Indian Textile and Clothing Industry Report

7/29/2019 Indian Textile and Clothing Industry Report

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INTRODUCTION

„Tayagam‟ is a „trust‟ that was started in 2003. During the initial days of operation, Tayagam was

meant to be a „charity‟ based organization. Nevertheless, the passage of time and the increasing

awareness of business world concepts among the trustees of Tayagam have given a change in the„plan of future course‟ for the organization. In the year 2007, Tayagam is zealously embarking on

a business model called Centre of Excellence Model (CEM). Tayagam believes that CEM when

implemented in the apparel manufacturing sector can provide a compelling value proposition to

the consumer (apparel consumer) and the beneficiaries (rural women, who will be the

employees in the apparel manufacturing units).

CEM aims and hopes to seamlessly integrate the

1. business motive of „ profit based apparel manufacturing‟ and

2. social motive of provision of employment to the lower most economic strata (in rural areas)

without requirement of dislocation

3. social motive of „ providing opportunities for school children to expand their learning and

discover their talents and thus complementing school education‟

MOTIVATION & OPPORTUNITY

MARKET OPPORTUNITY:

The IMAGES-KSA Technopak Indian Apparel Report 2006 estimates the market size of the

men‟s shirt market at Rs 12010 crore.1

In fact, the shirts category commands 14% of the market

share of the total apparel market in India. In addition to being the largest selling segment in India,

this segment has the potential to grow extremely fast. This is one of the reasons for us to pick this

segment to compete in. Also, the variety in terms of size and designs are not as much as one would

expect from other apparel such as sarees, etc. This lends itself to be produced in a business model

such as ours. As of 2002, 88 million branded and unbranded shirts were sold in India. This has

been growing at the rate of 100%. The ensuing GDP growth has been much higher than in 2002

and hence the demand growth now is also expected to be really good.



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Apparel Manufacturing in India2

Indian textile sector has a dualistic manufacturing structure, each of which has its own merits and

demerits. The 2 models of operation of the apparel manufacturing segment are as follows

1. Model 1 – „Apparel retail store „X‟ – middleman - fabricators‟: This is very dominant

model where the entity „X‟ feels the pulse of the market and understands the fashion of the

season (in terms of clothing material, design, colour etc). „X‟ then decides a manufacturing

scheme and out-sources the fabricating work to highly decentralized small scale

fabricating units (say, in rural areas), through middlemen. This is a phenomenon of the

recent years with „X‟ ranging from textile showrooms in India (like RMKV, Pothys of

Chennai) to international retail chains (like Walmart). Example of this model are the

manufacturing units in Pudhiyamputhur in Tuticorin (Tamil Nadu)

2. Model 2 – „Vertically integrated, large scale composite mill and apparel

manufacturing segment‟: This model is fast declining in the Indian context. Typically in

this model, there will be a centralized factory location where fabrication of apparels takes

place. The centralized factories are generally located in city centers and therefore this

model mandates many of the employees to be from the city

In model 1, because of the following reasons the rural apparel manufacturers don‟t capture

enough value –

1. The retailer „X‟ is the one which knows about the market and therefore can decide better

about kind, texture, design of material etc. This makes „X‟ to capture more value in the

value chain.

2. The middlemen capture a significant portion of the remaining value because the apparel

manufacturers are insulated from „X‟ and therefore are at a disadvantageous position when

it comes to bargaining for a better price

Model 2, because of the following reasons, is not of significant value to rural people –

1. The employees are to an extent compelled to stay in urban or semi urban areas, where cost

of living is relatively high

2 “Indian Textile and Clothing Industry Report”, ICRA, October 2005



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2. When moving to the urban / semi-urban areas, the whole family setup is disrupted either in

terms of earning potential (getting USD 1 while being in a township may be probably

better than getting USD 2 while being in a city, when it comes to earning potential) or in

terms of staying together (just to join workforce, spouses split up at least for a short period

which will disrupt family life).

