Margin pressure keeps garment exporters on edge.

NEW DELHI: The country’s leading garment exporters are basking under a surfeit of orders from Europe and the US, but relentless pressure on margins means they can’t relax yet despite a sharp uptick in demand in these key markets. “The demand is finally stabilising,” said Arvind Mills CFO Jayesh Shah.

Companies such as Arvind, Alok Industries, Gokaldas Exports, Orient Craft and House of Pearls say their order books are chockfull till September despite the prospect of more economic pain in the US and Europe. The growth in volumes has gathered pace sharply in recent months as customers in overseas markets who slashed budgets to the bone are again returning in hordes.

But exporters can’t celebrate yet because of a lingering pressure on pricing, mainly a result of the rupee’s appreciation and intense competition from suppliers of neighbouring countries like Bangladesh. With rivals selling garments up to 25% cheaper, Indian garment exporters are being pushed to lower prices.

“The volumes are increasing, but the margins are not great,” said Apparel Export Promotion Council senior vice-chairman Praveen Nair. The value of India’s apparel exports dropped 10% to $9.7 billion for the year to end-March from a year ago due to lower prices, he said.

Orient Craft managing director Sudheer Dhingra said there is a squeeze on the pricing front while Alok Industries MD Dilip Jiwrajka said fresh orders will be fixed at new rates, which will pinch margins due to currency swings. Even so, the swell of orders comes as a relief to exporters pushed into a corner by the recession.

For example, Arvind Mills expects a 15% growth in orders in the three months to end June from the March quarter.
Likewise, Bangalore-based Alok Industries expects a 50% increase in orders for the three months to end June while Gokaldas Exports is seeing ticking volumes. “We will do the same kind of business we did last quarter, which is good news,” says Gokaldas Exports managing director Rajendra Hinduja. Even the marginal depreciation in the rupee’s value against the dollar in recent weeks will be short-lived, say exporters.

Source : The Economic Times