nation and are considered as the prime drivers for employment generation and GDP growth, besides contributing to the balanced regional development. Further, MSMEs contribute greatly to economic diversification, social stability, and play an important role in development of the private sector. The entrepreneurial spirit and innovative nature of these enterprises have been crucial in driving competitiveness in the economy. The Organization for Economic Co-operation and Development (OECD) reports that over 95% of the enterprises in the OECD region are MSMEs accounting for almost two-third of the private sector employment. Definition and Economic Contribution of SMEs to the Indian Economy The Indian government passed the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, to address the policy issues affecting the SMEs and to extend the coverage and investment ceiling of the sector. The MSMED Act, 2006, classifies enterprises broadly into: (i) Manufacturing enterprises and (ii) Services enterprises. The Act further classifies these enterprises into micro, small and medium enterprises based on their investment in plant and machinery (for manufacturing enterprises) or investment in equipment (for services enterprises). Nonetheless, revision in the existing definition of MSMEs has been proposed by the Ministry of MSMEs. In this regard, The Micro Small and Medium Enterprises Development (Amendment) Bill, 2015 has already been introduced in Lok Sabha which is still under consideration. The table below provides the existing definition of MSME as well as the proposal of revised definition. India s Definition of MSMEs Sector Manufacturing Micro Small Medium Services Micro Small Medium Investment Limit Investment in plant and machinery Up to ` 2.5 mn Above ` 2.5 mn & up to ` 50 mn Above ` 50 mn & up to ` 100 mn Investment in equipments Up to ` 1 mn Above ` 1 mn & up to ` 20 mn Above ` 20 mn & up to ` 50 mn Source: Ministry of Micro, Small and Medium Enterprises, GoI MSMEs play the crucial role of a catalyst in driving growth of the Indian economy by providing vital linkages to large local and international value chains. As per the Fourth All India Census of MSME, 2006 MSMEs are estimated to contribute around 45% to India s manufacturing output and 40% to India s exports, in terms of value.

15 Overview of MSMEs in India 7 As per the Annual Report FY16 of Ministry of MSMEs, more than 117 million people were employed in around 51 million working enterprises in FY15. Rural units with lakh working enterprises account for 55.3% of the total working enterprises in the MSME sector. On the other hand, there are lakh working enterprises in the urban area accounting for 44.7% of the total working enterprises in the MSME sector. Indian MSMEs are spread across the length and breadth of the country, with the southern region accounting for almost one third of the total MSMEs in India. Further, nearly 32% of the enterprises are engaged in manufacturing activities, while the remaining 68% are engaged in services. In terms of ownership patterns amongst MSMEs, 90.1% are proprietary enterprises, 4% are partnership enterprises, 2.8% are privately run enterprises, 0.5% are publically listed, 0.3% are owned by cooperatives/trusts, while the remaining 2.3% do not have a specific ownership pattern. There are more than 6,000 products manufactured by the Indian MSMEs, in addition to providing a wide range of services. Lending Scenario in MSME Sector With a view to enhance banks credit to the MSME sector, the Reserve Bank of India has issued timely guidelines, according to which, all loans granted to the Micro and Small Enterprises (MSEs) under the MSME segment are classified as a part of priority sector lending. The Presumption taxation scheme for small and medium enterprises has also been extended to turnover limit of ` 20 million against ` 10 million. Under the priority sector lending targets of all scheduled commercial banks (SCBs) for the MSME segment, banks are required to extend 60% of total MSME sector advances to micro (manufacturing & enterprises) enterprises. As of March 2015, total priority sector lending by all SCBs to the MSEs stood at ` 8,003.4 bn compared to ` 7,078.0 bn as of March 2014, registering a growth of 13.1%. Deployment of Bank Credit to MSE Sector (` bn) Source: RBI Note: Figures denote outstanding credit as of March each year

