Q3 export realisations seen at Rs 60/$: Arvind

Textile major Arvind raised it FY14 revenue guidance to 24 percent after it reported a net profit rise of 38 percent compared to same period of previous year. Speaking to CNBC-TV18 post Q2 results, CMD Sanjay Lalbhai said that company has been able to improve its margins due to growth in textile and clothing segment. The company eyes a margin of 14 percent for the current fiscal.

Going ahead, the company expects its export realisations to improve to Rs 60/USD in Q3 from Rs 55/USD in Q2.

Below is the verbatim transcript of Sanjay Lalbhai’s interview on CNBC-TV18

Q: Post your numbers you have revised your FY14 revenue guidance higher to 24 percent versus 20 percent. Can you break it up segment wise for us and tell us where the incremental growth is going to come from in the second half?

A: Textiles is growing by 25 percent and brands and retail is growing by 45 percent, so that is broadly the kind of breakup. If you see the breakup of Rs 1,700 crore in Q2, Rs 1,200 crore is from textiles and garments and brands and retail is Rs 500 crore. So, it has grown by 45 percent, brands and retail and textiles and clothing has grown by 25 percent. So, this is the kind of trend which is likely to continue. We have grown by 30 percent in Q2 compared to previous quarter in the previous year.

Q: You have also guided for better margins than you have reported in the first half. Your margins in Q2 are south of 13.5 percent versus 12.5 in the previous year but now you are expecting 14 percent. Is this largely rupee depreciation impact or is this something beyond that?

A: Mainly the Q2 numbers, the margins have improved predominantly because of the growth which we have been able to achieve in textile and clothing. The 25 percent growth in fabrics and much more growth in garment packages; we have grown from 2.9 million garment exports in Q2 to 4 million garment exports. This is a huge growth in garment packages being the growth leader in our entire portfolio and this has led to the margin improvement in textiles.

Q: What about your exact export realisations? What have you realised exports at in this quarter and do you think your realisations could improve in the quarters to come because of the way the rupee has moved?

A: Yes, Q2 was at Rs 55. We have covered our foreign exchange and as a result Q3 will be at Rs 60. So, we will have an improvement in Q3 compared to Q2.

Q: Will any of that be eroded by the higher cotton prices that you will see? What is your view on cotton prices?

A: To a certain extent. Cotton has moved up from – our mixing cost was around Rs 35,000 a candy in denim which has moved to Rs 40,000. So, there is definitely an increase in cotton prices because of the depreciation of rupee but broadly, we will be having some improvement in our margins in Q3.