The shine fades from wine

Winemakers see stocks piling up for want of takers due to the ongoing slowdown

Although Cyclone Phyan hit Nashik a week back and damaged a major portion of the grape crop under cultivation, consumers might not have to pay much for their bubbly in the coming months as last year’s recession has left unsold stock of wine at various wineries across Maharashtra.

The unsold wine stored in tanks will result in winemakers selling their produce at a lesser price. Sula Wines still has over 40%-50% of its wine lying unsold in its tanks, while Indus Wines has around 90% of its wine still in its inventory.

“Because of the recession and the terrorist attacks, the hospitality industry was hit hard. People stopped patronising hotels or visiting Mumbai. The food and beverage industry also took a hit with a result that our wines could not be sold,” said Violet D’souza, director, Indus Wines.

For winemakers, the season from Diwali to the end of the year is the peak season which sees maximum wine sales taking place.

The market for wine before 2007 was growing at 28%. However, since 2008, the market has dropped by 30%.

The problem facing the industry is not only reduction in sales and demand, but also the restricted marketing structure—both domestic and international—for Indian wine firms, according to Nasik Valley Grape Promotion Association president, Pradeep Panchpatel.

Adding to this, winemakers are a part of the agriculture industry, but are made to pay 20% sales tax as wine is considered as ‘hard liquor’ which impacts the annual bottom-line of various winemakers.
 
According to Sula Wines vice president Neeraj Agarwal, the prices of grapes will increase by at least Rs10/kg as there will be a shortage in the fruit output this year.

“The production cost will increase by about 10%-20% as the wines are still in our tanks. Holding cost will go up,” Mr Panchpatel said, adding that due to the cyclone the production of grapes will decrease.

Even with this scenario, winemakers will not increase prices of their product as their main objectives for this year is to promote the product, Mr Panchpatel added. This view is maintained by Indus Wines which has launched Mumbaai Dreamz, a low-priced wine category.

- Aaron Rodrigues [email protected]

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New index launched for realty market

Liases Foras has launched Ressex, a real-estate sensitivity index that will capture trends in price, inventory, sales and demand in six cities.

Real-estate research firm Liases Foras has launched its Real Estate Sensitivity Index, or RESSEX, which will provide data on price, inventory, sales and demand changes in six cities—Mumbai Metropolitan Region, Pune, National Capital Region (NCR), Bengaluru, Chennai and Hyderabad.
 
This Index will increase transparency in real-estate transactions by providing timely, accurate and relevant data to investors, developers and financial institutions, said Pankaj Kapoor, founder and chief executive officer of Liases Foras.
 
“Ressex data are collected through primary surveys and include detailed micro-research of the six cities,” he said.
 
“This type of a tool was needed in the industry for a long time and we are working closely with Pankaj. It will bring more transparency in the market,” said Renu Sud Karnad, joint managing director of housing finance major HDFC.
 
Subscribers will be charged a quarterly fee of Rs25,000 for access to this website, while yearly access will cost Rs 75,000, Kapoor said, adding that a separate service will be launched for individual investors to select projects using analytical tools.
 
 The website provides calculators that allow the user to tweak various parameters such as prices, gestation period, location, etc. to compute key valuations like fair value, net present value and even Ressex futures.
 
“Developers will benefit a lot from such a sensitivity index because it will be easy for us to know which sector is enjoying more demand and work accordingly,” said Niranjan Hiranandani, managing director of real-estate developer Hiranandani Constructions.

Pallabika Ganguly, [email protected]

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Textile sector on an uptrend

The textile sector was facing a slowdown last year, but a surge in exports may help it to achieve a turnaround, say industry experts

The textile industry was hit hard by the global economic slowdown. However, it is now showing signs of recovery. Experts feel this is just the beginning of the growth story for this sector. According to government data, during FY09, textile exports from India grew by 8.1% to Rs96,309 crore. Higher prices for cotton overseas, a depreciating local currency and stimulus packages from the Union government were the main reasons for higher exports, say experts.

“A gradual improvement in the world economy and consequent rise in demand for textiles in most countries—especially in the major Western markets ahead of Christmas—has led to a boost in exports,” a source from the Synthetic and Rayon Textiles Export Promotion Council (SRTEPC) told Moneylife.

“With a lot of nations across the world recovering from the recession, the demand for textiles has grown,” said Textile Association of India’s (TAI) chairman KD Sanghvi.

According to the SRTEPC source, in the next few months, the demand for textiles from erstwhile markets like the US and EU will gradually decrease (currently India exports around 60% of textiles to these regions), but demand from new markets like Japan, Argentina, Brazil, New Zealand and Australia will see a rise.

Even as the rupee is appreciating against the dollar, industry experts believe that the demand for textile exports will continue to grow.

“By the end of the fourth quarter, the sector will get a boost from the rising demand for cotton which is set to increase by 10% while the demand for man-made fibres will go up by 7%-8%,” said HR Kapoor, managing director, Nahar Spinning.

“Indian cotton quality is higher and with the higher raw cotton price over the last year it is still lower then international prices. Higher cotton prices abroad have resulted in demand from India and Pakistan,” Mr Kapoor added.

However, according to Mr Sanghvi, in the remaining four months of the fiscal year, textile companies may not see a sharp rise in profits, but there will be an improvement.

There is a need for additional stimulus packages to attain the profits incurred a year before for the industry to compete with nations like China and South Korea which have “better trade norms”, said Mr Kapoor.

The segment could get an added boost as Dayanidhi Maran, the country’s textile minister, has called for a need to attract and sustain foreign direct investment in the sector for India to attain 4% share in global trade in textiles and clothing.

According to media reports, Mr Maran has also called upon major international players to collaborate with the Indian textile industry in the manufacture of fabric and setting up of greenfield units in textiles machinery, man-made fibre and yarn.

Maran believes that Indian textiles and apparel exports are expected to register a four-fold increase to touch $90bn-$100bn over the next 25 years.
- Aaron Rodrigues [email protected]

 

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