Revenue of textile companies likely to drop significantly
India Ratings & Research (Ind-Ra) in its latest report stated that the textile companies are likely to witness a huge fall in their revenue in the first half of 2020-21 (H1FY21), due to the economic slowdown, following COVID-19 led lockdown. It has been observed that the subdued domestic demand and declining export demand, caused due to the lockdown, comes as a double blow for the textile companies.
According to the report, while domestic demand could revive in the third quarter of FY21 with the onset of festive season and reopening of retail spaces, export demand would fairly depend on recoup of major economies such as US and UK. However, there also seems to be a short-term opportunity for Indian companies to cater to those markets, which were earlier being catered by China and Bangladesh.
Further, the agency stated that the players in spinning, readymade garments carry high debts on account of stretched working capital cycles with low cushion to borrow. It expects the working capital cycle to stretch for textile players over the next nine months due to a delay in collections and a longer inventory. It added that the ongoing economic slowdown is likely to contract the demand by 25-35 per cent across yarn, fabric and apparels in FY21, as compared to the previous fiscal year.