Hits and Misses of Textile Conglomerates in FY ’19

by Apparel Resources

14-May-2019  |  11 mins read

Textile Conglomerates

It has been a stellar financial year for some Indian textile companies, while being a very challenging one for many others. Biggies such as Arvind Mills, Raymond, Vardhman Textiles and Grasim Industries have yielded a positive outlook for fiscal 2019, despite challenging global business environment. These companies, which are into the production of yarn and fabrics besides production and export of garments, have also recorded a higher growth in revenues along the integrated chain. On the other hand, companies like Morarjee Textiles, Bombay Rayon Fashions, Mafatlal and JCT slipped into the red and their quarterly revenues missed the estimates. Although these companies are optimistic, they believe that increased penetration of organised retail, favourable demographics and rising income levels are likely to drive demand for textiles this year.

Dwelling deeper into the performance of five public limited textile companies, Apparel Online found that businesses which are proactive to the changing time and have strong strategies in place are not only seeing top-line growth but also have healthy bottom line.

Raymond expanding offerings to stay relevant

It was a robust FY ’19 for India’s largest textile and global conglomerate Raymond, excluding the Q4 result, which is pending. Still the company is expecting the Q4 demand momentum to remain intact in the textile, shirting and apparel segments on extension of the wedding season and ‘end of season sale’ schemes. Its Q3 revenue from the textile segment stood at Rs. 847.7 crore, up by 10.3 per cent from Rs. 768.4 crore earlier. The company’s Q2 revenue from branded textiles stood at Rs. 884 crore, higher by 15 per cent over the previous year led by 14 per cent growth in the suiting business and 17 per cent in the shirting business. The segment sales for the quarter ended June 30, 2018 was Rs. 589 crore, higher by 3 per cent over previous year. However, excluding GST impact, it was up by 7 per cent, led by 23 per cent growth in the shirting business and 3 per cent in the suiting business driven by channel expansion and exports growth. Raymond CMD Gautam Hari Singhania said, “The initiatives that we have undertaken in the recent past are yielding strong results, and with seasonally strong quarters. coming in, we are confident to continue with the growth trajectory, enhancing value for all our stakeholders.”

Embarking on a large expansion strategy, it has teamed up with Reliance Industries to launch the eco-friendly range of fabrics, Ecovera, which will be manufactured using R|Elan, a technology from Reliance.

Arvind restructuring of businesses is supporting growth

In November 2018, the Ahmedabad-based textile manufacturer Arvind Mills got demerged into three separate entities, where the textile businesses including the denims, fabric and garments segment, along with the advanced material business, remained with Arvind. The company reported negative income numbers in Q3 of FY ’19. The consolidated revenue of the continuing business for Q3 of FY ’19 decreased by one per cent year-on-year from Rs. 1,691 crore in Q3 of FY ’18 to Rs. 1,680 crore in Q3 of FY ’19. The management attributed this decline to lower volume sales by 5 million metres in the denim business. Many international customers have undertaken inventory corrections due to which the sales fell, it informed. This caused an overall revenue reduction of 7 per cent, which was offset by an increase of 32 per cent in revenue from advanced material business. For Q2, the overall revenue growth of 12 per cent came on the back of 15 per cent growth in garments revenue and 21 per cent in the advanced materials’ division’s revenue, whereas it reported 13.3 per cent increase in consolidated net profit to Rs. 64.3 crore for the first quarter ended June 30, 2018-19.

It is to be noted that Arvind has an annual production capacity of nearly 250 million metres of fabric — both denim and woven fabric — but the company converts only 10 per cent into garments. Over the next three years, it aims to ramp this up to 40 per cent, and then to 50 per cent by 2022. Also in future, more and more of its looms and mills will be used for contract manufacturing of garments for its clothing partners.

