Yarn Making Stocks

ICRA’s most recent report predicts that there will be an approximately 10% increase in demand for the cotton yarn industry in terms of volume during FY2024. 

The CareEdge report also provides statistics that support this projection, stating that the Indian cotton yarn industry is expected to experience a sales volume growth of 5-7%.    

Concentrate on purchasing Cotton Yarn Manufacturing Companies at suitable prices: RSWM Ltd (Rs.210.15), Nahar Spinning and Weaving Mills Ltd (Rs.304.40), Nitin Spinners Ltd (Rs.347.90), Alok Industries Ltd (Rs.32.20), Vardhaman Acrylics Ltd (Rs.63)Ambika Cotton Mills Ltd (Rs.1732), Rajapalayam Mills Ltd (Rs.869.50), and so on.    

♦️Rajasthan Spinning & Weaving Mills Ltd: RSWM Limited, the primary organization of the LNJ Bhilwara Group worth USD 1 billion, is a prominent producer and exporter of synthetic and blended spun yarns from India. 

It ships a diverse collection of yarns and fabrics to approximately 90 nations worldwide.

The company operates 11 manufacturing facilities situated in various regions of Rajasthan, which manufacture top-notch cotton, mélange, synthetic, sustainable, greige, dyed, novelty, and value-added yarns, in addition to knitted and denim fabrics.    

In the previous year, RSWM Ltd made a decision to allocate ₹315 crore for the growth of its compact cotton yarn production at the Lodha Unit in Banswara, Rajasthan. 

This investment aimed to increase the unit's spindle capacity from a total of 95,376 to 146,448 by March 2024.    

The increasing need for cotton and the cotton industry has led to the decision to increase capacity.  

♦️Nahar Spinning and Weaving Mills Ltd: Its expansion endeavors are progressing according to plan.

Last year the company successfully completed the expansion of its spinning unit in Lalru village, with machinery being delivered to the site.

Moreover, 10 (ten) ring frames of 1632 spindles each, totaling 16320 spindles, have been installed, and the remaining 14880 spindles are expected to be operational by February, 2024.    

Upon the successful implementation of the company's expansion strategies, the operational capability of the enterprise will be amplified to encompass 5,73,376 spindles and 1080 rotors.

Furthermore, Nahar has diligently executed a comprehensive modernization initiative across its spinning units, incorporating the installation of 8 Vortex machines, each equipped with 96 positions, all of which are now fully functional. As a result, the production capacity has risen by 40,000 tons per annum.

♦️Positive News:   In response to the surge of substandard imports, the Indian government instituted a Quality Control Order (QCO) concerning polyester yarn, encompassing both fully drawn yarn (FDY) and partially oriented yarn (POY). Essential in upholding these stipulations, the Bureau of Indian Standards (BIS) performed a pivotal role.   

Originally planned for implementation in April 2023, the BIS rollout was subsequently postponed twice, ultimately taking effect on October 5, 2023. 

As a consequence, September 2023 witnessed a substantial upswing in imports attributable to pre-buying, followed by a noteworthy decline of nearly 60% in November 2023 compared to the preceding year.    

In the future, CareEdge Ratings predicts a decline in the importation of polyester yarn, which could potentially enable Indian industry participants to raise prices and enhance their overall sales performance.   

It is anticipated that the gap between prices of polyester yarn will narrow, and there will be a gradual increase in the margin for Profit Before Interest, Lease, Depreciation, and Tax (PBILDT) starting from the third quarter of the financial year 2024. 

A more substantial improvement is projected for the fourth quarter of the financial year 2024, as a resurgence in domestic demand in critical markets such as China, the United States, and Europe is expected to reduce the discrepancy between supply and demand, thereby reinvigorating the export demand for Indian polyester yarn manufacturers. 

Moreover, a report by the Hindu BusinessLine states that, "Cotton prices are ruling steady over the past month helping in demand improving from spinning mills, traders and multinational trading houses as the general consensus is that the market may not drop any more from here". 

Also, according to data from the GujCot Association, Gujarat has seen around 38 lakh bales (170kg each) from Oct 1 to Jan 15.

The state is seeing about 45,000 bales arrive every day despite cotton prices being significantly lower than last year. Across India, cotton arrivals reached 1.35 crore bales till Jan 15. GujCot Association secretary Ajay Shah said, “By our estimates, Gujarat will have around 85 lakh bales for pressing in the cotton season of 2023-24 (Oct 2023 to Sept 2024). This year, arrivals have been stronger with a daily average of 45,000 bales in Gujarat. Last year, farmers were not selling the crop in volume, so arrivals were low. This year prices have decreased but farmers are selling cotton.”

According to GujCot data, good quality raw cotton is priced at around Rs 1,450 per 20kg while low quality cotton is priced at around Rs 1,250 per 20kg. Processed cotton prices have remained at around Rs 55,000 a candy (356kg) for about a month, which has brought stability to the textile industry.

Cotton prices had reached Rs 1.10 lakh per candy due to low supply in May 2022 and this affected the textile industry badly. Since Dec, cotton yarn export orders have also increased, according to the Spinners Association Gujarat. (SAG).

Naresh Sharma, secretary of Maskati Cloth Market Association, said, “Cotton arrivals have been encouraging for the industry because they have ensured stability in prices. We hope that with improved capacity utilization in the spinning sector, there will be better market conditions for the entire value chain.”

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Sources:  

➡️The Textile Magazine

➡️Fibre2Fashion

➡️The Times of India

➡️Hindu BusinessLine