Denim industry operating margins decline to 10% amid overcapacity

Factors that could ease the situation include softening of cotton prices due to rise in sowing, coupled with capacity absorption to some extent by export

Operating margins of the denim industry fell from 13 per cent in 2015-16 to around 10 per cent in FY18. This is on the back of continued overcapacity in fabric and mismatch between denim fabric and garment capacity additions.

India Ratings and Research (Ind-Ra) anticipates the domestic denim sector will continue to face margin pressures during FY19, with 15-20 per cent of capacity not utilised. 

Led by Nandan Denim, Arvind, KG Denim, Jindal Worldwide and Aarvee Denim, India is a leading denim fabric manufacturer in the world, with a capacity of about 1,500 million metres per annum (mmpa). The competition is set