Alok Industries, Arvind to see higher margins

Alok Industries and Arvind Ltd (formerly Arvind Mills), two major textile companies, are likely to see a better quarter as cotton prices during the fourth quarter of FY13 have remained stable at around Rs 10,000 a quintal and synthetic fibre prices have been on the higher side.

Although cotton prices were around the same level last year during the same time, companies were sitting on costly inventory. Both companies still use more cotton than synthetic fibre. For Alok Industries, the share of revenue from polyester rose in the last financial year to 38 per cent from 35 per cent in FY12.

However, cotton use is much higher at 62 per cent. Revenue for the period is expected to be Rs 3,172 crore, up 22.2 per cent from last year. Profit after taxes might rise by 90 per cent. Weak exports might pull down Alok's margins.

In the quarter, key inputs such as purified terephthalic acid and monoethylene glycol have become costlier by 8.6 per cent and 13.3 per cent year-on-year to Rs 69.5 a kg and Rs 68.3 a kg, respectively. On the other hand, domestic chip and partially oriented yarn have also become expensive by 5-10 per cent, thereby providing cushion to margins.