Micro and small enterprises (MSEs) in men’s readymade garment manufacturing have better financial metrics compared with their peers manufacturing women’s and kids’ garments, reveals a CRISIL SME Rating analysis of more than 100 rated MSEs in the sector.
CRISIL-rated MSEs in men’s apparel had an average operating profit margin of 9.8 per cent — a good 200 bps more compared with those in kids’ and women’s apparel, which logged 7.5 per cent and 6.9 per cent, respectively.
The trend also held in net profit margin, where these players logged 6.3 per cent, compared with 4.5 per cent for kids’ and 3.9 per cent for women’s apparel makers.
The higher profitability of men’s apparel manufacturers has also resulted in higher accretion to their reserves and consequently, lower reliance on debt funding.
Thus, men’s apparel manufacturers had a gearing of 1.1 times compared with 1.3 times for kids’ apparel and 1.9 times for women’s apparel MSEs.
Standardised designs in menswear and the limited requirement of incorporating pattern and embroidery into the apparel could be one reason for the lower cost of production of men’s apparel and therefore higher profit margins. CRISIL believes that adoption of zero-defect production combined with investment in brand development can help MSEs in women’s and kids’ apparel improve their profit margins.