Calendar Year 2010 is on the verge of end. Mr Sharda, being a finance fellow at the core, how will you count on major happenings that this year has brought-in to shape the global industry’s fate differently. How would you predict year 2011 for select sector?
Having faced a sluggish economic environment in the big economies, a mere stagnation or no de-growth is growth story. The economic shrinkage has shrunk with symptoms of buoyancy returning back. Weakening of international currencies of USD and Euro has provided impetus to other economies by facilitating exports though at the cost of employment opportunities in the developed economies. The larger economies are moving up slowly and the movement is quite encouraging, sentimentally. However one needs to watch the same carefully before framing any conclusion.
Textile industry has lesser worries attached to it in mid to long term. There have been marginal shocks during recent past but being an essential life style statement, one can’t postpone expenditure towards textile products. Till the strong signs of buoyancy are witnessed consistently in otherwise stagnated economies, the seasonality factor would continue to dominate. In Indian context, the going is good, significantly due to ill-favour of weather conditions in China, Pakistan and the US. We believe, this cotton season year would once again put the Indian textile on front foot in terms of quantity and value as well. However, a strong national currency could be a major threat to sustain the international trade in subsequent seasons when the advantage due to weather may not exist. The Companies with strong focus on technology and dependence on domestic market could continue to benefit.
As you too mentioned -'in Indian context the going is good', few other textile veterans ideate next decade to be golden era for Indian textiles industry. What is your say? How will you intensify your domestic presence?
The industry was hit so adversely in sentimental and financial terms that anything from now on can only be considered an improvement. Textile has become a life statement with potential to evolve into other functional applications. The ever increasing leveraging of technology would provide adequate impetus to the growth much beyond decade.
Our company has intentionally built business model to cater domestic requirements and has presence in almost entire country through networking partners. We are working on to further strengthen the presence through a larger product basket for varying needs, differentiated pricing points and in line with the overall growth plan that the Company has laid down.
What Challenges and Threats cloud over the industry in land and overseas, presently?
The biggest issue that I foresee as of now is the dependence of Indian textile industry on export segments. The industrial growth is propelled by the segment that is not really growing in line with the domestic industry. Strength of Indian currency vis-à-vis international currencies of USD and Euro is an area of concern for the long term sustenance of the growth. The higher prices in foreign currency may not be feasible in view of negligible growth / stagnation in US and EU economy. The Fed movement of buying back the bonds could bring inflation in the US economy and buoyancy at the Wall Street to bring a “feel good” factor. Coupled with almost zero cost of short term financing, the US economy could be trying last of its bullets to revive and should it succeed, the demand for the Indian textile could register adequate growth. In the current year, however, Indian textiles can do better than most other textile players due to distinct cotton crop advantage but building up capacities based upon this overnight position could only glut the domestic market in mid-term that could further bring down the curtain on growth engine through consolidation. Also, most of the textile players are into basic or minimum value addition chain of the textile products that means anyone can compete on cost advantage matrix. Unless one raises the standards of deliverance to a new height, it would be difficult to sustain the growth propeller.
Domestic market is showing resilience after a lot of companies had a tough financial performance for quite sometime. This breather would certainly repose the faith of investors into the segment. The robust P/E growth at the bourses is bringing cheers to the spending power of the masses. Continuous growth reflected in the IIP data are fuelling otherwise dormant sentiments. In all, this year is going to be historic for most of the textile players and I personally believe, those who can’t make this year, better should look into the next decade only.
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.