ICRA assigns ‘stable’ outlook to textiles industry for FY2022

Rating agency ICRA has said the textile industry's performance will recover to pre-Covid levels in the next fiscal on account of boost in demands from domestic as well as export markets. The agency assigned outlook for the sector as ‘stable’ for FY2022. It added that the recovery in the domestic textile sector, that picked up pace in Q3 FY2021, is likely to continue in the upcoming quarters. This will be supported by the opening up of economies and markets, improved consumer confidence levels and continued pick up in discretionary spending.

After witnessing a major setback in Q1 FY2021 following the Covid-19 pandemic and the ensuing lockdowns, the domestic textile sector started reporting a gradual recovery from Q2 FY2021 onwards. This was supported by opening up of the markets and resumption of activity across the value chain. As per the report, based on an analysis for samples of large, listed players across segments, ICRA expects cotton spinning and apparel export segments to report relatively lower contraction in FY2021 vis-a-vis other segments (including fabrics and domestic apparels), considering higher dependence of these segments on exports.

Similarly, the recovery is slated to be faster for these segments in FY2022. It added that revenues for the cotton spinning and the apparel export segments in FY2022 are likely to grow by 15-20 per cent, following a contraction in mid-teens, estimated for FY2021. While operating margins for spinners are likely to revert closer to pre-Covid levels, those for apparel exporters may remain marginally lower than the pre-Covid levels amid a competitive operating environment, wherein buyers could be expected to negotiate for steeper discounts. For fabric and domestic apparel categories, the revenue growth in FY2022 is projected at 30-35 per cent and 35-40 per cent, respectively, with these segments estimated to report steeper contraction vis-a-vis other segments in FY2021.