There is significant benefit in consolidation of the highly fragmented apparel fabrication activities

(model 1) and operating on a model which is very similar to „cooperatives‟ in terms of operations

alone. This hybrid model (hybrid of models 1 and 2) will eliminate the impairments of individual

models and thereby helping CEM achieve „best of both the worlds‟ benefits and also helps to pass

on significant benefits to the employees (rural people).

School Education in India (Specifically in Tamil Nadu)3

In terms of education, school education has been identified as the most important part of the entire

academic life for a student in any country (Refer to Exhibit 1 to see the return to education).

Understanding this, the Government of Tamil Nadu has set up massive infrastructure for primary,

secondary and higher secondary schools around the state. However, the significant problem that

haunts the educational department (and the society, of course) is the fact that the government

schools are not performing up to the standards to which they are expected to perform. In fact, some

of the private schools which have been set up in rural areas (some time closer to rural areas), are

out beating the government schools in terms of performance (Refer to Exhibit 2 to understand the

comparison between private and government schools in rural areas). This is happening in spite of

the poor infrastructure (on an average) and less educated (in terms of academic degree) teachers of

the private schools. It has always been felt that the education imparted through government

schools are more of a nominal quality. Co-curricular and extra-curricular knowledge imparted is

almost negligible. In view of the long run benefits of quality class room education has to be

complemented bygood quality library facilities

(which the students can use often to get

accustomed to the process of learning on their own), sports facilities (which will enable the

children to attain an overall growth rather than just book-based-educational growth.

3 “Public Private Partnerships for Quality Education in India”, Karthik Muralidharan, Harvard University, 2006



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BUSINESS MODEL – CEM

The business is envisioned to be set up in Tamil Nadu, India, where there is a lot of textile manufacturing currently happening.

FIGURE 1 – VALUE CHAIN OF TEXTILE BUSINESS AND CENTRE OF EXCELLENCE MODEL

Market Research,

Design and

Procurement

Apparel

Manufacturing

Cost Saving:

Social Benefits:

Marketing/Sales

Function:

R&D,

Design,

Material

Order

Location:

CHO in

Chennai

Function:

Material

Reception

Location:

correspondi

ng RO/PO

Function:

Manufactu

ring: Pre-

stitching

Location:

CoE

Function:

Manufactu

ring:

Stitching

Location:

TH

Function:

Manufactu

ring: Post-

Stitching

Location:

CoE

Function:

Marketing,

Sales

Location:

CHO, RO

(partly)



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Centre of Excellence (CoE)

Geographic coverage – 5000 sq km

Total adjoining population – 100,000

Target population (working age women in

bottom 5%, prospective employees) – 750

Apparel manufacturing capacity - 1,000,000

units per year

Beneficiary school children coverage – 750

HR:

One Fashion technologists (apparel

manufacturing)

Regional Office /

Product Office -

Shirts (RO/PO-

Shirts)

HR:

1 Product manager

2 Office staff

(RO/PO –

Pants)

…

…

CoE

CoE

…

Corporate Head Office

(CHO)

HR:

Design and R&D – 10

Fashion technologists

Procurement of raw

materials – 10 people

Sales and marketing –

10 people

Staff – 10 people

(RO/PO –

Sarees)

Team House

(TH)

Stitching

Machines – 3

Employees – 3

…

TH

FIGURE 2 – VARIOUS COMPONENTS OF CEM



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The important physical components of the CEM are –

1. One central Corporate Head Office (CHO), located in Chennai (Tamil Nadu)

2. One Regional Office / Product Office (RO/PO) in a district (Unique PO- Product-

District combination) coordinating the efforts of the Centres of Excellence of that

district. Typically a district has enough target employees‟ population – to produce

one product (say a shirt or pair of pants etc) and satisfy around 5% of demand in

the regional market (Tamil Nadu)

3. One Centre of Excellence (CoE) in each panchayat union, just near the panchayat

union primary school (Each district of Tamil Nadu typically has around 10-20

panchayat unions) (CoE helps move closer towards the natural habitat of the

villagers)

4. Designated Team Houses (THs, which are nothing but houses of some employees

i.e. villagers). Typically around 200-250 Team Houses come under the purview of

one CoE.

