The Hindu Business Line : Textile cos make big strides to see new dawn

WITH the global textile quotas on their last leg, domestic textile stocks have emerged as the darling of the bourses, while manufacturers and exporters of textile products are cranking up expansion plansand the level of credit drawn from the Textile Upgradation Funds Scheme (TUFS) this fiscal is expected to exceed three times what was taken by the industry last fiscal.

As the January 1 deadline for phasing out of quotas in global textile trade approaches, textile stocks are quoting between 50-220 per cent higher than last year's stock prices in mid November, while the BSE went up only a modest 19 per cent.

In fact, prices of 28 of the 30 companies considered for analysis by Indian Cotton Mills Federation (ICMF) quoted higher this November as compared to last November.

For instance, the Mahavir Spinning and Vardhaman Spinning stocks were up 221 per cent and 216 per cent as on November 17, compared to the same day last year.

Denim major Arvind Mills, which supplies to JC Penney and Levi Strauss & Co, Welspun India, Zodiac Clothing, Raymond, Shree Rajasthan Syntex and Loyal Textiles are among the stocks that have outperformed the index in a big way.

According to KSA Technopak's Mr Arvind Singhal, the prospects are definitely positive for the domestic textiles sector as the global trade opens up.

"The general optimism in the domestic textiles sector is well founded. But when it comes to valuation of stocks, textile companies across the board seem to be benefiting from the upbeat investor mood, including even companies that are not into exports," he said.

Mr Singhal said that only those companies that are into the export business and have products capable of weathering increased competition following quota phase out deserve the higher valuations.

The fact that manufacturers and exporters of textile products are upbeat and investing heavily is clear from the off take from the TUFS during the first six months of the current fiscal; the off take has nearly double of what it was for the last financial year, and is expected to be around three times last year's off take by the end of 2004-05.

"The domestic textile sector players and the investor community akin are clearly brimming with confidence. A lot of Indian textile companies are expected to unleash their competitiveness once the quantitative restrictions are phased off from January 1, 2005.

"The investors are therefore investing heavily in textile stocks," the ICMF's Secretary-General, Mr D.K. Nair, said.

The country's big manufacturers are already working overtime to gear up for the business opportunity.

Welspun India Ltd, one of the world's largest producers and exporter of terry towels, is building a spanking new factory in Gujarat.

Arvind Mills Ltd is setting up new plants in Bangalore and Ahmedabad.