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Amit Goyal, president, Confederation of Indian Apparel Exporters, plans to reduce the number of companies his group Sarju International runs from 14 to one or two by merging most of these companies after the group executes its current export orders.
Manoj Sachde, who owns Shilpa Creation Exports, has shut one of his group companies. "I had two firms to make use of the quota regime. I have already shut one," he admits.
J B Jain, the proprietor of Rupam Exports, says he is in the process of bringing down the number of his group firms from four to one.
With the garment quota regime drawing to a close on January 1, 2005, India's garment exporters are starting to close the plethora of firms they had launched to get a share of quotas.
According to Goyal, nearly all apparel export houses have 10-15 firms to utilise quotas. Several of these firms will now be merged with the parent company or with each other as India's garments industry readies to join battle with its global rivals, mainly the Chinese.
The garment industry forecasts two other consolidation moves. Big garment companies will take over the smaller ones, and they will forge joint ventures with Sri Lankan and Nepalese firms. As a result, the existing number of units will drop from 30,000 to 5,000 over the next few years.
According to Goyal, the big apparel companies have started gobbling up the smaller ones, though garment industry men are cagey about furnishing the names of companies that have hit the takeover trail.
One of the ways Indian apparel makers have adopted to beat the quota system is by making arrangements with their Sri Lankan and Nepalese counterparts -- the Indian companies export the raw material and finished products are exported from plants in Sri Lanka and Nepal.
"The cumbersome process of servicing an export order in association with a Nepalese or a Sri Lankan company is no longer required for an Indian company," says Jain. "On the other hand, Nepalese and Sri Lankan firms do not have enough raw material. Such an association is a win-win situation for both."
Goyal says some Sri Lankan and Nepalese firms are in the process of setting up production facilities in India. For instance, Vishal Apparel, a Nepalese firm, has set up a production base in New Delhi.
Jain says a handful of Sri Lankan companies have shown interest in setting up production facilities in Bangalore. Sri Lanka's Mas group is also in the process of setting up units in the city.
An executive at the Cotton Textiles Export Promotion Council, however, cautions it is unlikely that hordes of Nepalese and Sri Lankan firms will come to India.
But industry observers have forecast a third development. According to Suchde, some of the Dubai companies are also coming to India. Indian exporters had in the past set up shop in Dubai, both directly and indirectly, to corner more orders from the US and the UK and also to enjoy the tax benefits offered there.
"Now, with the abolition of quotas and the government's initiative to set up specialised export zones, Dubai loses its charm. Indian exporters will now come back to India," says Suchde.
The apparel industry, which accounts for almost 50 per cent of the textile industry's exports, is poised for a big leap. This calendar year, exports are expected to touch Rs 26,000 crore (Rs 260 billion), up from last year's Rs 23,500 crore (Rs 235 billion).
After the quota raj
