Be it in India or overseas, the demand for embroidered apparels and textiles have been on the rise! And this growth has also catalysed the rise in demand for sophisticated embroidery machines. Here’s a delightful fact – India is already the world’s biggest importer of these machines. The Dollar Business evaluates this business and weights the logic behind importing them from just one market.

Niladri S. Nath | March 2017 Issue | The Dollar Business

Guaranteed 100% handmade embroidery work! That’s how shopkeepers allure us when we’re out shopping. Hand embroidered pieces have their own charm and we all love hand embroidered garments, but chances are high that the shopkeeper is actually selling you a machine embroidered garment. For, machine embroidery technology today has reached a place where it is increasingly difficult to differentiate a machine embroidered piece from a hand embroidered one. And machine embroidered ones are much cheaper than handmade garments to boot. The price factor is even more important because when it comes to garments, India is a price sensitive market. And that is where embroidery machines come into play.

Price of imported embroidery machines usually ranges from as low as $150 per unit to as high as $70,000.

For the record, be it Tiruppur (Tamil Nadu) or Surat (Gujarat), embroidery machines have been in use for decades. Garment manufacturers employ various types of embroidery machines such as flat embroidery, cording embroidery, sequins embroidery, multi-head machines, etc., to produce fascinating pieces of textiles for both domestic and international markets. While a large portion of India-made embroidered garments find their way to foreign shores, the machines that they are embroidered on are imported. And it’s the importers who play a huge role in fulfilling the growing demand for these increasingly sophisticated embroidery machines.

NUMBERS TALK

That embroidery machines are much in demand is evident from their ubiquitous presence in garment manufacturing units across India. As far as the numbers are concerned, more than 10,000 embroidery machines (big and small) are currently in use in Jaipur alone, informs Navin Adwani, Managing Director of The Choice Fashions Pvt. Ltd., a Jaipur-based garment manufacturer and exporter and Vice President of the Garments Exporters Association of Rajasthan. In Tiruppur too, more than 2,500 machines are operational in various manufacturing units – confirms A Gopalakrishnan, Chief Executive, Unity Overseas, a Tiruppur-based importer. However, what Kishore Bhingradia, director, Shivani Enterprises, a Surat-based imported machine attachment supplier, reveals may leave you speechless! According to him, Surat boasts of the largest market for the imported embroidery machines with approximately 1,50,000 units currently in use.

Concurring with the aforesaid numbers, the Ministry of Commerce (GoI) data also suggests that India has already imported embroidery machines worth $162.09 million in FY2017 (till November 30, 2016). It also reveals that in FY2016, the import figures stood at $222.63 million. However, there was a major fluctuation in the import figures of FY2013 as imports dropped 114.87% y-o-y, from $225.88 million in FY2012 to $105.12 million in FY2013. “Such a massive fluctuation happened due to not-so-positive market sentiment and sluggish demand for apparels,” explains Gopalakrishnan.

No doubt, the numbers are impressive. But what really makes import of embroidery machines a lucrative business is that the manufacturing of embroidery machines is still not high on priority in India – which also indicates that importers have nothing to fear. What’s more? As per Indian Brand Equity Foundation (IBEF) January 2017 report, the textile industry is currently estimated to be around $108 billion, which is likely to become a $223 billion industry by 2021. Further, textile industry contributes roughly 5% to India’s GDP and 14% to the overall Index of Industrial Production (IIP) and is acknowledged as the second largest employer after agriculture sector. All this, coupled with an almost non-existent embroidery machines manufacturing set up, indicates that the importers will continue to dominate the market, at least in the foreseeable future.

CHINESE DOMINANCE

And not surprisingly it’s China again that continues to feed India’s demand for embroidery machines. In fact, in FY2016 alone, India imported embroidery machines worth $183.53 million from China, making the country the biggest source of imported embroidery machines into India. While Switzerland and Japan were India’s second and third largest sources of the product, imports from these two nations stood at just $24.14 million and $12.29 million, respectively.

Though, during the last decade, imports from China have seen several ups and downs, the current trend shows an upward trajectory hereon. “India will remain the biggest export market for China. Exports to India constitutes 30% of our total exports pie and we have been witnessing a year-on-year growth of 20% for quite some time now,” affirms Qinmei Wu, CEO, Zhuji Galaxy Electromechanical Co. Ltd., an embroidery machines manufacturer and exporter based at Zhejiang in China.

Interestingly, while Indian importers source Chinese machines in big numbers, not all are convinced about the quality of these machines. “Buying Japanese-made embroidery machines, such as Tajima and Barudan brands, is like owning a Mercedes Benz, whereas buying Chinese machines is like purchasing hatchbacks. Both take you to the destination, but the experience is different. So is the result,” says Adwani. He also points out that while Japanese embroidery machines are useful for manufacturing export-quality garments, Chinese machines are ideal for catering to the domestic market.

