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Apparel exports gain over domestic sales in Sept quarter

According to analysts, there was slightly reduced domestic demand in the month after GST rollout


Apparel exports gain over domestic sales in Q2

Apparel exporters gained over others in the segment during the September quarter results, the second one (Q2) of this financial year.

For instance, KPR Mill, Kitex Garments and Gokaldas Exports, for which external shipment are the bulk of business, saw revenue or profit either improving or steady over both the June quarter (Q1), which was just before the goods and services tax (GST) rollout, as well as a year before. Fabric and garment maker showed profit of Rs 62 crore as against a net loss of Rs 7 crore in the pre-GST quarter of April-June.

However, and Arvind Ltd, whose garmenting business is equally focused on the domestic market, saw the impact of GST rollout of 28 per cent on branded apparel, with their bottom line declining over Q1 this year.

According to analysts, there was slightly reduced domestic demand in the month after GST rollout, despite a slight uptick in export sales. Wazir Advisors, a consultancy, says sales for exporters had increased with a rise in capacities and utilisation of specific (KPR, Kitex, Gokaldas).

For instance, KPR Mill saw its garment production increase year-on-year from 30.48 million units in last year to 39.41 mn this year.

"Overall apparel export of India to the US grew six per cent in Q2 from the previous year's Q2. However, for overall top textile players, consolidated sales declined by five per cent and Ebitda (operating earnings) margins declined by an average of four per cent," said Prashant Agarwal, joint managing director of Wazir Advisors.

Further, Ebitda margin remained the same or fell for most A rise in net profit of some, according to Wazir Advisors, such as Raymond, Kitex and Gokaldas Exports, was primarily due to higher other income.

While KPR Mill posted growth in net profit from Rs 62.8 crore in Q2 last year to Rs 63.2 crore this time, Kitex Garments went from Rs 13.1 crore to Rs 24.1 crore. Arvind, on the other hand, saw net profit for Q2 at Rs 42.1 crore, down from Rs 67.5 crore in the quarter last year.

"The second quarter turned out to be another challenging one for the industry, with GST implementation impacting our domestic textile business. Even the consumer-facing brands business was impacted in July as both the wholesale and retail channels were under pressure. However, the brands business saw strong performance in August and September, leading to good growth overall. Going forward, we expect the transitionary impact of GST to settle and expect revenue growth to return to normalcy," said Jayesh Shah, chief financial officer at Arvind.

Gokaldas Exports said the government had notified reduced drawback rates, along with availing of credit of GST paid on inputs effective October 1. "The is hopeful that the government will address this issue to restore competitiveness of the globally."

First Published: Thu, November 23 2017. 19:24 IST