Denim makers post healthy Q1 growth despite oversupply

Arvind, KG Denim and Nandan Exim have each posted over 20% growth rates in their net profits for the said period

Oversupply and continual rise in capacity notwithstanding, the denim industry has plugged a double digit growth in bottomline for the first quarter of fiscal 2013-14. Major players like Arvind, KG Denim and Nandan Exim have each posted over 20 per cent growth rates in their net profits for the said period.

While its overall standalone net profit growth was 75 per cent at Rs 79.35 crore, Arvind's textile segment registered a bottomline growth of 46.17 per cent at Rs 149.52 crore. Similarly, at Rs 3.63 crore, KG Denim's Q1 net profit for fiscal 2013-14 grew by 77 per cent as against Rs 2.05 crore for the corresponding period last year.

Further, Ahmedabad-based denim arm of textile conglomerate Chiripal Group, Nandan Exim Limited posted a 45.19 per cent increase in its first quarter net profit at Rs 9.51 crore. According to industry experts, the growth has come despite oversupply in the denim market due to raw material and price stabilisation.

"Cotton prices have been stable for most part of the first quarter. Moreover, prices were under pressure only for a short time. There have also been hardly any problem in volumes and orders which as resulted in a healthy growth for the denim industry," said PR Roy, chairman and co-founder of Diagonal Consulting, a textile strategy consulting firm.

According to Deepak Chiripal, chief executive officer of Nandan Exim, the improved first quarter results have also been due to introduction of qualitative products.

"The performance of the company has been satisfactory for the quarter both in terms of sales and profits. The impressive growth in the first quarter of the year 2013-14 can be contributed to the company's effective management, increase in production capacity and qualitative products. We thank our shareholders for their continuous support and hope to receive the same in future as well," said Chiripal.

However, the oversupply did take a toll on net profit as well as income generation for Q1 of FY '14 of Aarvee Denims & Exports Limited. The Ahmedabad-based denim maker registered a decline in net profit of 72 per cent at Rs 3.70 crore as against Rs 13.24 crore for the corresponding period last year.

"We had been under price pressure as well as decline in orders. Add to that, the industry has been adding capacities continually which has distributed the orders among old and new," said Utsav Pandwar, chief financial officer of Aarvee Denims & Exports Limited.

Meanwhile, industry players and experts alike believe the second quarter is likely to be better for the current fiscal. "The demand situation has been improving while there seems to be certain stability in raw material prices which should improve the second quarter," Pandwar added.