16 8 In addition, to facilitate easy access to finance by MSMEs the Government/RBI has: 1) Launched Credit Guarantee Fund Scheme to provide guarantee cover for collateral free credit facilities extended to micro & small enterprises (MSEs) up to ` 10 mn. 2) Issued guidelines in mandatorily requiring banks to dispense with collateral requirement for loans up to ` 1 mn to MSEs. 3) Set up a Micro Units Development & Refinance Agency (MUDRA) Ltd which would be responsible for refinancing all Micro-Finance Institutions, which are in the business of lending to MSEs up to ` 1 mn. Apart from this, in view of the problems faced by most of the MSMEs regarding modernization of technology, the government is implementing Credit Linked Capital Subsidy Scheme (CLCSS) under which 15% (subject to maximum of ` 1.5 mn) upfront subsidy on capital investment for technology upgradation is provided to MSMEs. The allocation of funds for the scheme during FY16 is ` 3 bn with a physical target of 5,700 units. Besides, the government is implementing schemes for market development and export promotion. More than 1500 technologies under 51 products/sub-sectors, have been approved under the scheme. Total 30,732 units have availed subsidy of ` 17.8 bn since the inception of the scheme. The Indian Government has announced the following policies and schemes to promote MSMEs in the union budget of National Scheduled Caste and Scheduled Tribe Hub will be created in the MSME Ministry. The Hub will facilitate professional support to SC and ST entrepreneurs in the MSME sector Presumption taxation scheme for small and medium enterprises has been extended to turnover limit of ` 20 million against ` 10 million. Plans are to set up 1,500 multi skill institutes across the country under the Pradhan Mantri Kousal Vikash Yojana (PMKVY) at a total cost of ` 170 million. Allocation for the Ministry of MSME has been increased by 14.7% to ` billion. New manufacturing companies incorporated on or after March 1, 2016 to be given an option to be taxed at 25% + surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of investment allowance and accelerated depreciation. Lower the corporate tax rate for the next financial year for relatively small enterprises i.e. companies with turnover not exceeding ` 50 million (in the financial year ending March 2015), to 29% plus surcharge and cess. The Way Forward Considering the critical role played by MSMEs in economic development, particularly in terms of job creation and boosting economic growth, the Government has, over the years, launched and implemented a plethora of schemes and policies for this sector. Yet the MSMEs continue to suffer from critical challenges affecting their growth and even survival, particularly due to lack of availability of adequate and timely credit, high cost of credit, access to technology, lack of skilled manpower, and inadequate marketing support and infrastructure facilities, among others. The widespread lack of information and awareness among the MSMEs regarding the various schemes and policies designed and implemented by the Government to foster their growth has been acting as a major dampener towards exploiting their full potential.

17 Overview of MSMEs in India 9

18

19 Coimbatore Cluster Overview

20 12 Coimbatore Cluster Overview About Coimbatore Coimbatore, also known as Kovai, is situated on the banks of river Noyyal. It has an area of 7,469 sq km and is bounded by the Nilgiris on the north, Erode district on the east, Dindigal district on the south and the state of Kerala on the west. Coimbatore existed even prior to the 2nd or 3rd century AD and was ruled by the great rulers like Rashtrakutas, Chalukyas, Pandyas, Hoysalas and the Vijaynagara kings. Today, Coimbatore is one of the fastest growing tier-ii cities in India and one of the most industrialized cities in Tamil Nadu. It is referred to as the Manchester of the South due to its Textile industry. Coimbatore is also referred to as the pump city as it supplies two thirds of India s requirements of motors and pumps and the term Coimbatore Wet Grinder has been given a geographical indication. Demographics According to 2011 census, Coimbatore district had a population of 3.5 mn, registering a growth of 18.6% in a decade. The population density also rose from around 616 people per sq km as per the 2001 census to around 731 people as per the 2011 census. Around 75.7% of the district population lived in urban area as per the 2011 census as compared to 71% in Coimbatore has a high literacy rate of 84.0% as per the 2011 census as against 78.5% in Population Statistics Population (million) Male Female Total Male Female Total Source: Census , Office of The Registrar General and Census Commissioner, India Literacy Statistics Literacy Rate (%) Male Female Total Male Female Total Source: Directorate of Census Operations Tamil Nadu Infrastructure The city is well connected with the other major cities of the country through rail, road and air infrastructure. Road Coimbatore has a well-developed transport infrastructure and is well connected with most cities and towns in India by rail, road, and air. Coimbatore has a well-connected road transport network comprising various arterial roads and national and state highways. The city has six major, well connected arterial roads and three national highways. These include NH - 47 (Thiruvananthanpuram - Salem), which passes through the city, NH - 67 (Mysore -