Chinese machines are in demand because of the simple fact that they come cheap – in fact, four times cheaper than a Japanese machine. “A 20-header-9-colour Japanese machine costs around Rs.50 lakh, whereas a Chinese machine of similar specification will be available at Rs.12.5 lakh. Although the quality of the Chinese machines has improved, it is yet to reach the standard of Japanese machines,” feels Gopalakrishnan.

However, the Chinese have a different perspective when it comes to the quality of their machines. Betty Chen, Export Manager at Zhuji City Baoshijie Sew Equipment Co. Ltd, a Chinese exporter of embroidery machines says, “Production quality of the Chinese embroidery machines is now almost at par with the Japanese and Swiss machines. Our prices are unmatched as they are just half or one-third of the price of those machines.” Currently, Zhuji’s exports to India constitutes 50% of its total exports basket.

Meanwhile, Radhey Shyam Kumawat, CEO, Rajdhani Technology, holds a view that most Indian garment manufacturers will agree with. “Chinese embroidery machines work well for the garment manufacturers who cater to the domestic market as Indian customers are price-sensitive and not quality-sensitive.” But, with that said, there are buyers like M. Ramasamy, Director, Q-Rich Creations, who vouch for Japanese products saying, “International buyers always insist on Japanese embroidery machines.”
Mukesh Chovatiya, Director, Dolphin Embro, also holds a similar opinion and says, “In this pronto moda (fast fashion) era, investing huge amount on costly machines doesn’t make any business sense.” And this must be why Amit Jain, Director of Nav Pankaj Creations, manages to sell 400 machines annually!

Another area where Chinese manufacturers score better than their counterparts is its after-sales service. “There is a certain level of comfort while doing business with Chinese exporters. Their turnaround time is fast, after-sales service is efficient and spare-parts are easily available,” says Bhingradia.

Surat, in Gujarat, boasts of the largest market for imported embroidery machines in the country with approximately 1,50,000 machines currently in use.

BUSINESS MANTRA

So, what it takes to get into this lucrative import business? Well, according to Kumawat, an investment of Rs.6 lakh was all what he needed to start his business. “You can start with a low investment in small machines. Once you have some inventory, you may plan to hold the stock. However, you need to study the market trends before holding the stock as this is a market where design trends change very fast,” he cautions.

As far as payment terms are concerned, an importer needs to pay about 30% in advance while placing an order for the machine. “The balance amount is claimed by the exporter when the shipment is ready,” adds Kumawat, who enjoys a healthy 15-20% margin on each sale. However, for distributors like Gopalakrishnan, a 5% sales and service commission is what they receive from the exporter on every sale made by them.
The after-sales services like upgradation of machines and maintenance packages also fetch importers handsome profits.

Though importers pay a total import duty of 18.7% on embroidery machines and 32-36% on machine attachments, duties don’t seem to bother them much. For, there is a steady demand for the product and hardly any competition from domestic manufacturers. To add to that, after-sales services like upgradation of the machines and maintenance packages also fetch importers a handsome margin. “Upgradation and intergradation attachments to the machine costs between Rs.2,000 and Rs.10,000. So, if one machine requires 10 attachments, importers can add a decent Rs.1 lakh to their topline. And, such upgradations happen regularly,” says Bhingradia.

That is not to say that competition among importers is not heating up and taking a toll on margins. For some importers in Ludhiana margins have shrunk significantly, from 15% to 5-6%, and that includes an annual maintenance service. However, this is restricted to only certain parts of the country.

Driving Growth

Market forces have till date driven the demand of embroidery machines in India. And now since the government has also extended its support to the textile sector, import of embroidery machines is bound to only go up from here. Both, importers of embroidery machines and garment manufacturer-cum-exporters, believe that the Rs.6,000 crore allocation under the Technology Upgradation Fund Scheme (TUFS) for the textile and apparel sector will boost imports of embroidery machines into India.

In addition, the proposed textile parks at Tiruppur in Tamil Nadu and at Warangal in Telangana are also expected to boost import of the product. Anticipating brighter days ahead, Gopalakrishnan says, “I am certain, by 2020 garment exports from India will touch Rs.10 lakh crore, which will drive the demand for embroidery machines in a big way.” And if this isn’t a reason enough to get into imports of embroidery machines, as per an Edelweiss Broking report, the Indian branded apparel segment (currently pegged at $10 billion) is projected to grow 10-12% annually in the near future.

To achieve this projected growth, garment manufacturers will require more embroidery machines. So, as long as there is demand for finely embroidered yet affordable dresses, these machines, big or small, will remain in vogue.

‘Money-making machines’ as an import business idea is for real. Check with some Indian’s importers if you will.