Continuing their bad run due to high inventory costs, several textile and clothing (T&C) companies have either booked losses or reported poorer results for the fiscal end March 31, 2012. While financial results of some of the firms are still awaited, those who have reported have a sorry story to tell.
Ahmedabad-based Pradip Overseas Ltd. and Gokak Textiles Ltd. have marked their balance sheets red with losses of Rs 76.65 crore and Rs 41.38 crore, respectively for the fiscal end.
A year ago, the firm had reported net profits of Rs 69.25 crore and Rs 9.37 crore.
Among other T&C companies so far, the likes of Century Textiles Ltd., Indo Rama Synthetics (India) Ltd., Mudra Lifestyle Ltd. and Vardhman Textiles Ltd. saw a dip in their net profits by 90 per cent, 77 per cent, 749 per cent and 76.65 per cent, respectively. Century Textiles posted a net profit of Rs 22.13 crore for fiscal year ended March 31, 2012 as against Rs 237.49 crore in corresponding previous fiscal. Similarly Indo Rama Synthetics (India) Ltd. and Vardhman Textiles Ltd. also saw a dip in their bottomline from Rs 139.41 crore and Rs 469.73 crore in previous fiscal 2010-11 to Rs 31.86 crore and Rs 109.66 crore in fiscal 2011-12, respectively.
In fact, Mudra Lifestyle Ltd. which registered a net loss of Rs 25.25 crore in previous financial year 2010-11 saw the same dip further to Rs 214.49 crore this year.
"More than half of the T&C companies would have made net losses while at least 70 per cent would have had poorer results. This is because of high inventory costs both in terms of raw materials and finished goods, restrictions on cotton exports, fluctuations in raw material and finished goods prices globally and domestically," said DK Nair, secretary general of Confederation of Indian Textile Industry (CITI).
While fully integrated companies like Arvind, Welspun, Alok, and Raymond may not be affected much by cotton and yarn price fluctuations, it is the smaller firms that are reeling under high inventory costs.
Yet, despite posting a rise in its profits by 48 per cent, even the textile conglomerate Arvind Ltd. felt the heat of high inventory costs. "The fiscal 2011-12 was extremely challenging year for Arvind. The year was characterised by global slowdown, weak retail demand at home, high volatility in cotton prices and foreign exchange and higher interest cost," Jayesh Shah, director and CFO of the company had told Business Standard earlier. The company's profit stood at Rs 245 crore for 2011-12 against Rs 165 crore in the previous year.
However, industry experts believe the situation may not prolong much and the next quarter may usher in good news for T&C companies. "Cotton and yarn prices have stabilised and demand has also been improving. However, firms don't have money to buy raw materials right now. If the government gives two year moratorium against repayment of principal amount term loans, textile firms would get enough breathing space to continue operations," Nair added.
