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India: Increased Demand Boosts Profits, Margins for Textile Firms

Rising international demand for textiles and the availability of raw materials at a reasonable cost lifted margins and profits for some of India’s largest textile producers. Even those firms not posting a profit from the increase in demand still reported lower net losses as the worldwide textile market heated up.

India’s major textile exporters, including Arvind Ltd., Gokaldas Exports, Vardham Textiles and Welspun India posted positive numbers for the quarter ended in March.

Welspun India posted a hefty net profit increase of 83 percent for the quarter. Net profits for Vardhman Textiles climbed 33.9%, and Arvind Ltd. saw an 11.49% increase.

Vardham Textiles issued a statement explaining the spike in textile demand and the corresponding increase in margins and profits.

“There has been a spurt in the margins compared to the corresponding period last year, essentially due to favorable conditions, both in terms of availability of raw material at reasonable costs and the demand for textile products, owing to the huge rise in exports to China.”

Arvind Ltd.’s increase in profits was attributed to its growing brand sales and generally healthier retail sales. The firm’s quarterly net profit was $15.3 million compared to $13.7 million for the same period in 2013.

Golkaldas Exports’ net profit for the quarter was $11 million, against a net loss of $17.7 million in the same period last year.

Vardham Textiles posted a net profit of $2.5 million for the quarter compared to $1.8 million for the same quarter in 2013.

Welspun India’s net profit for the quarter $15.9 million, up from $8.7 million in the same period last year.

In the wake of March’s positive numbers, Indian textile firms were optimistic about the remainder of the year.

Exports to the U.S. are expected to increase along with exports to Europe. Structural problems potentially impeding export growth for Bangladesh, China and Pakistan, could also help increase Indian exports.

“While the demand pattern is likely to be similar, adjusted for seasonality, there are headwinds on account of inflationary conditions and an increase in wage rates,” a spokesperson for Gokaldas Exports said. “However, the key risk is the impact of this increase in costs on the competitiveness of the Indian garments industry vis-à-vis other countries.”