Cluster _Development __ Initiative

December 2006

www.ilfsindia.com

Index
IL&FS-Cluster Development Initiative

The Need
Vision Approach & Methodology Bouquet of Services Our Footprint

The Organogram
Our Team Why Us?

Index
IL&FS-Cluster Development Initiative

The Need
Vision Approach & Methodology Bouquet of Services Our Footprint

The Organogram
Our Team Why Us?

MSMEs: Integral Part of Indias Growth Strategy

Significant contributor to Indian economy

Employs more than 28 million people and

accounts for over

40% of gross industrial value addition

35% of direct exports

15% of indirect exports

Ensuring the competitiveness of small scale sector is important as it would help in overall growth of Manufacturing Sector as also the National Economy - NMCC
The Need

Sub-Sector Engagement Is the Key for MSMEs Development Programme

Certain sectors emerge in the forefront of

growth and employment because of the unique opportunities they enjoy at the present time. Textiles & Garments,Leather & Leather products, Food Processing, Auto components and Drugs & Pharmaceuticals, select them selves at this point in time-NMCC

The Need

Textiles : Emerging Growth Story

90 80 70 60 50 40 30 20 10 0

Value in USD Billions

45 40 2010

25 13 2005 Exports Domestic

Burgeoning domestic markets and favourable international trade climate in the post quota regime offer significant opportunities for the Indian textile industry to grow rapidly
The Need

Increasing Market Share of Indian Clothing in US Market Before Quotas

Rest of world 24% Bangaladesh 4% China 16% Rest of America 16% Mexico 10% HK- China 9%

Post Quotas

India 15% Indonesia

2%

Rest of world Bangaladesh 10% 2%

India 4%

Indonesia 4% Philippines 4% Chinese EU Taipei 5% 4%

Philippines 2% Sri Lanka 2% Thiland 3%

China 50%

HK-China 6% Mexico 3%

Rest of America 5%

The Need

Leather & Leather Products:significant Turnaround and Growth

Value in USD Billions

8 7 6 5 4 3 2 1 0 Exports

7 2.39 2005 2010

The Need

Agro & Food Processing: .

300 250 200 150 100 50 0 102 62 2005 Primary Processed Food 93 2010 Processed Food 182

Value in USD billion

Emergence of organized retail chains in India and increasingly urbanizing lifestyles offer a strong opportunity for SMEs to participate in supply chain as well as food processing segments

The Need

Auto Components..

Value in USD Billions

6 5 4 3 2 1 0 Exports

5 1.8 2005 2010

The Need

Handicrafts: Growing Market for Ethnic Products

Value in USD Billions

7 6 5 4 3 2 1 0 Exports

6.5 3.8 2005 2010

The Need

Exploiting the Emerging Market Opportunities Challenges & Constraints

Global free trade regime - survival of the fittest

Policy and fiscal rationalization within the country lower protection and increased competition

Increasing technology benchmarks

Lower turnaround time

Compliances - trade and legal

Lowering cost of manufacture and improving quality
The Need

..Challenges

Factors adversely affecting competitiveness of

MSMEs

Limited size and scale Outdated technology

Non-availability of finance
Traditional marketing systems Inability to meet environmental compliances Poor infrastructure

The Need

MSMEs & Clusters

Most of the MSMEs are located in 388 industrial

clusters across the country

490,000 firms 75,00,000 employed

Rs 157,000 crores of annual output

The Need

.Some of the Prominent Clusters

Production (Rs. Crore) 5500 5000 6500 7000 % of total sectoral production 90 60 60 (80% of exports) 80

Cluster Ludhiana Panipat & Karur Tirupur Surat

Product Woolen knitwear Home furnishings Cotton knitwear Synthetic textiles

Jalandhar
Jamnagar Ludhiana Ambur, Agra,Kanpur

Sports goods
Brass parts Sewing machines Leather

400
1000 750 3500

65
70 70 80

Chennai & Gurgaon

Badohi & Jaipur Alleppy Rajkot & Coimbatore Cochin & Veraval

Auto components
Carpets Coir products Diesel engines Sea-food processing

6000
3500 600 3500 3000

60
70 80 80 80

The Need

Cluster: Definition & Principle

Definition: Geographical concentration of units producing similar products and facing similar threats and opportunities Principle: Collaborating while competing

The Need

Why Cluster Based Approach?