Corporate Head Office (CHO)

The Corporate Head Office (CHO) will be located in Chennai. This will be the hub,

and will perform the main upstream activities such as sensing the pulse of the market and

fashion, making designs to meet the trends, R&D and Ordering of required apparels from

the manufacturing locations.

Regional Offices/Product Offices (ROs/POs)

There would also be several Regional Offices (or) Product Offices (PO). Each RO will

basically cater to one particular product such as trousers, jeans, shirts, leather sandals, etc.

They would receive orders from the CHO, and pass it on downstream, and also serve as

point of receiving raw materials (cloth, etc) from supplier as well as the finished product

from production units. These would be split upon geographies within Tamil Nadu, such

that production for one particular product will be clustered into one or more neighboring

districts. This will also help generating economies of scale, and improve coordination

activities.



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Centre Of Excellence (CoE)

The crucial elements in the chain are the proposed “Centres of Excellence” (CoE).

These will basically be located in the panchayat union headquarters (normally there will

be around 10-20 panchayat unions in a district and consequently 10-20 CoEs), which

serve as the hub for a number of adjoining villages surrounding it. The orders from POs

would be received for production. The CoE would house the machinery for the initial

cutting of the cloth based on the product. For example, for “Shirts”, the cloth would be

cut into several bits for the sleeves, the main body, collar, etc. This is a highly

mechanized process, and hence output is envisioned to be of the tune of around 1,500,000

units a year from one CoE. These cut pieces of cloth are then distributed to the Team

Houses for stitching. Also, the CoE would house the facilites for packaging of the

finished products. This would also be a low process time job. One CoE is targeted tocover a geographic area of around 5000 sq. km or a population of around 100,000 people.

Of this, the targeted number of workers is around 750. These workers are mainly targeted

to be women, as it is well accepted that women in general hold superior skills for this

type of activity, and also this would help additionally serve the social cause of women‟s

empowerment.

Team Houses (THs)

The stitching will be done in what are termed as “Team Houses” (TH). These are basically houses where a group of 3 workers jointly work, i.e, the 3 sewing machines, etc

will be kept in one person‟s house and a group of workers collaborate to pr oduce the

required output. The dynamics of Team Houses are very similar to SHGs. THs are

ultimately used to ensure quality of labour even when the labour is happening in

employees‟ houses. The group would come to the CoE at specific frequency of days, and

take the order and the cut pieces of cloth. They would also take the required quantities of

thread, needles, etc if they need replacement.



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BUSINESS MODEL DYNAMICS

Corporate Head Office

The Corporate Head Office will function like a normal corporate entity. There will be an R&D

team which conducts research into materials, manufacturing technology, etc. This team would

have about 10 fashion technologists recruited from institutions like NIFT, etc. There would also be

a subteam which conducts Marketing Research, into the current and expected fashion trends. This

team will then forecast demand. There will be a separate team of around 10 people taking care of

placing orders for different products with the downstream offices and with supplier, for raw

materials by doing Materials Requirement Planning (MRP), etc.

Once the finished products are received from the Pos, there will be a dedicated team of about 10 people for Sales & Marketing, who will handle distribution efforts to various big retailers and

export units. In addition, there will be an administrative staff of about 10 people who will handle

general and admisnistrative duties. Overall, the functioning will be similar to any normal business,

and we will not dwell to much over here, as the key differentiating factor is in the CoEs.

Centre of Excellence

The “Tayagam Centre of Excellence” model is distinctly different from the vertically integrated

model that players like Arvind Mills are using in one key respect. In the vertically integratedmodel, there is a central location usually in a semi-urban area at least (for easier access to various

facililties), where the most of the activity is concentrated. In this model however, the activity is

carried out in the rural areas. The main advantage is that families and workers do not have to be

relocated. They essentially work from home. Also, in a semi-urban area, the cost of living would

be higher and hence wages would have to be higher. Over here, since the workers are staying in

their own places in rural areas. Another key aspect of the model is in targeting the lower most

economic strata of people for workers. Thus wages can be considerably lower. Significantly, this

ensures the self-sustainability of the competitive advantage of the model, as there will always be

strata of people who are relatively at the bottom of the economic ladder. Thus, their labour would

always be cheaper than for the other players.



