Rupees’ downfall helps garment makers

The sharp fall of the rupee over the past few months

is expected to help the Indian textile companies since most of them have increased exports. Cotton textile exporters would get more value for every dollar-denominated sale unit made in the global markets. Readymade garment exporters will benefit, given that the export volumes are also on the rise since the beginning of 2013 after nearly two years.

A report by Crisil Research reiterates that garment exports to the US and Europe, which fell by 7 percent and 15 percent, respectively, in 2012, compared to the previous year, have shown signs of improving in the current year. Interestingly, India has also gained market share in these two regions, although on a low base against China.

As per Apparel Export Promotion Council (AEPC), leading global brands have increased their sourcing from India following greater stability in output and factory compliance compared with other Asian countries. Further, most garment makers have also increased prices this year to pass on higher yarn prices.

As per experts, some integrated units are likely to register higher revenue after nearly three to four quarters. Therefore, favourable market conditions like higher volumes and better pricing power could translate into improved profitability for garment makers amid rising yarn and cotton prices.

Crisil says, garment makers had seen an operating margin erosion of around 70-80 basis points to 9.3 percent from fiscal 2012 to the year ended March. One basis point is one-hundredth of a percentage point. Fortunately, garment manufacturers, barring some integrated companies, are not saddled with huge debt like the spinning mills.

However, with importers seeking discounts over export orders due to falling rupee, coupled with tough competition from countries like China, Bangladesh, sustaining the growth volume could prove difficult for Indian exporters.