Offers critical mass for customization of interventions Economies of scale in operation Better access to technology, information Greater access to customers, channels Cheaper access to inputs, raw materials
Cluster approach should be the preferred route for improving

the manufacturing competitiveness. New and innovative approaches to cluster development should be adopted- NMCC
The Need

Some Benefits of Clustering

1 2 3 4

Commercial Benefits Enhanced chances of securing larger contracts Greater bargaining power with customers Greater presence in the market place

Economic Benefits Sharing & Pooling of resources Sharing Business Development & Operating Costs Access to New Technology

Environmental Benefits Aids in decongesting units from urban areas Ensures that environment al safety standards are maintained Various forms of pollution always under check

Social Benefits Employment generation Compliance to trade related barriers Ensures enhanced security during the start up phase

1.

1.

1.

1. 2.

2.

2.

2.

3.

3.

3.

3.

4.

Guidance from experienced larger companies with shared risks

The Need

Index
IL&FS-Cluster Development Initiative

The Need
Vision Approach & Methodology Bouquet of Services Our Footprint

The Organogram
Our Team Why Us?

IL&FS Cluster Development Initiative Vision , Goals and Objectives Vision IL&FS would be the preferred service provider to MSMEs and the Government for developing clusters across the country Approach PPP driven & Concept to Commissioning Development Goal Contributing to creation of 1 million jobs by 2010 Commercial objective Rs 1 billion annual revenues by 2010

Index
IL&FS-Cluster Development Initiative

The Need
Vision Approach & Methodology Bouquet of Services Our Footprint

The Organogram
Our Team Why Us?

Our development approach in addressing critical gaps to enhance sustainability

Not for profit Commercial

Critical Infrastructure Soft Inputs Marketing, Credit

Association

SPV (Company)

Approach & Methodology

Cluster based PPP Model where we play a pivotal role in bringing the stakeholders together

SMEs

Government

Banks/FIs Other Institutions

Approach & Methodology

Methodology entails handholding the stake holders from concept to commissioning

Concept

Need Assessment Capacity Building

Project Development
Project Financing Commissioning Project Execution
Approach & Methodology

With specific focus on Common Infrastructure in the Cluster

Cluster Common Infrastructure

Physical Infrastructure

Technology Infrastructure

Marketing Infrastructure

CETP Power Supply Water Supply

CFC Design Studio Testing Centre

Display centres e-commerce Exhibitions

Approach & Methodology

Not forgetting the Social Capital which is a prerequisite for SME common infrastructure

Awareness creation

Sensitization
Trust

Organization
Capacity building

Competitive reliance on one another

Approach & Methodology

Why are Cluster Parks different - A comparative analogy

1 2

Cluster Parks
1. Focus on the enterprises and their needs 2. Owned and managed by user enterprises 3. Pre-marketed 4. Customised infrastructure 5. Homogeneous units with strong linkages and collaborative behavior

Industrial Estates
1. Focus on real estate 2. No involvement of user enterprises 3. Post marketed

4. Standard infrastructure
5. Absence of collaborative behavior

Approach & Methodology

Index
IL&FS-Cluster Development Initiative

The Need
Vision Approach & Methodology Bouquet of Services Our Footprint

The Organogram
Our Team Why Us?

Bouquet of Services

CDI

Infrastructure

Finance

Capacity Building

Technology

Market Access

CLUSTERS Textiles Agro Pharma Leather Artisan

Bouquet of Services

Our Services are encompassing

1. 2. 3. 4. Structuring of the Special Purpose Vehicle (SPV) Proposal Preparation for funding from Central/State Govt Financial Closure through syndication of debt funding requirements Detailed Engineering/Procurement process including
a) Layout, design, detailed engineering
b) Preparation of cost estimates of the infrastructure facilities c) Preparation of bid documents

d) Selection and appointment of contractors/consulting firms

5. 6.

Monitoring and supervision of implementation Assistance in establishing systems and contractual structures for O&M

Bouquet of Services

With Value Added propositions such as :

1. Capacity building of the SPV/members 2. Assistance in selection of appropriate technology/ machinery 3. Facilitating marketing tie-ups

4. Creating Brand concepts

5. Facilitating compliances:
a) Corporate Governance

b) Legal compliance
c) Social compliance d) Environmental compliance
Bouquet of Services

Index
IL&FS-Cluster Development Initiative

The Need
Vision Approach & Methodology Bouquet of Services Our Footprint

The Organogram
Our Team Why Us?

