In an interview with ET Now, Dinesh Oswal, MD, Nahar Spinning Mills , shares his outlook for the textile sector. Excerpts:
ET Now: Cotton prices in last three months have slipped by 37%, how will that change life for Nahar Spinning?
Dinesh Oswal: Like all other textile and spinning units the margins will be negative this time. Because of the such a adverse fall in the prices of the raw cotton.
ET Now: So are you likely to report a loss for this quarter?
Dinesh Oswal: I think so.
ET Now: Would you not be passing on this cost decline to end customers?
Dinesh Oswal: The prices have come down not have gone up. And all good textile mills they tend to cover their raw material by the month of March-April for next six months because Government of India had allowed export of raw cotton but surprisingly had banned the export of cotton yarn. Now the result is all good textiles are having the raw cotton at to the price of 62,000 and the prices have crashed down to 38,000 level and so have the prices of yarn crashed down. Now we having been stuck with the high rate of inventory and can do nothing but have to sell at such a big loss.
ET Now: Some spinning mills are actually running at half the capacity just about 50%, what are your current utilisation levels?
Dinesh Oswal: We also like the industry, our utilisation is not 100% but we are trying to run it to the maximum capacity. Because, if we do not run, we will be carrying the stocks to the next season that we do not want.
ET Now: So what is the likely inventory loss because of drop in cotton prices for Nahar?
Dinesh Oswal: This I cannot calculate and tell you because the market prices are going down every week.
ET Now: Have spinning margins come down for both the category of yarns?
Dinesh Oswal: All categories cores, count, medium (5:21) profitability. We will see this time all the spinning mills are going to have all over India very big negative impact. And moreover Government of India in spite of the fact that there was a drawback, and there is a drawback involved and it is the policy of the Government not to export taxes but still surprisingly there is no drawback. We are requesting the government that if you have to save the industry there was a drawback but on the plea of the government and its own wisdom, I do not know why they had withdrawn this or benefits. We are again pleading to government that please restore the at least the drawback benefits but still government is doing nothing.
ET Now: Initially you had a plan of implementing 90,000 spindle expansions as well so would one assume that those plans of expansion have now been shelved?
Dinesh Oswal: No, no because it was in a very final stage of implementation and in fact about 50,000 spindles are already now working and the next batch will be completed by September-October. But hopefully this will benefit in the next season after October because we do not have cotton beyond October.
ET Now: But what will happen to the yarn demand, I would reckon that if cotton prices are down yarn demand will also pick up?
Dinesh Oswal: They should, but now it is not only the yarn all the textile segment all over the world I do not know why. Whether it is garment or fabric the demand is very very low, retailers are not placing the order, everyone is waiting and watching because all over the world people know that India is stuck up with two months stock all spinning mills. So they want to push the market down before placing for the order. But I think by within one month time people will eventually start buying now because their pipeline must be now dry.
ET Now: Have global spinning margins come down or this more like a India specific phenomenon?
Dinesh Oswal: No, it is all over world phenomena including India. The prices of export and domestic prices are same and all are negatives.
ET Now: Do you have any exposure to the fabric business or you are a pure spinner?
Dinesh Oswal: In Nahar Spinning we have only spinning as well as garmenting.
ET Now: So I am sure your garment business will make more money as yarn prices have come down?
Dinesh Oswal: But the volume of garment is very small as compared to the volume of the yarn.
ET Now: What is your current operating loss on a daily basis?
Dinesh Oswal: Actually the loss will be converted when we are able to dispose of the yarn but as of now, the outflow of yarn is very less so we cannot quantify the loss as it is.
ET Now: You are the Managing Director the company I am sure you get the number on a daily basis that what is a difference in operating income and the operating loss?
Dinesh Oswal: No, you are right but the difference we have to calculate at a certain price. Now this price is fluctuating every day, so I just cannot quantify that.
Rgds/saurabh
India’s cotton yarn exports declined 33 per cent in the first two months of the current financial year, due to low demand. The directorate-general of foreign trade (DGFT) registered 134.55 million kg for export in April and May and the actual shipment is estimated at 100-110 million kg, as against 150-160 million kg in the corresponding period last year.