Cluster Dev

Cluster _Development __ InitiativeDecember 2006

IndexIL&FS-Cluster Development Initiative The Need VisionApproach & Methodology Bouquet of Services Our FootprintThe OrganogramOur TeamWhy Us?

IndexIL&FS-Cluster Development InitiativeThe Need VisionApproach & Methodology Bouquet of Services Our FootprintThe OrganogramOur TeamWhy Us?

MSMEs: Integral Part of Indias Growth StrategySignificant contributor to Indian economyEmploys more than 28 million people and accounts for over40% of gross industrial value addition35% of direct exports15% of indirect exports

Ensuring the competitiveness of small scale sector is important as it would help in overall growth of Manufacturing Sector as also the National Economy - NMCC The Need

Sub-Sector Engagement Is the Key for MSMEs Development ProgrammeCertain sectors emerge in the forefront of growth and employment because of the unique opportunities they enjoy at the present time. Textiles & Garments,Leather & Leather products, Food Processing, Auto components and Drugs & Pharmaceuticals, select them selves at this point in time-NMCCThe Need

Textiles : Emerging Growth StoryValue in USD Billions Burgeoning domestic markets and favourable international trade climate in the post quota regime offer significant opportunities for the Indian textile industry to grow rapidlyThe Need

Increasing Market Share of Indian Clothing in US Market Before QuotasPost Quotas The Need

Leather & Leather Products:significant Turnaround and GrowthValue in USD Billions The Need

Agro & Food Processing: . Value in USD billionEmergence of organized retail chains in India and increasingly urbanizing lifestyles offer a strong opportunity for SMEs to participate in supply chain as well as food processing segments The Need

Auto Components..Value in USD Billions The Need

Handicrafts: Growing Market for Ethnic ProductsValue in USD Billions The Need

Exploiting the Emerging Market OpportunitiesChallenges & ConstraintsGlobal free trade regime - survival of the fittestPolicy and fiscal rationalization within the country - lower protection and increased competition Increasing technology benchmarksLower turnaround timeCompliances - trade and legalLowering cost of manufacture and improving qualityThe Need

..ChallengesFactors adversely affecting competitiveness of MSMEsLimited size and scaleOutdated technologyNon-availability of financeTraditional marketing systems Inability to meet environmental compliancesPoor infrastructureThe Need

MSMEs & ClustersMost of the MSMEs are located in 388 industrial clusters across the country490,000 firms75,00,000 employedRs 157,000 crores of annual outputThe Need

.Some of the Prominent ClustersThe Need

Cluster: Definition & Principle

Definition: Geographical concentration of units producing similar products and facing similar threats and opportunities

Principle:Collaborating while competing

The Need

Why Cluster Based Approach?Offers critical mass for customization of interventionsEconomies of scale in operationBetter access to technology, informationGreater access to customers, channelsCheaper access to inputs, raw materialsCluster approach should be the preferred route for improving the manufacturing competitiveness. New and innovative approaches to cluster development should be adopted- NMCCThe Need

Commercial BenefitsEnhanced chances of securing larger contracts Greater bargaining power with customersGreater presence in the market placeGuidance from experienced larger companies with shared risksEconomic Benefits Sharing & Pooling of resourcesSharing Business Development & Operating CostsAccess to New Technology Environmental Benefits Aids in decongesting units from urban areasEnsures that environmental safety standards are maintained Various forms of pollution always under checkSocial Benefits Employment generationCompliance to trade related barriersEnsures enhanced security during the start up phase

Some Benefits of Clustering The Need

IL&FS Cluster Development Initiative Vision , Goals and ObjectivesVisionIL&FS would be the preferred service provider to MSMEs and the Government for developing clusters across the countryApproachPPP driven & Concept to CommissioningDevelopment Goal Contributing to creation of 1 million jobs by 2010Commercial objective Rs 1 billion annual revenues by 2010

