India’s exports of bedspreads, in value terms, has seen a phenomenal rise in the last decade. And it’s one of those few export products where China plays catch-up to India. With India expected to further consolidate its leadership position in the coming years, bedspreads appear a safe and snug option for an export business.
Ahmad Shariq Khan | June 2016 Issue | The Dollar Business
In one of your overseas business trips if you come across a sophisticated wrinkle-free linen or a chic cotton spread in your hotel room, chances are high that it has been sourced from India. Yes, you heard it right! From low-priced polyester bedsheets to hand-woven high-end cotton bed linen to decorative bed covers, duvet covers, pillow covers, cushion covers, quilts, comforters, summer blankets, shams, coverlets, etc., India has been supplying it all to the world for years now, and in big quantities.
When it comes to exports of bedsheets or bedspreads (HS Code: 630419; bedspreads of textile materials, not knitted or crocheted), India has always been a clear leader in exports. In fact, India’s overseas shipments of bedspreads in CY2015 stood at $980.33 million, against the world exports of $1.38 billion during the same period – that’s an impressive 70% global share!
India’s dominance in exports of bedspreads can also be gauged from the fact that it’s one of the few export products where China, for a change, plays catch-up to India. [China, the world’s second biggest exporter of bedspreads, managed to ship just $226.78 million worth of bedspreads in CY2015]. What’s more? India’s exports, in value terms, have almost quadrupled in the last decade to touch about a billion dollars in CY2015 from just $282.52 million in CY2006. That speaks volumes about the export performance of the industry and its importance as a significant foreign exchange earner for the country.
R. K. Dalmia, Chairman of Texprocil, attributes this growth to “lower input costs including fibre cost and diversification of exports to non-traditional markets.” And with bedspread exports growing at a CAGR of 13.25%, between CY2006 and CY2015, Indian exporters seem to have made good use of the opportunities available to them. The laudable performance in bedspread exports can also be attributed to America’s love for ‘Made in India’ bedsheets, with about 75% of the total consignments from India being shipped to US, followed by Germany (14%) and UK (2.6%). A 173.5% increase in export shipments to US since CY2011 – from $266.20 million in CY2011 to $728.11 million in CY2015 – clearly reflects the export growth potential of the product in perhaps the biggest consumer market in the world. And not to say, the Dragon’s factories are still far behind its Indian counterparts in fulfilling this growing demand!
Explaining India’s advantageous position in this niche segment, K. K. Lalpuria, Executive Director, Indo Count Industries, tells The Dollar Business, “I believe, India has built a very competitive position in cotton, and cotton-related exports. We have modern machinery required to produce cotton textile at a cost that is quite competitive. Also, India as a brand is definitely becoming more competitive in global markets, which is helping us improve our market share and positioning too.” It’s a matter of fact that of late, China has been focusing more on its domestic consumption than exports. This has surely given India an upper hand, and particularly so in textile exports.
In fact, in recent times, many Indian manufacturers of top-of-bed items have invested heavily in new technologies, which is one of the reasons why India leads the exports race in this category. Moreover, continued focus on innovation and robust marketing mechanism – all seem to have worked in India’s favour. India has also managed to establish itself as the most competitive destination for sourcing fine thread count sheet in bedspreads. [Thread count refers to the number of horizontal and vertical threads per square inch of fabric. Earlier a thread count of 200 was considered high, but in the modern times, manufacturers even double or treble the count very easily to meet customer demands.] Also, specific to this segment, consistency in quality supply seems to be giving buyers around the world a huge confidence in Indian bedspreads.
A visit to any home furnishings market, such as the one in Lajpat Nagar in New Delhi, can help you unravel why dealing in bedsheets – both domestically and globally – can be a profitable proposition. Talking to The Dollar Business, Daleep of Leela Furnishings, a Lajpat Nagar-based wholesaler and exporter, says, “We supply high-grade bedsheets to both local and overseas buyers and the demand for our products has only been rising over the last few years.” And while the bed linen industry in India continues its growth trajectory, the entry of big players like Home Town, Home Centre, @home and Home Stop have only raised the bar for manufacturers in India.