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The social benefit of this model is that it serves to generate employment for the economically

backward and helps them come up. It also equips them with new skills which would make them

independent and give them confidence.

Another main advantage is that the infrastructure needed is much lesser, since they work from

homes. Hence, much lesser number of people have to be housed in the Centres of Excellence.

Therefore, the space required and consequently the capital investment is considerably reduced.

This would make it easier to obtain a higher return on investment.

Why Team Houses?

As explained earlier, having workers work from their homes would reduce physical infrastructure

needed. Stitching is a fairly routine job, the necessity of having to be in one location for constant

monitoring is lesser. However, this is also tackled to an extent by making the workers work in

groups through the concept of Team House. Thus, they get to interact, help out and learn from

each other (especially in terms of learning curve effect where more experienced employees can

help out less experienced ones).

The more significant utility of the Team House concept is however that of having quality control

built in to an extent. The team would take the cut pieces of cloth together, and would have to

deliver the output as a team. In case the output is not of sufficient quality, the entire team‟s

compensation would suffer. Hence, this leads to a positive incentive within the team to conduct a

quality check within them to ensure that poor performance of one of the members does not

jeopardize the pay of the rest of the team. It would also help increase output. This would happen

by a variable compensation component to the pay, linked to output over a benchmark quantity, for

the team as a whole. Thus, again the incentive is to perform to get the maximum possible as a

group. Thus, there will be peer pressure to perform from amongst other group members, which

will help in obtaining a good production output.

Why “Centre o f Excellence”?

The CoE will be a building which houses about 200-300 people inclusive of the workers involved

in cutting and packaging activities. Thus, there will be a fair amount of space which would lie

waste in the evenings after working hours (which is envisioned to be upto about 4 p.m). Thus, the



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CoE can be used a small library-cum-activity area for school children to come and indulge in

enriching activities. The library would house a number of elementary picture books, magazines,

news papers in Tamil (vernacular language) and English. A large number of children in rural areas

and small towns are extremely eager to learn contrary to popular opinions. The objective is to help

the children also increase their awareness, and gain general knowledge. The manager of the CoE

would be in regular touch with the teachers of the local school so as to be able to provide material

which supplements the school education and so that the CoE becomes, not a competitor, but as a

partner to the school. Activities like encouraging one child at a time to read aloud a magazine/

newspaper to the rest of the group, make posters/charts about certain topics, etc can be initiated.

In this manner, by helping more children discover their innate talents and shine, it would truly

serve as a Centre of Excellence.

From the apparel manufacturing business point of view, CoE‟s help Tayagam reach out to the rural

areas (after ensuring economies of scale) and therefore tap the cheapest available labour pool.

MARKET SIZE/ESTIMATION

Segmentation The market for apparel could be broadly classified into 3 categories:

Segment Customer expectations Brand loyalty

1 Unbranded Apparel Cost conscious None

2 Branded Apparel Value for money Little

3 Premium Branded

Apparel

Prestige conscious High

In the Unbranded Apparel segment, there are a multitude of suppliers. There is seldom significant

importance laid on retaining customer loyalty. There may not be much choice for the customers to

select from in terms of design and colour. For the customer, cost overrides all other considerations.



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In the Premium Branded Apparel segment, the players present are huge and have significant

marketing depth and command high levels of brand loyalty. It is very difficult to wean away

customers from these brands.

It is the Branded Apparel segment, where the customer does not mind experimenting between

products of similar quality if he could get a price saving, that we would be targeting.

Targeting Rationale for choosing the Branded Apparel segment :

The chief competitive advantage of our business model is going to be the fact that apparel of

similar quality to that being offered by competitors would be produced at a much lower price. The

quality of apparel to be produced will be much higher than those being produced in the Unbranded

Apparel segment. Also, building a sustainable brand image is extremely difficult in the

„Unbranded Apparel‟ segment. On the other hand, we lack the marketing muscle to take on the

players in the Premium Branded Apparel market.

