India's textile exports to the US grew by 19.3%
Source: CCPIT TEX (Jhini Sinha Phira) Date: 2006-08-02
India's textile exports to the US grew by 19.3% in April 2006, allowing it to capture a marketshare of almost 7%. From acquiring brands abroad to tie-ups to expanding capacities, domestic textile companies are leaving no stone unturned to grab a neat pie in the US textiles market.
In absolute terms, India's textiles exports to the US grew from USD 1.6 billion in 2005 to USD 1.9 billion in April 2006. This helped India gain its marketshare to 6.9% and made it the third largest supplier to the US. During the same period China's textile exports rose by .8% to USD 6.4 billion. India has an export target of $40 billion by 2010.
Although China still remains the largest textile exporter to the US, its market share has been steadly declining in recent times. The principal reason behind this is the levy of quotas on Chinese textiles in the US, which was to an advantage to Indian exporters. In March 2006, India抯 market share in the US textiles import market had touched an all-time high of 7%.
A Morgan Stanley report states that India is likely to be one of the biggest beneficiaries of restrictions imposed on China. 擨ndia gained 41 bps market share in total textile exports to the US and China lost 28 bps (y-o-y) during March due to the levy of quotas,?said the report. But India will need to do much more to make spectacular dent in China's share of the US market. For the 12-month period ended March ?6, India抯 textile exports to the US stood at $4.8bn against China抯 $22bn-plus.
Surprisingly, the competition with China in the textile business has an interesting side. While China is bigger than India in volumes, value-addition wise, India appeals more. Gokaldas Exports , Celebrity Fashion, and Orient Craft, are some of the companies which are big on exports.
In a bid to capture US marketshare, some of the textile companies are even concentrating on acquiring foreign brands. Welspun India and GHCL are cases in point. Welspun acquired 85% stake in CHT Holdings, the holding company of UK's largest and number one terry towel brand Christy for Rs 132 crore.
GHCL is a domestic soda ash company and does not have any presence in textiles. But it went ahead with two acquisitions in the last six months for about Rs 450 crore (Rs 4.5 billion). These are Dan River (bought in December 2005) and Rosebys. rosebys is UK's largest home textile retailer. Alok Industries has also chalked out plans to expand its range from bed linens to terry towels and is looking for a marketing tie-up in foreign markets.
When the going gets tough, TUFS get going
Against this backdrop, will the government's announcement on TUFS withdrawal impede growth plans of the industry? According to a Karvy report, the textile sector has off late seen lot of investments in the weaving segment. The feed stock for weaving industry is yarn, which is a high capital intensive and low margin business. The average margins here range between 5% and 8%. The TUFS subsidy made viable for these yarn companies to go for expansions when interest rates prevailing in the market were at its all time low. In a scenario where new expansion become difficult in yarn segment, then there will be shortage of yarn to commensurate with the weaving requirement, which witll push the yarn prices up. This will force the weaving companies either to increase the prices or take a hit on their margins. If prices are increased it will have impact on the garment prices and garment industry will see their exports declining
Till 30th April, 2006, the total loan amount sanctioned under TUFS stood at Rs 180.34 billion. While the total amount disbursed stood at Rs 117.74 billion. The amount sanctioned was against the total project cost of Rs 397.29 billion. The Government has estimated that the whole textile sector will require around Rs 1400 billion of investments to make the sector competitive to tap the global textile market and achieve the targeted export of $ 40 billion by 2010.
