 "Denim makers upbeat after better Q4 margins in FY13")
The denim industry, led by Arvind Limited, Aarvee Denims & Exports Limited, KG Denim Limited and Nandan Exim Limited, among others, saw bottomline increasing manifold for Q4 of FY '13.
According to industry players and experts alike, it is the growth in domestic market, drop in raw material prices along with success of value added products that has resulted in the positive trend.
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"Unlike exports, the domestic market grew tremendously as far as denim fabric and finished goods is concerned. What's more, even the rural areas saw considerable rise in demand for denim products. Also, since many players were expanding, lot of top denim makers forayed into functional and value added denim products which reaped benefits for us in the fourth quarter," said Sandip Mistry, company secretary of Ahmedabad-based Nandan Exim.
An Ahmedabad-based denim maker, Nandan Exim is investing around Rs 1000 crore for expanding its manufacturing capacity from current 70 million metres per annum to 115-120 million metres per annum by 2014.
The company posted a 264 per cent increase in its net profit for the fourth quarter ended March 31, 2013 at Rs 9.33 crore, up from Rs 2.56 crore for the corresponding period last year. On the other hand, Aarvee Denims and Exports Limited registered a net profit of Rs 11.85 crore as against Rs 3.22 crore for corresponding period last year, registering a rise of 268 per cent.
Apart from value addition in their products finding success with denim buyers in the fourth quarter, the companies also attribute it to decline in raw material prices.
"Drop in cotton prices helped us post better margins and we hope this should continue for sometime," said Utsav Pandwar, finance controller at Aarvee Denims & Exports Limited.
Even the denim major and textile conglomerate Arvind Limited registered a Q4 net profit of Rs 85.11 crore as against Rs 62.52 crore for the corresponding period last year, despite inflationary and weak consumer sentiments.
For the Coimbatore-based KG Denim, the growth in Q4 net profit was a whopping 39,100 per cent at Rs 3.92 crore. Last year, the company posted a mere Rs one lakh or Rs 0.01 crore of net profit due to high raw material prices.
"Both volumes and value have worked for denim industry this quarter. While the over capacity resulted in the industry pushing in huge volumes into the market, the value added products helped them explore demand well. Also, raw material also benefited them since cotton prices fell significantly in the previous quarter," said PR Roy, chairman of Diagonal Consulting, an Ahmedabad-based denim and textile strategy consulting firm.
According to Roy, cotton prices fell from Rs 39000 per candy of 356 kg to Rs 31000 per candy in the fourth quarter while denim fabric prices rose to Rs 132-170 per metre range.
It needs to be mentioned here that in order to beat over capacity in the market, denim makers had in recent times begun engaging in value addition, right from fibre, machinery, dyestuff to fabric. For instance, denim companies were engaged in value addition in areas like stretch denim, coating, fluorescent neps, knitted denim and printed denim, among others.