21 Coimbatore Cluster Overview 13 Nagappattinam), and NH (Bangalore - Dindigul). The bypass road connects the three major highways to the city. Coimbatore has 13 railway stations and is a major junction on the Madras-Palghat Broad gauge section. Road Network: Type of road kms Corporation/Municipalities roads 2,666.5 Town panchayat road 1,841.5 National Highways State Highways 1,168.7 Panchayat & forest roads 7,626.0 Source: Coimbatore District Statistical Handbook, Rail Coimbatore is well connected with all major locations such as Delhi, Chennai, Bengaluru,Indore, Bhopal, Gwalior, Jabalpur, Mumbai, as well as other districts of the State through a broad /meter gauge railway line. Railway Network Parameter Broad Gauge Meter Gauge Total Route Length (in Km.) Track Length (in Km.) Number of Railway Stations Source: Coimbatore District Statistical Handbook, Air Coimbatore has an airport at Peelamedu and an air force base at Sulur. The airport caters domestic flights to all the major Indian cities and international flights to Sharjah, Singapore, and Colombo. Upcoming Infrastructure Projects Tamil Nadu Government has launched several projects for the infrastructural development in Coimbatore. Some of the projects are as follows: Name Capacity Investment in USD Million 6/8 Lane triangular Corridor: Thoothukudi Coimbatore Alignment Roads 1,000 6/8 Lane triangular Corridor: Coimbatore Chengalpet Alignment Roads 1,800 Madurai Coimbatore high speed rail link Railway 4,600 Coimbatore Chennai high speed rail link Railway 9,000 Expansion of Coimbatore Airport Airport 600 Coimbatore-Salem Industrial Corridor Industrial Corridor 2,400 Coimbatore Madurai Industrial Corridor Industrial Corridor 2,000 Mass Public Transit Systems for Madurai and Coimbatore Urban Infra 10,000 Knowledge Hub in Coimbatore/Salem Education 150 Entrepreneurship Development Centre Coimbatore Education 3 Source: Vision Tamil Nadu 2023, Strategic Plan for Infrastructure - Phase II

22 14 Industrial Scenario Economy of Coimbatore is largely influenced by textiles, textile machinery, auto components, steel & aluminum foundries, pumps & motors and information technology (IT) industries. It is part of the Coimbatore-Tirupur-Erode industrial corridor and has more than 25,000 manufacturing units. Coimbatore, which is known as Manchester of the south, houses a large number of small, medium and large textile mills. The first textile mill came as far back as in 1888 but now, there are numerous mills that specialize in spinning, weaving, powerlooms and knitwear. A large produce of the knitwear, woven apparel and home furnishings are exported to different countries. The factors that have led to growth of the textiles industry in Coimbatore are mainly the quality of its cotton and dyed fabric. The growth of the textiles industry also led to the inception of textiles machinery manufacturing. Today, some of the famous global brands in textile machinery and component manufacturing companies are operational in Coimbatore. Coimbatore is also called the pump city of India. The motor & pump industry of Coimbatore supplies more than 40% of India s requirements, while its wet-grinder industry has a near monopoly. The district has more than 700 wet grinder manufacturers and wet grinders manufactured in Coimbatore have been given a geographical identification. In recent years, the city has also emerged as the second largest software development centre in Tamil Nadu. Although the IT industry in Coimbatore is nascent as compared to its textile and pump industries, the launch of TIDEL park and other planned IT parks are expected to help Coimbatore to emerge as the IT & BPO hub. Industrial Estates in Coimbatore Coimbatore has two industrial estates both owned by SIDCO namely Kurichi Industrial estate and Malumichampatti industrial estate with 271 industrial sheds and 99 plots being developed. List of Operational SEZ in Coimbatore SEZ Coimbatore Hitech Infrastructure Pvt Ltd (CHIL) Electronics Corporation of Tamil Nadu Limited (ELCOT) Aspen Infrastructures Limited Span Ventures Pvt Ltd Source: Ministry of Commerce & Industry Industry IT/ITES IT/ITES Hi Tech Engineering IT/ITES The large and diversified manufacturing industry of Coimbatore has been facilitated by the presence of manufacturing research & development institutes and industry associations. Some of these are: The Textile research institute like the Central Institute for Cotton Research (CICR)- Southern Regional Station South Indian Textile Research Association (SITRA) Two Centres of Excellence (COEs) for technical textiles proposed by the Government of India, namely Meditech, a medical textile research centre based at SITRA, and InduTech based in PSG College of Engineering & Technology

