KNITTED GARMENTS

A. INTRODUCTION

Knitting has been practiced as a craft in many parts of the world from ancient
times. In India, the first cotton hosiery unit was established in 1893. With the
growth of population and the improvement in the standard of living the
demand for knitted fabrics has been increasing the knitting industry
monopolised in the field of underwears, socks, stockings, jackets and sports
wear. Recently, there has been a spurt in the demand for knitted garments
which are used as outer garments also. The technology used for knitting in
India is being improved with the introduction of modern machines.

The first cotton hosiery factory appeared in the Indian scene at Kidharpur,
Calcutta (West Bangal) in 1893. In the year 1902, the woolen hosiery industry
was first established in Punjab and first synthetic industry came to India in
1950.

Today, the cotton hosiery industry is mostly concentrated in Tirupur

(Tamilnadu) and Kolkata (West Bengal) while the woolen hosiery industry is
mostly concentrated in Ludhiana (Punjab) and Art Silk industry is only
operating in Mumbai & Delhi. It is estimated that there are about 75000
knitting unit operating in India with direct employment of 5 lakhs and indirect
labour of 3 lakhs and with a turnover of about Rs.20000 crores per year.
Domestic market takes a share of Rs.12000 crores while the export accounts a
share of Rs.8500 crores. The knitted garments have tremendous export
potential and the sophisticated knitted fabric will be converted into garments
as per buyers’ requirements in various designs.

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The consumption of knitted garments like Casual wear, T-shirts and other
cotton garments is increasing due to frequent changes in the styles and fashion
in buyer countries.

B. PRODUCT SPECIFICATION & USES

The Bureau of Indian Standards has not prescribed any standards for knitted
garments. However, the buyers prescribe the standards for the final products
according to their requirements like count of yarn to be used, specification of
knitted fabric, colours, size, design and attachments etc.

C. MARKET POTENTIAL
The Indian Textile Industry is growing at 20% and accounts for 4% of India’s
GDP. It contributes 14% to the Industrial Production and 8% to indirect tax
revenues and employs about 35 million people, the second largest after
agriculture-and accounts for 18% of industrial employment. It accounts for
21% of India Gross Export Earning. Foreign Direct Investments inflows worth
€681.59 million have been received by the industry between Aug 91 and May
06, accounting for 1.29% of total FDI inflows in the country.

In the global market India offers comparative advantage in textile and apparel
sector with its excellent raw material base, skilled manpower and cost
competitiveness.

The contribution of this industry to gross export earnings is about 21% and it
adds less than 1.5% to the gross import bill of the country.

Since 1972 the market for readymade garments has been expanding mainly
due to increase in demand for casual wear, T-Shirts and garments made from
wash-n-wear fabrics. A look at the year wise figures of exports of apparels from
India as given below amply illustrates the growth in this trade.

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 Years Export of garments value (Rs. in crores)

1996 16,710
1997 17,764
1998 20,834
1999 22,915
2000 25,852
2001 22,000
2002 21,421
2003 22,750
2004 24,179
2005 28,000
2006 34,324

Source: AEPC

According to the new textile policy, the Government will endeavour to achieve
an export turnover of textiles and apparels from the present level of US $11
billion to US $50 billion of 2010 of which the share of garments will be US $25
billion. This will provide a conducive environment to enable the Indian textile
industrial to realise its full potential and to achieve global excellence.

D. TECHNICAL ASPECTS

1. Installed capacity

The installed capacity of the unit proposed is 3,60,000 pieces of Knitted

garments per annum at 100% capacity utilisation, which is based on 1200
garments per day, the unit works for 300 days per year on single shift basis.

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2. Plant & Machinery
The following items of plant & machinery are required.
Sl. Types of Machine Qty
.
1. Single needle lockstitch M/c. 15
2. 4 thread overlock M/c. 6
3. Flat lock M/c. 4
4. Bartacking M/c. 1
5. Button Holing M/c. 1
6. Button Stitch M/c. 1
7. Straight knife cutting M/c. 1
8. Band knife cutting M/c. 1
9. TSSM cloth inspection M/c. 1
10. Steam Ironing M/c. 1
11. Other Essential spares
Total 30.00

3. Manufacturing Process
The following chart shows the manufacturing process of knitted garments
Purchase of Knitted fabrics

Inspection of fabric

Cutting the fabric

Sub assemblies

Stitching, finala assemblies

Inspection

Trimming

Inspection

Ironing

Inspection

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 Packaging / Delivery
4. Raw Materials
Raw materials required per annum at 100% capacity utilisation are given
below:
Qty. Rate/Kg.(Rs.) Total Value (Rs.lakhs)
Knitted fabric 144000 Rs.240 345.60
(400 gms per piece inc. waste)
Other attachments (Rs.15 per garment) 21.60
Consumables/Packing (Rs.8 per garment) 11.52
Total 378.72

5. Land & Building

A building area 4000 sq. ft. is required to install the machinery and to store
the raw materials and finished goods. It may be taken on lease basis. An
advance of Rs.2.00 lakhs is provided.

