Garment cos plan 10% hike in prices by month-end.

MUMBAI: Garment makers will raise prices by at least 10% by April-end, the second hike in three months, to offset spiralling raw material costs.

Cotton prices have gone up by over 25% to Rs 29,000 per candy, or 355.5 kg, in the past five months. Yarn and fabric prices have risen by nearly 50% during the same period.

“Manufacturers have no choice, but to pass on the price hike to consumers. It will be done gradually,” said Rahul Mehta, president of Clothing Manufacturers Association of India.

The government may look at reducing excess yarn export in an attempt to ease raw material prices, said Sanjay Lalbhai, MD, Arvind Mills, adding his company was considering a price hike.

Yarn exports went up by 5.5 million bales in the year to April, against last year’s 3.5 million bales. The textiles industry’s calendar ends in September, coinciding with the cotton crop season.

In addition to high raw material costs, an appreciating rupee and an increase in employees’ dearness allowance are burning a hole in textile companies’ pockets.

Companies have started paying their staffers 20-35% more dearness allowance from April 1. “This will help employees fight food inflation, but dent margins,” said Rajan Hinduja, MD of Gokaldas Export.

The rupee, on its part, has gained by over 5% against the dollar in the past one month, putting pressure on bottomlines.

Firms that convert fabrics into garments have been the worst hit, as they operate on wafer-thin margins, said Sunil Khadelwal, CFO, Alok Industries. Margins are as low as 3% in the industry, according to GP Mittal, president of Garment Export Association of Rajasthan.

Source : The Economic Times