Released on = September 18, 2006, 1:18 am

Press Release Author = Nitin Madkaikar - YarnsandFibers.com

Industry = Apparel & Fashion

Press Release Summary = Textile companies are increasing looking at backward and
forward integration businesses, which will lead to value added products and higher
returns. Like, spinning units are foraying into weaving and garmenting, as forward
integration while fabric producers are entering spinning segment (backward
integration) to ensure quality supply of yarn and garment manufacturing as forward
integration.

Press Release Body = The YarnsandFibers' sixth consecutive quarterly survey on
Business Confidence of Indian textile industry reveals a discernable approach in
investment pattern of the textile companies in recent past.

Companies are increasing looking at backward and forward integration businesses,
which will lead to value added products and higher returns. Like, spinning units are
foraying into weaving and garmenting, as forward integration while fabric producers
are entering spinning segment (backward integration) to ensure quality supply of
yarn and garment manufacturing as forward integration.

Many respondents have also indicated taking over existing units in their investment
plans. This will, in short, lead to quick capacity set up with low capital cost.
Some respondents have hinted at entering into new product lines like technical
textiles. Technical textiles, hitherto is in the development stages in India and has
large business potential.

Total investment on hand in textiles stands at Rs.218.65 billion as of July 2006.
These are spread over 399 projects in cotton textiles, manmade fibres, garments and
other textiles. Of these projects worth Rs.129.16 billion are under implementation
with a gestation period of 1-2 years, while another Rs.89.5 billion worth of
projects are under various stages of planning.

According to the survey for the quarter July to September 2006 on Business
Confidence textile companies are a bit skeptical about their performance in the
quarter of July to September 2006. In the quarter ending September 2006, the
Business Confidence Index, a measure of future prospect, was at 81.8 while the
actual performance, measured by Current Status Index stands at 69.3.

The Business Confidence Index on the scale of 0 to 100, where the highest is 100, at
50 the confidence is same as today and below 50 implies lower than the current
level. The September 2006 index is a shade below than the previous quarter index
which was at 85.9.

Of the respondents, 70% (72% in previous survey) are of the opinion that their
performance would be better in the July to September 2006 quarter. Significantly,
about 7% of the respondents indicated that their performance would be worse in the
ensuing quarter (July-September). They are largely garment manufacturers. Such
pessimism was not seen in the past two quarters and the proportion of respondents
expecting worse performance is the highest amongst the past six quarters. The
remaining 23% respondents believed that their performance would remain unchanged and
would be the same as in the preceding quarter.

This pessimism is despite the overall healthy economic growth and booming
manufacturing sector. Domestic consumption was also on a strong footing which was
being reflected in the growth of mobile subscriptions and automobile sales. These
trends would certainly have a positive impact on the textile consumption also.
However, the high and strong oil prices remain a major cause of concern.


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