It is the middle of November, but there's still no respite from the sweltering afternoon heat in Tirupur. There are, it seems, only two weather patterns in this textile town-hot and hotter, with some rains thrown in during the monsoon. We are here to meet Nachimuthu Chandran, Managing Director of the Rs 623-crore Eastman Exports, India's second largest readymade garments exporter and Asia's largest knitwear exporter, and finally track him down in the cavernous finishing shop floor of his factory, where hundreds of workers are giving final touches to garments of all shapes and sizes. Chandran is a diminutive man whose thin frame and taut skin belies his 52 years; in his half-sleeve shirt and white dhoti, he could pass off for one of the 10,000 workers he employs. Chandran, who is careful with his choice of words, grins. "The ac offices are for international buyers and visitors like you; I am happiest when I'm among workers, trying to solve problems." Looking at him, it is difficult to imagine that he supplies garments to top-end buying houses in Amsterdam, Turkey and Italy and that his products often reach end-customers with Marks & Spencer, Metro Group, JC Penney, Sears, Kappa, Nike, Tommy Hilfiger, Pepe Jeans and Esprit labels on them.

The garment exporters of Tirupur, long handicapped by the quota regime imposed by the US and Europe, are now revelling in the post-quota world (the quotas were abolished in January 2005). In the last 12 months, Eastman alone has invested Rs 120 crore in capex. It has a spinning mill with a capacity of 50,000 spindles and its factories can manufacture two lakh T-shirts a day. "The opportunities are huge. And this is only the beginning as Indian players are just finding their feet in the global market. The future is even brighter," says a confident Chandran.

Success of Tirupur

The future didn't look very bright even 23 months back. Located 50 km east of Coimbatore, Tirupur is an unlikely success story. The land is dry and not very fertile; the Noyyal, a non-perennial river, and seasonal rains, are its only sources of water. It was a hardscrabble existence for most. In the early 1970s, people began to move away from agriculture to undertake small-scale manufacturing of briefs and vests (called jatti and banian in the local lingo). The 40-year-old Muthuswamy Ramaswamy, Partner, Warsaw International, a Rs 50-crore export house, who also runs Alpine Knits, says the high mineral content in the local water, which was the bane of agriculture, has played a big role in Tirupur's success in textiles. "Clothes bleached with the local water came out whiter. This was before the arrival and extensive use of chemicals like chlorine in bleaching. That was how Tirupur made a name for itself in the grey and white briefs and vests market."

The second, and more important, factor that has significantly contributed to its success is the work ethic of the Gounder community. Almost 80 per cent of Tirupur's exporters come from this traditionally agricultural community; the men spent 12-14 hours on the farm as a matter of routine; and brought this ethic to the factory. Says N. Shanmugam, MD of the Rs 250-crore Royal Classic Mills and a major exporter: "Though it is politically incorrect to talk about caste, it is a fact that the Gounder community's work practices have contributed a lot to Tirupur's success. Also, community connections help. When I started this venture with my brothers, I was extended yarn only on the basis of a handshake; I was not asked to provide any guarantees. Then, if someone bags an order he can't execute, he passes it on to a fellow community member. Trust and hard work have helped this agricultural community's first-generation entrepreneurs to build companies worth several hundred crores."

Tirupur's garment manufacturers took their first tentative steps in the global market in the early 1980s.

A. Sakthivel, President, Tirupur Exporters Association (tea), and Chairman of the estimated Rs 150-crore Poppy's Group, one of the oldest players in this town, reminisces: "Most were first-generation entrepreneurs; so, cracking the international market was not easy." But by early-to-the mid 1990s, Tirupur had come to be recognised as the knitwear and hosiery capital of India.

Quota Regime

Though India was among the largest cotton producers (till 2002, us used to be ahead, now India is #1), with cheap labour and a history of textile expertise, it couldn't export beyond a point because of the quota regime. This meant that there was little or no incentive for players to invest in technology, expand capacity or build long-term relationships with large global customers. Result: a fragmented, small-scale industry, without the wherewithal to compete globally.

Eighty five per cent of India's readymade garments exports went to the quota countries. There was even a thriving trade in buying quotas from countries like Sri Lanka and Bangaladesh, which had quotas but not the capacity to utilise them. However, the end of the quota regime has heralded a new era for Tirupur. The government had recognised even before abolition of quotas that Indian players needed to upgrade their infrastructure. So, it set up a Technical Upgradation Fund to help these units (TUF was set up in 1999 and became operational in 2001. In the first year, it disbursed Rs 800 crore; last year, it disbursed Rs 15,000 crore). D.G. Reddy, Director, Apparel Export Promotion Council (AEPC), the apex body of garments exporters in the country, says: "TUF helped the industry by providing funds at low rates (2-3 per cent) of interest." TUF has so far disbursed substantial amount of loans to Tirupur's textiles industry.

