It’s a double whammy for denim fabric manufacturers in India. At home, they have landed in a payment crisis whereas political tension in Bangladesh has affected exports of denim fabric to the nation. India has a capacity to produce 1 billion metres of denim fabric per annum, The Economic Times reports from Kolkata. Talking to the ET, Sharad Jaipuria, president of the Denim Manufacturers Association, said: ‘Nearly 75 per cent of the denim fabrics produced in India is used domestically while the rest is exported. The denim manufacturers have landed in a problem as payments have slowed down due to economic downturn. Moreover, denim manufacturers have scaled up the installed capacity to 1 billion metres whereas the utilised capacity is 700 million metres, which has created a glut in the market.’
The ongoing political tension in Bangladesh has also affected exports to the country. Foreign buyers who used to pick denim from Bangladesh are now staying away from the neighbouring country. Nearly 50 per cent of the denim fabric manufacturing units are located in Gujarat, another 30 per cent is located in Punjab and Rajasthan and the rest is in Maharashtra. The growth of denim has been 10 per cent to 12 per cent in the last decade.
The maximum affected are the units that are in the lower end of the market. Denim fabrics are of three types — low end (Rs 115 per metre), mid quality ( Rs 130 to Rs 150 per metre) and high end ( Rs 160 to Rs 250 per metre). ‘The maximum problem is in the low-end market,’ said Rajiv Dayal, MD & CEO of Mafatlal Industries. The low quality denim fabric constitutes 60 per cent to 70 per cent of the market.
Dayal said since Mafatlal Industries was into the value-added and fashion-oriented denims, it has not faced much of a problem.
‘It is true that tension in Bangladesh has created some problem but now the fabric is being diverted to Cambodia, Vietnam, Honduras, and Sri Lanka where the garments are being made for the export markets. We are following that trend. But for the manufacturers who are at the lower end, there is a problem,’ he added. The company manufactures 25 million metres of denim and the capacity is being scaled to 30 million metres.
Like Mafatlal, Raymond UCO Denim is also not feeling the heat of this market scenario. ‘We are into value-added products and there is no glut in this category. However, the present scenario in the denim market is temporary and will take a year or two to come to normalcy,’ said SK Gupta, group CEO, Raymond UCO Denim.
But YC Gupta, CEO of LNJ Denim, said that now the low-range and mid-range fabric manufacturers are upgrading to the high-grade quality.
‘This will create a lot of problem as more surplus stock will be created in the market. Right now, low-grade manufacturers are exporting denim at a throwaway prices to the Latin American nations,’ he added.
-With New Age input
