BizNewsConnect

Away from China, garment retailers may look to India

Ind-Ra sees export opportunities for garments, home textiles

By Bhagirath Banda

MUMBAI, Aug 5, 2020: Indian textile industry in the long run can look forward to opportunities emanating from global retailers looking to diversify away from China and the segments to benefit are garments and home textiles, says India Ratings and Research (Ind-Ra).

Exports of readymade garments declined substantially in March 2020. The export outlook is likely to remain weak, the agency said in its June 2020 edition of credit news digest on India’s textile sector.

The agency expects demand for home textiles to gradually recover in 2HFY21.

Several textile companies have increased their capacity use with the easing of lockdown restrictions since May 2020. The inventory pile-up, lower channel liquidity and labour migration in the context of subdued demand will continue to impact textile operations and exports in 2QFY21. Furthermore, the pick-up in domestic demand in June 2020 could only be a flash in the pan post the unlock and hence needs to see its sustainability.

The extension of Rebate of State and Centre Levy of Taxes scheme has provided some respite to exporters. For FY21, the agency expects textile players to record a fall in their top line and drop in operating profits.

Ind-Ra says the prices of textile products recovered broadly in June 2020 from the lows of April 2020 and May 2020, on account of the gradual resumption of operations. International cotton prices (US) continued to recover in June 2020, after dipping in April 2020. With India cotton prices remaining stable in June 2020, Ind-Ra expects cotton exports to inch up due to a better pricing environment.

It is a stronger recovery story on the man-made textiles side, with crude oil prices continuing to increase after falling in April 2020. Drawn texturised yarn price needs a special mention, which increased June 2020. However, on a YTD basis, the price for imported purified terephthalic acid and mono-ethylene glycol fell.

Fibre prices are steady, but yarn prices are weak, which will continue to pressure the margins of industry participants. Polyester staple fabric to cotton spread is the lowest since 2016; thus, the switching rates are likely to slow down a bit in the near term.

While the upstream product prices recovered, the downstream products prices continue to struggle due to a low demand. Cotton yarn and blended yarn prices declined on a monthly basis. Cotton yarn exports increased to 30% of the overall output in 4QFY20. Overall, spinners’ margins will remain under pressure with weak spreads on yarns while raw material prices may increase.

Reflecting the trends in the recovery of upstream products, the fabric and apparel prices marginally improved across the knitted and woven fabrics, largely on blended or man-made side of the products. On the contrary, cotton cloth prices dropped in June 2020. Apparel prices improved due to a pent-up demand following the lockdown.

Exports of readymade garments declined substantially in March 2020. The export outlook is likely to remain weak. The agency expects demand for home textiles to gradually recover in 2HFY21.

Several textile companies have increased their capacity use with the easing of lockdown restrictions since May 2020. The inventory pile-up, lower channel liquidity and labour migration in the context of subdued demand will continue to impact textile operations and exports in 2QFY21. Furthermore, the pick-up in domestic demand in June 2020 could only be a flash in the pan post the unlock and hence needs to see its sustainability. The extension of Rebate of State and Centre Levy of Taxes scheme has provided some respite to exporters, Ind-Ra says.

 

 

Recent News

Advertisement