Even as denim capacities are being added continually, the industry is now reeling with over supply and rising finished goods inventory. Denim industry players say the piled up inventory would take more than a quarter to subside.
"There is no short term solution for the over supply of denim finished goods. While the domestic market currently consumes 350-400 million metres per annum and exports another 200 million metres, the industry's capacities is running over one billion metres already," said Aamir Akhtar, chief executive officer, Arvind Denim, part of the textile conglomerate Arvind Ltd.
Resultantly, there is a demand-supply gap of 400-450 million metres currently in the domestic market. According to industry experts, the only respite to the situation could be the upcoming summer season wherein domestic demand for denim finished goods could rise.
"Over supply had been there since few months now. But in the current quarter, it has aggravated due to exams around the country. It is likely that with next quarter, youngsters would enhance their shopping and thereby retail sales for denim products. This should ease the over supply situation to some extent," said Rajesh Dudeja, founder of Denim Club of India,
Denim finished goods inventory is also piling up at Ahmedabad-based Aarvee Denims & Exports Limited.
"However, it would still take two more quarters before things could normalise. At Aarvee Denims too we are having finished goods inventory piling up," said Utsav Pandwar, chief financial officer of Aarvee Denims & Exports Limited, while refusing to divulge exact inventory details.
On a positive note, the situation is only prevalent in the domestic market which has offered some respite to major exporters like Arvind Limited which has over 60 per cent of its total 100 million metres of denim production meant for exports. "The situation is worse for denim players who are majorly focused on domestic market," Akhtar added.
It needs to be mentioned here that with such capacities rising in the denim industry, several denim makers are trying to find their niche by adding further value to their denim products.
Right from fibre, machinery, dyestuff to fabric, top denim makers including Arvind Ltd. and LNJ Denim of Bhilwara Group are looking to bring in exclusivity and premium to their products in a bid to stand out.
For instance, Arvind Limited is working closely with fibre, machinery and dyestuff makers on exclusive basis to add value to our products which could sell at a premium, while LNJ Denim has been investing in R&D for value addition like stretch denim, coating, fluorescent neps, knitted denim and printed denim.
