For the fourth quarter Arvind’s margins improved due to a good product mix. Revenue in the advanced materials segment grew on the back of strong demand and order execution. Overall gross margin rose sharply year-on-year due to sourcing efficiencies. High overheads restricted operating margin expansion. A significant increase in financing costs resulted in flat bottom-line margin.
Arvind is one of India’s leading textile manufacturers. Prospects in the advanced material (technical textiles) category remain good since the product portfolio comprises high-margin and specialised products such as human protection fabric/garments, industrial equipment, advanced composites and automotive fabrics. However, since the contribution of this segment to annual consolidated revenue is less than ten per cent on a yearly basis, it won’t improve the company’s financials dramatically. Arvind’s dependence on external fabric suppliers is likely to reduce. Captive consumption of fabrics (for manufacturing garments) is slated to increase to 30 per cent (of the total fabric output) over the next two or three years, as against ten per cent to 15 per cent in fiscal ’19. Additionally, the company is likely to foray into manufacturing of athleisure and activewear fabrics and garments.
India’s textile sector has been going through a rough patch. This is largely on account of steep rise in input procurement costs, the liquidity crisis and the industry slowdown.