Crisil, a global analytical company providing ratings, research, and risk and policy advisory services, in its latest report has said that the Indian readymade garment (RMG) makers may witness revenue growth of 10% in this calendar year (CY2019). The growth will be mainly driven by healthy domestic demand and 10% growth in exports. The agency is expecting revenue growth of RMG makers to accelerate 300 basis points (bps) to 10% in CY2019, compared with 7% in CY2018, riding on robust domestic demand and a spurt in exports.
It further mentioned that higher revenue growth will provide the benefit of operating leverage and will help improve profitability. It added that profitability of exporters is also aided by favourable exchange rate and restoration of incentives, resulting in better cash generation, which will improve the credit profiles of RMG firms this fiscal.
It highlighted that credit profiles had moderated in the previous two fiscals on account of depreciation in the rupee against the dollar and a reduction in export incentives. Domestic sales logged an annual growth rate of 9.6% in the five years through CY2018 to Rs 4.83 lakh crore, which was 80% of the sector's revenue. That pace is set to increase to 10-10.5% this year for two reasons, increasing penetration of both organised retail and brands in tier II and III cities, and rising growth of value apparel retail segment.