Jul 14 2013
The sharp fall of the rupee over the past few months should improve the revenue of many textile companies since most of them accrue from exports. Cotton textile exporters would get more value for every dollar-denominated sale unit made in the global markets. Readymade garment exporters will benefit, given that the export volumes are also on the rise since the beginning of 2013 after nearly two years.
A report by Crisil Research reiterates that garment exports to the US and Europe, which fell by 7% and 15%, respectively, in 2012, compared with the previous year, have shown signs of improving in the current year. Interestingly, India has also gained marketshare in these two regions, although on a low base against China.
Going by media reports, India’s Apparel Export Promotion Council says that leading global brands have increased their sourcing from India following greater stability in output and factory compliance compared with other Asian regions. Further, most garment makers have also increased prices this year to pass on higher yarn prices.
Analysts reckon that some integrated units such as Vardhman Textiles Ltd, Alok Industries Ltd and other firms such as Page Industries Ltd and Kewal Kiran Clothing Ltd are likely to register higher revenue after nearly three to four quarters. Therefore, favourable market conditions like higher volumes and better pricing power could translate into improved profitability for garment makers amid rising yarn and cotton prices.
According to Crisil, garment makers had seen an operating margin erosion of around 70-80 basis points to 9.3% from fiscal 2012 to the year ended March. One basis point is one-hundredth of a percentage point. Fortunately, garment manufacturers, barring some integrated companies, are not saddled with huge debt like the spinning mills.
That said, the Indian marketshare in the US and Europe is only in the low single digits. And, though Chinese readymade garments marketshare fell in the US and Europe in 2013 so far, it enjoys a little over one-third of the marketshare in these regions. But it remains to be seen whether the uptrend in volumes will sustain over the longer term, given the fierce competition from other countries.
Source:-www.livemint.com
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