Centre of GravityAny discussion about India’s home textiles is incomplete without the mention of Karur, a small town situated in the southern state of Tamil Nadu. The textile hub, which as per industry estimates generates a revenue of about $300 million per annum through direct and indirect exports, is home to many export-oriented units. In fact, Asian Fabricx, one of the largest Indian suppliers to IKEA, the world’s largest furniture and furnishing chain, also operates from Karur. Easy availability of raw material, skilled manpower, and robust and facilitative business ecosystem are some factors working in favour of Karur. Further, the town provides workers a conducive work environment, including strict adherence to labour laws and uniform wage policy that results in minimal worker unrest. And so, while in recent times, Karur has etched its name on the global map as an ideal hub for sourcing quality handloom products – especially bedspreads and bedsheets – its northern counterpart, Panipat, is struggling to keep alive its long tradition.
Demand for high thread count bedspreads is growing rapidly in developed markets.
A Battle half lost?Panipat was once known as the epicentre of India’s handloom industry. Unfortunately, today, handloom is no longer a part of its local tradition. Increased labour costs and miserable business outlook, coupled with intense competition from Chinese suppliers, are some of the reasons for the dismal export performance of the city that once accounted for 50% of India’s total handloom exports. And amid the global slowdown, margins have narrowed considerably.
An acute dearth of an efficient marketing mechanism is adding to the woes of exporters from Panipat. “2013 was the last year when we had a few exports orders. And since then, no global order came our way. We request the government to come up with an integrated marketing platform especially for exporters from Panipat,” Sunny Arora, Director of Ashoka Textiles, a textile exporter based out of Panipat, tells The Dollar Business.
Although critics feel the handloom industry in Panipat has plateaued, the scope and growth in this business is immense. In fact, with the advent of new technologies and rising demand from newer markets, there’s a wide scope for product diversification when it comes to home textiles.
Further, Panipat has some unique characteristics – proximity to the national capital, existing and proposed ICDs in the neighbourhood, easier access to raw materials, presence of ancillary units, and creative abilities. If the government can lend an ear to the concerns of exporters based out of Panipat, the city definitely has the potential to once again become the epicentre of India’s handloom exports.
There are companies that continued to play to their strengths in tough times, and their lot has thus emerged stronger today. One such is Mumbai-based Indo Count Industries – the second-largest exporter of bed linen, sheets and quilts from India. Started in 1991, this vertically integrated company has been exporting almost 100% of its entire production in made-up items to various countries in North America, Europe, and South America and is today amongst the top 15 home textile suppliers in the world. Apart from Indo Count, Textrade India, Alok Industries, Welspun, etc., are some other names in bedspread segment that are doing India prouder each day!
Speed BreakersMeanwhile, despite being on a healthy growth path, the Indian bedspread industry continues to struggle with numerous challenges such as fierce competition amongst small and medium-sized manufacturers to meet demand, competition from cheap Chinese products, and at times, quality issues. Apart from these, the market is dominated by the unorganised sector, and the entry of online retailers has further killed profit margins.
Bal Krishna Kabra of Kabra Exports, a Noida-based exports firm, which is into home furnishings and top-of-bed products, shares, “Profit margins used to be quite healthy a few years ago, in the range of 5-15%, and on some items it was much better. This is not the case now.” However, as per him, cotton-based items have always remained in demand and have garnered good profits, generally above 8%. “Polyester, including its articles has lost sheen in the international market these days and they no longer yield good ROI,” he adds. The Director of this 100% export-oriented company that exports to US, EU and the Gulf feels that there is an increase in demand for new-age high technology, value added products such as organic top-of-bed items.
Interestingly, every player has his own stand on the changing consumers’ tastes, as some even say that polyester blends are rapidly replacing 100% cotton linen (as polyester increases the durability of bedspreads). As per many exporters, customers across US, Asia and Europe are currently on the lookout for new-age, high-value products, such as ‘breathable sheets’ 
that come with a special dobby structure that allows 30% more air to flow through it. Similarly, the weaving technique is also undergoing upgradation, with bedsheets manufacturers going for higher thread counts.