23 Coimbatore Cluster Overview 15 The Southern India Mill s Association (SIMA) Coimbatore District Small Industries Association (CODISSIA) Coimbatore Industrial Infrastructure Association (COINDIA) Coimbatore MSME Scenario Coimbatore is one of the industrially developed and commercially vibrant districts of Tamil Nadu. Historically, it had been famous for the textile mills in the entire South India with the presence of textile mills dated back to late 19 th century. However, over the years, other industrial sectors such as pump & motors, foundry, light engineering, wet grinder, electronic products, IT/ITES, and gold jewellery etc have witnessed substantial growth. MSME Scenario in Coimbatore District, Name of the Block/Taluka No. of MSME Units Employment Annur 245 3,808 Coimbatore North 6,090 46,750 Coimbatore South 4,501 35,251 Madhukkarai 93 1,084 Mettupalayam 430 3,692 Pollachi 544 5,102 Perur Sulur 871 9,552 Valparai 5 34 Total 12, ,911 Source: Coimbatore District Statistical Handbook, As per the Coimbatore District Statistical Handbook for , Coimbatore has 12,873 MSMEs. Most of these units are located in the Coimbatore North of the district. Around 80% of the MSME investment is in the textile sector and has been the traditional strength of Coimbatore and is expected to be in the next 5 10 years. Coimbatore is also known for other industries such as cement, motors & pumps, wet grinders, various types of electrical and non-electrical machines, animal feed, steel rolling, and ancillary machinery. The major exportable items from the district are textiles & garments, software products, motors & pumps, granite, gold jewellery, wet grinders and electronic products.

24 16 Investment Scenario in Coimbatore District in USD million Industry Outstanding Completed Status Total Food & Agro-Based Products Textiles ,092 Chemicals & Chemical Products Consumer Goods Construction Materials Metals & Metal Products Non-Electrical Machinery Electrical Machinery Electronics Automobiles & Ancillaries Miscellaneous Manufacturing Information Technology Total 775 1,203 1,978 Source: CAPEX, Coimbatore District Profile Tamil Nadu Global Investors Meet 2015 Outlook of MSMEs in the district The government initiatives like the single window system for clearances, investment in infrastructure and development of industrial corridors are likely to benefit industries in Coimbatore. For instance the Coimbatore-Tirupur-Erode industrial corridor is likely to attract investment for the creation of modern infrastructure facilities which in turn will create further investment opportunities. With its emergence as an industrial hub, the district is encountering rapid growth in real estate with large investments being made in the development of residential townships and commercial complexes. Potential for new MSMEs in Coimbatore Structural Fabrication Works Mechanised & fibre boats Dry fish processing Poultry feed manufacturing Petroleum products such as refining of waste industrial oil Masala products Meat gravy concentrates Invertors and UPS Powder coating Source: Brief Industrial Profile of Coimbatore District Silica sand processing Cane products Bricks/Hollow bricks Desiccated coconut powder and other coconut based products Automobile rubber molded components Sodium silicate Purified packaged drinking water Agricultural implements Flour mills, rice mills