The growth expected to occur in the Indian middle class is likely to shift customers from segment

1 to segment 2 and not so much from segment 2 and segment 3. This is also one reason for

choosing segment 2 to target.

Positioning

Our value proposition would be to offer the best quality shirts at a highly competitive price

compared to those of our competitors.

ROLL OUT PLAN

Marketing Strategy

Promotional campaign:

The promotional strategy would be conducted on broadly two fronts:

1. Advertising through mass media like newspapers and regional language television

channels, primarily with a view to create brand awareness.2. Paying the retailers in order to acquire shelf space which is of utmost importance in

attracting the customers who visit the shops to our brand.

70% of the resources would be expended in the quest for shelf space and the remaining 30% would

be used for advertising via the media.



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Distribution Footprint

Also, the areas that we expect to cover would amount to 40% of the Indian market. While we would primarily have our footprint in the

Southern States, in the long run, our aim would be to establish a pan Indian presence by tying up with major retail stores all over the

country.

ORGANISATIONAL STRUCTURE

Figure 3: ORGANISATION STRUCTURE

CEO

President -Finance

Accouning /Payroll

President – Marketing

R&D

Market Research Fashion Design

Sales Team Brand Manager

COO

Product Manager1 (Shirts) Office

CoE 1

TH1

TH 2

CoE 2

Product 2(Trousers)



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Roles And Responsibilites / Operations Strategy

Demand Forecasting is done by Market Research by studying fashion trends

Fashion Design team makes the designs

Based on these, orders are given to Operations department Materials Requirement Planning is done by using data of inventory, capacity, planned

increases, etc from Product Offices

Based on MRP, orders are given for cloth to suppliers from CHO from the COOs office

Supply is made straight to the Product Office

Cloth is distributed to CoEs based on labour capacity available, and consumable such as

thread, needles, etc are also sent

Production is carried out in CoEs and THs as described earlier

Finished Products are again transported from CoEs to PO

Sales Team will meanwhile approach various dealers and retailers, and obtain orders from

them

Once the order is available, shipping of finished product will be made straight from PO to the

retailers address through contracted transportation

Implementation

The roll out will be carried out a district at a time. A separate dedicated team will be out in

place for this purpose.

Initially the towns within the district where the Centres of Excellence are to be located are

chosen.

One person will be deputed toward setting up of each CoE. The building can be either bought

completely, or expanded upon a purchased building or constructed.

During the time for renovation, setting up of the CoE, the in-charge will try to accumulate

information regarding the target population of workers.

This can be obtained from the details of the houses, and families from Panchayat Office. This

data however, will not be complete, and will have to be supplemented by field visits to the

neighbouring villages to ascertain the number of families, the economic status of them, no. of

working members, and of possible their identities.



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This is important since the recruitment of the workers should be such that, only one from a

family is given employment. This is so that the broadest base of families can be reached, for

employment generation.

The data is also important to ensure that the workers should also be from the lowest economic

strata.

Reasons:

Social Angle - This is for the social objective of reducing the economic disparity levels.

Business Angle - Only by continually selecting from lowest economic strata, can the model

become self-sustaining, due to use of lowest cost labour available

Meanwhile, sewing machines are ordered and purchased. This is initially given to the workers

as their own, and a small monthly instalment deducted from salary. In this way, the workers

can own the sewing machine, and thus will feel enabled and empowered.

All the workers will be put through training in the near most Industrial Training Institute (ITI).

This will impart the necessary skills to them, but the training period is not extremely time

consuming

If the building is being constructed, the CoE should be ready to start production within 3

months

Once, the CoE is going to start production, a regular crew will be sent there, and the cutting

machines and equipment for packaging, etc will be set up.

Contracts would also be simulatenously be fixed with Transport Operators for transportation of

the finished product to various cities.

Once the CoE is up and running, the dedicated team will be assigned towards setting up of

Product Office and CoEs in another district/ geographical cluster.

