Explained: How textile supply chain companies come out with enthusiastic quarter results

Presently, the talk of the town are the quarterly results of the textile and apparel manufacturing companies. Across India, many companies at various levels with different product categories in the textile supply/value chain have shown tremendous results.

Apparel Resources(AR) analyses the results of many companies in different segments and compares them with that in the same period during pre-Covid. As far as reasons for the ‘impressive’ performance of these companies are concerned, there are some interesting reasons that have cropped up. For most of the companies, results in Q2 of FY ’22 have been good compared to not only that of Q1 of FY ’22 but also Q2 of FY ’20.

The good thing is that the majority of small to big companies, irrespective of their product categories, market focus and other such important factors, have performed tremendously. Ludhiana-based leading yarn and fabric company Vardhman Textiles has achieved its best-ever profits,. The net profit of the company for Q2 of FY ’22 has been Rs. 454 crore on a standalone basis, which is higher by 57 per cent compared to Q1 and 815 per cent over Q2 of last year. Included in India’s top apparel exporting companies, Bengaluru-based Gokaldas Exports consolidated net profit has been up by three-fold at Rs 28.61 crore in Q2 FY ’22. It posted a profit of Rs 8.66 crore in Q2 of FY ’21.

Mumbai-based Kewal Kiran Clothing Ltd., a well-known jeans and westernwear brand for the Indian domestic market, also achieved a 195 per cent surge in its net profit to Rs. 27 crore in Q2 of FY ’22 compared to a net profit of Rs. 9 crore during the Q2 of FY ’21.

Similarly, in case of vertically integrated companies, Raymond’s consolidated net profit has been Rs. 56.15 crore and revenue from both segments – textile and apparel – have been up by over three-fold. Its total income has been up by two-fold during the quarter under review as against the corresponding period of the previous fiscal year.

Kolkata-based leading undergarments and casualwear manufacturers Dollar Industries, Lux Industries and Rupa & Company also achieved impressive results in Q2 of FY ’22. (see table for detail)

Following a similar track of good growth and continuing the momentum, home furnishing companies are also performing better. Mumbai-based Welspun India’s total income was Rs. 2501.39 crore during the second quarter as compared to Rs 2227.22 crore for the previous quarter. Net profit was Rs 199.06 crore as against a net profit of Rs 217.53 crore for the previous quarter. Not only the top global players of home furnishing, but even medium-level players in this segment are also performing well. For example, Jaipur-based leading home furnishing manufacturer Bella Casa Fashion & Retail witnessed a 443 per cent rise in its net profit to Rs. 6 crore in Q2 of the current fiscal, as against Rs. 1 crore it reported in the year-ago period. Similarly, its revenue in this quarter rose by 197 per cent to Rs. 68 crore, as against Rs. 23 crore of the previous fiscal year.

The companies having huge loss in Q1 of FY ’22 also recovered in Q2 and generated profit like Aditya Birla Fashion and Retail (ABFRL) which reported a consolidated net profit of Rs. 5 crore in Q2 FY ’22 while its net loss was Rs. 188 crore in Q2 of FY ’21. Its consolidated revenue in Q2 of FY ’22 doubled Y-o-Y to Rs. 2054 crore from Rs. 1,028 crore registered in Q2 of FY ’21.

Retailers like Trent Ltd., Reliance Retail are also on the same bandwagon as they have performed well. During the Q2, FY ’22, Trent Ltd., the operator of Westside apparel stores recorded net income at Rs. 92.5 crore against a loss of Rs. 126.6 crore in Q1 of FY ’22.

Reasons behind these enthusiastic results 

There are various reasons for these enthusiastic results including natural factors like the festive season for the domestic market, growing demand in the overseas market. Accelerated vaccination drives and resumption in the global supply chain and growth in e-commerce  are also important factors. Apart from that, individual reasons and strategies of the companies also contributed as their key operating parameters are continuously improving.

The companies are focusing on innovating new products and continuously increasing such products in each of their sub-brands having the best fabrics and cutting-edge production techniques.

Gokaldas Exports believes that production efficiency, on-time production, wastage reduction and delivery have consistently improved. It has initiated several measures to augment its capacity to meet the business demand from customers. ABFRL also said that the EBITDA performance has been driven by robust demand recovery and tight control on costs.

BK Goenka, Chairman, Welspun Group said, “Our markets like US and UK have been showing strong consumer spending. In India, the economy is coming out of pandemic led slowdown with strong demand supported by monetary policies and fiscal stimulus from the Government.”

Trident Group, Ludhiana is also not behind as it has achieved the highest ever quarterly profit after tax.

For some of the companies, growth was driven by improvement in both primary sales as well as secondary sales as Raymond noticed that there was a gradual pickup in primary sales from August onwards catering to the festive demand and the wedding season. Growth in secondary sales was led by improvement in consumer sentiments post gradual unlocking, leading to increasing footfalls in retail stores.

Noel N Tata, Chairman at Trent said, “We have been encouraged by the rapid recovery in customer off-take starting from the middle of June as the business reopened in many markets. Our fashion business has, in particular, recovered sharply and is now back to operating profitability.”

Vinod Kumar Gupta, MD, Dollar Industries Limited said, “The financial results for the second quarter of FY ’21-22 indicate that the company has been able to align itself with its growth trajectory as we have witnessed a greater demand for our products in the market.”

Similarly, Dinesh Kumar Lodha, CEO, Rupa & Company believes that the good results are on the back of improved operating efficiencies and cost reduction strategies adopted by the company. “We have seen improved traction during the festivities, and we expect a much better second half of the year. There is strong demand for the thermalwear range.”

The industry deserves appreciation as these ‘achievements’ are despite the plenty of challenges that have prevailed for long. High raw material price, increasing energy prices and global logistic issues have been constantly creating obstacles in the path of industry growth.

(All figures in Rs. crore)