The Indian Leather industry has immense potential to generate employment, further growth and utilize available raw materials to increase its export volume.
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| • The size of Leather industry across all product groups is US$ 7 billion out of which the expected export turnover is 3.8 billion dollars • The average growth rate is 10 per cent • The footwear, garments and Leather products are top in terms of revenue for this sector • Women’s fashion footwear would put the sector on higher trajectory of growth |
Manufacturing leather from animal skin was a cumbersome process earlier. Now, with the advent of advanced technology, the sector is producing leather finished goods much more easily. The time taken to process leather and convert them into finished products has reduced to a matter of days with the help of advanced technology. RK Jalan, Vice Chairman; Regional Chairman Council for Leather Exports (CLE) says, “Central Leather Research Institute (CLRI) and Footwear Design and Development Institute (FDDI) are doing their best to keep the industry abreast of new technological advances for improvement of not only finished leather but also all product segments. This technological push has helped the industry to compete in the world market. However they need to continuously work hard for industry to stay on top.”
The Industry's HR needs
Leather industry is a highly labor intensive sector. Skill development courses and trainings are therefore essential here. Jalan says, “As the industry is growing at a fast pace, we have a huge shortage of not only workmen but also middle level supervisors and managers. The industry has taken up the cause strongly with the government.”
Major growth drivers
Leather footwear is one of the major growth drivers of the leather industry and has been identified as a focus area. India exports mainly to the US, Germany, UK and Spain with leather footwear being one of the largest exported products among different categories of leather exports. Value-added leather products constitute close to 80 per cent of India’s leather
exports, thus marking the transition of India from an exporter of raw hides and skins to a reliable source of value-added leather products.
Future Outlook
With the implementation of various industrial developmental programs as well as export promotional activities; and keeping in view the past performance, and industry’s inherent strengths, the Indian leather industry aims to augment production, thereby enhancing export and creating additional employment opportunities for overall one million people and increase exports to US$ 7.25 billion by 2016-17. Jalan says, “The outlook for the industry as a whole is positive not only on the export front but also our country offers huge potential being a nation of 1.21 crores with a very young population, more so because the retail is getting organized.”
| CRISILl Comments |
| CRISIL’s analysis of more than 110 SMEs in the leather industry covers tanning and finishing, footwear and footwear accessories, and leather garments and goods. The analysis shows marked differences in performance based on legal status, scale of operations, and share of exports in revenue. The industry is dominated by family-run enterprises, and their long track record offers them a strong foothold in the international market. Thus, CRISIL’s analysis reveals that proprietorship concerns and partnership firms derive 65 per cent of their sales from exports, as against 48 per cent by corporate entities. Similarly, export-oriented units focus on value addition and thus enjoy higher margins than players focused on the domestic market. During 2009-10, 100 per cent export-oriented units (EOUs) recorded a higher operating margin (8.14 per cent) as compared to other enterprises that cater to both the domestic (3.94 per cent) and export markets (7.05 per cent). CRISIL’s analysis reveals that the scale of operations of the enterprises has a bearing on their ability to withstand competition and absorb or pass on the impact of increase in raw material prices. The operating margin of entities with turnover of less than Rs 50 million sharply declined to 2.11 per cent during 2009-10 from 7.85 per cent during 2007-08. Entities with a turnover of more than Rs 50 million did not witness such sharp decline in their margins during the same period. High dependence on debt to fund working capital requirements remains a key challenge more for family concerns than for companies. CRISIL’s analysis highlights that corporate enterprises had lower gearing (0.76 times) than proprietorship and partnership firms (more than 1.85 times) as on March 31, 2010. |
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