As new-age customers across the globe aspire for quality bed linen, the outlook seems to be positive for Indian bedspread exporters. It’s a modern-age business that presents great opportunities for Indian entrepreneurs looking to foray into exports. All they need to do is focus on innovation, and reap profits.
With ever-increasing demand for home furnishing products, both in India and overseas, there could not be a better time to indulge in exports of bedspreads.And better still, China’s not even a threat in this business!
The Indian bedspread industry is dominated by the unorganised sector, and entry of online retailers has increased competition amongst exporters.
K. K. Lalpuria, Executive Director, Indo Count Industries Ltd.
TDB: Can you brief us on your scale of operations and business?
K. K. Lalpuria (KKL): Indo Count was incorporated in 1988 as a company with a focus on exports. Initially, we started with cotton spinning as a 100% EOU and exported cotton yarn to various global markets. But, today, we have grown to become the second-largest exporter of bed linens from India and are amongst the top three suppliers of the sheets in US. We are also among the top 15 global home textile suppliers in the world.
Our current capacity is 68 million metres and we are on our way to expand it to 90 million this year. Out of the company’s turnover of $400 million, our exports stand at about $300 million. We export to 49 countries and supply to major retailers like Macy’s, J.C. Penney, Target, Walmart, John Lewis, ASDA, Next, Primark and Metro Germany, etc.
TDB: Because of the dull global economy, growth in textile and apparel exports is sluggish. What is your opinion on the current situation?
KKL: Well, not all markets are wobbly. Europe is a little slow at the moment, but once the FTA is signed with Europe and with some other developing countries, the future will change for textile exporters. Also, India as a brand is definitely becoming more competitive across global markets, which is helping us improve our market share and positioning too. As for Indo Count, 70% of our product goes to US, which is still doing well.
TDB: Our textile industry plans to explore new markets to beat the economic slowdown, but apparently find higher tariffs a major hurdle. How do you view this?
KKL: Countries like Russia, China, South Africa, Brazil, Canada, and Mexico are unable to import major quantities of Indian goods because of import tariffs. Our government is signing free trade agreements with them. So, once these agreements are in place, we should be able to promote our goods in these markets more competitively.
TDB: But if we go by numbers, most of India’s free trade agreements have not reaped desired results. It also includes the agreement with SAARC, where the tariffs were already on a higher side. Also, with TPP on the horizon, things are bound to get tougher for Indian exporters. What is your take?
KKL: The SAARC agreement will take a while before it starts giving us any benefits. We are the largest producer of cotton in the world, but still we are behind even countries like Bangladesh and Vietnam in terms of the industry. It is because we are not competitive and lack skilled labour. In order to realise higher value, we should focus on exporting finished products rather than mere raw materials. And not only in cotton, we need to develop competitiveness in the polyester segment as well.
Regarding TPP, since we are in finer count bed linen where the duty component is only 6.7%, it is presumed that there won’t be much effect on Indian exports. Also, TPP specifies a yarn forward rule whereas most of the TPP countries do not have fine count spinning, neither do they have the raw material to produce it. Since India has both, it will remain competitive in this segment in spite of TPP getting implemented.
TDB: What, according to you, are the major threats to the industry?
KKL: Some of the unfavourable trade pacts and availability of raw material at dearer rates are the major threats. For example, cotton rates and economic recession in developed nations are a threat. Since textile is a significant contributor to our GDP and the second-largest sector for employment, we hope the government will provide necessary guidance and support in making our industry come to a level playing field with other exporting countries.
TDB: How can we counter stiff competition from China and save our domestic players?
KKL: Only competitive pricing can counter the Chinese products, for which the government has to support the industry; in terms of capital cost, labour and land reforms, and easy and cheap availability of resources including utilities like gas, water and electricity. Rationalising duties on synthetics, especially, in the case of polyester filament and assisting the newer domestic manufacturers will help bring down prices. Also devaluation of the Chinese currency has been a cause of concern.
TDB: There is much hype about Make in India campaign. Is it really working?