Our development approach in addressing critical gaps to enhance sustainability Not for profitCommercialSoft InputsCritical InfrastructureMarketing, CreditSPV (Company)AssociationApproach & Methodology

Cluster based PPP Model where we play a pivotal role in bringing the stakeholders togetherSMEsGovernment

Banks/FIsOtherInstitutions

Approach & Methodology

Methodology entails handholding the stake holders from concept to commissioningNeed Assessment Capacity Building Project Development Project FinancingProject ExecutionConcept Commissioning Approach & Methodology

With specific focus on Common Infrastructure in the ClusterApproach & Methodology

Not forgetting the Social Capital which is a prerequisite for SME common infrastructureAwareness creation Sensitization TrustOrganization Capacity building Competitive reliance on one anotherApproach & Methodology

Cluster Parks Focus on the enterprises and their needsOwned and managed by user enterprisesPre-marketedCustomised infrastructureHomogeneous units with strong linkages and collaborative behaviorWhy are Cluster Parks different - A comparative analogy Focus on real estateNo involvement of user enterprisesPost marketedStandard infrastructureAbsence of collaborative behaviorIndustrial Estates Approach & Methodology

Bouquet of ServicesBouquet of Services

Our Services are encompassing Structuring of the Special Purpose Vehicle (SPV) Proposal Preparation for funding from Central/State Govt Financial Closure through syndication of debt funding requirementsDetailed Engineering/Procurement process including Layout, design, detailed engineeringPreparation of cost estimates of the infrastructure facilitiesPreparation of bid documentsSelection and appointment of contractors/consulting firms Monitoring and supervision of implementation Assistance in establishing systems and contractual structures for O&M Bouquet of Services

With Value Added propositions such as :Capacity building of the SPV/members Assistance in selection of appropriate technology/ machinery Facilitating marketing tie-upsCreating Brand conceptsFacilitating compliances: Corporate GovernanceLegal complianceSocial complianceEnvironmental compliance Bouquet of Services

Focus Areas and Current MandatesOur Footprint

Commencing with formulation of the Scheme for Integrated Textile Parks (SITP)Addresses infrastructure constraints of textile industry on cluster basis- sectoral and cluster approachTargets growth potential clusters- 26 parks, Rs.13,126 Cr investment, Rs.19,529 Cr Annual production, 5 Lakh employmentCritical mass of entrepreneurs- clusterSPV led by entrepreneurs to own, develop & manage park- sustainabilityGoI as facilitator 40% of project cost not exceeding Rs. 40Cr as grant/equity- improving viability and need based IL&FS as Programme Manager for handholding support from concept to commissioning-proactive project development Our Footprint

Small footsteps has resulted in 26 Park Projects being approved so far under SITPOur Footprint Our Footprint

Expected Techno-commercial impact due to development of Textile Parks * The number of shuttle-less looms (20,188) out of this initiative will be 2/3rd of the existing shuttle-less weaving capacity (32,000) in the decentralized sector

** Includes yarn processing, fabric processing as well as texturizing, converted into million meters

** The modern processing capacity (3416 million meter) out of this initiative will be 35% of the existing modern processing capacity (6,000 million meter)Our Footprint

Our footprint has been covering more sectors ever since - > 40 clusters Industrial Textiles 26Chemical - 3Steel 2Pharma-1Light engineering-1Foundry- 1Leather-2Chemical-1AgroBamboo - 1Fisheries- 1Rubber-1CraftArt Metal-ware -1Stone Carving - 1Zari -1Bamboo-1

Our Footprint

Project Development Process - A Snapshot Interaction with industry associations and other representatives Identification of cluster Identification of potential EntrepreneursNeed assessment and capacity building Establishment of SPVIdentification of LandProcurement of Land Assessment of Common infrastructure, amenities & factory buildings for the park Preliminary layout planPreliminary CostingVetting by SPVPreparation of DPR GoI Approval Detailed Engineering & Procurement Award of contractFinancial closureConstruction & Supervision Operation & MaintenanceOur Footprint