6. Utilities
Power: The total power requirement of the unit will be about 60 HP.

Water: Water is not required for this process. Water is required only for
human consumption.

Man power:
Category Nos. Monthly Total
Supervisor 2 8000 16000
Operators Tailors 50 4000 200000
Helpers 20 3000 60000
General Manager 1 12000 12000
Export Manager 1 10000 10000
Assistants 4 4000 16000
Watch & Ward 6 3000 18000
332000
Add : 20% benefits 66400
398400

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 Total salary per annum (Rs.lakhs) Rs.47.81 lakhs
7. Implementation Schedule
The machinery can be ordered and erected within a period of 3 months. The
building can be taken on lease. The project can be implemented within a
period of 3 months after conceiving the idea

8. ASSUMPTIONS

• Installed capacity is 360000 pieces of Knitted Garments per annum.

During first of operation 60% of capacity utilisation is assumed. This will
be increased to 70% and 80% in subsequent years.

• Selling price is estimated at Rs.160 per garment plus duty draw back at
7% which is realised to Rs.171.20 per garment.

• Cost of raw materials Rs.428.40 lakhs at 100% capacity utilisation per

annum.

• Power charge is estimated at the current rate which works out to Rs.5.40
lakhs per annum.

• Wages & Salaries is estimated at Rs.47.81 lakhs per annum.

• Repairs & Maintenance is estimated at Rs.1000 per month.

• Depreciation is calculated on WDV method

• Selling, General & Adm. expenses amount to Rs.50000 per month.

• Interest on Term Loan & working capital borrowings are estimated at 12%.

• Income tax is provided at 33.99% on taxable income.

LIST OF MACHINERY SUPPLIERS

‘Juki’ Machines
1. M/s.Veesew Machine, 11, Thiruvalluvar Street, Villivakkam, Chennai-49
2. Apparel & Leather Technics Pvt Ltd, 117 Nelson Manickem Road

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Chennai 600 029
Other Accessories like Ironing Machines
1. M/s.Ramsons Garment Finshing Equipemnts Pvt. Ltd., No.320, Mysore
Road, Bangalore 560 026

LIST OF RAW MATERIAL SUPPLIERS

Various knitted fabrics suppliers in Tirupur.

[Rs.
1. COST OF PROJECT lakhs]
Building (Advance) 2.00
Machinery & Electricals 30.00
Other Misc. assets 0.50
Pre-Operative expenses 1.50
Margin for WC 10.66
Total 44.66

2. MEANS OF FINANCE
Capital 22.16
Term Loan 22.50
Total 44.66

3. COST OF PRODUCTION & PROFITABILITY STATEMENTS

Years 1 2 3
Installed Capacity (No.of garments p.a.) 360000 360000 360000
Utilisation 60% 70% 80%
Production/Sales (No. of garments p.a.) 216000 252000 288000
Selling Price Rs.160 per garment
Sales Value 345.60 403.20 460.80
Add: Duty draw back 7% 24.19 28.22 32.26

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Sales Value 369.79 431.42 493.06
Raw Materials 257.04 299.88 342.72
Power 3.24 3.78 4.32
Wages & Salaries 47.81 50.20 52.71
Repairs & Maintenance 0.12 0.13 0.14
Depreciation 4.50 3.83 0.57
Cost of Production 312.71 357.82 400.46
Selling, Admin, & General expenses 6.00 6.30 6.62
Interest on Term Loan 2.70 2.36 1.69
Interest on Working Capital 4.77 4.77 4.77
Total 326.18 371.25 413.54

Profit Before Tax 43.61 60.17 79.52

Provision for tax 15.65 21.59 28.53
Profit After Tax 27.96 38.58 50.99
Add: Depreciation 4.50 3.83 0.57
Cash Accruals 32.46 42.41 51.56

4. WORKING CAPITAL:

Months Values % Margin Bank

Consumptions Amount Finance
Raw Materials 1.00 21.42 25% 5.36 16.06
Finished goods 0.50 13.03 25% 3.26 9.77
Debtors 0.50 15.41 10% 1.54 13.87
Expenses 1.00 0.50 100% 0.50 0.00
50.36 10.66 39.70

Say --> Rs.39.71 lakhs

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6. PROFITABILITY RATIOS BASED ON 80% UTILISATION

Profit after Tax

50.99 10%
Sales
493.06
Profit before Interest and Tax
85.98 102%
Total Investment
84.37
Profit after Tax
50.99 230%
Promoters Capital
22.16

7. BREAK EVEN LEVEL

Fixed Cost (FC): [Rs.lakhs]

Wages & Salaries 52.71

Repairs & maintenance 0.14

Depreciation 0.57

Admin. & General expenses 6.62

Interest on TL 1.69

61.73

Profit Before Tax (P) 79.52

BEL = FC x 100 61.73 x 80 x 100

FC +P 61.73+ 79.52 100

35% of installed capacity