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FIIs warm up to the textiles story

January 20, 2004 10:13 IST

Foreign institutional investors including Goldman Sachs Investment Mauritius Ltd, Oppenheimer Fund Inc and T Rowe Price International Inc have turned bullish on the Indian textile sector and have considerably increased their holdings in several textile companies in the quarter ended December 31, 2003.

In Arvind mills, the FIIs have increased their holding by 5 percentage points to 18.18 per cent during the quarter, as against 13.18 per cent in the previous quarter.

While Goldman Sachs Investment Mauritius Ltd and T Rowe Price International Inc have maintained their 2.23 and 1.42 per cent holdings, respectively in the company, the Oppenheimer Fund picked up 3.07 per cent of the total equity in the last quarter alone.

According to equity analysts, a lot of activity is expected in the textile sector after December 2004 when the textile quota system is abolished. This will open the floodgates of opportunity for domestic companies in terms of export potential.

Ambreesh Baliga, vice president, Karvy Stock Broking told Business Standard, "Larger companies like Arvind Mills, Century Textiles and Mahavir Spinning are going to benefit from the post-2005 regime, which help these companies to increase their exports thus adding to their bottomline. I expect this year to be good for most textile companies with at least a 50 per cent upside in their stock prices from current levels for front line companies."

In Pantaloon Retail and Welspun India, the FII holding has gone up by 8.60 and 6.94 percentage points respectively during the quarter ended December 31, 2003.

The FII holding in Pantaloon Retail has touched 21.46 per cent in the quarter as against 12.86 per cent in the previous quarter with American Fund Insurance Series picking up 5.52 per cent, Lloyd George Investment Management (Bermuda), T Rowe Price International Inc. and Frank Russell Investment Company Plc picking up 3.35, 2.05 and 1.36 per cent, respectively, according to data of shareholdings posted by the company on the Bombay Stock Exchange website.

Bela Agarwal, textile analyst with Batliwala and Karani Securities said, "The demand should surge after December 2004 with a abolition of quotas which will benefit the Indian companies as they have an edge of low labour costs, strong spinning and strong raw material facilities. I expect the larger companies to benefit more as they have already started increasing their production capacity in the last two years to meet the addition demand through exports."

Similarly in Welspun India, the FII holding has gone up to 12.37 per cent in the last quarter with Goldman Sachs picking up 2 per cent and T Rowe Price International Inc (New Asia Fund and International Discovery Fund) picking up 2.59 and 1.75 per cent, respectively.

The FII holding in the last quarter was 5.43 per cent. The only exception among the textile companies was Raymond's where the FII holding has dipped by 2.65 percentage points to 3.88 per cent as against 6.53 per cent in the pervious quarter.

In Raymond's, Goldman Sachs has sold most of its holdings.

Fitch Ratings in its special report on the Indian textile sector had said, "The Indian textile industry seems to be on a comeback trail and there is a conscious effort on part of many companies to expand and modernise to become internationally competitive."

With competitiveness of the organised sector being restored and terms of world trade in textile shifting to India's favour, the sector has started attracting investment, the report said, adding, the fundamentals of the industry is changing.
Nimesh Shah in Mumbai