Export demand is causing a denim downturn in the United States
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26th August 2021, Mumbai:
The second wave of the pandemic prompted a drop in denim fabric sales in the local market, but the export industry has responded with a much-needed spike in demand.
Denim sales and production mills across the nation have ramped up their pace as a result of continuous export demand, with Gujarat accounting for 60% of total denim manufacturing capacity and earning the moniker of "denim capital" of India.
“Demand from the worldwide market, including nations like the United States and those in Europe, has increased substantially, and orders have begun to flow in,” said Gaurav Davida, Head of Corporate Finance and Strategy at Jindal Worldwide Limited. Export orders, in fact, were a lifeline for denim manufacturers, as they helped compensate for a drop in domestic demand from April to June 2021, when the second wave of COVID-19 was at its peak and a raft of limitations were implemented to keep the spread in check.”
Denim manufacturers saw strong growth in the first quarter of 2021, despite the low base of the previous fiscal year's first quarter. Despite this, according to an industry spokesperson, their output has returned to pre-COVID levels. “Manufacturers are also seeing higher price realizations, which is helping to offset the margin loss. This is due to a rise in demand, with merchants in major areas such as Europe, the United Kingdom, and the United States reporting double-digit sales increases, both offline and online.”
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For the first quarter of 2021-22, major denim producers reported a significant increase in revenue. Arvind Limited, for example, reported a 186% rise in denim manufacturing sales, from Rs. 145 crore in the first quarter of 2020-21 to Rs. 416 crore in the same quarter of 2021-22. According to the company's investor presentation, total volumes increased 2.8-fold year over year. “We attained at least 80% of the pre-COVID level of our revenues from denim sales in the April to June quarter of 2021-22,” Davada noted. We generated an income of at least Rs. 500 crore over this time, thanks to improved export realisation.”
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