Focus Areas and Current Mandates

Focus Areas and Current Mandates

New Industrial Clusters (Induced) Existing clustersInfrastructure improvement

Textiles

Leather

Pharma

Skill Development Agro Processing Growth Poles Artisan clusters Policy Advisory

Our Footprint

Commencing with formulation of the Scheme for Integrated Textile Parks (SITP) Addresses infrastructure constraints of textile industry on cluster
basis- sectoral and cluster approach

Targets growth potential clusters- 26 parks, Rs.13,126 Cr

investment, Rs.19,529 Cr Annual production, 5 Lakh employment

Critical mass of entrepreneurs- cluster

SPV led by entrepreneurs to own, develop & manage parksustainability

GoI as facilitator 40% of project cost not exceeding Rs. 40Cr

as grant/equity- improving viability and need based

IL&FS as Programme Manager for handholding support from

concept to commissioning-proactive project development
Our Footprint

Small footsteps has resulted in 26 Park Projects being approved so far under SITP

State Andhra Pradesh Gujarat Maharashtra Tamil Nadu Rajasthan Karnataka Uttar Pradesh West Bengal Total

No of Parks 4 6 6 5 2 1 1 1 26

Our Footprint

Expected Techno-commercial impact due to development of Textile Parks

State No of Parks Aggregate Investment (Rs. crores) Employment (No of Persons) Annual Production (Rs. crores) Weaving Capacity (No of shuttle less looms) Annual Processing Capacity (Million meters) Annual Garmenting Capacity (Million Pieces)

Andhra Pradesh Gujarat Maharashtra Tamil Nadu Rajasthan Karnataka Uttar Pradesh West Bengal Total

4 6 6 5 2 1 1 1 26

5512 3164 2020 1298 650 132 210 140 13,126

124,000 73,500 38,100 30,500 17,000 2,000 3,500 30,000 500,400

7825 5034 2550 1895 1350 350 225 300 19529

4788 4106 6516 2214 1260 704 600 20,188*

1347.5 1610.5 126.8 318 0.5 12.5 3415.8**

297.00 37.00 10.00 7.00 2.5 2.25 30.00 386.00

* The number of shuttle-less looms (20,188) out of this initiative will be 2/3rd of the existing shuttle-less weaving capacity (32,000) in the decentralized sector ** Includes yarn processing, fabric processing as well as texturizing, converted into million meters ** The modern processing capacity (3416 million meter) out of this initiative will be 35% of the existing modern processing capacity (6,000 million meter)

Our Footprint

Our footprint has been covering more sectors ever since - > 40 clusters

Industrial

Agro

Textiles 26
Chemical - 3 Steel 2

Bamboo - 1 Fisheries- 1 Rubber-1

Pharma-1
Light engineering-1 Foundry- 1

Craft

Art Metal-ware -1 Stone Carving - 1

Leather-2
Chemical-1

Zari -1
Bamboo-1

Our Footprint

Project Development Process - A Snapshot

Identification of cluster

Interaction with industry associations and other representatives

Identification of potential Entrepreneurs Identification of Land Need assessment and capacity building Establishment of SPV Procurement of Land Assessment of Common infrastructure, amenities & factory buildings for the park Preliminary layout plan Preliminary Costing Vetting by SPV Detailed Engineering & Procurement Award of contract Construction & Supervision Operation & Maintenance Preparation of DPR GoI Approval Financial closure

Our Footprint

Growth Pole Projects

Integrated development of a sub-district (about 1000

sq kms) with economic potential that would become growth engine with in the region

Cluster of clusters Enterprise development with PURA (infrastructure and

linkages)

Projects are being formulated by GoI (SSI) through

National Commission for Enterprises in Unorganised Sector (NCEUS)

IL&FS has been mandated to prepare the DPRs to

begin with
Our Footprint

The Growth Pole Concept

Eco System For Sustainable Employment and Incomes

Existing Enterprises & Clusters

Promotion of Potential Clusters

Attracting New Investments

Factor Conditions Policy Initiatives

Capacity Building Market Skills Business Dev Services Technology Prod. Infrastructure

Infrastructure and Linkages (PURA)

PPP Institutional Framework

Our Footprint

Growth Pole: Evolution and Development

Public Existing and Potential clusters STAGE I Capacity Building: Business Development Services Skills and Micro Finance

Inst. Advisory Group/ Project Manager

Organisations (Formed with Common Interest Groups/SHGs)

Production Inputs: Technology and Design

Enabling Policy Framework

Market Linkages Market

Cluster / Sector Development PPP Technology Upgradation Finance STAGE II Infrastructure and Linkages SPVs

Demand for employees and migrants

Private
Social Infrastructure Retail Services

STAGE III Housing

ULB

Growth Pole

Our Footprint

Skill Development a precursor to industrial growth

If Indian manufacturing sector has to grow at a rate of 12% per annum, it will be necessary for the education and training system to produce at least 1.5 million technically skilled people every year - NMCC

Our Footprint

Manpower Development for Apparel Industry

Apparel fastest growing segment in the textile value

chain

In need of skilled manpower at various levels Lack of trained manpower has been adversely affecting
volumes, quality and productivity

Demand-supply gap of 1.9 Million persons by 2010 Limitations of the present initiatives:

Current training capacity (govt & private) is only 40,000 per

year Quality of training does not match with the industry requirement
Our Footprint

The Strategy

Demand driven and placement assured programme

To train 1 million persons over a period of six years

Leverage the infrastructure of existing institutions like
ITIs, PSCs, ATDCs, and private/NGO vocational

institutions.

