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Textile companies likely to witness huge fall in revenue in H1FY21: Ind-Ra

19 Jun 2020 Evaluate

India Ratings & Research (Ind-Ra) in its latest report has said that textile companies are likely to witness 'huge fall' in their revenue in the first half of 2020-21 (H1FY21), due to the economic slowdown following lockdown to curb the spread of the Coronavirus disease (COVID-19). It noted that subdued domestic demand and declining export demand due to lockdowns in global markets on account of COVID-19 come as a double blow for textile companies.

According to the report, while domestic demand could revive in 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 the US and the UK. However, it said there also seems to be a short-term opportunity for Indian companies to cater to those markets which were earlier catered by China and Bangladesh.

Further, the agency stated that 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 delays in collections and a longer inventory. It added that the ongoing economic slowdown is likely to contract the demand by 25-35 percent across yarn, fabric and apparels in FY21 as compared to the previous fiscal.

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