Monday, October 01, 2012

Cotton yarn spinners hopeful of revival in fortunes
 The brokerage house Nirmal Bang Ltd recommends Arvind Ltd at Rs.79, for a target of Rs.92.
S P Oswal, chairman and managing director of Vardhaman Group of Industries, one of the largest cotton spinners in north India, is optimistic of a lucrative year for the Indian spinning mills. The rising demand for cotton yarn from China and moderating prices of the commodity in the global markets might help the Indian textile sector revive this year.
“Spinning factories in India are going great guns, as cotton prices in the domestic market have stabilised and most mills are running on full capacity. Although it is slightly premature to predict the impact of the poor monsoon on the cotton crop, we expect a crop size of 32-32.5 million bales (a bale is 170 kg), compared with 34.7 million bales last year. Keeping cognizance of annual domestic consumption of 25.5-26.5 million bales, supplies would be sufficient, but the exportable surplus may come down. If the government keeps a vigil on the export of cotton, there may not be a dearth of cotton for the spinning units,” Oswal said.
Last year, due to skyrocketing prices and an inconsistent cotton yarn export policy, spinning mills had to go for a steep cut in production and several of these slipped into huge debt burden. While banks have been told by the Reserve Bank of India (RBI) to restructure their debt on a case-to-case basis, improving fortunes of cotton yarn spinners will provide much needed support to them.
The industry finds the current price of cotton at Rs 37,500 a candy (1 candy=356 kg) viable, as yarn prices are also firm.
Manish Bagrodia, managing director of Winsome Textiles Industries Limited, expects pink days for yarn manufacturers, as spinning in China has become uncompetitive due to policy regulations and India is likely to get maximum benefit of that. The provisional figures for the export of 100 per cent cotton yarn from India reflect an encouraging trend.
The industry was earlier apprehensive over the fall in cotton acreage from 12.1 million hectares to 11 million hectares, owing to unstable prices and farmers diverting to alternative crops like guar, paddy, oilseeds and pulses. This was further accentuated by the draught possibility in some states. But the monsoon progressing in Gujarat (the state grows one-third of India’s cotton crop) and Maharashtra, the projections regarding availability of cotton have now improved.
According to D K Nair, secretary general of the Confederation of Indian Textile Industry, “There may be a decline of about 10 per cent in cotton acreage, but better yield can compensate that. Last year, the yield was 490 kg per hectare. We had a record yield of 554 kg per hectare in 2007-08. If farmers are able to draw higher yield, the crop size would not be much affected.”
V K Goel, executive director and group CEO of SEL Manufacturing Company Ltd, said, “We are expecting to do better this year, as the demand in international markets seem to remain subdued. So, exporters may not have much incentive. Our yarn export destinations (China, Bangladesh and Korea) are likely to give us enough room for exports. So, we project a good year.”
India exported close to 12 million bales of cotton last year. But low prices in the global markets may dissuade exporters this year and spinning mills expect to have a smooth sailing this year.