India Not Yet Attractive For Synthetic Garment Manufacturing, Says Pearl Global ...
India is not yet an attractive manufacturing base for synthetic garments due to constraints around the man-made fibre (MMF) ecosystem and raw material availability, even as global demand increasingly shifts towards non-cotton apparel, according to Pallab Banerjee, Managing Director of Pearl Global Industries. He said the company is well positioned for the transition as it has a substantial number of non-cotton products in its profile and also ships from Vietnam, Indonesia and Bangladesh.In an interview with BW Businessworld, the MD of the apparel exporter and the key manufacturing partner to leading international brands, including Inditex (Zara), PVH Corp. (Tommy Hilfiger and Calvin Klein), Walmart, and Target, said Pearl Global is ready to scale synthetic garment manufacturing in India once the country becomes more MMF-friendly and raw material availability improves. The company is targeting over 125 million pieces of installed capacity by next year, expects to cross its Rs 6,000-crore revenue milestone ahead of its 2028 target if market conditions remain favourable and is ultimately aiming to become a billion-dollar global giant.
Banerjee also sees the India-United Kingdom free trade agreement as a major growth catalyst, saying India's apparel exports to the UK could double or even triple over the next few years. With existing relationships with leading UK retailers and a diversified manufacturing base spanning India, Bangladesh, Vietnam and Indonesia, Pearl Global expects to benefit faster from the trade pact while continuing to diversify beyond the US to reduce tariff risks without compromising growth. Edited Excerpts:
Many industry studies point out that India remains disproportionately dependent on cotton-based products while global demand is increasingly shifting toward man-made fibre apparel. How exposed is Pearl to this transition and how are you aligning your portfolio with future demand trends
Talking about Pearl Global Industries, we are not limited only to India. As a result, the limitation of India is not applicable to us. Because we are already shipping from Vietnam, Indonesia, Bangladesh and India, we have a substantial amount of non-cotton products in our profile. As India becomes more and more open to non-cotton products, we can do the same thing in India as well.
It is just that India is not an attractive place to manufacture those synthetic garments as on date. But in future, if it becomes so, then we can make more and more. If India becomes much more friendly to synthetic garments and the raw material is available more easily, then we can also make synthetic garments in India.
Nearly half of your business now comes from markets outside the US. At what point does diversification stop being a defensive strategy and become an offensive growth driver, and which market do you expect to contribute the most incremental business over the next five years?
I do not think our diversification was ever a defensive strategy. It was definitely part of the offensive. We have been growing in the US. The growth in the other markets like Japan, Australia, Europe and the UK has been faster than the US market. Whatever effort that we are putting into the US to grow the business, we have been putting effort into the other markets as well. The whole market has been distributed. US is a very attractive market. US customers are the most organised customers. The opportunity to create a profitable margin in the US is always better than in the other markets.
But at the same time, if you have too much exposure and if uncertainties like tariffs come in, it becomes a huge risk. We could diversify the market and we can bring down the risk. But at the same time, we have been growing in the US market.
There is considerable excitement around the India-UK FTA. Can you quantify the opportunity for Pearl as well as India?
If I have to talk about India as a country, for the UK market, we have been shipping about a billion dollars of goods to the UK market. Between USD 1 and 1.2 billion of exports were already there. Now, with this duty-free access, it makes it a much more level playing field compared to other countries like Bangladesh, Cambodia and Vietnam.
I personally feel that India's exposure to the UK over the next two to three years should go at least 2x to 3x. India will be able to double or triple the amount of shipments that it has been sending to the UK.Now, at Pearl Global, we are at an advantage because we already have the customer in our hands. We have been supplying to these customers through our Bangladesh operation. The same customers are already showing a lot of interest in placing business in India. For the country, the growth may happen over a period of two, three or four years. For Pearl, it might happen a little bit faster because we are already present in the market.
Your India facilities operated at about 62 per cent capacity utilisation in FY26, compared with higher percentages in Bangladesh, Vietnam and Guatemala. India also saw standalone revenue decline during the year. What explains this utilisation gap?
When we set up a factory, we take the factory's maximum capacity as our capacity. If I am creating an infrastructure of 1,000 machines and these 1,000 machines are going to run for eight hours every day for about 300 working days in a year. That is the total capacity that we calculate.
Now, depending on the planning of the business, we hire the number of operators and the people who will be working in the factory. Normally, if you set up a new factory, a 1,000-machine factory will mean about 2,000 workers will be working. 1,000 sewing operators and 1,000 other staff. This 2000 cannot be hired in one day. It is ramped up over a period of time. Every month, we would hire about 200 to 300 workers, train them, put them into the job and then go to the next month, hire another 300.
