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Textile exporters ride out of slowdown

source: china textile 2010-08-30  

Textile exporters, who had been facing soft demand in key markets of the US and Europe as the developed economies struggled to shrug off a severe economic downturn, are once again seeing order flow that could lead to a turnaround in fortunes.

The country’s top textile exporters including Gokaldas Exports, Alok Industries, Arvind Mills, Orient Craft and House of Pearls have seen 20% increase in exports orders in the first five months of the current fiscal over the year ago period. As against this, April-August 2009 had reported a 10% drop in orders over the corresponding period of the previous year.

The overseas buyers want to diversify their sourcing beyond China so they are turning to India, said Dilip Jiwrajka, MD, Alok Industries. “Our order book is at an all-time high and we expect this scenario to continue,” he said. The growth in demand has come on the back of improving economic prospects in the US and Europe, besides the appreciation of Yuan that makes sourcing from China relatively costlier compared with the past.

This is expected to yield even better results for Indian exporters by the third quarter ending December 2010 when the orders for next year’s summer collection start pouring in, feel exporters.

Arvind Mills that supplies to international brands such as GAP, Banana Republic, Tommy Hilfiger, JC Penny and Polo Ralph Lauren expects to run its factories to their full capacity for the next three months as it has seen a growth of 20% in its order book in the first five months of the fiscal, company CFO, Jayesh Shah said.

“Textile demand has stabilised in international market and many new buyers are also pouring in due to the situation in China,” he said.

But concerns remain on earnings potential for textile firms as the government has allowed export of cotton from October. Industry players say the move has increased raw material cost by over 15%. Rajendra Hinduja, MD, Gokaldas Exports said even as the orders are increasing and the factories are running to the full capacity, net realisation has come down.

Industry body Apparel Export Promotion Council (AEPC) cautions the sector is not out of the woods yet, especially small firms that have shrunk overall apparel exports by 8% in the first five months of the fiscal over the year ago period. “The increase in cotton prices and the currency fluctuation against US Dollar and British Pound has affected the small exporters,” AEPC chairman, Premal Udani said.

But some like private equity firm Blackstone-backed Gokaldas Exports who has seen international demand stabilising, expect additional business from smaller markets like Sri Lanka, which depends on Pakistan’s textile exporters. “The flood in Pakistan has destroyed its cotton crops and India is the best alternative for Sri Lanka. We have received inquiries from that market,” Mr Hinduja said.

Indian textile exporters are also hoping to grab some buyers who were traditionally sourcing in bulk from Bangladesh. This is because wages in Bangladesh’s garment industry are expected to almost double from November after the garment makers agreed to wage hike demand of local workers. This will affect the cost of products made in the neighbouring country, one of the top low cost global competitors for Indian textile firms.