India Ratings and Research (Ind-Ra) in its latest report has said that Indian textile sector is likely to witness higher growth on the back of robust domestic demand and falling rupee value against dollar. It has maintained a stable outlook for the sector for 2019-20 following strong domestic demand, fading impact of the disruptions due to GST and note ban and rising exports aided by a weak rupee.
According to the report, the textile companies are likely to improve cash-flow from operations for FY20, as their working capital would stabilise as challenges related to demonetisation and the GST subside. It also said that the sector is likely to continue deleveraging gradually in FY20 in view of strong annual growth generation and some moderation in the debt level. It also noted that the liquidity of the majority of players in the sector is likely to remain adequate, along with an improvement in operational cash generation, backed by steady raw material costs and strong demand from end-user segments.
The ratings agency further said that the India's textile exporters are likely to continue to benefit from improved cost competitiveness because of weak rupee, which would drive volume growth. It highlighted that over the first nine-month of FY19, the Indian rupee depreciated at a higher rate against the US dollar than the currencies of key apparel-exporting countries like Vietnam and Bangladesh. Besides, it noted that India's apparel exports also showed signs of recovery in Q3 (October-December) of FY19 and are likely to increase in FY20 after remaining weak for three years.
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