Competition may affect margins in the denim segment

Friday, 01 June 2012

With many new companies entering the denim fabric space and existing companies expanding their production capacities in anticipation of high demand, experts feel that such a heightened competing environment would put pressure on denim makers’ profit margins. According to analysts, domestic as well as international demand for denim has been growing at the rate of 25-30 per cent yearly, despite the economic crisis. The US export demand is also high. Moreover, in the next one year, demand is expected to go up 13 per cent. But with new players entering the sector, competition is becoming tougher and this situation could lead to margins coming under pressure in the next six months.

According to analysts, small players’ margins will get affected badly compared to big companies, such as Arvind, Aarvee Denims and Exports and KG Denim. However, the pressure could be short-lived. Experts also feel denim players should also look at exploring more export destinations to avoid pressure.

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