Mumbai: Indian textile exporters are negotiating a 3-4% dollar price increase to offset the effects of a rising rupee, industry players said.
The Indian rupee, which touched a nine-year high on 17 April against the dollar, has gained about 12% since July and more than 5% in 2007 to be Asia strongest currency against the dollar this year.
“We are negotiating higher prices for our new contracts,” executive director for finance Rajendra Hinduja of Gokaldas Exports Ltd said. “Margins are thinning, but it is still early to take a blanket call.”
Exports account for 98% of the Gokaldas’ revenue, which has a net profit margin of 8%. It expects to have closed 2006-07 with sales of about Rs1000 crore. The company is seeking to convert dollar negotiated Europe-bound shipments into euro contracts, he said.
Home textiles exporter Welspun India Ltd and Alok Industries Ltd are also looking to raise prices, but said their current contracts were backed by forex hedging. “We generally have six months forex exposure. We are also closing new contracts 3-4% higher than before,” said M. L Mittal, finance director, Welspun.
Alok and Welspun export goods worth up to $20 million a month. Large exporters such as Gokaldas and Alok also have an inbuilt hedge as nearly 40% of their inputs are imported.
Not all are as hopeful of countering the hit they expect from the rupee’s recent rise. And many are already contract bound.
“It is only the new business that will benefit from higher prices. The old contracts have to be honoured,” said Hinduja.
Only exporters that offer services such as warehousing and distribution have some pricing power, said Gautam Roy, a sector analyst with Edelweiss Securities said.
The worst hit will be small exporters from apparel hubs such as Tirupur. The textile town has about 1,500 firms exporting apparel worth more than Rs1,00,00 crore a year and most have annual revenues of less than Rs300 crore.
Some of them have been wary of taking new orders in the face of competition from China and Bangladesh that have held prices on the strength of their currency.
“The hit on margins would be to the tune of the rupee appreciation for those that have neither hedged nor can review prices,” Roy said. “This would hit textile exports, for that matter all exports from India.”
While Indian textile exports halved to about 5% in the first two months of the year, Bangladesh and China expect textile exports to grow more than 15%.