25 Coimbatore Cluster Overview 17

26

27 Industry Overview Engineering Textiles & Garments

28

29 Engineering

30 22 Engineering Introduction The engineering sector plays an important role in the development of other industrial sectors of the economy. It is closely linked with the manufacturing and infrastructure sectors. The sector caters to capacity creation requirements in an array of sectors like power, mining, oil & gas, refinery, steel, automotive and consumer durables. Engineering products are largely used as input in the capital goods industry. Hence, the growth and demand of this sector is largely fuelled by the growth and demand of the capital goods industry. Indian engineering companies enjoy some degree of advantage in some of the engineering sub-sectors vis-àvis foreign players, in terms of manufacturing costs, market knowledge, technology and creativity. The sector, therefore, attracts immense interest from foreign players. The government has de-licensed the engineering sectors and has allowed 100% FDI. Between Apr 2000 and Dec 2015, the foreign direct investment (FDI) inflows into India s miscellaneous mechanical and engineering industries stood at around USD 2, mn. Engineering is a diverse sector encompassing a number of segments and can be broadly classified into the heavy engineering and light engineering sectors. Heavy Engineering Heavy engineering usually involves the manufacture of high value goods, using high-end technology. It generally entails huge capital investments and has high entry barriers. The heavy engineering industry comprises of machineries such as mining equipment, cement machinery, textile machinery, machine tools, material handling equipment, oil field equipment, rubber machinery, metallurgical machinery and dairy equipment. The heavy engineering goods find applications in industries such as power, infrastructure, steel, cement, petrochemicals, oil & gas, refineries, fertilisers, mining, railways, automobiles and textiles, among others. Light Engineering The light engineering sector consists of a diverse set of sub-sectors including items such as medical instruments, sophisticated process control equipment, castings, forgings, fasteners, bearings, steel pipes and tubes. These sectors usually use medium to low end technology as compared to high-end technology used in the heavy engineering industry. Relatively lower requirement of capital and technology makes it a low entry barrier sector. The light engineering segment is characterised by small capacities and high level of competition. It is a highly labour intensive sector, and generates ample employment opportunities in the economy. Some products that form part of the light engineering segment serve as inputs for the heavy engineering and capital goods sectors. Demand for engineering and capital goods, therefore, influence the overall health of the light engineering sector.

31 Engineering 23 Broad Classification of Engineering Sector Engineering Sector Heavy Engineering Light Engineering * Textil Machinery * Cement Machinery * Sugar Machinery * Rubber Machinery * Material Handling Equiipments * Oil Field Equipments * Metallurgical Machinery * Mining Machinery * Dairy Machinery * Machine Tools * Roller Bearing * Welding Equipment and Consumables * Medical and Surgical Instruments * Ferrous Castings * Process Control Instruments * Seamless Steel Pipes and Tubes * Electrical resistance Welded Steel Pipes and Tubes * Submerged-Arc Welded (SAW) Pipes * Industrial Fasteners * Steel Forging * Bicycle Engineering goods exports displayed decent growth in FY15 A major portion of India s exports of engineering goods goes to UK and Europe, which together account for over 60% of total engineering goods exports. Recently, India s exports of engineering goods to Japan and South Korea have grown significantly. India s exports of engineering goods have been growing steadily over the last decade, reflecting a double digit growth rate. Exports declined during FY10 as the global financial crisis severely impacted global trade. While engineering exports recovered during FY11 and FY12, it again contracted during FY13 in tandem with a decline in overall exports. Engineering exports returned to growth in FY14, growing by 8.1% as India s overall exports grew by 4.7% during the year. As per data provided by the Engineering Export Promotion Council of India (EEPC) for FY15, India s export of engineering goods grew by 14.7% in spite of a decline in overall exports. In FY15, India s exports of engineering goods stood at USD 70.7 bn as compared to USD 61.6 bn in FY14. The sector s share in overall exports stands at around 23%.

32 24 Exports of Engineering Goods Exports in USD million FY12 FY13 FY14 FY Growth Rate (%) Export of Engineering Goods Growth Source: Engineering Export Promotion Council of India (EEPC) The Way Forward Increased investment in infrastructure development and industrial production has helped India s engineering sector to grow rapidly over the past few years. The Government envisages the current spending on engineering services to increase to USD 1.1 tn by the year With development in associated sectors such as automotive, industrial goods and infrastructure, coupled with a well-developed technical human resources pool, engineering exports are also expected to touch USD 120 bn by GoI has made several announcements in the recent Union Budgets which are expected to directly and indirectly help the engineering sector. The Union Budget announced a slew of changes in indirect taxes, particularly customs and excise duty, to boost local manufacturing. The duty changes on inputs seek to make manufacturing competitive for sectors such as IT, capital goods and defence. For instance, GoI has scrapped excise duty on inputs, parts and components, and subparts for the manufacture of charger or adapter, battery and wired headsets or speakers of mobile phones. Measures such as exemption in customs duty on machinery used in the manufacture of semiconductor wafer fabrication, capital goods used in the manufacture of fuses and exemption in excise duty on capital goods used by ship repair units are also likely to aid the growth of the capital & engineering goods industry. The government has also taken steps to improve the quality of technical education in the engineering sector by allocating a sum of ` 5 bn for setting up five more IITs in the states of Jammu & Kashmir, Chhattisgarh, Goa, Andhra Pradesh and Kerala. Funds have also been allocated for several infrastructure projects which are further expected to provide an impetus to the engineering sector.

