Integrated textile manufacturing company Vardhman Textiles, has started hedging cotton on Multi Commodity Exchange (MCX) to manage the volatility in cotton prices. Cotton is the basic raw material for the textile industry and its price is influenced by domestic and international situations, largely following increasing globalisation and international trade.
During October 2016 and September 2017, cotton prices reached a volatility of 19.25 per cent (annualised) and with physical market size of cotton projected at around Rs 68,000 crore, the cotton industry faced annualised price risk of over Rs 13.000 crore.
Vardhman Textiles, part of the Vardhman Group, is one of the largest textile companies in India that manufactures cotton yarn and fabric for various applications — such as hand knitting yarn, machine knitting yarns, jerseys, sweaters, sarees, dress materials and carpets— with a capacity of over one million spindles, amounting for 4 per cent of the country’s yarn production, 1320 looms for weaving of fabrics and 180 million meter per annum of fabrics processing capacity. It is also the second largest producer of sewing threads and the market leader in hand knitting yarn in the country.
Mrugank Paranjape, MD & CEO, MCX says they are glad to serve Vardhman as the platform of choice for their cotton price risk management obligations. Increased corporate participation has enhanced the quality and the process of information convergence in MCX cotton futures, thereby making it the hedging tool of choice for the cotton stakeholders in the country, besides transmitting signals to other major global markets in cotton trading.
IJ Dhuria, Director-Raw Materials, Vardhman Textiles explains, MCX cotton futures contract has been gaining strength, providing them an ideal platform to hedge our inventory and raw material risks effectively. “It has always been our corporate endeavour to best serve the investor interests besides strengthening our competitiveness.
I am happy to note that this risk management initiative of ours will help not only convey the same through our corporate governance report, but also provide for better compliance.”