The Power of I 2014

Tailor-made success

Orient Craft, now one of India’s largest garment exporters, rose phoenix-like from the ashes of a failed business

Here’s an interesting story. It starts with a young man who grows up on a farm and then travels the world. A casual meeting with a friend when he’s in his 20s leads him to venture into business on a lark. It clicks and he enters the big bad world of business, defying his parents and turning his back on the family farm and a possible career in law. Surprise — he’s an instant success and it’s champagne parties and fast cars all the way. Until one day, when the house of cards comes crashing down and the young man loses everything. More determined than ever before to succeed, he pulls himself up by the bootstraps and gets back into business. A few years later, our older and wiser protagonist is once again a roaring success. 

Sounds like something out of a movie, doesn’t it? But it’s all too real; just ask Sudhir Dhingra. The promoter of Orient Craft now ranks among the top garment exporters from India. The 75-year-old’s ₹1,151-crore company employs over 30,000 people, making it the second-largest employer in the garments sector. 

Started in 1978, Orient Craft works with leading fashion labels such as Gap, Banana Republic, Tommy Hilfiger, Calvin Klein and Polo Ralph Lauren. It also supplies to clothing retail chains such as Macy’s, Ann Inc and Dillard’s in the US. It expects to grow nearly 35% this year and close FY14 with revenues of ₹1,550 crore. The target for FY15: ₹2,000 crore. All very impressive, no doubt, but even more so when you consider that Dhingra’s tryst with garment manufacturing happened purely by chance.  

To the brink — and back

Growing up at Fazilka in Punjab near the Pakistan border, Dhingra had to undergo the rigours of farm life under the watchful eye of his grandfather. “He would make us walk for hours in the sun. It would take us three days to cover our entire land tract.” His family was among the large cotton producers in the area, growing wheat and vegetables. Like his father and grandfather before him, Dhingra studied law before heading to the US for a nine-month-long trip in 1972. On his return, he stopped by in London to visit a friend who was a trader — someone who buys from importers and sells to wholesalers and retailers. The friend gave him a sample of a ‘cheese cloth’ shirt in vogue in the UK at the time, asking him to get 1,000 pieces of those made in India and shipped to him. “I had no clue how to get it done,” Dhingra says. Upon his return, he managed to get a trader in New Delhi’s Janpath market to make the shirts at ₹15 apiece and delivered in two months. That ₹15,000 is what Dhingra now calls his “seed capital”. It was his first business transaction and exposure to export formalities. His first company, Mainline Exports, was thus born. 

But then he forgot all about it till some months later, when his bank account was credited with ₹21,000. His friend had made a neat 3X profit and sent Dhingra his share of the London shipment sale. The shirts had sold out in the first hour of arriving in London and buyers were clamouring for more. “He convinced me to partner with him and start a business.” His father, not surprisingly, was upset. But Dhingra asked for a year’s time to try his luck, borrowing some money from his father and promising to join him if it didn’t work out by then. 

The next order for 5,000 shirts from India sold out overnight as well. Soon, the partners were selling 5,000 pieces every week. The shirt had become a fashion rage in western markets. “We could do no wrong then. People came to receive us at the airport, chauffeuring us and inviting us to drinks and fancy meals.” Dhingra says he bought an apartment in London and a small home in South Delhi with just two months’ earnings. 

As business grew, he was exporting 40,000-50,000 shirts a month, earning £1 on each. He would travel to London each month, drive a BMW sports coupé and vans would queue up outside his office there. “We got to a point where we said we wouldn’t accept cheques, only cash from local boutiques,” he recalls. It was a high of a different kind, where nothing mattered as long as the shirts were delivered. “Even my drivers drank nothing less than Scotch whisky,” he says. “Life was a party.” 

In 1975, his world came crashing down. “Cheese cloth shirts went out of fashion and supplier credits began to dry up. In just a couple of weeks, the shirts stopped selling.” Dhingra was saddled with over 100,000 shirts — at ports and warehouses in London, New York and Los Angeles. “We were never trained to gauge the market, and where it was headed.” In desperation, Dhingra and his wife, Manju, went to the US, negotiating with retailers to sell the shirts at less than cost. “We sold them at whatever price we could get.” It was a hard lesson, but well learnt. “It was not that the wholesalers did not have a demand for shirts. It was just that what we had was no longer in trend,” he says. Travelling door-to-door and meeting retailers and customers during their journey, Dhingra learnt a lot about the market. “I came back energised from that trip, with a bruised ego but back on Mother Earth.” 

Slowly, he inched back, teaming up with designers such as Carmen Marc Valvo, who was with Moonglow, a now-defunct fashion house in the US, to create new designs. “It was our first stepping stone into the global fashion scene, and we got a great deal of learning and exposure.” By then, Dhingra had lost all his money, and took his father’s help in buying a small piece of land in South Delhi’s Hauz Rani area, setting up a basic office and outsourcing work to smaller units. But he was clear he didn’t want to be a cottage industry set-up like others at the time. By 1978, he rented an industrial plot in Okhla and built his first showroom and manufacturing unit that did everything in-house, which was new to the trade. A new company, Orient Craft, was registered. “We acquired customers in Germany and the UK and rebuilt the business into something that was very agile, knew the market sentiment and demand patterns.”

World-class in India

By 1993, Orient Craft had four factories in Okhla and big names such as Gap and Liz Claiborne had signed up as customers. Then, a tour across South East Asia, where he saw better standards of manufacturing, changed his thinking. “I realised that things were on a much larger scale there. I now wanted to have a larger, world-class factory in my company too,” Dhingra recalls.