Vardhman Textiles banking strongly on new developments in fabric

Vardhman Textiles’ revenue grew by 12.3 per cent year-on-year and 8.2 per cent quarter-on-quarter to Rs. 1,648 crore. Its revenue came above estimates of Rs. 1,537 crore. On the other hand, it reported good numbers mainly on account of better operational performance. Its revenue in Q2 of FY ’19 grew by 27.7 per cent year-on-year and 10.3 per cent year-on-year to Rs. 118 crore and Rs. 1,592 crore from the acrylic fibre and textiles segments respectively. Similarly, its revenue in Q1 of FY ’19 from acrylic fibre and textiles segments grew by 47.2 per cent year-on-year and 6.9 per cent year-on-year to Rs. 99 crore and Rs. 1,625 crore respectively.

The company has lined up Rs. 1,500 crore capex for the next 2-3 years, which it will use equally for fabric and yarn manufacturing facilities. Additionally, yarn production from increased capacity will be wholly used by fabric division. It also expects that fabric division would be more profitable compared to yarn division owing to less capital requirement.

Grasim Industries greater market acceptance of viscose is a winning edge

Grasim Industries’ viscose staple fibre (VSF) business in Q3 of FY ’19 stood at Rs. 2,616.7 crore and at Rs. 2,187.5 crore in the corresponding quarter. “The VSF business delivered highest-ever production in Q3 of FY ’19 at 1,41,000 tonnes, an increase of 11 per cent, and the sales volume at 1,34,000 tonnes,” the company said. The net revenue for Q2 of FY ’19 at Rs. 2,606 crore was up by 23 per cent. The VSF business reported quarterly production and sales volume of 137 KT and 136 KT respectively. The share of domestic sales in the overall sales rose to 84 per cent in Q2 of FY ’19 from 70 per cent in Q2 of FY ’18, led by a huge demand. The net revenue for Q1 of FY ’19 at Rs. 2,480 crore was higher by 35 per cent.

The company recently launched its eco-enhanced VSF variant ‘Livaeco’ on the back of the tremendous success of its brand Liva. The VSF business will continue to focus on expanding the market in India by partnering with the textile value chain, achieving better customer connect through its brands Liva and Livaeco and enriching the product mix through a larger share of specialty fibres. Last month, it signed a deal to acquire 100 per cent equity shareholding of Soktas India from its current promoters, for Rs. 165 crore. Thomas Varghese, Business Head – Textiles, Aditya Birla Group, said, “The acquisition is in line with Grasim’s linen business strategy to strengthen its presence in the premium fabric market. Increasing disposable income, fashion and quality orientation of Indian consumers has resulted in an increase in the demand for premium fabric over the years. This acquisition is a compelling strategic fit and further strengthens our leadership in the premium cotton and linen fabric market in India.”

Morarjee Textiles consolidating for greater integration of supply chain

Ashok Piramal Group’s Morarjee Textiles is a global player in the premium shirting fabric and high-fashion printed fabric business. The net profits of the last three quarters of FY ’19 show the textile manufacturer in the red, although the net sales for Q3 was up. The company reported Q3 net loss at Rs. 5.8 crore in December 2018, down by 2157.1 per cent from Rs. 0.3 crore in previous year. However, its net sales was at Rs. 95.3 crore in Q3, up by 0.08 per cent from Rs. 95.2 crore in the corresponding period. Similarly, its Q2 net loss was at Rs. 7 crore, down by 2002.7 per cent from Rs. 0.4 crore in September 2017 and net sales in Q2 was Rs. 82.4 crore, down by 4.5 per cent from Rs. 86.3 crore in September 2017. With the profit margins declining quarter-on-quarter, it seems the company is facing a strong competition from its peer group.

However, the company hasn’t done any major expansion last fiscal except in May when it announced to undertake a backward integration project to incorporate its manufacturing processes and to reduce the dependence on vendors of yarn and weaved fabric. The expansion project was intended to replace the outsourcing of raw materials (yarn and fabric) and enable it to achieve higher levels of integration of spinning, weaving and printing activities and thereby improve the margins.

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