A revival in textile and apparel exports is reflected in the performance of companies active in yarn spinning, fabrics and apparel. In the second quarter, textile companies saw a growth in top lines and bottom lines on strong export demand and rupee depreciation.
In the quarter, the rupee hit a low of 68.83 against the dollar on August 28; the average rate was 62.07. Textile exports were $13.6 billion, compared to $12 billion a year ago.
Exports in the past few months have shown a good pick-up, with an increase in cotton yarn exports to China. The country has started heavy imports of Indian cotton yarn, even as it has reduced import of cotton from India. Yarn spinners and textile and apparel makers have reaped benefits of this revival.
Take Vardhaman Textiles, which has benefited from this, with 30 per cent of revenues from cotton yarn and fabric exports. In the quarter, the company saw a rise of 26.5 per cent in its net sales to Rs 1,279.5 crore. The net profit saw a rise of 154 per cent to Rs 177.8 crore. Analysts said it had fully hedged its foreign-currency exposure. “It is still sitting on low-cost cotton inventory, which will help it in the quarter and it will not be burdened with higher raw material costs. That is not the case with others,” said Bharat Chhoda, assistant vice-president at ICICI Securities.
Apparel exports from India have increased 31 per cent to $1.2 billion in October. India has started eating competing countries’, Bangladesh and China, shares. During April-October, exports increased 15.5 per cent to $8.26 billion.
Arvind and Raymond, which are into denim fabric and apparel exports, have benefited from this in a big way thanks to higher realisations and increase in quantity demand in export markets. Both the companies are present in the branded apparel space in the domestic market, which also grew during the second quarter.
“Arvind’s Mega Mart business and other branded apparel businesses have seen a growth of 35 to 40 per cent which has also helped the company to see a growth in their top line as well as bottom line,” said Rahul Singh, research analyst at Karvy Stock Broking.
Arvind had not fully hedged its foreign currency and was able to take advantage of the fall in the rupee, but raw material costs during the quarter was higher. Raw material cost of the company went up by 29.1 per cent to Rs 564.43 crore, compared to same period last year.
The firm posted a 29.6 per cent rise in its net sales on a year-on-year basis at Rs 1,762.76 crore. Net profit of the Gujarat-based textile major during the quarter went up by 39 per cent to Rs 90.05 crore.
Raymond performed better than expected during the quarter as the company’s Makers and Combo packs saw an increase in off-take, which helped the company’s textile segment perform better during the quarter. The company’s net profit during the quarter increased by 84 per cent to Rs 92 crore, while net sales moved northward by 10 per cent to Rs 1,224 crore. In the case of Alok Industries, operating margins have been impacted with the share of polyester increasing. Polymeris-ation is a business that requires a lot of cash flow, which has impacted the company. The company’s operating margin was 16.5 per cent during the quarter, compared with 21 per cent in the same quarter last year.
Net profit during the quarter was down by 66.5 per cent to Rs 96.98 crore, while total income showed a rise of 12.5 per cent to Rs 3,740.67 crore.
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