Gujarat’s textiles industry is seeing early signs of recovery in production, exports and order enquiries, but a sharp rise in raw material, fuel and chemical costs is squeezing margins across the value chain. Although capacity utilisation and orders have improved, manufacturers remain cautious. Higher input costs are pushing up working capital and limiting profitability.The outlook is nevertheless positive. The industry is expecting festive demand and improving export enquiries to support volumes.Chintan Thaker, chairperson, Assocham Gujarat State Council, said, “FTA has had a good impact but rising crude and other input costs remain a concern. Crude is touching $100 — this might touch margins.” Thaker noted that overall, a robust demand scenario is coming up.Processors say Gujarat Mineral Development Corporation (GMDC) lignite prices have also climbed from Rs 2,800-3,000 per tonne to around Rs 4,500 during the same period. The increase has extended to dyes and chemicals. The price of H-acid, a key dye intermediate, has nearly tripled from about Rs 300 per kg to Rs 800-900 per kg, while dyes have become costlier by 50-60%. Grey knitted fabric, which earlier cost Rs 240-250 a kg, is now Rs 320-330 a kg.Liquidity stress, thin profit marginsRecovery remains fragile, with manufacturers struggling to pass on the higher costs to buyers. “There is a lot of turbulence and the cost of raw materials remains high. We are still not sure which trajectory the market will take,” said Suketu Shah, secretary, Denim Manufacturers’ Association of India (DMAI).Shah said high inventories with brands and retailers were holding back fresh orders, while delayed payments were aggravating liquidity crunch. “Across the industry, profitability has been marginal or many units have reached break-even. Liquidity has been under stress as businesses have accepted higher-cost inventories but are unable to realise payments on time,” he said. The pressure is particularly severe for textile processors for whom fuel is a major production cost. Narol Textile Infrastructure & Enviro Management (NTIEM) has sought relief from GMDC after seven successive coal and lignite price revisions between Jan and July pushed fuel prices up by about 60%.Processing units depend heavily on coal and lignite to operate boilers and thermic fluid heaters, with fuel accounting for nearly 25% of processing costs, according to NTIEM. The price revisions have made it increasingly difficult for processors to quote competitive rates while maintaining margins.Akash Sharma, director of a textile processing unit, said prices of imported coal went up from around Rs 7,000 for a tonne in Jan to Rs 9,500 in July. “Rising input costs have pushed up working capital requirements by nearly 30%. Many processors have cut down production because they just cannot finance higher inventories,” Sharma said. He estimated that domestic and international demand remained 20-30% below earlier levels. Although capacity utilisation is up from about 60% to 80%, margins have remained tighter.Surat’s MMF sector stretchedIn Surat, the country’s man-made fabric (MMF) hub, rising yarn prices have emerged as a major concern for the entire textile chain, from yarn dealers and weavers to processors and traders.Yarn prices have risen sharply in recent months, while downstream units are struggling to secure corresponding increases in fabric and processing prices. “The impact of the war is not as significant now, but supply is still insufficient to meet demand. As a result, yarn prices have risen by up to 50%,” said Lucky Singhi, vice-president of the United Gujarat Yarn Dealer Association.The increase has triggered a dispute between processors and traders over processing charges. South Gujarat Textile Processors Association (SGTPA) has decided to raise charges by up to 15%, citing higher input costs, while Federation of Surat Trade and Textile Associations (FOSTTA) has opposed the move and threatened to stop placing orders. Processors said higher coal prices were a key reason behind the proposed increase and warned that charges could rise further if fuel costs continued to climb.Southern Gujarat Chamber of Commerce and Industry (SGCCI) has separately raised concerns over polyester raw material prices. It has submitted a technical letter and data analysis to Union textile minister Giriraj Singh, highlighting a sharp rise in domestic prices of polyester melt (MELT) and partially oriented yarn (POY) following Centre’s withdrawal of the basic customs duty exemption on mono ethylene glycol and pure terephthalic acid. SGCCI said the polyester value chain had witnessed an artificial escalation in prices that was not commensurate with underlying cost movements. It warned that the surge was disrupting procurement cycles and squeezing margins for downstream textile units, particularly in Surat.Denim exports show signs of recoveryDespite the cost pressures, Gujarat’s denim sector is seeing improved export enquiries after months of muted orders and inventory correction. “We are seeing early signs of improvement in export enquiries and order visibility, although I would term the recovery as gradual rather than broad-based,” said Ronak Chiripal, promoter, Chiripal Group.Chiripal said the group’s denim facilities were operating at full capacity and volumes could rise 10-15% as demand strengthens. However, ordering patterns remained measured and varied across geographies. Rahul Shah, co-chair, GCCI textile committee, said demand had improved as pipeline inventories declined, but buyers remained cautious because of higher input costs. Yarn prices have risen around 30% over the past three to five months, while dyes, chemicals and freight costs have also increased. Denim fabric prices were up by about 10%, but manufacturers said the increase had not fully offset higher production costs.Volumes yet to translate into good profitsArvind Ltd’s Q1 FY27 performance reflects improving volumes. Denim volumes rose 34% year-on-year to 17.5 million metres, the company’s highest in 16 of the past 17 quarters. Export volumes increased to 12.3 million metres from 7.6 million metres a year earlier, while denim revenue rose 37% to Rs 450 crore.However, textile EBITDA margin slipped to 8% from 8.4% a year earlier. The company cited an additional raw-material cost impact of about Rs 19 crore during the quarter.International buyers remain cautiousManufacturers said the improvement in overseas demand is not uniform. Buyers remain reluctant to build inventories and are increasingly placing staggered orders. Vinod Mittal, director of Vinod Denim, said denim usage is growing across fashion categories globally as well as in India.“Worldwide there is increasing usage of denim fabric in fashion. The trend is similar in the domestic market too. There is strong demand from Bangladesh, Vietnam and Latin American markets,” he said. Mittal added that while yarn, chemicals and freight costs have risen sharply, demand has held up and “most of the mills are running at more than 80% capacity in Ahmedabad”.He said currency movement has offered limited relief to exporters. “The rupee’s depreciation against the dollar is not resulting in margin growth entirely because buyers negotiate pricing aggressively with currency devaluation,” Mittal said. “Overall margins have shrunk due to increasing input costs but strong volumes are helping the industry,” he said.
Experts are banking on a positive outlook riding on increasing orders
