Bangalore: Gokaldas Exports Ltd, India’s largest garments exporter, plans to triple its revenue from India this year, on demand from local retailers for branded higher priced apparel and to offset the impact of the rising rupee against the dollar.
Bangalore-headed Gokaldas earned most of its revenue— about 96%—last year from exports to global brands such as Tommy Hilfiger, Nike and Adidas and to large retailers such as Walmart Inc. and Gap Inc. The company expects sales in the domestic market to increase to Rs100 crore this financial year, from Rs35 crore in fiscal 2007, as demand grows from international brands such as Nike, Adidas and Benetton in India and local apparel brands from ITC Ltd and Arvind Brands Ltd in the domestic market.
“Profits in the domestic market are better than in exports,” said Rajendra J. Hinduja, executive director, Gokaldas Exports Ltd. Gokaldas earns gross margins of 22-23% in exports, while it sees higher margins of close to 25% for apparel sold in India, Hinduja said. Net profits could be as high as 12-13%, he said. Gokaldas earned profit of Rs70.3 crore on revenue of Rs1,044.9 crore for the year to March. Export of garments from India last fiscal totalled $9.4 billion or Rs37,600 crore. Precise estimates for sale of garments in India are not available but local trade body, The Clothing Manufacturers’ Association of India, pegs it between $20 billion and$30 billion.
For domestic sales, “there is no pressure of the rupee appreciation, nor do we have logistics issues as in exports,” said Hinduja, but he declined to specify the impact of the rise in rupee over the dollar on profits for the quarter to June ahead of quarterly results to be announced on Monday.
The dollar, the currency that companies such as Gokaldas bills customers in, has risen almost 7% in the April- June period.
Indian garment exporters send their cargo to their customers in the US and Europe through ships, but face delays in clogged ports in the country, and often pay “higher freight charges” to airlift their shipments. Gokaldas hopes that shipping goods within the country would not be as laborious as exporting them.
Gokaldas, which supplies garments and apparel to Pantaloon Retail Ltd, expects significant jump in sales in local market once the operations of big retailers such as Reliance Retail and Bharti Walmart gather momentum.
Garments and apparel account for nearly 40% of goods sold in retail chains globally.
“There have been discussions with Reliance and Bharti. We are ready to supply (garments) once they firm up their plans,” said Hinduja.
Besides increasing focus on the local market, the four-decade-old Gokaldas is setting up new units in centres such as Mangalore and Hyderabad, where skilled workers cost one fifth less than in Bangalore, a hub for garment exporters.
The Hyderabad facility with 2,000 seats is expected to be operational this year and will be the largest single unit in the city.