A recent Centre for Monitoring Indian Economy (CMIE)’s ‘Industry Outlook’ gives an optimistic view of India’s RMG industry as it states the industry is expected to deliver a healthy financial performance in 2015. Sales are estimated to have grown by 8.6 per cent. This was backed by a steady demand for apparels in the domestic as well as overseas markets. Operating profit of is likely to have increased by 21.4 per cent and net profit by 41.8 per cent.

Growth to continue upward ride

The report anticipates the industry to continue on a growth path both in terms of sales and profits even in the near future. Growth in sales will be backed by a continuation in demand for apparels from both the domestic and the overseas markets. Going forward, increase in urbanization, rapid changes in fashion and lifestyle patterns, rise in consumer spending would propel the domestic demand for apparels, it said. On the other hand, improved prospects of global economies will fuel the overseas demand. Furthermore, lower operating and non-operating expenses would result in a healthy growth in the industry’s profits.

During 2015-16, the industry’s sales are expected to grow by 13.3 per cent. Revenues of Page Industries, the largest listed company in the industry, are expected to grow by 26.6 per cent, in both - volumes and realizations. The company is into manufacturing innerwear and primarily caters to the domestic market. Similarly, sales of Rupa & Co, another leading manufacturer of innerwear is likely to grow by 13.5 per cent during the year.

Gokaldas Exports, one of the top apparel exporting companies in the industry, is expected to report a 10.3 per cent increase in sales in the current fiscal. Among the other major apparel companies, sales of Orient Craft, Lux Industries, Pearl Global Industries, Dollar Industries, Sudar Industries and Raymond Apparel are expected to grow in the range of 10-15 per cent.

In the ongoing fiscal, prices of raw materials such as cotton yarn and synthetic yarn are expected to be lower as compared to the preceding year. Prices of cotton yarn are expected to decline by about five per cent and that of polyester by around eight per cent. Consequently, raw material expenses of the industry are likely to grow by 11.5 per cent, slower than the growth in sales. Other expenses viz. power & fuel, wage bills and other operating expenses are expected to increase in the range of 12-14 per cent. Consequently, the industry’s operating profit is projected to rise by 15.5 per cent. Operating margin is likely to expand by 40 basis points to 12.5 per cent.

In 2016-17, the industry’s sales growth is likely to improve to 14.1 per cent. Operating profit is expected to grow by 17.8 per cent and net profit by 24.5 per cent. Operating margin and net margin are likely to expand by 40 basis points and 50 basis points to 12.9 per cent and 6.3 per cent, respectively.

Industryoutlook.cmie.com