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Textile exporters bet big on interest subvention

source: china textile 2010-08-24  

INDIA'S largest textile exporter Gokaldas Exports is upbeat about the two per cent interest RELATED of the 2009-2014 foreign trade policy and sees this as a positive move in helping exporters get interest payment relief.

As per the annual foreign trade policy review, zero duty export promotion capital goods (EPCG) scheme has been extended by one year to March 31, 2012, duty entitlement passbook (DEPB) scheme has been extended by six months till June 30, 2011, the number of additional products from sectors like leather, engineering, textiles, jute were added to two per cent interest subvention scheme and additional benefit of two per cent bonus was given under focus product scheme.

"The two per cent interest subvention scheme is definitely a good thing for exporters like us. This scheme was in place till March 2010, following which it had been withdrawn. Now with its re-introduction, the company will get about Rs 1-2 crore interest payment relief per quarter from banks, which will be beneficial for us," Rajendra Hinduja, MD of Gokaldas Exports, told Financial Chronicle.

According to him, other schemes such as EPCG and DEPB are not applicable to the textile company. "DEPB scheme is generally not utilised by apparel textile exporters like us as it is a longdrawn process. Instead textile exporters like Gokaldas prefer the drawback payment scheme in which the Government offers the exporters 8.8 per cent payback and thereby is lot more beneficial," he said.

However, Hinduja is not completely satisfied with some of the newer provisions and said that benefits under market linked focus product scheme to garment exports to EU, which extended till March 2011, will negatively impact the com pany's income.

"This scheme was earlier extended to both Europe and US, and now with US being omitted, the company's income will be hit by at least Rs 2 crore per quarter," Hinduja pointed out.

The Bangalore-based company, whose exports stood at Rs 1,100 crore last fiscal, expects its export target for FY11 to remain at Rs 1,150 crore.

Gokaldas, which swung to loss of Rs 177.25 million for the quarter ended June 2010 compared with a profit of Rs 28.16 million in the same quarter previous year, sees the pres sure continuing in the second quarter as well. The compa ny, which clocked about 10 per cent year-on-year growth till 2008, is growing at 5 per cent annu ally post recession.

"The rise in raw material costs, 25 per cent increase in s as well pressure on wages as well pressure on export prices have been the predominant reason behind poor performance last quarter. We hope the situation to improve from Q3 onwards, helped by good cotton crop during October, which in turn is likely to bring down the prices o raw material," he added.

As per Capitaline data there are 979 listed com panies in the textiles an fabrics industry with an ag gregate net sales of R 128,761 crore and an ag gregate net profit of Rs 25 crore in their respectiv latest financial years Gokaldas Exports operate in the readymade appare sector, a part of textile and fabrics industry. I this, 68 companies had total net sales of Rs 705 crore and a total net profi of Rs 301 crore. Gokalda Exports' non-consolidate net sales in the FY 2009-1 was Rs 1,068 crore an suffered a net loss of R 1.93 crore. Thus, Goka ldas' net sales is 15.15 pe cent of the readymade ap parel sector and 0.83 pe cent of the total textile and fabrics industry.

Among 68 readymad apparel companies, Gok aldas is the second largest The largest in the sector i Koutons Retail with a ne sales of Rs 1,203 crore an a net profit of Rs 83.1 crore in FY 2009-10.

Of Gokaldas' net sales o Rs 1,93.40 crore in F 2008-09, the revenu earned in forex was R 1,004.81 crore indicatin revenues from exports.