Volatile dollar behind cotton price rise: Nahar Spinning

Cotton prices, globally, have jumped up. Dinesh Oswal, Managing Director of Nahar Spinning Mills , spoke about how it impacted his company.

Here is a verbatim transcript of an exclusive interview with Dinesh Oswal on CNBC-TV18. Also watch the accompanying video.

Q: What is the kind of cotton prices which you are likely to pay? Will this global cotton scarcity mean that our prices also move up?
A: The cotton prices have increased a lot as compared to last year. They have gone up approximately about 26-27%. The main reason for it is dollar trade. A lot of big multinationals are into it and are buying the commodity in a big way. We being the actual user of the cotton are being affected. However, those who have covered adequately for sometime may not be as much affected as those who will buy now.
Q: Your PAT would be about 4-5% when cotton prices were stable. How much of this would really affect? Would you run into a loss making position at the moment? Could you tell what the spread is between your sales prices and your cost of the raw a material and if you are in any position to increase the prices of your final products?
A: Last year there was a loss on account of foreign exchange loss. This year there is no more exchange loss. Moreover, cotton prices have gone up. We as a company have been selling our yarn in proportion to that. We will not be much affected by that. We have already sold our yarn till March.

Q: How does the currency affect you? We have seen very serious depreciation on Chinese banks. Has that impacted your competitiveness in any way or are these companies, which are depreciating their currencies, not competing in the yarn space?
A: Dollar has breached 47 and if Indian rupee remains above 47, it will be good for the textile industry as a whole.

Q: What kind of profits or margins are you likely to end with in the current year?
A: In the last six months, our sales were Rs 541 crore. The cash margin was Rs 77 crore, which is about 14-15%. Bearing unforeseen circumstances, we hope to do better in the next six months.