A year later, he made another big bet, investing about ₹14 crore in a new, state-of-the-art factory in Gurgaon that would employ 1,800 people. It was the largest at the time in the readymade garment manufacturing business. He also flew down expats in the business to train his people in the latest manufacturing practices in the trade. “People said I had gone mad and was building a white elephant.” Dhingra recruited from the first batch of NIFT at the time, setting up functions such as merchandising, design etc. and the first design studio. “Today, this is the gold standard for our trade.” 

Orient Craft was doing well, but at one point Dhingra realised that 70% of his business was coming from a single customer in the US. It was an easy but risky option to focus on a single client. That feeling was cemented after he lost ₹17 crore in a transaction after a New York-based importer defaulted on payments. “We were getting complacent. It was probably the most expensive lesson for us,” he says. From then on, he decided that he would never again depend on one customer for business. “I told my team that I want us to be a 32-legged animal. If one leg breaks or even five legs break, nothing should happen. We should still be able to walk and run.” 

Today, Orient Craft does business with over 50 customers, none of which goes beyond 20% of its capacity across its 22 manufacturing units. “On an average working day, we make between 150,000 and 200,000 garments in 200-300 different styles, mostly all new; very few of them are reorders.” Its products range from home furnishings to clothes for babies, teenagers and adults, with a focus on women’s wear (75%). Dhingra says his company is also the largest supplier from India to Ann Inc and Macy’s. Most of Orient Craft’s work involves long-standing relationships with existing clients, some of whom have been with the company for over 25 years. “We don’t encourage walk-in customers.” 

Staying trendy

The fashion business is very seasonal, and keeping track of emerging patterns, designs and fashion trends is integral to staying in business. Dhingra knows that all too well. “We are a year ahead of the curve. In January now, we have finished the whole production for spring, summer and fall of 2014, and even for Christmas. Our designers are currently working on the spring collection for 2015.”

Investing early on in design was a game-changer for Orient Craft. “We decided 10 years ago that design would become a differentiating factor between other countries and India,” says Dhingra. “China has a typical cookie-cutter approach towards garment manufacturing, and they’re good at it.” India’s strengths, on the other hand, lie in its rich cultural heritage. “Bringing our arts and crafts, merging them with western tastes, and using that as an opportunity, we invested into developing our design capabilities,” he says. Orient Craft has three design studios in Gurgaon, dedicated to its three main product lines — home furnishings, woven fabrics and knits. “We have a large number of people focused on developing new products with our customers’ teams. They are sourced from fashion institutes and from overseas as well.”

The company also has an office in New York, which collects “design intelligence” from the market. These insights into the future of fashion come from international fashion events such as the New York and Milan Fashion Weeks, where designers showcase their newest designs. “We interpret all that into what trends and patterns are emerging, and then suggest new concepts to our clients,” says Dhingra. “There are two approaches to this business. One is where the customer comes in and says, ‘This is my design, you copy it and give me the cost and delivery schedules.’ The other is to bring in an understanding of what new trends and tastes are coming into the market. When you have the ability to show them what’s coming, it becomes a collaborative relationship,” he adds.

Investing in training was another important step for the company. Through its non-profit arm OCFIT, it runs 23 training centres across India. Located mostly in rural areas, these centres focus on training women below the poverty line in basic skills to become operators in garments manufacturing units. Some are also absorbed into Orient Craft.

But what’s really helped Orient Craft grow every year since inception is its focus on higher-end products. “The average unit realisation (selling price) for most garment manufacturers is $3.3; we are at $8.7. We’ve done this through value-added products and through our emphasis on design, better embroidery, trims and materials.” While the minimum order size is 5,000 pieces, Dhingra says an average lot could be much more, going up to 50,000-100,000 pieces. The company is also constantly working on its processes to improve efficiency. “Two years ago, we would deliver the goods in 150 days. Now we manage that in as little as 60 days,” he adds.

That attention to systems and processes is what helped the company during the 2008-2009 crisis. “We did not lose sales. In fact, we added some. And we built one of our largest plants, in Bhiwadi, during this period,” Dhingra says. “Most of our customers in western markets were looking for cheaper prices from their suppliers. We worked with some of them to improve their margins.” And how did he manage this? “We listened to our customers. We gave them lower prices without affecting our margins, examining our productivity and costs that were redundant.”

Those weren’t hard to spot. “When you are a 40-year-old firm, a lot of inefficiencies get built in over time.” For example, at one of the company’s facilities, there were 42 peons attached to various executives, when not more than six or eight were really needed. “We didn’t fire them; instead, we retrained most of them. Some were taken through basic computer training. One of them became an office assistant, and his salary is now three times what he was making then,” Dhingra says. 

If his employees sailed through the slowdown, Orient Craft came out smiling, too. And the future looks equally cheery for Dhingra. This is the period when bad times seem to be getting over. Orient Craft is growing well and is projecting at least 25% growth y-o-y going forward. Of a $500 billion global garments trade, India’s share is hardly 3%. There are very few Indian players who do business above ₹1,000 crore. “Most don’t have the infrastructure to execute and deliver on large orders. We, on the other hand, are growing our infrastructure. We just need to grow our business from our existing customers and execute this well,” sums up Dhingra. 

Like all good stories, this one, too, seems set for a happy ending.