KKL: Textile is a major sector for India’s exports. Such initiatives by our Prime Minister help us to further substantiate our competitiveness in getting textile delivered more cost-effectively. For example, if India manufactures textile machinery we would stop importing them, saving on cost and foreign exchange.
TDB: What factors affect margins of made-up-items? And what margins can one expect in this business?
KKL: Margins depend on the markets you are exporting to. The average profit margin in made-up-items is between 5% and 10%. However, these margins are constantly under pressure due to currency fluctuation, raw material cost, labour and utility costs, etc.
B. K. Kabra, Managing Director, Kabra Exports Pvt. Ltd.
TDB: Please tell us about your export operations. How is the overseas market for made-up textiles these days?
B. K. Kabra (BKK): We regard ourselves a quality exporter of all kinds of home furnishing products such as bed sheets, bed covers, cushion covers, bed linen, diwan sets, quilts, curtains, etc. We are a 100% export-oriented company, with EU being our biggest overseas market, followed by USA and UAE.
However, when it comes to the performance of textile export markets, the growth seems to have stagnated in almost all developed markets. For instance, our shipments to some of our regular buyers in EU have decreased to one-fourth. Although the European market has shown some positivity in recent times, we are still not out of the woods.
TDB: How are you countering the challenges emerging from the dull global economic scenario?
BKK: In order to counter challenges posed by an unpleasant trading environment, we are reaching out to several new (untried and untested) markets across the globe. For instance, we are exploring many Central and Latin American markets. However, at the same time, higher tariffs in these countries is a major hurdle that we need to deal with.
TDB: Can you tell us about your raw material sourcing procedure.
BKK: Sourcing of raw materials depends on the cost advantage we can draw from a place. For instance, we get our cotton from Karur in Tamil Nadu, polyester from Surat in Gujarat, and likewise, many materials from Maharashtra. We also import some labels and tags from Hong Kong-based suppliers, nominated by our buyers.
TDB: Do you think India’s current FTAs are really helping exporters in partner countries?
BKK: I believe FTAs have helped in some cases. However, the government needs to focus on issues we are facing in geographically closer markets. For example, we have issues in Afghanistan, which has a significant demand for our products. Unfortunately, Afghanistan has recently created many bureaucratic hurdles for Indian textile exporters. We have already shared our concerns with the Indian government and have requested them not to just focus on FTAs with far off countries, but to also resolve issues in our neighbourhood.
TDB: Do you envision the Amended Technology Upgradation Fund Scheme (ATUFS) helping exporters in this segment? And what are your views on the Make in India programme?
BKK: We certainly and most urgently need technology upgradation across the sector. And schemes such as ATUFS can go a long way in helping our fraternity in this regard. The new scheme will facilitate finer and appropriate technology for making our textile industry globally competitive, and help reduce its capital cost. As for Make in India, it’s a very good initiative, but since the global market is currently in a bad shape, any concrete change will take at least a couple of years to be visible.
TDB: Are you satisfied with the current incentives offered by the government to your industry? And how do you see the competition going forward?
BKK: According to me, government policies are good and we are mainly hit by the current global slowdown. When it comes to competition, we are still behind our peers from China and Korea as we are not at par with them in terms of technology. I would also mention that Pakistan, one of our neighbouring countries, produces good cotton fabrics and textiles. However, for made-up products, I believe India is still way ahead of this western neighbour.
Further, China is now also slowly eating away our strength i.e. handmade items, embroidery, beading work, etc. Of late, Chinese manufacturers have started using machines that produce products which give an impression of a handmade product, but in reality they are not. This has dented our share in the segment in our traditional markets.
Moreover, the productivity of Chinese manufacturer is extremely high. While, we produce 10 handmade products in a day, a Chinese produces 200. Hence, you can imagine the level of competition we have to face. Our artisans are quite good, but the industry faces a lot of issues which are impeding its growth. The government needs to pay urgent attention to the industry’s concerns.
TDB: What kind of margins can one expect in this business?
BKK: We won’t be able to give an exact margin range. However, at the moment, while cotton is doing fine, global demand for polyester is on a lower side. Moreover, the profit margin depends on the export product as well as the country to which it is being shipped.
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