The denim fabric manufacturing companies have shown considerable rise in margins, for the fourth quarter of the fiscal ended 2012-13, despite the over supply in the market.
Leading players inclduing Arvind Limited, Aarvee Denims and Exports Limited, KG Denim Limited and Nandan Exim Limited, among others, saw bottomline increasing manifold for Q4 of FY `13.
According to industry players and experts alike, it is the growth in domestic market, drop in raw material prices along with success of value added products that has resulted in the positive trend.
`Unlike exports, the domestic market grew tremendously as far as denim fabric and finished goods is concerned. What`s more, even the rural areas saw considerable rise in demand for denim products. Also, since many players were expanding, lot of top denim makers forayed into functional and value added denim products which reaped benefits for us in the fourth quarter,` said Sandip Mistry, company secretary of Ahmedabad-based Nandan Exim.
Nandan Exim, based in Ahmedabad, is investing aprroximately Rs 1000 crore for expanding its manufacturing capacity from the current 70 million metres per annum to 115-120 million metres per annum by 2014.
Nandan Exim posted a 264 per cent increase in its net profit for the fourth quarter ended March 31, 2013 at Rs 9.33 crore, up from Rs 2.56 crore for the corresponding period last year.
Aarvee Denims and Exports Limited registered a net profit of Rs 11.85 crore as against Rs 3.22 crore for corresponding period last year, registering a rise of 268 per cent.
Besides value addition in products, finding success with denim buyers in the fourth quarter, decline in raw material prices has also contributed to the rise in margins..
`Drop in cotton prices helped us post better margins and we hope this should continue for sometime,` said Utsav Pandwar, finance controller at Aarvee Denims and Exports Limited.
Arvind Limited, the leading denim manufacturer also registered a Q4 net profit of Rs 85.11 crore as against Rs 62.52 crore for the corresponding period last year, despite inflationary and weak consumer sentiments.
Coimbatore-based KG Denim, the growth in Q4 net profit has been whopping 39,100 per cent at Rs 3.92 crore. Last year, the company posted a mere Rs one lakh or Rs 0.01 crore of net profit due to high raw material prices.
`Both volumes and value have worked for denim industry this quarter. While the over capacity resulted in the industry pushing in huge volumes into the market, the value added products helped them explore demand well. Also, raw material also benefited them since cotton prices fell significantly in the previous quarter,` said PR Roy, chairman of Diagonal Consulting, an Ahmedabad-based denim and textile strategy consulting firm.
In order to beat over capacity in the market, denim makers had in recent times begun engaging in value addition, right from fibre, machinery, dyestuff to fabric.