The transporter’s strike has affected the entire textile industry hitting its production, fund flow, employment, credibility and reputation. The ongoing indefinite strike of transporters has led the textile industry to amount a loss of up to Rs 1,500 crore. It is estimated that Rs 1,200-1,500 crore export orders are lying idle due to this strike.
Why is this important
- Since October 2017, the knitwear exports have been on a decline and in H2FY18, the decline was to the tune of 21% as compared to the corresponding period in 2016-17.
- In Q1FY19 also, the export has declined by 21% as compared to the same period in FY18 leading to a substantial loss of foreign exchange.
- As the festive season approaches, this strike can lead to lower domestic order completion and will also affect the global order commitments by the exporters. This strike is hampering the transport of finished garments for shipment through sea ports in Tuticorin, Chennai, Cochin and Mumbai or through airports of Chennai, Bengaluru, Mumbai and Cochin.
- According to the South India Spinners’ Association, the small spinning mills are facing the hardship for the past week with a 25,000 tonne of yarn/threads worth Rs. 550 crore lying idle at the factory gates. Raw materials such as cotton and yarn also could not be brought to the mills.
- The strike has forced the units who used to work on the basis of ‘just-in-time’ arrival of raw material to suspend their production and would lead to loss of livelihood and lower wages in the absence of production incentives and overtime.
- The export market is season conscious and design-driven making the on-time supply a key cog in the wheel. An extended delay would lead the foreign buyers to procure from countries such as Bangladesh, Cambodia, Myanmar, Sri Lanka, Pakistan, Vietnam and China.
- The industry may lose a good amount of foreign exchange due to not fulfilling their export obligations. The delay in shipments would lead to LCs expiring, air shipment costs and cancellation of orders.
- India is one of the largest exporters of garment and textile products and if production is curtailed, it will affect the fund flow, credibility and reputation of Indian exporters amongst foreign buyers.
Stocks to be impacted:
Trident Ltd. (CMP: Rs. 56.3, Market Capitalisation: Rs. 2894 , FY2020 P/E: 8.14)
IndoCount Industries Ltd. (CMP: Rs. 81.6, Market Capitalisation: Rs. 1,610, FY2020 P/E: 8.7)
Welspun India Ltd. (CMP: Rs. 53.3, Market Capitalisation: Rs. 5,350 , FY2020 P/E: 8.7)
GHCL Ltd. (CMP: Rs. 252, Market Capitalisation: Rs. 2,469 , FY2020 P/E: 6.02)