2011 to be turnaround yr for textile cos: Gokuldas Exports

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2011 to be turnaround yr for textile cos: Gokuldas Exports

In an interview with CNBC-TV18, Rajendra Hinduja, Managing Director, Gokuldas Exports and Sunil Khandelwal, Chief Financial Officer, Alok Industries, talk about the Indian textile industry and give their outlook going forward.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Govt unlikely to offer more stimulus to textile ALSO READ See latest News about Gokaldas Export See previous management interviews See what other Experts & Brokerages are saying about Gokaldas Export Gokaldas Export BSE | NSE 09/02/12 Are Mutual Funds betting on Gokaldas Export?

A note put out by JPMorgan says Indian textile exporters could be playing or enjoying the same boom that Indian IT companies enjoyed in 1990s. It says downtrading in US could be positive for Indian textiles.

In an interview with CNBC-TV18, Rajendra Hinduja, Managing Director, Gokaldas Exports and Sunil Khandelwal, Chief Financial Officer, Alok Industries , talk about the Indian textile industry and give their outlook going forward.

Below is a verbatim transcript of the exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: Is this true, are you already seeing signs of bigger orders from the US?

Hinduja: I don't see initial signs of what you just now mentioned, but at the moment the consumer buying in the US as well as Europe is sluggish. But compared to last year this year is better, there are signals and indications that the volumes will improve towards mid and end of this year. So that being the case this could be a possibility that 2011 could be a better year rather than 2010.

For the next five-six months, I don't see much of a big jump unless the US Economy improves which is going to go slow as per the present conditions. I think beginning of 2011 could be a U-turn for textile companies in India.

Q: How much do developing countries contribute in terms of say the textile consumption in the US, is there a lot to be gained from developed market?

Khandelwal: The thing is that today world trade is about USD 600 billion, out of which almost 35% comes from China, the next big zone is EU zone which almost constitutes again 35% and India is at number three with 3.5%. So you clearly see a gap between number two and number three and I see that the EU zone, which is at about 35% today, is definitely going down and we see it coming down to about 10% maybe in next ten years. So definitely there is good room for especially India to move up from 3.5% to maybe about 10-12%.

Q: What does this opportunity finally makes for companies like yours? If look at your profile, you are supplying to high quality brands like 'GAP', 'Tommy Hilfiger' etc, what you mean, will these brands stop selling shirts with USD 50 and start selling the ones which are priced at USD 10 or you will move from a sophisticated product to a basic product and that people will not buy from China and start buying here, how does this really translate to any bottom-line for companies like yourselves?

Hinduja: I don't think they will go to a basic product. Every product bought by our customer namely a 'GAP' or a 'Banana Republic' or a 'Nike' or 'Adidas' has a fashion element. We can't sell those goods only with basic ideas, but they need to sell fashion.

The idea of JP Morgan is that the fashion garments will be sold which are more competitive and less value added when compared to what is happening today. If a garment which is in fashion which is selling at USD 50, they are trying to sell stuff at USD 40 next year, this is what they are trying to say that they can't afford a bigger price, but they definitely buy fashion; they will never go to basic or will never downgrade, the trend is always to go and upgrade.