The Hindu Business Line : Rising Re: Textile exporters shift focus to Europe

While exporters are in talks with European buyers to increase revenues from the European market, keeping long-term interests in mind, they are also looking to ramp up domestic activities and improve manufacturing efficiency and output.

Even as the rupee strengthens itself to Rs 39.8 versus the dollar, the euro-rupee equation is comparatively at a higher exchange rate of Rs 56.

Shift from $ to €

Bangalore-based Gokaldas Exports is trying to convince its existing clients in Europe to shift from paying in dollars to euro.

While talks are on with Nike (Europe) and Marks & Spencer, Mothercare and Metro have agreed, says Mr Rajendra Hinduja, Managing Director, Gokaldas Exports.

About 40 per cent of Gokaldas Exports’ business comes from Europe while 55 per cent of its clients are from the US.

Gokaldas Images, on the other hand, is looking to take on new clients from Europe.

Currently, about 80 per cent of its export revenues come from the US and 20 per cent from Europe. “We are looking at market diversification and greater emphasis would be on Europe. Talks are on with buyers,” says Mr Jagdish Hinduja, Chairman, Gokaldas Images.

Price revisions

Exporters have also resorted to price revisions on new export orders to the US.

Says Mr Rajendra Hinduja of Gokadas Exports: “Although there was some resistance from buyers, we have managed to increase prices by about 8 per cent. But how far exporters are successful in this depends on your clout as a seller and how much the buyer needs you. We have also increased euro prices marginally.”

profit margin

Tirupur-based Royal Classic Mills saw its profit margins being eroded in the April-June period.

To offset this, the company has introduced an extra shift and has employed 250 more people in one of its factories. It has also increased prices for US clients for new orders by 3 per cent.

The company is also keen to take on more European clients and is talking to buyers in this market. However, this is not a long-term solution, says Mr R. Sivaram, Executive Director of the company.

“The European market cannot bring in as much volumes as the American market. We are also looking to focus on domestic business.”

The company has about 42 exclusive retail outlets in the country. It is looking to reach 100 by March 2008.

Hedging

While bigger companies like Gokaldas Exports have managed to plug losses by hedging, it is time, smaller companies too looked at this option as the textile industry has had to grapple with issues such as job cuts and profit losses this year.

According to Mr Rajendra Hinduja, the textile export sector has seen a 15 per cent cut in jobs so far. Tirupur has been horribly hit, he says.

Mr Sivaram adds: “If the situation continues, it could snowball into more job cuts, bankruptcy and even closing down of shutters. Especially in the case of smaller players…”

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