The third and a much stronger and deadlier wave of coronavirus in the country is raising concerns for the economic and industrial activity that revived much quickly after the lockdown and restrictions were lifted during the first wave last year. Sectors that have truly seen spur in activity include the textile sector among others which has helped the country’s trade balance position improve after a long time.
Companies have seen their financial performance improve staggeringly during the recent 9MFY21 primarily due to improvement in export numbers. (Textile exports crossed $11 billion in the 9MFY21 with a growth of over 9 percent year-on-year. Key growth drivers have been knitwear, bedwear, garments and towels in that order. Interloop (PSX: ILP) has also seen its earnings increase by more than 2.5 times in 3QFY21, and more than double in 9MFY21.
The growth in earnings stemmed from the rising topline, that grew by 30 percent year-on-year in 3QFY21 and by 17 percent year-on-year in 9MFY21. The growth in revenue was primarily due to rising volumes, better prices for value added exports as well as increase in operational capacity of denim division to 100 percent during the current period. Also, higher utilization of the denim plant also helped lift sales. The company saw as significant growth in gross margins despite the exchange losses incurred during the 3MFY21. Similarly, net margins improved dramatically despite the increase in expenses that were offset by lower finance cost.
The current situation of covid pandemic in India as well as a decline in export from China due to human rights issue has once again offered a lucrative opportunity to the textile players at home to rev up the exports. While the third wave of covid in the country along with the restrictions imposed recently to curb the virus can adversely affect the optimism as well as the operations, companies have already begun expansion plans. Interloop has recently announced its Vision 2025 where the company aims to double its sales by FY2025-26 versus FY2020-21, which they plan to achieve through an investment of $300million for the addition of a knitwear apparel plant, an activewear plant and a denim fabric mill along with its 6th hosiery plant and enhancing its spinning and yarn dyeing capacity over the next 5 years.