Growth Pole ProjectsIntegrated development of a sub-district (about 1000 sq kms) with economic potential that would become growth engine with in the regionCluster of clustersEnterprise development with PURA (infrastructure and linkages)Projects are being formulated by GoI (SSI) through National Commission for Enterprises in Unorganised Sector (NCEUS)IL&FS has been mandated to prepare the DPRs to begin withOur Footprint

The Growth Pole ConceptOur Footprint

Growth Pole: Evolution and DevelopmentPrivatePPPExisting and Potential clusters Organisations(Formed with Common Interest Groups/SHGs) MarketCapacity Building: Skills and Micro Finance Production Inputs: Technology and Design Market Linkages FinanceCluster / Sector DevelopmentTechnology UpgradationInfrastructure and LinkagesDemand for employees and migrantsSocial InfrastructureRetail ServicesHousingPublic Enabling Policy FrameworkInst.Advisory Group/Project ManagerSPVsULBGrowth PoleBusiness Development ServicesSTAGE ISTAGE IISTAGE IIIOur Footprint

Skill Development a precursor to industrial growth If Indian manufacturing sector has to grow at a rate of 12% per annum, it will be necessary for the education and training system to produce at least 1.5 million technically skilled people every year - NMCCOur Footprint

Manpower Development for Apparel IndustryApparel fastest growing segment in the textile value chainIn need of skilled manpower at various levels Lack of trained manpower has been adversely affecting volumes, quality and productivityDemand-supply gap of 1.9 Million persons by 2010Limitations of the present initiatives:Current training capacity (govt & private) is only 40,000 per yearQuality of training does not match with the industry requirementOur Footprint

The Strategy Demand driven and placement assured programmeTo train 1 million persons over a period of six yearsLeverage the infrastructure of existing institutions like ITIs, PSCs, ATDCs, and private/NGO vocational institutions.Bring in innovative multi-media based teaching methodology and market oriented curriculumDriven by SPV with industry participation Government to provide one-time capital support

Our Footprint

The ApproachOur Footprint

The Process flowOur Footprint

IL&FS Anchoring the InitiativeConcept developed and presented to major stakeholdersSPV has been incorporatedContent development is in progress Training partners have been identifiedMinistries of Rural Development and Textiles have agreed, in principle, to support the programmeIndustry has agreed to be part of SPV and the programme To be launched by Feb 2007Our Footprint

Our operating framework :

Organogram

With emphasis on adding value to our clients by providing Multidisciplinary inputsOrganogram

Skill Sets residing in-house:Given the breadth and depth of services provided by our team across projects, an in-house cross-functional team with following skill sets has been put in place Industrial Domain Experts to assist in defining technical contours of the projects and providing SMEs access to technology and best practicesTechnical Experts to oversight physical project developmentCapacity Building Experts to develop SMEs capacity to move up the value chainProject Development Experts to interface with sponsors, State Governments, external technical consultants and other stakeholders on all aspects of project developmentProject Financing team to structure projects and raise external financingLegal, Accounting and Secretarial expertise from within IL&FS and outside Our Team

Our geographic presence helps us cater to the needs of our clients in the North, South, East or West Our Team

We believe inhandholding Indias industrial growth through considerable contribution from the MSMEs, by providing them with strong infrastructure enablers through a collaborative approach, thereby ensuring trade related compliances and creating a conducive framework for MSMEs to move up the value chain efficiently and expeditiously

Thank you, and looking forward to work with you soon

Sanjay Sethi IL&FS India Habitat Centre, 4th FloorLodhi Road, East Court,Zone VI, New Delhi - 110003Tel: 91-11-24682060 to 63Fax: 91-11-24682070 to 71Email: [email protected]

Ravi RamanThe IL&FS Financial Centre, 3rd FloorBandra-Kurla Complex, Bandra (E)Mumbai - 400 051Tel: 91-22-66947682Fax: 91-22-66947700Email: [email protected]

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Cluster Dev