Companies & Sectors
Indian textile exporters target fresh markets

Following tough competition from China and South Korea as well as lack of incentives, many Indian textile exporters are unwinding their positions from traditional markets like the US and the EU. These exporters are now focussing on markets like Japan, the Latin American countries, New Zealand and Australia. 

“The US market is a comfortable zone and a better bet for all of us as it offers good quality and quantity potential for textile exporters. However, due to incentives withdrawn by the Indian government, our battle with countries like China and Korea has become even tougher,” said a senior official from Nahar Spinning Mills Ltd.
 
According to the Apparel Export Promotion Council (AEPC), during the first half of the current financial year (April to September 2009), Indian garment exports tumbled 7.3% compared to last year. In October, the country's apparel exports were hit severely and declined by 17.6% to $603 million over the year-ago period.
 
Indian apparel exports to the US, the world's largest market, declined by 6.5% to $2.27 billion during January to September this year compared to $3.1 billion in the same period a year ago. However, during the same period, China's exports to the US increased by 2% to $17.20 billion while Bangladesh's exports rose 2.4% to $2.70 billion.
 
"The government must introduce fiscal relief measures to save garment exports out of India," said AEPC chairman Rakesh Vaid, adding that there are fears of the industry suffering collateral damage. "Stimulus packages and other steps announced so far have had negligible impact on the Indian apparel industry. These measures were either release of withheld benefits or the restoring of benefits withdrawn earlier."
 
With weak US markets and despite marginally better recovery signs from EU countries, the Indian textile industry is not expecting higher margins, said an official from the Synthetic and Rayon Textiles Export Promotion Council (SRTEPC).
 
Accordingly, the trend is likely to continue for another two to three years with a 2% drop in exports to these nations, the official from Nahar Spinning added.
 
Textile exporters from India are not against the idea of exporting textiles to the newer markets like Japan, Latin American countries, New Zealand and Australia but would have preferred to  enjoy their earlier privileges which the government has withdrawn, he said.
 
The government has provided better pricing for the newer markets and with less competition, the textile exports to these markets will increase, the official added.
 
“We have just started (exports) and have not rigorously entered these markets as we are to still studying and understanding them,” the Nahar Spinning official said, adding that it would take at least another six months to a year to do well in these markets.
-Aaron Rodrigues

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Another SME trading platform; will it work this time?

Remember something called Indonext? Even hardcore market players would take a few minutes to recall this market segment created as a separate platform in the Bombay Stock Exchange in 2005 for small and medium enterprises (SMEs) under a diktat from the then finance minister P Chidambaram. That attempt failed. Indonext, to which some ‘B’ group stocks were hastily shifted, did not attract new SMEs. The market regulator Securities and Exchange Board of India (SEBI) has now announced fresh plans for an SME exchange. It has permitted existing exchanges to set up a separate trading platform for SMEs, rather than have a dedicated SME exchange.

SEBI’s latest move is a product of over four years of deliberation to come up with an effective solution to help SMEs raise public equity. However, uncertainty still prevails over the final outcome of the new plan. Will it do better than Indonext which was a disaster, mired in liquidity and credibility issues, coupled with very little awareness among investors and institutions alike? The platform was launched in haste, not giving adequate consideration to various issues involved. It was linked more to the survival of the regional stock exchanges rather than creating an SME exchange. One earlier attempt, the Over-the-Counter Exchange of India (OTCEI) also turned out to be a failure, also plagued by issues such as liquidity, investor interest and technology.

SEBI recently released the norms for the SME trading platform, which have relaxed the criteria for SME listings. Companies will be exempted from the eligibility norms like track record on profitability as is applicable to other issuers. In order to have informed, financially sound and well-researched investors with a certain risk-taking ability, a minimum IPO application size of Rs1 lakh would be prescribed. An upper limit of Rs25 crore paid-up capital would be prescribed in order for a company to be listed on the SME platform and a minimum paid up capital of Rs10 crore would be prescribed for listing on the main boards of NSE and BSE. The merchant banker to the issue will bear the responsibility for market making for a minimum period of three years. The market regulator has also specified that during the compulsory market making period, promoters or acquirers will be allowed to dilute their shareholding only through offer for sale or to an acquirer and not to a market maker. SEBI has also allowed companies to go for pure auction of public issues instead of price band for institutional investors. Listed companies will be required to prepare and submit financial results on a half-yearly basis, instead of quarterly basis.

It is not clear whether these norms would bring about a thriving public market in SMEs allowing them to raise capital and provide returns to investors. The willingness of the market maker to be around for three years has not been tested. Whether investors, who have plenty of choices in the small-cap space, will jump into a new exchange is doubtful. Finally, it must be remembered that Indonext failed because it was a product of government diktat. In this case too, SEBI issued its order about SME exchange without much discussion.
–Sanket Dhanorkar

 

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COMMENTS

kishoreghiya

7 years ago

OTC died because late mr. Ravimohan allowed all the bse members to become members of otc and the members were determined to kill the experiment. The memberships should have been made open to fresh candidates who did not have access to closed BSE. The same is the case of indonest and that too by BSE it was destined to fail.
MR. Pranavda please open up ,deregulate, stop worrying, daily astrologers are advisings and brokers are sending sms where to invest but we are surviving. So pl stop worry about us and let owners of small companies be allowed to raise there will be future infosys and bhartiairtel like promotrs are there and we can make money if we take calculated risk.
Pl stop worrying we know higher the risk higher the returns after all it is our money is it not?
Kishore Ghiya mob 09825217857

Iran may offer 40% stake in South Pars gas field to Indians

Iran is believed to be ready to offer a 40% stake in a giant gas field in the Persian Gulf to India's ONGC Videsh Ltd (OVL) and non-resident Indian (NRI) business conglomerate of the Hindujas.

On the second day of talks the two held with a delegation led by Iran's deputy oil minister and managing director of National Iranian Oil Co (NIOC) Seifollah Jashnsaz, sources in the know said that Tehran offered a 40% interest in the development of Phase-12 of South Pars gas field. London-based Hinduja Group is also interested in the $7.5 billion South Pars Phase-12 (SP-12) project, but the two entities are independently pursuing the deal, the sources said.
 
Iran, they said, stated that it can offer a maximum 40% interest in SP-12 to Indians and it was for OVL and the Hindujas to decide among themselves how it would be split among them.
 
ONGC Videsh, the overseas investment arm of the state explorer Oil and Natural Gas Corp (ONGC), was clamouring for 25%-30%, they said, adding that the remaining stake could be taken by the Hindujas.
 
Sources said OVL wanted liquefied natural gas (LNG) in return for its efforts in the project. SP-12 is to produce 3 billion cubic feet per day of gas, two-thirds of which is to be converted into LNG for export.
 
OVL wants at least half of the 10 million tonnes a year of LNG to be produced from the SP-12 project.
Yogesh Sapkale [email protected]

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