Dollar decline does in sports goods exporters

RUPEE RUBBLE PART - 2

Satish Wasan is busy overseeing the footballs made in his factory getting loaded into a truck. These will soon be used by the top football clubs of Europe. Wasan has little reason to complain.

However, he is far from happy. "There is no fun left in this business," says the 60-something Punjabi businessman. The reason is not far to seek: Though most of his orders were invoiced in pounds, his buyers have started making payments in dollars. And with the rupee gaining against the dollar, his profit margins have got squeezed.

"In one such case, I lost almost Rs 400,000. The customers have not explained to me why they sent the payments in dollars. But, in the process, I am losing money," rues Wasan. For the 125-odd sports goods exporters of Jalandhar, business prospects have seldom been so bleak. Some of them say nearly 70 per cent of the business is now invoiced in dollar, though the destination of the sports goods could be Australia, New Zealand and Europe, to which the city has been supplying since the 1960s.

"Jalandhar started supplying to the US about 10 years ago, while the South African market opened up five years ago," says Raghunath S Rana, who owns two firms called Ranson and Aresson and is also the chairman of the Sports Goods Manufacturers and Exporters Association.

"Our margins are between 5 per cent and 10 per cent. The entire dollar component of our business is suffering a loss," says Surjit Singh Jolly of Robinson Sports, adding: "New orders are very hard to come by as we cannot supply at the current rates. It is very difficult to convince our clients to give us a better price, as they have the option to go to Pakistan and China."

Exporters like Wasan and Singh manufacture almost the entire spectrum of sports equipment and accessories. Due to their lower costs, they have managed to capture a sizeable part of the overseas market. In the April to January 2006-07 period, the city of Jalandhar exported sports goods worth Rs 343 crore. This year, exporters say, growth of exports from the city would be minuscule as the realisations could be down by at least 12 per cent.

Supply to the domestic market is not a viable alternative for exporters. "Though domestic sports goods market has lot of potential, it is not organised and hence at short notice we cannot supply. But in the coming years, this market is likely to come up," says Rana. With margins under threat, exporters say they have been left with no option but to revise their prices more frequently. "Usually, we used to revise our prices one a year. With the dollar weakening, we may need to revise prices on a monthly basis," adds Rana.

As it happens, most of the Jalandhar sports good exporters are small and have little reserves to cushion the impact of the rising rupee. Rana points turnover between Rs 2 crore and Rs 7 crore. Only 10 exporters have business above Rs 10 crore, while two exporters have business above Rs 20 crore. Along with the exporters, the rising rupee has also put a question mark on the future of the 400,000 artisans and workers who draw their livelihood from the industry.

The 8 per cent rise in the rupee in the past one year has burnt a hole in the pocket of India's exporters. Business Standard finds out the impact on the country's traditional export clusters in a three-part series.