Gokaldas Exports, a leading apparel exporter, reported a significant increase in revenue for the year. In an interview, Sivaramakrishnan Ganapathi, VC & MD of the company, attributed the growth to several factors, including recovering demand and strategic acquisitions.
Revenue Soars, Margins Dip
Gokaldas Exports’ revenue grew by a staggering 85% year-on-year. However, the company’s margins experienced a 200 basis point dip. Ganapathi explained that this was primarily due to the integration of recently acquired entities, which have lower margins. He expressed confidence that margins will rebound in the next fiscal year as corrective actions are implemented.
Recovery in Retail Sales Fuels Demand
Ganapathi pointed to a positive trend in retail sales as a key driver of growth. He noted that US and European retail sales have grown by 3% year-on-year, indicating healthy consumer demand for apparel. This, coupled with brands normalising their inventory levels after a period of underbuying, has led to a surge in orders for Gokaldas Exports.
China +1 Strategy: A Slow Burn
While the potential shift in sourcing away from China has been a topic of discussion, Ganapathi believes it’s a slow-burning trend. He anticipates this effect to accelerate if there’s a change in US leadership but emphasises the ongoing benefits of India’s strong economic fundamentals.
Trade Wars: A Double-Edged Sword
Regarding the potential for renewed trade barriers under a Republican US administration, Ganapathi offered a nuanced perspective. While increased tariffs could benefit India in a scenario where they don’t disproportionately target Indian exports compared to competitors, it might also lead to inflation for US consumers.
Bangladesh: Normalisation and Diversification
The interview also touched upon the situation in Bangladesh, another major apparel exporter. Ganapathi acknowledged that Bangladesh’s supply chain has normalised, but brands remain cautious due to upcoming elections and economic uncertainties. This cautiousness has led brands to diversify their sourcing, creating opportunities for Indian companies like Gokaldas Exports.
Overall, the interview paints a positive picture for Gokaldas Exports. The company is well-positioned to capitalise on recovering demand in the global apparel market, with its recent acquisitions and focus on margin improvement acting as additional growth levers.
