Start a Leather Garment Business

                  

(252). Start a Leather Garment Business 

Introduction 
Leather Garments are one of the sophisticated products of finished leather. Leather Garments consist of articles of leather apparel and other cloth accessories as per ITC Classification which would include more specifically Gents Leather jackets, Long Coats, Waist/Shorts, Leather Pants/Shorts (Gents), Leather Jackets for ladies, Long Coats, Waist Coats/Shirts, Pant/Shorts and Children Garments. These are used only in cold places and usually garments made for autumn – winter are made of some what heavy leather from Hides with thick lining of either wool or artificial fur. Demand for Goat suede and light sheep nappa is generally high for European markets in spring summer while that for cow hides and somewhat heavy sheet skin is high for the autumnwinter in Europe and the USA.

Market Potential

Digital Technologies are changing the perspectives of business and culture with the advent of new computing tools for the home and office or new communication net works in the world. Technology is the single most important force behind the creation of enterprise. The Leather Garment sector is in close contact with the latest trends in the fashion. Therefore, the new winds in the fashion world always have a direct effect on the development of the sector and gives a wider scope for marketability.

Leather Garment production in India is almost exclusively for export. Some demand for Jackets exists but this is limited to some North Indian towns, which experience severe winter.

India's export for Leather Garments has been 5.28 million, 6.50 million and 6.9 million pieces during the year 1997, 1998 and 1999 respectively. The estimated production capacity for Leather Garments in India has been estimated at 18 million pieces a year. In 1998, the total value of India's Garments export was the third highest next only to that of China and Turkey. In 1999, India has reached the second place next to China, Korea, which used to command the second position in export of garments has fallen way behind.

Now that the demand seems to be picking up from the beginning of 2000, it would open up scope for new garment units which will help the country to increase the export of garments. As a matter of fact, it is heartening to note that the total export of Leather Garments during the year 2000-01 was higher than the export during the same period in 1999-2000 by as much as 33% in terms of US $.

In the circumstances, it would, therefore, be prudent to concentrate India's efforts in the currently strong importing countries viz. USA, U.K., Germany. Italy, France, Netherlands etc.

    

Basis and Presumptions

1. For achieving the full capacity utilisation of the plant, the efficiency should be 100% with 2400 working hours.

2. The time period for achieving the full capacity is three years - 60% in Ist year, 75% in 2nd year and 90% in 3rd year.

3. Labour wages as per the existing rates in the region.

4. Interest Rate: 12% for the fixed and working capital

5. Margin Money: 33 % of the total capital investment

6. Pay back period: 5 years after starting the regular production

7. Land and Building: Own

Implementation Schedule

The implementation schedule is anticipated to be about one year which is necessary considering the time required for preparation of project report and appraisal, registration, obtaining loan, acquiring land, building, plant and machinery, organising working infrastructure, establishing contacts with parties, buyers and market agencies etc.

Process of Manufacture

The manufacturing process in the industry does not involve much complicated techniques. Leather garment industry is normally based on strict specification of buyer and country to which items are exported. Due care has to be taken in the manufacturing garments as follows:

(i) The component of the article is to cut from the materials as per specification or keeping in view the quality. This comprises a complete list of properly evaluated materials both leather and auxiliaries, components in addition to correct pattern for cutting leather, lining etc.

(ii) The design evaluation may be conducted in a small batch or trial production to find out the production difficulties so that these can be sorted out and timely corrected.

(iii) The items should be manufactured as per strict design and specification of the buyer or standards.

(iv) Component Specification: This consists of details of materials plus dimensional stability or tolerance so that the component will fit up or stand satisfactorily.

(v) Process and Production Control: This is an area where control could be actually implemented. As for materials, Leather lining and auxiliaries should be tested for tear, stitch tear and tensile strength. Fastness of colours of Leather has to be tested repeatedly.

Threads: One of the most important requirement in thread is a level of properly balanced twist, particularly in Garment industry, stitching plays a vital role and synthetic thread is much stronger than cotton and does not absorb moisture so readily.

Glue and Cements: Adhesive plays a dominant role in the fabrication of leather joints and testing of emblem. Invariably, the closing of joints is first secured by adhesives and later by means of stitching.

Grindery and Hardware: These are known as metal grindery or hardware and some of the embellishments and fittings are also grouped in this category.

Zip Fastener: In Garment Industry Zip Fastener plays a key role and oftenly tear and wear related complaint come from buyers. So the imported fastener may be used duly tested by repeated closing and opening method. Finally in the assembling section, which is mainly concerned with the workmanship is carried out at each stage. The final inspection takes place before the goods are packed and sent for stores.

Embellishment: Due care should be taken while doing this job, a small negligence will damage the whole product.

