Interviews
Budget impact on Textiles and Apparels
01 Mar '08
4 min read
Man-made fibres:
• CRISIL Research expects polyester demand to increase at a CAGR of 8-10 per cent in the medium term. While operating rates will improve, the industry will continue to be characterised by overcapacity. Demand for man made fibers will be driven by strong growth in blended yarn segment and the increasing use of non-cotton fabric in technical textiles and home textiles.
• In November 2007, the government reduced the customs duty on PSF/PFY from 7.5 per cent to 5.0 per cent and on fibre intermediates from 7.5 per cent to 5.0 per cent. The customs duty cut resulted in domestic polyester prices being closely aligned with international prices. While this reduction did not impact margins, it resulted in reduced profits for MMF players.
• Polyester feedstock prices are expected to soften in the medium term, which would ease the pressure on margins.
Rising cotton prices will also provide pricing flexibility to polyester players and help improve margins.
Readymade garments:
• Garment exports have been severely affected due to the sharp rupee appreciation against the dollar - the rupee rose by around 12 per cent against the dollar during January-December 2007. However, its appreciation against the euro was not as sharp over the same period. India's market share (in value terms) in the US fell from 4.5 per cent in 2006 to 4.3 per cent in 2007; its share in the EU declined from 3.9 per cent to 3.8 per cent over the same period.
• The highly fragmented nature of the industry has hindered India's attempts to gain a larger share of the global apparel market. Moreover, lack of adequate investments in weaving and processing has affected this sector to a large extent. Going forward, in order to mitigate the currency risk, CRISIL Research believes that Indian garment exporters should move toward high-value products, where competition is limited and realisations are better. The EU market, for instance, offers considerable opportunities for exporting premium products.
• The domestic market continues to be robust and is expected to exhibit strong growth in the medium term. Rising incomes, increasing preference for readymade apparels over tailor-made garments and higher penetration of organised retail would continue to act as growth drivers.
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• CRISIL Research expects polyester demand to increase at a CAGR of 8-10 per cent in the medium term. While operating rates will improve, the industry will continue to be characterised by overcapacity. Demand for man made fibers will be driven by strong growth in blended yarn segment and the increasing use of non-cotton fabric in technical textiles and home textiles.
• In November 2007, the government reduced the customs duty on PSF/PFY from 7.5 per cent to 5.0 per cent and on fibre intermediates from 7.5 per cent to 5.0 per cent. The customs duty cut resulted in domestic polyester prices being closely aligned with international prices. While this reduction did not impact margins, it resulted in reduced profits for MMF players.
• Polyester feedstock prices are expected to soften in the medium term, which would ease the pressure on margins.
Rising cotton prices will also provide pricing flexibility to polyester players and help improve margins.
Readymade garments:
• Garment exports have been severely affected due to the sharp rupee appreciation against the dollar - the rupee rose by around 12 per cent against the dollar during January-December 2007. However, its appreciation against the euro was not as sharp over the same period. India's market share (in value terms) in the US fell from 4.5 per cent in 2006 to 4.3 per cent in 2007; its share in the EU declined from 3.9 per cent to 3.8 per cent over the same period.
• The highly fragmented nature of the industry has hindered India's attempts to gain a larger share of the global apparel market. Moreover, lack of adequate investments in weaving and processing has affected this sector to a large extent. Going forward, in order to mitigate the currency risk, CRISIL Research believes that Indian garment exporters should move toward high-value products, where competition is limited and realisations are better. The EU market, for instance, offers considerable opportunities for exporting premium products.
• The domestic market continues to be robust and is expected to exhibit strong growth in the medium term. Rising incomes, increasing preference for readymade apparels over tailor-made garments and higher penetration of organised retail would continue to act as growth drivers.
Click here to view more:
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