Bring in innovative multi-media based teaching

methodology and market oriented curriculum

Driven by SPV with industry participation Government to provide one-time capital support
Our Footprint

The Approach
APPTEX Manpower Development Company Limited (SPV)
Assistance towards Equipment Content development Teaching aids O&M expenses Provide equipment Content development Train the trainers Certification Placement Assistance

MoRD

Advisory Committee

Training Partners

Training Centres
(Polytechnics/ ITIs/PSCs/ ATDCs/NGOs/ Private Entrepreneurs Provide Land & Building Conduct programme Placement

Trainee

Feedback

Our Footprint

The Process flow

Identification of Prospective Employer Assessment of manpower requirement Identification of Potential catchment area Identification of BPL trainees as per GoI Norms Screening by SPV representative with respect to suitability for training Selection of trainees Sending the trainees to nearest training centre by SPV Training by the SPV through training partner Examination & Certification by training partner under supervision of SPV

Placement by SPV

Our Footprint

IL&FS Anchoring the Initiative

Concept developed and presented to major

stakeholders

SPV has been incorporated Content development is in progress

Training partners have been identified Ministries of Rural Development and Textiles have
agreed, in principle, to support the programme

Industry has agreed to be part of SPV and the

programme

To be launched by Feb 2007

Our Footprint

Index
IL&FS-Cluster Development Initiative

The Need
Vision Approach & Methodology Bouquet of Services Our Footprint

The Organogram
Our Team Why Us?

Our operating framework :

CEO COO
Architects

SME Policy Experts

Legal Experts Industry Technical Experts Marketing Experts

Engineers Project Finance Experts Project Management Experts Infrastructure Planners Environment Engineering Experts

Brand Developers

Cluster Capacity Building Expert

Cluster Capacity Building Expert

Cluster Capacity Building Expert

Cluster Capacity Building Expert

Organogram

With emphasis on adding value to our clients by providing Multidisciplinary inputs

Project Finance

SPV
Capacity Building

Engineering

Environment Specialists

Legal

Domain Expert

Organogram

Index
IL&FS-Cluster Development Initiative

The Need
Vision Approach & Methodology Bouquet of Services Our Footprint

The Organogram
Our Team Why Us?

Skill Sets residing in-house:

Given the breadth and depth of services provided by our team across
projects, an in-house cross-functional team with following skill sets has been put in place

Industrial Domain Experts to assist in defining technical contours of the projects and providing SMEs access to technology and best practices

Technical Experts to oversight physical project development Capacity Building Experts to develop SMEs capacity to move up the value chain

Project Development Experts to interface with sponsors, State Governments,

external technical consultants and other stakeholders on all aspects of

project development

Project Financing team to structure projects and raise external financing Legal, Accounting and Secretarial expertise from within IL&FS and outside

Our Team

Our geographic presence helps us cater to the needs of our clients in the North, South, East or West

Delhi Jaipur

Ahmedabad Kolkata Mumbai

Hyderabad Bangalore Chennai Palladam

Our Team

Index
IL&FS-Cluster Development Initiative

The Need
Vision Approach & Methodology Bouquet of Services Our Footprint

The Organogram
Our Team Why Us?

We believe in
handholding Indias industrial growth through considerable contribution from the MSMEs, by providing them with strong infrastructure enablers through a collaborative approach, thereby ensuring

trade related compliances and creating a conducive

framework for MSMEs to move up the value chain efficiently and expeditiously

Thank you, and looking forward to work with you soon

www.ilfsindia.com

You could reach us at:

Sanjay Sethi

IL&FS India Habitat Centre, 4th Floor Lodhi Road, East Court, Zone VI, New Delhi - 110003 Tel: 91-11-24682060 to 63 Fax: 91-11-24682070 to 71
Email: sanjay.sethi@ilfsindia.com Ravi Raman The IL&FS Financial Centre, 3rd Floor Bandra-Kurla Complex, Bandra (E) Mumbai - 400 051 Tel: 91-22-66947682 Fax: 91-22-66947700 Email: ravi.raman@ilfsindia.com

www.ilfsindia.com