33 Engineering 25

34

35 Textiles & Garments

36 28 Textiles & Garments Introduction India s textile industry is fragmented with a few large-scale enterprises and numerous small-scale companies engaged in various activities like spinning, weaving, finishing and apparel making. Readymade garments, cotton textiles, man-made textiles, wool & woolen textiles, silk, handloom products, carpets, jute, and coir are some of the major products manufactured by the textile industry in India. Indian textile industry contributes approximately 10% to the manufacturing production, 2% to the nation s GDP and 13% to the total export earnings. It provides direct employment to over 45 million people and is the one of the largest employer in the country. Key highlights Second largest exporter of textiles and clothing in the world First in global jute production Largest cotton producer in the world Second largest textile manufacturing capacity globally Second largest fibre producer in the world Second largest producer of silk in the world 95% of the world s handwoven fabrics are from India More than 60% of the exported fabric is manufactured in powerloom Largest installed capacity of spindles in the world with more than 50 mn spindles and rotors Source: Department of Industrial Policy & Promotion, Ministry of Textiles, Government of India Trends in the textile industry According to Ministry of Textiles, production of fabric grew by just 2.7% in FY15 and stood at 64,332 mn sq mtrs. Further, during FY16 (Apr-Oct), the production stood at 37,986 sq mtrs registering a growth of 2% as compared for the corresponding period of FY15. For the same period, the powerloom and hosiery segments account for nearly 59% and 26% of the total fabric production. India s cloth production (Mn Sq Mtrs) Particulars FY11 FY12 FY13 FY14 FY15 FY16 (Apr-Oct) CAGR (%) from FY11-FY15 Mill Sector 2,205 2,313 2,418 2,531 2,486 1, Handloom 6,907 6,901 6,952 7,104 7,203 4, Powerloom 38,015 37,445 38,038 36,790 37,750 22,277 (0.2) Hosiery 14,634 12,946 14,541 16,199 16,894 10, All Sectors 61,761 59,605 61,949 62,624 64,333 37, Source: Ministry of Textiles, Government of India

37 Textiles & Garments 29 Export Scenario According to Ministry of Textiles, exports of India s Textiles and Clothing (T&C) including handicrafts totaled to USD 28 bn in FY16 (Apr to Dec) as against USD 42.2 bn in FY15. During FY16 (Apr-Dec), the export share of T&C to India s total exports stood at 14.3%. The textile products of the country including handicrafts and handlooms are exported to more than 100 countries with the US and European Union constituting more than 50% of India s total textiles exports. India s Textile Exports (US$ mn) Export FY15 (USD mn) FY16 (Apr Dec) (USD mn) Indian Textile & Clothing 37,655 26,830 Handicrafts 4,537 1,221 Total 42,192 28,052 % Textile Exports of overall exports Source: Annual Report of Ministry of Textiles, Government of India Textile Industry in Coimbatore Coimbatore, also known as the Manchester of South India, has around 962 spinning units which account for more than 40% of total units in Tami Nadu. Total yarn production in Coimbatore is around 387 Million kgs which is 25% of Tamil Nadu s total production. At the Global Investors Meet 2015, held in Chennai, the handlooms and textiles sector of Tamil Nadu had attracted investments worth `19,550 million. Coimbatore, being a major textile hub in Tamil Nadu is expected to benefit greatly from this development. Tirupur cluster, which is the biggest knitwear cluster, accounting for almost 90% of knitwear exports from India is located in the Coimbatore district. The growing knitwear exports from Tirupur and handloom exports from Erode have led to substantial demand for spinning and weaving mills in and around Coimbatore. The growth of textile industry in the district can also be attributed to the good quality of yarn. With growing demand, textile mills in Coimbatore have upgraded their textile machinery and have increased their capacity. In fact this has also given rise to establishment of many textile machinery manufacturing units in and around Coimbatore. Coimbatore Textile Industry Overview (year ) Segment No of units Handloom 5,618 Powerloom 2,891 Total 8,509 Source: Coimbatore District Statistical Handbook