Quality Control and Standards

No particular specification of this product is available. The specifications in the export market mainly relate to the quality of leather i.e. colour fastness, softness and resistance to moisture and cold. Other specifications like pattern, design would be as per the requirements of the buyer. However, the following specification for accessories has been given below which are as per BIS.

Standards Related To Leather Garments Industry and Related Items

Elastic Tapes	IS 9686
Metal Buckles	IS 96986:1980
Threads	IS 1376/1803
Leather Garment Sizing System	IS 10397
Care of Leather Garments	NIL
Metalic Slide Fastner	IS 3148:1983
Garment Quality Guide	IS 12675
Leather For Garments	IS 12718
Fur Leather	IS 3840/2961
Fusible Lining	IS 12806
Zip Fasteners	IS 8894/3184/4829

Production Capacity

It is proposed to manufacture 90,000 pieces of Leather Garments for Men, Women and Children valued at Rs.

Quantity	:	90,000 pieces
Value	:	216750000
Motive Power		5 KV.

Pollution Control

The Leather Garment Manufacturing unit does not contain any environmental hazards, the performance of Production System is through waste minimisation/utilities and it is revealed that the waste emanating from 70% of the unit is utilised by the small leather goods (Tiny Sector) industries i.e. Chappal Manufacturing, Small Coin Purses manufacturing and Key Chain Purse Manufacturing units.

Energy Conservation

Energy is spent in the factory in the form of electricity and fuel. The workers should be properly trained to operate the machines as and when required. They should be trained cautioned to yield maximum units during the machine operation which would not allow the machine to run by motive power unnecessarily. The electrical lines should be properly made and checked at regular intervals.

Financial Aspects

A. Fixed Capital

(i) Land and Building		(Rs.)
i)	Land 1 Acres @ Rs. 2000000	2000000
ii)	Building Covered Area Office cum sheds – 3000 sq.ft. @ Rs. 1000	3000000
iii	Water System and electricity backup including tube well and generator set for electricity backup	500000
	Total	5500000

(ii) Machinery and Equipments

Sl. No.	Machinery and Equipments Description	Imp./ Ind.	HP	Qty	Rate Rs.	Value (Rs.)
1.	Flat Bed, Lock Stitch Sewing M/c.	Imp.	33	5	40000	200000
2.	Flat Bed Two Thread, Double Needle Lock Stitch Sewing M/c.	Imp.	33	4	75000	300000
3.	Zig-Zag Stitch Sewing M/c.	Imp.	33	2	35000	70000
4.	Cylinder Bed Lockstich Sewing M/c.	Imp.	.5	2	90000	180000
5.	High Speed Single Thread Lock Stitch Sewing M/c.	Imp.	.5	2	50000	100000
6.	Strape Cutting M/c.	Imp.	.25	1	20000	20000
7.	Post Bed Lock Stitch Sewing M/c.	Imp.	.33	2	50000	100000
8.	High Speed Single Thread Chain Stitch Sewing Machine	Imp.	.33	1	39000	39000
9.	Button Stitching Sewing, Single Thread	Imp.	.25	1	38,000	38000
10.	Hem Turning M/c. Clicking Press	Imp.	.25	1	30,000	30000
11.	Skiving Machine	Imp.	.5	1	40,000	40000
12.	Cliking Press	Imp.	1	1	400000	400000
13.	Tools and Equipments	LS				60000
14.	Office and Workshop Furniture	LS				200000
15.	Taxes ,Electrification and installation of machinery @ 40% of machinery cost					606800
	Total					2383800

(iii) Total Fixed Cost		(Rs.)
i)	Land and Building	5500000
ii)	Plant and Machinery	2383800
	Total	7883800

B. Working Capital (per month)

(i) Raw Material (per month) (for 7500 Pcs)

Sl. No.	Description	Qty.	Rate (Rs.)	Total (Rs.)
1.	Nappa Leather, Suede Leather, Cow Softy Leather, Cow/Sheep/Goat 1st grade Leather	187500 sq.ft leather @ 25 sq.ft. per piece	60	11250000
2.	Lining, Non woven/ Woven Fusible, Interlining, Ribcloth, Satin, Jacqards, polyester, staple yarns	22500 Mts. @ .	90 mtr.	2025000
3.	Zip, Buttons, Threads, Adhesive, Embellishments and Other Accessories	For 7500 Pcs. @ Rs. 120/ pcs		900000
4.	Packing Materials	For 7500 Pcs @ 20/ Pcs		150000
	Total			14325000

(ii) Staff and Labour (per month)

