Apparel industry faces slowing growth

Export fall, idling capacity, demand concerns weigh on sector

Idle capacity and deferment of expansion summarise the current state of the apparel retail industry, in the midst of a slowdown.

Alok Industries, for example, had plans to expand its weaving, knitting and terry towels’ capacities. “We have shelved the plans,” says Dilip Jiwrajka, managing director. Though sales are expected to grow 35 per cent, payments are coming in late. Till last month, a third of the installed capacity was idle.

Almost all leading companies are budgeting for a slower growth rate this year. “Monthly sales are fluctuating between Rs 80 crore and Rs 140 crore. More, we are expecting only a 30 per cent growth this year, compared to 50 per cent growth in the last two years,” said J Suresh, managing director of Arvind Lifestyle Brands and Arvind Retail.

The good news is that a part of the industry expects things to improve. According to Suresh, while the period between May and September saw poor sales, the upcoming festive season might bring some cheer. Demand has already started coming back, ensuring higher capacity utilisation in the past month, specially for yarn, fabric and home textiles.

“Textile players have witnessed an increase in orders which has led to higher capacity utilisation. Things are not back to the good old days, but the situation is better,” said D K Nair, secretary general of the Confederation of Indian Textile Industry.

Others are not convinced and said poor garment exports would impact the rest of the value chain. “No doubt, capacities are being added in certain verticals like denim and cotton shirting but others have deferred such expansion. The country has not been able to boost exports. So, while the domestic apparel retail market has slowed, exports have also faltered, impacting the entire value chain,” said PR Roy, senior textile consultant.

India’s garment exports fell 10.5 per cent year-on-year to $1.1 billion in June due to weak export demand. According to the Apparel Export Promotion Council, exports were $1.2 bn in the same period last year.

Even in denim, at a time when fabric manufacturers have expanded their capacities, a slowdown in retail has played spoilsport. “The year has been witnessing many players expanding their capacities. However, with overall retail slowing since the last couple of months, the denim industry has been affected to that extent,” said Rajiv Dalal, managing director of Mafatlal Denim.

According to another company, bigger textile players have also been facing demand concerns, coupled with underutilisation of capacity. Many had availed of the Technology Upgradation Funds Scheme (Tufs) in recent years and had expanded their capacities, currently not being utilised.

However, to be prepared for an improvement, Tufs is being made available for a longer period. “We are supporting the industry in every way, we are pushing for Tufs to be included in the 12th five-year Plan,” said Panabaaka Lakshmi, minister of state for textiles.

For the current financial year, the export target is pegged at $40.5 bn. This now seems unachievable, due to the current economic situation in major export destinations such as the Euro zone and the US.