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Textile exporters turn to retail

The loses incurred by rising rupee have lead textile players to invest in retail business, reports Saurabh Turakhia.

business Updated: Feb 01, 2008 22:17 IST
Saurabh Turakhia

The rising rupee has been giving nightmares to Indian exporters from quite some time. This is being reflected either through slow or unsatisfactory performance of export divisions of some Indian companies.

Indian textile houses have recorded mediocre results in the third quarter. Though Raymond’s net sales increased from Rs 297 crore to Rs 332 crore on a year on year basis, the operating profit fell from Rs 76 crore to Rs 43 crore. Its profit after tax suffered even more paling at just Rs 9 crore in comparison to Rs 39 crore last year. The provisional consolidated results in fact show a net loss after tax of Rs.8.7 crore for the quarter ended December 31, 2007 as against profit of Rs.39.9 crore for the corresponding quarter of the previous year.

Speaking to Hindustan Times, Pradeep Bhandari, group president of Raymond Ltd said, “The cause of poor results is partly due to high element of depreciation. Secondly, the supply at one of our plants was disrupted owing to workers who went slow with the production.” A saving grace was the apparel business which registered a growth of 40 per cent, said Bhandari.

The company’s export sales (excluding export incentives) were Rs.27.7 crore, an increase of 6 per cent over the corresponding period of previous year. Of this, 40 per cent of fabric exports were made through the garmenting route. Bhandari said that the worsted textile business gets 18 per cent of its business from exports.

Arvind Mills, another textile player, has recorded minor increase in profit after tax from Rs 4 crore to Rs 6 crore on a year on year basis. Jayesh Shah, chief financial officer and director of Arvind Mills said that measures are being taken to manage the rising rupee issue, “We are trying to reduce our reliance on exports. As of now, the exports proportion to the total turnover is 45 per cent and we would like it come down to 30 per cent by next year.”

No wonder then that while on one hand, these players are applying cost cutting measures, on the other hand, they are investing in the retail business. Suresh J, CEO, Brands and Retail Arvind Brands said, “We have already opened our fist large-format store called the Mega Mart. It will stock 140 brands and offer them at discounts. We will have seven more outlets by March 2009.”

Rahul Mehta, president of CMAI (Clothing manufacturers association of India) said that Indian exports are expected to register negative growth for the year 2007-08. China, he said is insulated largely due to maintaining an artificial weak currency. Shah said that improvement in productivity is the only way to manage the crisis caused due to the rising rupee.