Financial Daily from THE HINDU group of publications
Wednesday, Feb 09, 2005
Industry & Economy - Textiles
Textile stocks on radar in post-quota regime
Mumbai , Feb. 8
THOUGH textile stocks have been range-bound for the last several weeks, analysts are keenly watching this sector, as the impact of the abolition of the quota system would soon be visible.
Market participants expect a lot of activity in stocks in this sector as the industry moves towards a consolidation phase.
"The industry is very fragmented because of the quota system and now the big players are in the middle of serious negotiations for acquisitions. Textile manufacturers are looking to forward integrate into garments. We are actively focussed on this sector and expect some positive impact at the end of the quota regime," said Mr Vipul Ambani, Chairman and Managing Director, Tower Capital and Securities.
Analysts say that the Indian players have a long way to go before they become forces to reckon with in the global market, as capacities are a concern. China and Taiwan are the world leaders in garments and for India to compete with players from these markets, they have to undertake serious expansions of scope and scale.
"Also, garment manufacturers must keep in mind that their share of the domestic market would be eaten into by cheaper foreign goods. This could be a serious constraint on bottom lines," said an analyst with an institutional broking company.
"The tax structure in the industry should be rationalised. Hopefully, this would be addressed in the current Budget," Mr Ambani said.
Brokers see selective opportunity in the sector. A section of the textile and garment industry is expected to post strong growth figures, while many in the second rung may fall by the wayside.
Shares of Arvind Mills have been marginally on the rise in the last 30 days. The stock closed at Rs. 127.75 on Tuesday.
The other textile major that is being closely tracked is Alok Textiles. The stock, which is listed on NSE, is currently at Rs 67.10. Raymonds, Century Textiles and Welspun are also on the brokers' radars.
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