On 31st March every year, whatever capital investment that we have done, what is the maximum capacity that we can create, we publish that number. Workers may not be there. Workers will depend on two things. One, if it is a new factory, it will take about a year or so to fill up the full capacity. Also, the number of orders that we have, that might accelerate or decelerate my hiring.
Last year was an exceptional year because the USA had put a 50 per cent tariff on India. It did not make sense for me to hire all the people at all the factories. We were going slow in India and the same business I was executing in Bangladesh or in Vietnam was at a higher profit margin. That is why we kept India utilisation low and the other countries' utilisation as high.
Of the roughly Rs 250 crore FY26 capex, about Rs 110 crore was allocated to Bangladesh while only Rs 20 crore went towards capacity expansion in India. India contributes roughly a quarter of group capacity. What does suggest about the company's focus going ahead and what would need to change for India to attract a larger share of future investments?
Because we are a for-profit organisation. We track the profitability of each of our factories and the location. In India, last year there was a challenge. For every American order, we had to give a heavy, heavy discount so that for the end customer in America, the discount would take care of the tariff that was coming from the American government. As a result, we were losing money. It did not make sense for us to manufacture the goods in India. But we wanted to run our factory, just not at full capacity.
This year, as the business is much more normal, there will be a significant jump in the business which is being executed in India. If you talk of Bangladesh. Yes, Bangladesh has been a profitable country for us. That country is definitely a big apparel manufacturer and exporter. They also have certain advantage which increases the profitability, and they already have an FTA or basically duty-free access to the European, UK and Canada market. We take advantage of that. Bangladesh, as of now, was showing as a higher return. So, we have been going ahead and doing some investment in Bangladesh.
How concentrated is the revenue base today? Can you share how much business the top five customers contribute today versus three years ago
In our industry, it makes sense to be a little bit consolidated with the big customers. You cannot only have hundreds of customers with 2 per cent, 5 per cent kind of share. It is better to have certain customers which will be the top five or six customers, approximately about seven to ten per cent share each.
If you look at Pearl at this point in time, we have the top five customers, which is almost about 50 per cent of our total sales. These are very important. We always keep track of these customers that they are doing well. If the customers are doing well, then we know that they should be in my top. That is in our hands. Today, the top ten customers should be about close to 75 to 77 per cent of our business.
The group has crossed 100 million pieces of installed capacity. How much of the next growth phase can be delivered simply by filling existing capacity versus building new factories? Can you double your revenue without doubling the capacity?
We do have a vision to grow further. The big players in our industry are basically from countries like Korea, Taiwan, and China. They are all like USD 2 billion companies, USD 1.5 billion companies. We are only close to a USD 600 million company. We gave a forward-looking statement a couple of years back that by 2028, we should be a Rs 6,000 crore company.
At that point of time, our unit value realisation was coming out to be Rs 600. To become a Rs 6,000 crore company, I need to make 100 million pieces. I need to have a capacity of 100 million plus to ship 100 million pieces. Unit price also continues to go up. But that was the vision that we had talked about.
Today we already have that 100 million pieces capacity. Even if my unit value realisation is around Rs 600 and if I fully utilise this capacity, I should be a Rs 6,000 crore company. But capacity does not mean 100 per cent utilisation. We have capacity across so many countries. Depending on which country is giving me better profitability, I would utilise that capacity more. By the end of next year, we will have about 125 million pieces of capacity and we should be comfortably shipping 100 million plus to cross that Rs 6,000 crore mark.
But if we stop investing in more factories and try to focus on 100 per cent utilisation of the capacity, then definitely, it will play a different kind of game. We are not in that phase as of yet. In future, we might be into that phase.
Since you talked about the Rs 6,000 crore mark, is there any bigger milestone that you are chasing?
We declared it in the early period of 2024 and the vision was for 2028. The way this year is looking, we may achieve it earlier and we may cross that Rs 6,000 crore mark if the market continues to be in a good condition. Beyond that, internally, our dream would be to become one of those big players which are billion-dollar-plus. We want to be in that phase. That will be almost about Rs 9,000 crore, Rs 10,000 crore sales that you are talking about. Yes, We want to be in that path.
India has not produced one of these global manufacturer-exporters. If you look at the global map, if you go and talk to most of these big customers, they buy across the world. They know about the big South Korean suppliers who are USD 1.5 billion, USD 2 billion each.
There are big Taiwanese companies. Of late, some of the Sri Lankan companies have become very international. They have gone to various parts of the globe.
We are trying to put ourselves on the map as an Indian company with a global footprint and at a very large scale. If our company becomes successful, I am sure there will be many investments that will come in that direction. India's strength should always continue to go up.
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