Textile space is all set to rise to the occasion. The sector is awaiting investments worth over Rs 100 crore by next year.
It appears that the textile space is all set to rise to the occasion. Not only has the free-fall in prices halted, the domestic market may also see a price rise sooner-than-expected. The sector is also awaiting investments worth over Rs 100 crore towards expansion, mostly organic in nature, by next year. Of the companies that have plans to expand capacities, we have The Welspun Group, Banswara Syntex , Gujarat Ambuja Exports etc.
Moneycontrol has picked up a universe of 38 textile companies that have market capitalization of Rs 100 crore and above. And Arrow Webtex (a manufacturer of elastic and non-elastic tapes and woven and printed lables) have emerged as a company that have given maximum return in the one year period between October 28, 2005 and October 30, 2006. The stock with a market cap of over Rs 188 crore has given a return of 598% in one year.
Market capitalization wise, Aditya Birla Nuvo emerges as the biggest company clocking in a return of over 57% in one year. Banswara Syntex, which does not feature in out list of universe owing to its market cap of Rs 94 crore, deserves a mention nevertheless. The stock has given a return of 61% in one year and look promising on the back of its expansion plans.
According to a report by Edelweiss Research, The Welspun Group, Banswara Syntex, Gujarat Ambuja and Fab India have investment plans of Rs 3 billion, Rs 2.6 billion, Rs 3.3 billion and Rs 2.8 billion respectively in the near future.
Interestingly, both Welspun India (the terry towel company) and Welspun Syntex (the Synthetic Yarns company) have given negative returns of 16% and 7% respectively in the one year period under consideration.
Outlook and Challenge:
India was touted to take on China post WTO in terms of gains from global textile trade. But India remians a distant second to China. The first year of quota-free trade clearly went in favour of China, which retained its top position. Moreover, the three neighbours -- Pakistan, Bangladesh and Sri Lanka---- have ramped up their textile acts giving tough competition to India. Pakistan's textile industry is planning to invest between $7-10 billion to counter growing global competition, and raise its declining exports. This will be on top of $6 billion, it has already invested over the past five years.
Moreover, some of the companies feel the duty structure for the finished goods in the industry has to be rationalized to reap the benefits in a quota free world. The raw material prices have been very volatile due to high crude prices. The firming up of the rupee against the dollar too affected export margins.
Full table on Page 2
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