TEAM

Arul V is Trustee and Director of Tayagam Charitable Trust. A second year student from IIM

Bangalore, he is keen on starting new ventures which shall be sustained by „Tayagam‟.

Vignesh Kumar M is a PGP 2nd

year student at the Indian Institute of Bangalore. He is working

with Vikasana, the social service initiative of IIM Bangalore. He has had experience of conducting

English classes and sports campus for children of a neighbouring school.



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Hemant Chandrasekaran is PGP 2nd

year student at the Indian Institute of Bangalore. He is the

founder member of a student run organization called Diya and has prior experience of conducting

activities like blood donation camps and cultural activities. He is also a volunteer with AID

INDIA.

FINANCE

Table – 1: Annual expenses of Corporate Head Office (CHO)

Annual expenses

Office space INR 480,000 $10,667Office supplies INR 50,000 $1,111R&D spend INR 120,000,000 $2,666,667Marketing spend INR 10,000,000 $222,222IT spend INR 1,000,000 $22,222

Procurement overheads INR 1,000,000 $22,222SalariesDesign, R&D employees INR 5,000,000 $111,111Sales and marketing INR 5,000,000 $111,111Raw material procurement INR 4,000,000 $88,889Staff INR 2,000,000 $44,444Management salary INR 2,000,000 $44,444PO and below (4 no) INR 7,512,232,500 $166,938,500Total expenses INR 7,662,762,500 $170,283,611Expense/output (output = 22,500,000 * 4) 85.14180556 $1.9

Table - 2: Annual Expenses of Product Office (PO)

Annual expenses

Number Expense / year Expense / year Office space INR 240,000 $5,333Office supplies INR 50,000 $1,111CoE level expenses 15 INR 1,706,243,750 $37,916,528Product manager salary 1 INR 500,000 $11,111Staff salary 2 INR 400,000 $8,889Transport Expenses INR 170,624,375 $3,791,653

Total expenses INR 1,878,058,125 $41,734,625Output 22,500,000



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Table – 3: Startup Costs

Start up costs Rs. $CoE setup (15) 79410000 1764667Office supplies 250000 5555.556IT 1000000 22222.22Salaries for 1 year 19600000 435555.6Working capital 1000000 22222.22Total 1.01E+08 2250222



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Table – 4: Annual Expenses of Centre of Excellence (COE)

Number of Employees per CoE 750Number of student beneficiaries per CoE 500Output 1,500,000Initial Working Capital $1,000Common Cap-ex

Head Quantity Units Cost (in INR) Cost (in USD) Life in INR in USD

Land 0.1 acre INR 300,000 $6,667 20 years life INR 15,000 $333Building 2000 sq. feet INR 1,000,000 $22,222 20 years life INR 50,000 $1,111

Computer 2 number INR 70,000 $1,556 3 years life INR 23,333 $519Telephone connection 1 number INR 3,000 $67

Apparel manufacturing related Cap-ex

Machinery 750 number INR 3,750,000 $83,333 10 years life INR 375,000 $8,333Sundry equipments 750 number INR 75,000 $1,667 10 years life INR 7,500 $167

CoE related Cap-ex

Books 300 number INR 90,000 $2,000 1 year life INR 90,000 $2,000Sports equipments 10 number INR 5,000 $111 2 years life INR 2,500 $56Stationery 10 number INR 1,000 $22 1 year INR 1,000 $22

TOTAL Cap-ex INR 5,294,000 $117,644 INR 564,333 $12,541

Common On-Going Cost

Electricity consumption INR 100,000 $2,222 INR 100,000 $2,222Phone bill INR 12,000 $267 INR 12,000 $267CoE manager 1 number INR 300,000 $6,667 INR 300,000 $6,667Local assistant 1 number INR 25,000 $556 INR 25,000 $556

Sundry INR 100,000 $2,222 INR 100,000 $2,222

Apparel manufacturing related On-Going Cost

Salaries 750 number of staff INR 37,500,000 $833,333 INR 37,500,000 $833,333Raw materials INR 75,000,000 $1,666,667 INR 75,000,000 $1,666,667Sundry INR 10,000 $222 INR 10,000 $222Training cost 750 INR 75,000 $1,667 INR 1,667 $37

