September 19, 2021

Biz Journal

Business perfection

Unlock: Major garment export factories back to 60-80% capacity utilisation

Garment exporters have started seeing revival of demand, which in turn has increased capacity utilisation to around 60-80 per cent. Companies said that customers are placing new orders based upon the season and number of stores they have opened globally and e-commerce is also picking up pace. They expect growth to return by early next year.

The development comes months after shipments were kept on hold by international customers due to imposed in their respective countries. This led to revenue loss during the period. But now, they have started witnessing significant recovery in the order flow from the customers since May 2020.

SP Apparels, one of the leading exporters in the country said that all the factories are operating at around 60 per cent capacity due to social distancing norms imposed by the authorities.

The company managed to address labour shortage by supporting all the migrant workers’ stay and food in the hostel premises. Those who have gone also have started returning, while return of some others is restricted due to the transportation issue.

On the Covid-19 impact, the company said, besides the order flow, the Indian Rupee depreciated significantly in the fourth quarter compared to last year. This impacted company’s hedged positions and resulted in hedging losses and the loss of revenue due to the pandemic is expected to impact the hedges and may see an impact in the first and second quarters also.

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Rahul Mehta, Chief Mentor at The Clothing Manufacturers Association of India added, “most of the earlier cancelled orders are being reinstated to start with, and new inquiries are also being received. Most of the European as well as the US buyers are talking to exporters about situation, factory operation, and Covid-19 status. Discussions have started about the ability to supply, deadlines, amid very positive signs.”

He expects exports to pick up much faster and end up with a much lower deficit compared to the domestic market, where consumer sentiments, local lockdowns, and restrictions on mall activities are still preventing a rapid recovery of the Industry. He cautioned that today’s prices may in fact show a negative trend. Dollar weakening will impact profitability. “The 2020-21 fiscal year may end up with a deficit of 20-3o per cent. It will probably show good growth in 2021-22 due to the low base of 2020-21 and market sentiments getting stronger in 2021-22.”

Another leading exporter echoed a similar view, adding that today the order flow is more for the low and mid-segment garments, while high value orders are yet to see any momentum. “While volume is high, value is not very big,” he said.

Raja N Shanmugam, president of the Tiruppur Exporters Association, said that inquiry levels now were more than last year. One major reason for this is the return of inquiry from traditional markets, and another is brands’ lookout for an alternative to China. But there are three major challenges that Indian exporters need to address — quality consistency, quantity fulfillment, and timely delivery commitment.

“These factors have always been an obstacle for any buyer to look at procuring from India. Pricing challenge is part of any trade; if we can address these factors, we can surely get a good pie of the global trade,” he added.

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