Those who invested then are now reaping the benefits. Says P. Sundar Rajan, MD, SP Apparels, a Rs 270-crore company: "Our investments in the latest technology and in increasing capacities have definitely helped. This year alone, we are investing Rs 80 crore in capex, thanks, in part, to TUF." Today, most Tirupur exporters, who earlier focussed only on knitwear items like vests and briefs, also manufacture men's and women's T-shirts, sleepwear, sportswear, formal clothes, sweat shirts, cardigans, bermudas and leggings.

But Tirupur has grown haphazardly. "In the absence of zonal planning, you'll find factories in the midst of residential areas," says Ramaswamy of Warsaw International. Due to the small-scale nature of the business earlier, players had plants in multiple locations; the fear of industrial relations problems resulting from having a few thousand workers under one roof also contributed to this fragmentation of capacities. Now, players are realising that international buyers prefer vertically-integrated units. Result: they are consolidating their facilities.

In 2005, AEPC and tea set up the Netaji Apparel Park on the Avanashi Highway on the outskirts of Tirupur. This 220-acre park, said to be the first of its kind in the country, houses 60 units and is already full. Shaktivel says: "We are now planning to expand the park."

Chinese Competition

One problem that Tirupur still faces, in spite of the investments, is that of scale. In a tentative list of its Top 10 players, the 10th ranker has a turnover of less than Rs 100 crore. So how do they compete with Chinese textile exporters whose economies of scale are legendary? Chandran of Eastman Exports is unfazed. "We aren't scared of the Chinese. They have their strengths, but we're also ramping up our operations and can hold our own," he says. Over the last two years, Indian exporters have crunched their turnaround times quite dramatically. Earlier, the time lag between bagging an order and its execution was close to five months; it is now four-to-six weeks. The comparative figure for their Chinese counterparts: 12-16 weeks. Indian players also accept orders for a few thousand pieces; the minimum order size for Chinese players is 50,000. Rajan of SP Apparels, however, accepts that Indian players have a long way to go before they can even start comparing themselves with the Chinese. "We should emulate them and build up scale. And the government must keep TUF, which is due to be phased out from 2007, open so that more players can utilise it to grow."

Many companies are engaging international consultants to advise them on quality and productivity issues. Royal Classic Mills has hired Karl Heinz Laborgne, who has worked with textile exporters in Germany, Peru and Vietnam, to examine its work flow and processes and suggest ways and means of improving productivity. "There is definitely room to enhance productivity. While labour might be cheap now, in the long run, Tirupur-based players will be better served by increasing overall productivity," says Laborgne.

Domestic Market

Not all companies, however, are focussing on the global market. R. Nagaraj, the soft-spoken owner of the Rs 250-crore (estimated; he refuses to disclose his actual revenues) Ramraj Group, realised the potential of the domestic market early on and is now regarded as India's dhoti king. His two main product are the humble dhoti and shirt. Both come in only one colour-white. "While other players focussed on the export market, I decided to focus on the domestic market," he says. Others are now following his lead and are looking to expand in the domestic market. Tirupur supplied just Rs 300 crore worth of readymade garments to the domestic market in 2001-02; the figure is expected to touch Rs 2,000 crore this year.

Some companies are also moving up the value chain by building or buying brands. Royal Classic Mills has launched a range of menswear in the domestic market under the Classic Polo brand. N. Sivaram, Executive Director, RCM, says: "Creating a brand is not easy and takes years of investments before it starts paying off. However, it's worth it as the margins here are higher." He has built up Classic Polo into a Rs 40-crore brand in just four years and also acquired innerwear brand Smash in 2004.

Inspired by his success, Sundar Rajan of SP Apparels bought the loss-making Crocodile brand for Rs 7.5 crore in May this year. He has already turned it around and expects it to clock a turnover of Rs 12 crore by the end of the financial year. "Given that we supply to and satisfy international companies like United Colours of Benetton, Marks & Spencer, MotherCare, Disney Stores, George Asda, Tesco and Dunnes, there's no reason why we shouldn't succeed in the domestic market," he says.

That will only mean more competition for the established players in the country.