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Gujarat: Textile chain hit by cotton price rise; spinning mills worst affected | Ahmedabad News

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AHMEDABAD: The ripples of cotton prices skyrocketing to Rs 1.1 lakh per candy (365kg) are being felt across the entire textile value chain. Among the worst hit are the spinning mills, whose margins have eroded to such an extent that some have been forced to permanently shut shop. Since Diwali of 2021, at least three spinning mills i n d i f f e re n t parts of Gujarat have seen a change in ownership. Four more situated in Saurashtra are up for sale.
As demand remains weak in the domestic as well as export markets, yarn prices have not risen in line with cotton prices, leading to a rise in input costs of spinning units. Yarn makers are witnessing losses to the tune of Rs 30-50 per kg of yarn manufactured, depending on the quality.
UNITS UP FOR SALE: Dhrangadhra-based Omax Cotspin, which already has an installed capacity of around 70,000 spindles, has recently acquired a spinning unit in Rajula region of Amreli district. Jayesh Patel, director, Omax Cotspin, said, “The industry has been under pressure due to unprecedented cotton price hikes, triggered by falling demand.
Spinning mills had high profit margins in 2021, but there were inherent challenges prior to that rally in prices too. The owner of a Rajula-based spinning unit wanted to exit the business completely. 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 has acquired two spinning mills in the past one year. MM Group director, Natvarlal Navadiya, said, “We have recently ex- p a n d e d b y a d d i n g 5 3 , 0 0 0 more spind l e s a n d acquiring mid-size units.
If the situation does not improve soon, we expect more units to be up for sale.” The director of a Saurashtra-based spinning mill, which is up for sale, on condition of anonymity, said, “We were unable to meet input costs due to rising cotton prices. Over the past four months, we have been reducing capacity utilization and incurring steep losses. We cannot pass the cost increase to customers due to the uncertainty of the situation and lack of demand. Therefore, we have decided to sell off this unit and diversify our business.” A continuous weak trend has affected spinning mills. Industry sources claim that mills under pressure offer a r o u n d 15% reduced valuations.
However, potential buyers are in waitand-watch mode as the situation shows no sign of a sudden improvement.
VALUE CHAIN AFFECTED: Textile weaving and process houses are also facing challenges of low demand and high input costs. “There are around 200 cotton weaving units, and they are running at very low capacity. There is low demand and grey fabric rates have become very volatile. Spinning units are working at low capacities. This directly impacts weaving units,” said Bharat Chhajer, former chairman of Powerloom Export Development Council



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