Textile companies being dyed deep red

By Shyam Pitroda

The slowdown is weaving a vicious net. And leading textile companies, already trapped, are getting snarled. About 10 of the top 15 listed textile companies have reported loss for the third quarter. In previous quarter the number was five, and a year ago only two companies reported loss.

Gokaldas, the country’s largest garment exporter, reported a net loss of Rs 15.5 crore for the quarter ended December 31. This is its first ever quarterly net loss and first loss since private equity giant Blackstone bought majority stake in the company.

Though Gokaldas’ poor performance was solely on account of mark-to-market losses, net sales have declined both on a sequential and year-onyear basis. The slowdown bug has not spared even the biggies. Arvind Mills recorded a loss of Rs 33.17 crore, its rival Raymond reported a Rs 15.2 crore loss for the quarter. Nahar Spinning, Vardhman and Abhishek too have registered loss. The operating profit margin (OPM), a key measure of profitability, has also been under strain for several textile companies.

Abhishek Industries’ OPM declined to 11.63% in the latest quarter from 19.15% a year ago and for Kewal Kiran Clothing it fell to 18.43% from 22.03%. OPM fell to 9.94% for KPR Mill, a large textile company in the region, from 23.3%. “Our performance in the current quarter is indicative of the macro economic environment,” said P Nataraj, MD, KPR Mill. KPR, like other mills in the state, faces power shortage, which has resulted in a mere 58% capacity utilisation despite an increase in capacity. It has decided to defer expansion until existing capacities reach optimum utilisation.

“Fabric offtake has been poor. The export of yarn has been affected because of the demand slump,” said a top official of a leading textile company. “Raw material (cotton and polyester) prices declined during the quarter. However, higher minimum support price for cotton has increased manufacturing costs,” analysts said.

The silver lining is that net sales have grown for many of these companies. Most large textile companies have managed to register a growth in sales.