38

39 Coimbatore Cluster Insights

40 32 Coimbatore Cluster Insights Introduction Dun & Bradstreet conducted the financial analysis of ~32 small and medium enterprises (SMEs) based in Coimbatore for the period FY13 to FY15. The SMEs considered for the study had presence in varied manufacturing sectors such as textiles, engineering, auto components, chemicals, paper, and pharmaceuticals among others. Analysis on key financial parameters of the SMEs studied have been presented in this chapter. Sector-wise Classification of SMEs 19% 38% 44% Textile Engineering Others Source: CMIE and Dun & Bradstreet Note: Others comprises of chemicals, paper, pharmaceuticals etc. Following are some of the key findings of the study: Aggregate total income of SMEs in the Coimbatore Cluster grew at a CAGR of 5.7% during FY13-FY15 Key Highlights: SMEs in the Coimbatore cluster witnessed an aggregate income growth from ` 8,799 million in FY13 to ` 9,828 million in FY15 - registering a growth of 5.7% CAGR during the period The aggregate total income of the engineering sector in the Coimbatore cluster grew at a CAGR of 8.7% during the period FY On the other hand, textile sector showed flat growth for the same period. In FY13 the aggregate net loss of the SMEs in the Coimbatore cluster stood at ` 932 million, while the aggregate net loss stood at ` 489 million in FY15

41 Coimbatore Cluster Insights 33 Total Income, EBITDA, and Net Profit 12, , ,000.0 In ` Million 6, , , ,000.0 FY13 FY14 FY15 Total Income EBITDA Net Profit Source: CMIE and Dun & Bradstreet Research Exports of SMEs in the Coimbatore Cluster grew at a CAGR of 38.3% during FY13-FY15 Exports In ` Million FY13 FY14 FY15 Source: CMIE and Dun & Bradstreet Research Key Highlights: The aggregate exports reported by SMEs in the Coimbatore cluster witnessed an increase from ` 768 million in FY13 to ` 1469 million in FY15, growing at a CAGR of 38.3% The share of exports to total income of the SMEs in the Coimbatore cluster increased from 8.7% in FY13 to 15% in FY15

42 34 SMEs in the textiles and engineering sectors, collectively accounted for more than 50% share of the cluster s total exports Aggregate debt of SMEs in the Coimbatore cluster grew at a CAGR of 4% during FY13-FY15 Total Debt In ` Million 8, , , , , , , , , , , ,800.0 FY13 FY14 FY15 Source: CMIE and Dun & Bradstreet Research Key Highlights: The aggregate debt reported by SMEs in the Coimbatore cluster registered a growth of 4% CAGR for the period FY13-FY15 The debt to equity ratio for the SMEs in the Coimbatore cluster increased from 1.8 in FY13 to 2.6 in FY15 respectively. This increase can be attributed to the rising debt coupled with the consistent aggregate net losses reported by the SMEs in the Coimbatore cluster

43 Coimbatore Cluster Insights 35 Net Worth of SMEs in the Coimbatore cluster declined from ` 3,251 million in FY13 to ` 2,169 million in FY15 Net Worth In ` Million FY13 FY14 FY15 Source: CMIE and Dun & Bradstreet Research Key Highlights: In CAGR terms, SMEs in the Coimbatore cluster witnessed 18% decline in net worth from ` 3,251 million in FY13 to ` 2,169 million in FY15 The decline in net worth can be attributed to the consistent aggregate net loss reported by the SMEs in the Coimbatore cluster, especially due to the heavy losses reported by the SMEs in the textile sector

44

45

46