Rupee 2

Knitting hub Tirupur hit by rise of Re1 Jun, 2007 l 0223 hrs IST l Rajesh Chandramouli/TIMES NEWS NETWORK

TIRUPUR: Never has Balu, 35, been so restless. The apparel exporter's problem is simple, but seemingly looks un-ending: the fast appreciating value of the rupee against the dollar. Result: Losses and more losses. Balu's is not an isolated case in Tirupur, one of India's biggest hubs for knitting units and one that had been flourishing not very long ago. Hundreds of Balus are wondering why it is that they have been hit so badly. Balu, like many of the small exporters in Tirupur, operates with a profit margin of 7%. Unfortunately for him, the rupee has appreciated by more than 8% in six weeks. He now browses various financial portals to know the dollar-rupee rate, thinking that some day (within the contract period with his buyer), the rupee will lose some of its strength. "Small and medium entrepreneurs will be particularly hit by the rupee appreciation because they do not hedge their risks, largely due to lack of awareness," an exporter says. Bonheur Fabs was set up by Balu in April 2005. In April 2007, on a visit to France, he signed and sealed contracts with Stokomani, TCF and Gemo of France, three big names in garment buying. Thankfully for Balu, his contracts with two of the three are pegged against the euro, but painfully, one is a dollar denominated contract. "A couple of days back I told my buyer that we need to re-negotiate the terms of the contract for Spring-Summer 2008 (shipments for which need to start in November). I am not sure if they will be amenable to the idea. I have also asked them for a euro denominated contract. I am yet to hear from them," Balu said, and adds that if the client insists on the continuation of the contract, then there is a strong chance that he may be wiped out. "I have spoken to my friends in the trade. Many of them are in deep trouble and if the trend continues, they may shut shop. The smarter ones are doing service rather than business here ," he says. R Shivram, executive director, Royal Classic Mills (a fully integrated player), said that a lot of orders have been cancelled by the exporters in the area. "As an exporter, we have relationships with our regular buyers. With these people, we can't cancel contracts, instead we are operating our plants at a marginal loss. The RBI and the government are not providing information on the forex front, so there's a lot of uncertainty," he added. A Saktivel, president of Tirupur Exporters Association (TEA), agrees. "Never have we seen such chaos on the forex front. The RBI had always intervened and adjusted the exchange rates. The orders which are already booked by exporters are causing losses and new ones are moving to neighbouring countries. If this trend continues, some of the smaller units will close," he said.