Micro and small enterprises in men’s ready-made garment manufacturing have better financial metrics compared with their peers manufacturing women’s and kids’ garments, according to a CRISIL SME Rating analysis of more than 100 rated such traders in the sector. This segment dealing in men’s apparel had an average operating profit margin of 9.8 percent when compared with those in kids’ and women’s apparel, which logged 7.5 per cent and 6.9 per cent, respectively.
The higher profitability of men’s apparel manufacturers has also resulted in higher accretion to their reserves and consequently, lower reliance on debt funding, the release said. Therefore, men’s apparel manufacturers had a gearing of 1.1 times compared with 1.3 times for kids’ apparel and 1.9 times for women’s apparel MSEs.
According to the research, standardized designs in menswear and the limited requirement of incorporating pattern and embroidery into the apparel could be one reason for the lower cost of production of men’s apparel and therefore higher profit margins. CRISIL believes that adoption of zero-defect production combined with investment in brand development can help MSEs in women’s and kids’ apparel improve their profit margins.
The growing Indian economy has led to expectations of 11-12 per cent growth in the domestic apparel market in the next seven years, said a study conducted by the apex industry body the Clothing Manufacturers’ Association of India (CMAI). Rahul Mehta, President, CMAI, said at the 67th National Garment Fair held last month, India’s domestic apparel market was estimated at $67 billion in 2017 which had grown at a compounded annual growth rate (CAGR) of 10 per cent since 2005. Owing to strong fundamentals, India’s domestic apparel market size is now expected to grow at 11-12 per cent CAGR and reach about $160 billion by 2025.