Denim makers face tough times

TROUBLE TIME

Denim fabric manufacturers are forced to sell their products at a 10-20 per cent lower price, thanks to the hardening rupee, drop in exports and oversupply on the domestic front.

"Apart from the oversupply, overcapacity, strong Indian currency, lower exports from countries like Pakistan, China and Bangladesh have hit the denim segment in India," said Karthik Krishnan, chief manager (Corporate Strategy and Projects), Arvind Mills Ltd. The company, a pioneer in the denim segment in India, is one of the world's largest denim producers.

However Arvind's branded products are growing well, he added. "Last year our dependence on the denim segment was at 40 per cent, now this has come down to 30 per cent," Krishnan said.

Arvind Denim has a capacity to produce 110 million metres per year. The denim is exported to more than 70 countries, besides catering to the Indian market. However, Krishnan did not confirm the trend that denim is being sold at a discounted price.

He also declined to comment on the revenue per meter. "Excluding the denim segment, the Arvind Mill's production utilisation rate is 100 per cent. At present, our denim segment's utilisation rate is 70-80 per cent. The pressure on denim prices is likely to continue for some time," Krishnan said.

Arvind Mills has taken various initiatives to protect its profitability from the denim blues. It has opened marketing offices in Europe and the US to bag export orders. Apart from this, it has unveiled new products in the domestic market.

"At present, denim fabric is selling at a discount of 15-20 per cent. A few years ago there was a boom on the export front and manufacturers had undertaken massive capacity expansion. However, now that the demand is slowly declining, there is oversupply," said Sunil Gandhi, chairman, Garment Manufacture's Association.

"The profit margins are hit by at least 10-12 per cent. Besides, cotton prices are also high," said Nitin Parekh, executive director, Ashima Ltd. He added that the country was facing competition from China and Pakistan as the production cost here was higher as compared with those two nations.

Yamunadutt Agrawal, MD, Jindal Worldwide, said, "The stock glut in denim is on account of weaker dollar. If the Centre does not take any action, garment manufacturers will post losses," he added.