Textile majors post strong top line growth

The end of the quota regime has brought in new opportunities for Indian textile industry. The strong topline growth reported by most of the textile majors show the optimism prevailing in the industry.

Apart from the strong topline growth, textile majors have also reported good results in the third quarter of the current financial year and the companies are all optimistic of doing good business in the final quarter of the current financial year.

The Indian textile majors attribute their good performance in the topline growth to the measures taken by them well in advance before the end of the quota regime.

The Ahmedabad-based denim major Arvind Mills Ltd, a member of the Lalbhai Group and one of the largest integrated textile manufacturers in the world, has reported an 89 per cent rise in net profit for the third quarter ended December 2004 to Rs 36 crore against Rs 19 crore last year.

Jayesh Shah, chief financial officer and director, Arvind Mills, said, "Significant growth in volume is the driving the overall performance of the company. We have seen a topline growth of 19 per cent. Our results reflect the robust demand for denim and we expect the demand to accelerate further in the future.

"The company's new denim garment capacities will be fully operational in the next two months to cater the growing demand and provide a further boost to the company's strategic thrust in garments," he added.

The company is expected to further improve its operating performance in view of the reduction of the cotton prices by about 30 per cent.

The capacity expansion to financial restructuring of debts, from debottlenecking of its manufacturing facility to shifting denim and garment manufacturing facilities from Mauritius to India, shifting from naptha based captive power plant to gas based captive power plant and hiking the foreign institutional investor's (FII) investment in the company to 49 per cent have their positive effects on the profit of the company, the official said.

Welspun India Ltd (WIL), part of the Rs 2000 crore Welspun group and India's largest manufacturer and exporter of terry towels, has reported a profit before tax (PBT) of Rs 14 crore in the third quarter of the current financial year, up by 30 per cent as compared to PBT of Rs 10.8 crore last year.

B K Goenka, vice-chairman and managing director, WIL, said, "Despite the reduction in the DEPB rates, the company has achieved financial growth by optimising production, enhancing operational efficiencies and prudent fiscal measures. These initiatives shall be long lasting effect in maintaining company's competitiveness in the international market. To brace up the competition post-quota, the company has strengthened its marketing and design team by including highly experienced US professionals to spearhead the company's focus of becoming a home textile manufacturer in the globe. "

Aarvee Denims and Export Ltd (ADEL), the Ahmedabad based denim maker, notched up a total income of Rs 60.20 crore for the third quarter of the current financial year compared with Rs 48 crore for the same period in the previous year.

"We have achieved a significant growth in the third quarter of the current financial year due to the reduced cost of production and availability of raw materials at a lower price as compared to last quarter. Enhanced efficiency level and robust market demand is another important factor driving the performance of the company. We expect over 30 per cent top line growth for the current financial year as compared to previous year. The company expects to achieve a turn over exceeding Rs 225 crore by the end of the current financial year as compared to last year," said Vinod Arora, CMD of Aarvee Denims.

The Ahmedabad-based Ashima Ltd expects its turn over in the vicinity of Rs 450 crore for its current financial year ended on December 31, 2004.

"The strategy of increasing the value in the entire chain is expected to increase the margins and though the turnover is not expected to increase significantly in quantity terms. The profitability would increase due to better margins, better cotton prices and increased value addition. The company is also in the process of a major financial restructuring to reduce the interest and financial costs. The same coupled with the on going operational restructuring is expected to improve bottomline of the company," B Ravi, vice president, corporate finance and company secretary, Ashima Group.