Positive Q1 for Alok, Arvind due to stable cotton prices

Alok Industries and Arvind two major textile companies

are expecting to see a better quarter. Reason: cotton prices during the fourth quarter of FY13 have remained stable at around Rs 10,000 a quintal and synthetic fibre prices have been on the higher side. Although cotton prices were around the same level last year during the same time, companies had to deal with costly inventory. Both still use more cotton than synthetic fibre. For Alok Industries, the share of revenue from polyester rose in the last financial year to 38 percent from 35 percent in FY12. However, cotton use is much higher at 62 percent. Revenue for the period is expected to be Rs 3,172 crores, up 22.2 percent from last year. Profit after taxes might rise by 90 percent. Weak exports might pull down Alok's margins.

In the quarter, key inputs such as purified terephthalic acid and monoethylene glycol have become costlier by 8.6 percent and 13.3 percent year-on-year to Rs 69.5 a kg and Rs 68.3 a kg, respectively. On the other hand, domestic chip and partially oriented yarn have also become expensive by 5-10 percent, thereby providing cushion to margins.