Denim fabric capacity in India is increasing with passage of years. And although domestic consumption is rising alongside, exports of denim fabric have not risen in the same fashion. At the same time, many companies are setting up new denim plants, while a few existing players are adding new capacities. So, is there a situation of over capacity in the denim industry?
Denim fabric capacity in India is increasing with passage of years. And although domestic consumption is rising alongside, exports of denim fabric#
According to an industry expert – Mr Rajesh Dudeja of Denim Club of India, India currently has a capacity of one billion meters per annum and a domestic consumption of 600-700 million meters and with exports accounting for around 200 million meters. This leaves a balance of around 100-200 million meters or 10-20 percent of capacity.
Denim fabric capacity in India is increasing with passage of years. And although domestic consumption is rising alongside, exports of denim fabric#
Many forward looking denim players, such as Aarvee, Jindal, LNJ, Nandan, Sangam, Sri Lakshmi, have expanded capacity in the last 2-3 years and are continuing to expand capacity. Nandan Denim is expanding from 80 million meters to 100 million meters and Mafatlal Industries Ltd. is in the process of increasing capacity from 25 million meters to 30 million meters per annum.
Denim fabric capacity in India is increasing with passage of years. And although domestic consumption is rising alongside, exports of denim fabric#
Newer players have also emerged on the scene like R & B Denims - Surat and Mahak Synthetics - Ahmedabad, while some projects are in the setting up stage, such as those of SEL group and Anubha Industries.
Denim fabric capacity in India is increasing with passage of years. And although domestic consumption is rising alongside, exports of denim fabric#
Speaking to fibre2fashion, Mr Dudeja says, “The demand and consumption of denim in domestic market has been growing and is anticipated to rise in coming years. However, due to continuous adding and expansion of denim production capacities, the industry has been facing an oversupply situation.”
Denim fabric capacity in India is increasing with passage of years. And although domestic consumption is rising alongside, exports of denim fabric#
Mr Utsav Pandwar – CFO of Ahmedabad based Aarvee Denims discloses that there is an oversupply of denim fabric in the market due to recent expansion and entrance of some new players in the denim industry. “But the demand is growing at almost same pace”, he adds.
Denim fabric capacity in India is increasing with passage of years. And although domestic consumption is rising alongside, exports of denim fabric#
Mr Siddhant Sharma, VP-Operations at Rainbow Denim Ltd avers, “There is a supply-demand mismatch in the around Rs 100 per meter denim fabric category particularly made for domestic market, as robust demand mainly in this segment, led to increase of capacity in the last 2-3 years.”
Denim fabric capacity in India is increasing with passage of years. And although domestic consumption is rising alongside, exports of denim fabric#
When there is a supply-demand mismatch in favour of supply, the first casualty is margins as there is extreme pressure to reduce prices from denim fabric buyers. For instance, net profits at Aarvee in the quarter ending December 2013 have slipped to Rs 93 lakhs from Rs 2.63 crores in December 2012 and Rs 11.85 crores in quarter ending March 2013.
Denim fabric capacity in India is increasing with passage of years. And although domestic consumption is rising alongside, exports of denim fabric#
Mr Pandwar admits that the over-supply situation has affected them too which has also led to a stiff competition in prices, etc.