We have plans to add a new factory every year in the near future
Palmal Group of Industries is one of the promising readymade garment manufacturing business organisations in Bangladesh. The company was set up in 1984 by Nurul Haque Sikder, and his son Nafis Sikder took reins of the company in 2001. Since then, the company has seen a very high and significant business growth. In an interview with Fibre2Fashion, Palmal’s Vice President Aseem Sood discusses Bangladesh’s garment industry, the growth story of the company, and sustainability.
How much is the RMG sector contributing to the Bangladesh’s GDP at present? What is the projection for the next 2 years?
I guess it should be 15% of the GDP & about 80% of the total export earnings of the country. This number would have been higher in the past but as Bangladesh continues to grow there is a lot of sectors that are growing at a fast pace & therefore the percentage of the RMG sector should go down a bit. This is good for the country, a diverse export portfolio is definite plus.
How important is the RMG sector in Bangladesh both economically and socially? How many people does the sector employ to date?
After agriculture, garments is the second largest employer in the country. So, it is important both economically and socially. However, the number of people working in the garment industry have not grown at the same pace in the last five years due to continuous investment in automation, the flat knit sweater segment is a great example of this. Also the country is getting better in terms of efficiency which leads to less people being required as compared to the past.
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There are several ancillary industries that support the garment sector, so including them there could be 5.5-6 million people working in this industry. Unlike a decade ago, Bangladesh is now independent in in terms of trims & also has a greater capacity for yarns & fabrics, which means more people are being employed in the overall industry.
What kind of challenges the RMG sector is facing in Bangladesh? Where can the government of Bangladesh pitch it?
The challenges remain pretty much the same. There has been a significant improvement in core areas, while infrastructure improvement is happening the pace could definitely be faster. The govt has a lot of projects underway for roads, energy, a new airport & hopefully enhancing capability & capacity of the sea ports. The faster this happens the better for the industrial sector. The power supply used to be a big problem earlier. Our country has made significant improvements although the cost of electricity is very high. Secondly, the cost of finance is very high, banking reforms are much needed. While the government is focusing on infrastructure, setting house in order for financial sector may take some time.
In the next five years, the industry is likely to face another big challenge of labour attrition as they switch from apparel to other industries, similar to what we saw in India in the late 90s and early 2000s, when a lot of automotive, BPO, telecommunications and other industries started coming up and people started migrating to other industries. Chennai was probably the best example for having a thriving garment sector in the 80s & 90s, and from there workers moved on for better employment opportunities in other industries. So, that’s an upcoming challenge for the Bangladesh garment industry. However, this is a great for the country & will boost the overall industrial growth of Bangladesh.
According to you, which are the major issues brands should focus on to strengthen the RMG sector of Bangladesh?
Brands can only continue to buy and expand their product line in the country, and I think that’s what happened since I came here first time in 2003 as a buyer. When I moved here in 2007 to work here, Bangladesh was producing only at the cheap end of the spectrum. Today, you see some of the top end brands here. Brands need to have a greater exposure in this country because if you were to compare us with any other country today, Bangladesh has a huge young population & an industry which has grown despite all the challenges. It takes 12 hours to reach a port which is only 250 kilometres away and yet we are close to $50 billion market!! This simply amazes me & shows us how dynamic the leadership of the garment sector is.
Some people have tried Africa, Myanmar etc but you simply cannot substitute the capacity and capability that Bangladesh has to offer. And Bangladesh is still growing, we continue to add capacity & the results are clear in our growth pattern.
What is the story behind formation of Palmal Group?
Palmal was founded back in 1984 by the current MD’s father, Mr. Nurul Haque Sikder, who was one of the pioneers in the industry. He was also one of the founding members of the BGMEA and was laying out policy for apparel sector. He expanded the business from one to six factories. His son, Mr.Nafis Sikder took over in 2001 at a very young age having no experience at all, just straight out of college. He is a genius as what he has done what most people can only dream of. In the last 20 years, we have grown from a $30-40 million company to a $500 million company today. It is an outstanding achievement.
Yes, everybody in Bangladesh had a rough patch post the Rana Plaza incident, but the industry proved how serious and how resilient we were by making sure that millions of dollars were poured into fixing our weaknesses and getting our house in order. So, now from a safety and compliance standpoint, we are probably one of the best places to be at.
Personally, it has been & continues to be an extremely exciting journey.
What are the major milestones achieved by the company over the years?
We have crossed milestones every year except for a few years. We grew by three times from 2007 to March 2013. Then there was little pause in our growth due to the unfortunate Rana plaza incident. Again, we started growing from 2016 until COVID-19 disruption. If we look at 2018-19 versus 2022, our exports would be double. So, basically it is investing in our beliefs, setting up more factories/mills, enhancing backward integration and making sure that we are no longer dependent on external resources for as much raw material as possible.
Out of the various group companies that you have, which one is the most revenue generating?
