+917718880355

news

Apparel industry may be hit due to subdued demand from key importing countries

YarnsandFibers News Bureau 2017-03-29 16:00:00 – New Delhi

With subdued demand from key importing countries, the growth in apparel export may stay muted for a consecutive year in FY17. According to the Apparel Export Promotion Council’s (AEPC’s) estimates, it is likely to close at $17.3 billion (Rs1.12 lakh crore) in 2016-17, up by roughly two percent from $16.9 billion (Rs 1.10 lakh crore) in the previous financial year.

While sluggish demand from importing countries has been the primary reason for the muted guidance, what also works against India is its heavy reliance on cotton amid an increasing share of lower-priced man-made fibre-based apparels by other competing markets such as Vietnam and Bangladesh.

The other competing nations import almost all the raw materials and hence have a better economies of scale than India, which is dependent heavily on the domestic industry, predominantly driven by cotton, said an AEPC official, on condition of anonymity.

The exports in value terms have declined, following an increase in the share of man-made fibre-based apparels, which are lower in value vis-à-vis cotton-based apparels. This in turn has been caused by the improved competitiveness of polyester vis-à-vis cotton during the past few years, Icra said in its March update.

While this growth is modest compared to the healthy growth clocked in prior years, the growth quantum looks satisfactory in the backdrop of a one percent decline in import quantity of the US. Similarly, apparel export quantity to the European Union (EU) is estimated to have grown six percent in 2016, compared to a five percent in total apparel import quantity of the EU.

On the other hand, exports to the UK have fallen to $1.2 billion (Rs 7,800 crore) from $1.6 billion (Rs 10,400 crore) due to sluggish demand, according to AEPC sources.

The previous three quarters have seen fluctuating growth for the Indian apparel industry. Top garment manufacturers such as Gokaldas Exports Limited and Mafatlal Industries, among others, have posted net loss in the third quarter of the current financial year, against a profit in the corresponding period in FY16.

Gokaldas Exports posted a net loss of Rs 21.84 crore for the quarter ended December 31, 2016, against a net profit of Rs 25.92 crore for the corresponding period in FY16. It also posted quarterly revenue from operations of Rs 198 crore, down by 19 per cent as compared to Q3 of FY16.

The decline in revenue in Q3 FY17 was due to continued impact of loss of business from a key export customer and delay in onboarding and stabilising operations of a new customer. The company has been able to stabilise operations of the new customer towards latter part of the quarter and commence deliveries, complete servicing of the same is expected in the fourth quarter, the company said.

Similarly, Mafatlal Industries registered a net loss of Rs 12.5 crore in Q3 of FY17 against a net profit of Rs 1.74 crore in the Q3 of FY16. On the other hand, Arvind Limited posted net profit after taxes, minority interest and share of profit/(loss) of associates of Rs 75.62 crore for the quarter ended December, compared with Rs 90.46 crore for the year-ago period.

Given the weak trend in global apparel trade, the domestic market-focused apparel manufacturers are expected to perform relatively better than exporters for second consecutive year in FY17.

However, given the temporary pressures observed in domestic consumption owing to demonetisation, the gap between the growth rates is likely to narrow significantly. Thus, compared to an estimated revenue growth of 10 percent for domestic market-focused players, the revenues of exporters are expected to grow by nine percent in FY17 for the entities,it said, while adding the operating profit margins of the domestic market-focused apparel manufacturers remain higher than the apparel exporters.

0 0 vote
Article Rating
0 Comments
Inline Feedbacks
View all comments

Market Intelligence

Ask for free sample Report


why us?
21 yrs

experience

Fortune 500

Customer Base

100%

dedicated team

55+

Countries Served Worldwide


newsletter

Register below to receive our newsletters with latest industry trends and news!

WeCreativez WhatsApp Support
Our support team is here to answer your questions via WhatsApp. Ask us anything!
? Hello