Textile industry on a comeback trail

Cheaper raw materials, favourable foreign exchange, full capacity utilisation to propel the industry

Having posted better third quarter results, Indian textile industry is bullish that its hay days are back. So much so that industry representatives and experts alike cite the next financial year as the “come back year” for the sector.

Cheaper raw materials, coupled with a favourable foreign exchange scenario and full capacity utilisation, will propel the textile industry to an overall growth rate of 15-20 per cent against the current 8-10 per cent. “The flip turn began in the second quarter and it further improved in the third quarter. The fourth quarter looks even better. In fact, the industry is on a comeback trail and will see substantial recovery in the next fiscal with a sub 15-20 per cent growth rate,” says D K Nair, secretary general of the Confederation of Indian Textile Industry (CITI).

An improved US economy, a recovering demand from the European Union and favourable raw material prices are leading the recovery, he added.

According to K Selvaraju, secretary general of the Southern India Mills Association (SIMA), with China cutting down its textile capacity and newer markets emerging on the scene, the next fiscal has some better prospects. “While growth will be considerable for the entire industry, it will be yarn exports in particular that will see a huge increase in performance,” adds Selvaraju.

As against the total growth rate of the industry, textile exports, which has been growing 15 per cent this year, will see double the growth in 2013-14, says a senior official at Alok Industries Ltd.

Jayesh Shah, director and chief financial officer of Arvind Ltd, is of the view that Indian consumption of textile is on the rise and the pace of growth in demand will increase gradually in the next five years.

“Indian textile industry is likely to benefit due to increased cost of manufacturing in China. In our view, branded apparel business will grow over 20 per cent next year and the textile industry in india should witness about eight to 10 per cent growth in rates. As far as Arvind is concerned, we are targeting about 20 per cent revenue growth next year,” says Shah.

Even Welspun India, which supplies home textiles a year in advance, sees better things ahead. Despite being on a replenishment mode, where its products are required to be supplied throughout the year, Welspun India is “bullish about next year where business would be hugely sustainable,” says Akhil Jindal, head-finance and corporate strategy.

After a dismal performance in the first and second quarters this year, several textile companies posted a healthy growth in revenue and profit. Arvind posted a consolidated 46 per cent rise in its net profit after tax for the third quarter. One of the largest integrated textile and branded apparel players, Arvind posted a net profit from ordinary activities after tax of Rs 75 crore for the quarter, up from Rs 52 crore a year ago.

For Alok Industries, launch of its new value-added products helped the company post a stand-alone net profit of Rs 240 crore for the December against a net loss of Rs 37.58 crore for the corresponding period last year.

On the other hand, Welspun India witnessed a 12 per cent growth in its net profit for the December quarter at Rs 33 crore against Rs 29 crore a year ago. The company’s net income too increased at 20.97 per cent to Rs 765 crore.

The Indian textile and clothing industry is sized at around $80 billion of which around $35 billion is exports.