Releasing the second quarter numbers, the Vardhman Textiles’ management had predicted that margins may come under pressure ahead as cotton prices will increase while demand remains weak.
The statement of the company that “increase in cotton prices this year as compared to last year and relative lull in demand as of now may not allow the margins to continue at this level”, is however seen losing its relevance now as cotton prices continue to fall.
The prices of the cotton came down sharply amidst fears that China is gearing up to release a massive stockpile that has propped up the global market. Industry experts believe that China will start selling off rising cotton reserves that have kept domestic and international prices artificially high. According to various reports, China is sitting on a huge stockpile of nearly 10 million tones - 60 percent of world inventory.
However, despite the fears of Chinese government unloading its stockpiles, demand from China continues to be stable as of now, which will be a huge relief for Indian textile exporters including Vardhman Textiles, at least in Oct-Dec 2013 quarter because beyond that their exports will depend a lot upon how Beijing play its cards.
Robust demand from China has helped India’s Vardhman Textiles Ltd perform remarkably well in the second quarter ended September 2013, with net profit rising to record high of Rs 177.81 crore—a growth of over two-fold from the year ago period. Helped by rupee’s depreciation and availability of raw material at reasonable costs, the standalone EBITDA of the company has also jumped by a massive 70 per cent at Rs 346.55 crore in Q2 FY’14.
Vardhman, which exports around 30 per cent of its yarn produce, saw its revenues from the yarn business growing 32 per cent to Rs 1,098 crore in the September quarter compared with year ago period.
