Rise in demand boosts textile firms' margins

Vardhman Textiles' March-quarter net profit rose a whopping 101.37%

The availability of raw material at reasonable costs, coupled with a rise in demand, has led to a rise in the margins of textile firms for the quarter ended March.

Major textile companies such as Arvind Ltd, Vardhman Textiles, Welspun India and Gokaldas Exports have either seen an increase in net profit for the March quarter (10-80 per cent), or a drop in net loss, compared to the corresponding period last year. These companies attribute this to growth in exports, as well as a rise in domestic demand.

While Vardhman Textiles’ March-quarter net profit rose 33.9 per cent, those of Welspun India and Arvind rose 83 per cent and 11.49 per cent, respectively.

“There has been a spurt in the margins compared to the corresponding period last year, essentially due to favourable conditions, both in terms of availability of raw material at reasonable costs and the demand for textile products, owing to the huge rise in exports to China,” Vardhman Textiles said in a statement. For Vardhman Textiles, the net profit for the quarter ended March stood at Rs 154.32 crore, compared with Rs 115.25 crore in the corresponding quarter last year.

Consistent growth of its brands and its retail business segment led to Arvind’s standalone net profit for the March quarter rising 11.49 per cent. The company’s standalone net profit for the March quarter stood at Rs 94.89 crore, against Rs 85.11 in the year-ago period. Welspun India’s March-quarter net profit rose 83 per cent to Rs 98.66 crore from Rs 53.82 crore in the corresponding period last year.

Gokaldas Exports posted a net profit of Rs 6.35 crore for the March quarter, against a net loss of Rs 10.98 crore for the year-ago period. S Kumars Nationwide Ltd saw its net loss for the March quarter fall to Rs 233.07 crore from Rs 427.22 crore in the year-ago period.

With neighbouring countries such as China, Pakistan and Bangladesh facing structural challenges, which has hit their export competitiveness, Indian textile firms are consolidating their export positions. Welspun India says while the US economy is on a revival mode, which could boost Indian exports to that country, exports to Europe have also been rising. “This could receive a further boost if the India-EU free trade agreement is signed,” the company added. Textile firms are optimistic about growth in demand continuing this financial year. “While the demand pattern is likely to be similar, adjusted for seasonality, there are headwinds on account of inflationary conditions and increase in wage rates. However, the key risk is the impact of this increase in costs on the competitiveness of the Indian garments industry vis-à-vis other countries,” said Gokaldas Exports.