CoE related On-Going Cost

News papers, magazines 10 per day INR 18,250 $406 INR 18,250 $406 Awards 10 INR 10,000 $222 INR 10,000 $222Intra district events coordination costs INR 100,000 $2,222 INR 100,000 $2,222Sundry INR 10,000 $222 INR 10,000 $222

TOTAL On-Going Cost INR 113,260,250 $2,516,894 INR 113,185,250 $2,515,228

TOTAL PER ANNUM COSTS INR 113,749,583 $2,527,769

PER YEAR COST

Centre of Excellence (CoE)



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Table – 5: Roll Out Plan

We are expecting to have to have the following roll out plan

Roll outstrategy

Productoffice Product

Per productcost

Per productcost

Month 1 1 Shirts INR 90 $2.00

Month 4 2 Shirts INR 87 $1.93

Month 7 3 Trousers INR 86 $1.90

Month 10 4 Kurtas INR 85 $1.89



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Table – 6: Cost Structure Corresponding to the roll out strategy

Total cost Total cost Output Cost/Output Cost/OutputPO costs - (1PO)

INR1,878,058,125 $41,734,625.0

INR2,028,588,125 $45,079,736.1 22,500,000 INR 90.16 $2.00

PO costs - (2PO)

INR3,756,116,250 $83,469,250.0

INR3,906,646,250 $86,814,361.1 45,000,000 INR 86.81 $1.93

PO costs -

(3PO)

INR

5,634,174,375 $125,203,875.0

INR

5,784,704,375 $128,548,986.1 67,500,000 INR 85.70 $1.90PO costs -(4PO)

INR7,512,232,500 $166,938,500.0

INR7,662,762,500 $170,283,611.1 90,000,000 INR 85.14 $1.89

CHO costsINR

150,530,000 $3,345,111.1

Costs for fabrication of a shirt come to around USD 2 during the initial few months and USD 1.89 during month 10. Price of INR 300

– INR 500 (USD 6.7 – USD 11) is possible and gives a profit margin 251% - 485% which can be ploughed in for the expansion of

operations.



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Table – 7: SRoI calculation

The very tangible social benefits are 2 fold –

1. The increased wage for people at their village itself (Villagers would get a maximum of

USD 1 per day, otherwise; with Tayagam CEM coming to their village, the apparel

fabricators can earn USD 2 per day, with a very minimal labour efficiency)

2. The complementation to school education which essentially makes the effectiveness of

school education pass a minimum threshold. The private return to school education in Asia

is 64% (314

for primary education, 15 for secondary education and 18 for higher

education). Our venture can at least add 10 more percentage return and make the

numbers close to Latin America‟s returns (32 for primary, 23 for secondary and 23 for

higher education)

Excess wage to apparel fabricators INR 45.00 $1.0

Excess return to education due to Tayagam 10%

Initial coverage 4 POs

Employees 45000 $1,000.0

Student beneficiaries 45000 $1,000.0

Investment in CoEsINR

90,000,000.00 $2,000,000.0

Social value - imparted towards employeesINR

2,025,000.00 $45,000.0

Social value - imparted towards studentsINR

9,000,000.00 $200,000.0

Total social value (First year)INR

11,025,000.00 $245,000.0

Growth rate expected 15%

Risky rate of return 15%Social rate of return (Total social value / Invetsment inCoEs) 12%

4 Returns to Education: A Further International Update and Implications, George Psacharopoulos, Journal of Human

Resources, 1985



- 24 -

EXHIBITS

EXHIBIT 1 – RETURN ON EDUCATION

Source: Returns to Education: A Further International Update and Implications, George

Psacharopoulos, Journal of Human Resources, 1985

EXHIBIT 2 – PUBLIC VS PRIVATE SCHOOLS IN RURAL INDIA

Source: Public Private Partnerships for Quality Education in India, Karthik Muralidharan, Harvard

University, 2006

Documents

Indian Textile and Clothing Industry Report