Arvind feels the blues as denim sales plummet

Denim major Arvind Mills faced a sharp five per cent fall in denim sales due to overcapacity in the international as well as domestic market.

In the international denim market, low-cost supplies from companies from Turkey and Pakistan have left Arvind losing five per cent share.

The prices were already under pressure in the international market in the last few years.

Simultaneously, in the domestic market, companies from across the country have increased their production capacity and supplies leading to prices falling by Rs 5-6 per metre.

In the third quarter, the company recorded Rs 13 crore drop in net profit compared with the same period in the previous financial year.

"Our results have been impacted due to sluggish denim sales of five per cent. Owing to significant addition of denim capacity in the country, prices in the domestic market have been subdued and volumes in the international market are also under pressure due to regional capacity build up," said Jayesh Shah, chief financial officer and director of Arvind Mills.

Results in the next quarter may also follow the third quarter results with a dip in net profit. "Margins are likely to remain under pressure in near future and the company is devising strategies to overcome this situation," said Shah.

He also said the company's denim business has witnessed a build-up in the inventory pipeline, which has led to pressure on prices.

"The company expects the impact on denim prices to ease in the next financial year due to the retail boom being witnessed in the country, coupled with the fact that Arvind Mills has consciously entered into new denim markets," Shah added.