New Delhi, Nov 27, : Strong domestic and export demand will increase year-on-year (YoY), sales volumes for the entire textile sector in FY22 according to India Ratings and Research (IndRa). According to the agency, both domestic and export demand will continue to grow during FY22.
It has also maintained the sector’s rating outlook at ‘Stable’ for FY22.It is expecting a sustained improvement of sector players’ profitability as well as continued deleveraging of their balance sheet.
“Despite the increase in working capital requirements due to higher sales volumes and capital expenditure, the strong operating cash flow will lead to an improvement of their credit metrics.”
“The ratings already include the benefits of integrated business operations and healthy balance sheet liquidity as well as operating efficiencies over FY22.”
According to the agency, domestic demand increased over ‘2HFY21, before decreasing marginally during 1QFY22’ due to the closing of malls in cities and retail spaces.
“The demand for the product is expected to increase from ‘2HFY22’ due to the removal of restrictions, but it remains vulnerable to any further restrictions.
The demand for spinning mills appears to be rising ahead of the Indian festivities.
“During 1QFY22, players saw a rise YoY, but it decreased marginally QoQ.”
Segments such as fabrics and cotton yarn saw a higher YoY demand by downstream players during “1HFY22”.
“The domestic demand has remained strong for home textiles, while the demand for woven fabrics and apparels is expected to increase with the opening of retail shops and malls starting in ‘2HFY22.”
The agency also expects that the export demand will improve moderately in 2HFY22 due to accelerated vaccination and the ‘China Plus One sourcing strategy.
“The demand is expected to rise further in FY23.” The ongoing impact of China’s sourcing restrictions (Xinjiang), cotton, could also play a significant role in boosting demand.”
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