Gujarat: Textile chain hit by rising cotton prices; spinning mills most affected | Ahmedabad News

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AHMEDABAD: Cotton price ripples soaring to Rs 1.1 lakh per candy (365 kg) are felt throughout the textile value chain. Among the hardest hit are spinning mills, whose margins have eroded to such an extent that some have been forced to permanently close up shop. Since Diwali of 2021, at least three spinning mills from different parts of Gujarat have changed ownership. Four others located in Saurashtra are for sale.
As demand remains weak in domestic and export markets, yarn prices have not increased at the same rate as cotton prices, leading to higher input costs for spinning units. Yarn manufacturers incur losses in the order of 30 to 50 rupees per kg of yarn produced, depending on the quality.
UNITS FOR SALE: Dhrangadhra-based Omax Cotspin, which already has an installed capacity of around 70,000 spindles, recently acquired a spinning unit at Rajula area of ​​Amreli district. Jayesh Patel, Director of Omax Cotspin, said: “The industry has been under pressure due to the unprecedented rise in cotton prices, triggered by falling demand.
Spinners had high profit margins in 2021, but there were also inherent challenges before this price hike. The owner of a spinning unit based in Rajula wanted to exit the business altogether. We got a good deal. The acquisition will help us almost double our capacity as the unit has an installed capacity of 51,000 spindles. Similarly, Jasdan-based MM Group acquired two spinning mills in the past year. Director of the MM Group, Natvarlal Navadiyasaid: “We have recently expanded by adding 5 3 , 0 0 0 more spind them and the acquisition of medium-sized units.
If the situation does not improve soon, we expect more units to go on sale. The manager of a Saurashtra-based mill, which is for sale, on condition of anonymity, said: “We could not meet the cost of inputs due to rising cotton prices. Over the past four months, we have reduced capacity utilization and suffered heavy losses. We cannot pass on increased costs to customers due to the uncertainty of the situation and lack of demand. So we decided to sell this unit and diversify our business. A continued weak trend affected spinning mills. Industry sources say pressure plants offer discounted valuations of around 15%.
However, potential buyers are in wait-and-see mode as the situation shows no signs of any sudden improvement.
AFFECTED VALUE CHAIN: Weaving and textile processing companies also face the challenges of low demand and high input costs. “There are around 200 cotton weaving units, and they are operating at very low capacity. Demand is weak and prices for gray fabrics have become very volatile. Spinning units operate at low capacity. This has a direct impact on the weaving units,” said Bharat Chhajer, former chairman of Powerloom Export Development Council
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