Sl. No.	Designation	No.	Salary (Rs.)	Total (Rs.)
1.	Manager/Designer	1	20000	20000
2.	Supervisor	3	7000	21000
3.	Clerk-cum-typist	1	4000	4000
4.	Accountant-cum-Store-keeper	1	6000	6000
5.	Watchman-cum-peon	2	3000	6000
	Technical, Skilled and Semi-skilled			0
6.	Skilled Worker	15	6000	90000
7.	Semi-killed Worker	10	5000	50000
8.	Unskilled Worker	5	3000	15000
	Total			212000
	Perquisites @ 22%			46640
	Total			258640

(iii) Utilities (per month)			(Rs.)
i)	Power	L.S.	30000
	Total		30000

(iv) Other Contingent Expenses (per month)

Sl. No.	Description	Value (Rs.)
1.	Postage and Stationery	10000
2.	Advertisement and Publicity	100000
3.	Telephone	10000
4.	Transportation	20000
5.	Consumables	10000
6.	Legal Expenses	20000
7.	Insurance	8000
	Total	178000

(v) Total Working Capital (per month)

Sl. No.	Description	Amount (Rs.)
1.	Raw Materials	14325000
2.	Salary and Wages	258640
3.	Utilities	30000
4.	Other Contingent Expenses	178000
	Total	14791640
	(vi) Total Working Capital for 3 months	44374920

C. Total Capital Investment

Sl. No.	Description	Amount (Rs.)
1.	Fixed Cost	7883800
2.	Working Capital for 3 months	44374920
	Total	52258720

Financial Analysis

(1) Cost of Production (per year)

Sl. No.	Description	Amount (Rs.)
1.	Total Recurring Expenditure	177499680
.	Depreciation on Machinery @ 10%	151700
3.	Depreciation on tool and Equipment @ 25%	15000
4.	Depreciation on furniture @ 20%	40000
5.	Depreciation on Building @ 5%	275000
6.	Interest on total Capital Investment @ 12%	6271046
	Total	184252426

(2) Turnover (per annum)

Sl. No.	Description	Qty. Pcs	Rate (Rs.)	Value (Rs.)
1.	Leather Coats Men/Women	45000	3000	135000000
2.	Leather Jacket, Shirts, Blouses and Trousers	22500	2500	56250000
3.	Leather Short, Shirts and Mini Skirts	15000	1200	18000000
4.	Leather Children Garments	7500	1000	7500000
	Total	60,000		216750000

(3) Net Profit (per annum)
	=	Annual Turnover – Cost of Production
	=	Rs. 216750000 – 184252426
	=	32497574
(4) Net Profit Ratio
		Net Profit x 100
	=	————————
		Turnover per annum
		32497574x 100
	=	—————————
		216750000
	=	14.99
(5) Rate of Return
		Net Profit x 100
	=	———————————
		Total Capital Investment
		35160069x 100
	=	——————————
		52258720
	=	62.19

(6) Break-even Point

	Fixed Cost	(Rs.)
1.	Depreciation on Machinery	151700
2.	Depreciation on tools ,Office Equipments and Furniture	55000
3.	Depreciation on Building	275000
4.	Interest on Capital Investment	6271046
5.	Insurance	96000
6.	40% of salary and wages	1241472
7.	40% of other contingent expenses	816000
	Total	8090218

B.E.P.
		Fixed Cost x 100
	=	————————
		Fixed Cost + Profit
	=	13.37%

Addresses of Machinery and Raw Material Suppliers

1 M/s. Prototype Dev. Training Centre
B/24. Guindy Estate,
Ekkaduthangar,
Chennai –9

2. M/s. Cochin Leathers Pvt. Ltd.
Industrial Dev. Area,
Edayar, Muppathadam PO,
Cochin 683 102

3. M/s. Twin Star Engineering
2, Thiruneermala Road,
Pammal, Chennai 75

4. M/s. Atlant Trading Pvt. Ltd.
Atur House, Worli Naka,
Mumbai 400 018

5. M/s. Valliappa Leather Corporation
3/5, Narayana Chetty Street,
Periamet, Chennai – 3

6. M/s. Solar
Atur House,
Worli Naka,
Mumbai 400 018

7. M/s. T. Abdul Wahid and Co.
26, Vepery High Road,
Chennai –3

8. M/s. Chandra's Chemical Ent. Ltd.
5, Naval Hospital Road,
1st Floor, Periamet,
Chennai –3

9. M/s. Akay Sales Corporation
Office: C-8-346, Ring Road,
Naraina, New Delhi –110028

10. M/s. Zeb Exports Pvt. Ltd.
280 Sidappa Lay Out,
Bommanhalli Post,
Madivala,
Bangalore–560 068

11. M/s. Jay Cee Enterprises (P) Ltd.
E-357, Greater Kailash – II,
New Delhi–110048.