We work in three segments: fabric mills—we have two and are now building the third one, apparel making, and ancillary division comprising embroidery, printing, washing, trims, etc. But, when we say our turnover should be about $500 million this year, we only talk about garment sales, and that does not include any of our other sales like the fabric, trims or washing.
What would you like the government to do to help garment units achieve size and scale?
You ask any industry & they will have a long list of what the governments can do to help, it’s the same everywhere, we always have a wish list. However, for Bangladesh we are still in our development stage so there is actually are a lot of basic issues which need to be addressed, infrastructure, upscaling skill development, technical education resources, banking reforms, proper plans for the rising energy requirements, development plans for improving the value addition enhancements, financial encouragement for high value sectors etc.
Am sure they are working on all of this & we shall be seeing results in the near future.
What are the challenges that you face in spite of government support to the industry?
I think this is the same as the above, whatever help we need from the govt are the challenges that we face today.
What are your major goals for the next five years and any plans to enter any other line under Palmal group?
Simply put, we would like to double ourselves in volume & revenue. We have been very clear on not entering any other line. Unlike some of our peers who have diversified into various other industries, we are pretty focused on garments as we understand garments and that’s our strength. We would like to continue to play on our strength. There is no serious competition for Bangladesh in terms of scale & capability so we have ample opportunity in the next decade and a half to keep growing. In the next decade, Bangladesh should be able to reach $100 billion in garment exports.
How many sewing, knitting, dyeing, etc units do you have as on date? Are you planning capacity expansion in future?
As of now we have two fabric mills and we are building a third one, which we expect to start in 2024. Post which, we expect to serve about 80 per cent of our capacity requirement ourselves. That would be a great achievement because 12 years ago we had zero verticality and from there we have built almost 55 per cent to 60 per cent of our capacity requirement today. We have 16 garment factories, 1 printing facility, two washing plants, two embroidery plants, and a trims factory as of now. Our main focus currently is on expansion of fabric production & we exploring the options of a spinning plant. We also have plans to add a new factory every year or so in the near future and continue to strengthen our trim capability as we go forward. Any growth that we are expecting is based on expansion & product enhancement, that’s how we have grown throughout.
What are the types of garments you produce? What is your annual production capacity?
We only produce knitted garments. That’s our only product. We don’t do anything else as of now. Our current annual capacity is about 180 million garments.
Which international markets are you currently present at? Which new markets are you exploring?
We currently supply about 40 per cent of our production to North America, about 40 per cent to Europe, about 12 per cent to Australia, and about 8 per cent to the rest of the world. Five years ago, we would have done business with anyone, but now we are being a little more thoughtful about whom we do business with, both in terms of long term synergy as well customer’s financial health.
How are your products different from other garment manufacturers? What innovation do you plan to bring into your production process and product quality?
One cannot say that we are any different because at the end of the day we make knitted garments, which is no rocket science, and it is the easiest business to enter in this country. It is not costly if you just want to be a garment factory, however, if you want to be a whole vendor then it’s an expensive proposition and not easy.
At a very initial stage we realised that in order to be different we would have to invest in design, R&D, fabric research, technology in terms of 3D and digitisation. So, we invested in all these. We set up our design team way back in 2013-14 and ever since we have been doing a lot of product R&D, both in yarn/fabric as well as garment form. We have a design team overseas & a strong team here. We create & present collections for each season to our customers. We also have two very strong teams in each of our mills for fabric development and R&D. We are constantly exploring newness & then engineering it to suit the needs & requirements of our clients. A lot of our business is backed by co-creation of products along with the customers design teams.
From a technology perspective too, we have always been ahead of the game. Whatever new technology comes in terms of machinery, we have always been investing and if it works for us, we have integrated it into our factories. Our fabric mills are probably the best in class in terms of plant & equipment & the people who manage them.
In order to be keep growing your business you got to constantly keep evolving.
What kind of green initiatives are you taking on at the production level? How much of energy savings it is leading to?
This is something very close to our hearts, because eventually we got to leave something for the future generations. About 10 years ago when new technology came in for dyeing with lower water/lower liquor ratio requirements, we were one of the first to invest in this technology. Our second plant is 100 per cent built entirely on the latest generation of these machines. Other than this we introduced CPB dyeing machines (Cold pad batch) in 2016 & now have multiple such machines in both plants & these are probably the most environment friendly machines in the commercial segment. These use 80% less water/energy compared to the best soft flow dyeing machines, also these machines do not require any salt at all. There are other benefits such as significantly reduced steam etc but I do not want to bore you with further technicalities.
Next is the kind of ETP’s we are now using biological ETP compared to chemical ETP’s in the past. We make sure that the water that is pumped out meets or beats all regulatory standards.
We have the second largest solar energy plant in one of our mills which is already running and by the end of the next three years we would have almost about 12 MW of solar energy being generated in most of our plants.
Other than this we have indigenously designed hot water reuse, heat recovery, condense steam recovery & generator flow gas reuse for steam generation. These are all in sync with our greater sustainability philosophy.
We are constantly on the lookout to reduce our carbon footprint.
