Home / Knowledge / News / Textiles / Outlook for Indian synthetic textiles stable – Fitch
Outlook for Indian synthetic textiles stable – Fitch
02
Feb '12
Fitch Ratings says that the outlook for the Indian cotton textiles is negative to stable in 2012, while the outlook for the Indian synthetic textiles is stable.

Margin pressure persists for both cotton and synthetic textiles driven by rising wage costs and power costs (including shortage of power), and higher interest rates. Cotton textiles are also facing challenges of a slower demand pick-up and a loss of margins; however, recovery is expected from the falling cotton prices, subject to any further volatility in input costs or forex movements.

Synthetic textiles benefit from higher demand for blended textiles, although margins can turn volatile in sync with crude oil price volatility.

Weak demand for cotton and cotton products in YTD FY12 was mainly a result of existing inventories causing mills to postpone any further buying in the backdrop of uncertainty in overseas demand for textiles. Weak demand, labour and power shortage in textiles centres such as Bhiwandi and Tirupur have lead to about 50% of underused capacities.

Instead of adding capacity in India, garment manufacturers are looking at options of setting up capacity or outsourcing job work to Bangladesh to benefit from the lower cost of production.

Cash losses for cotton yarn manufacturers and lower-end fabric companies in H112 impaired their debt repayment capacity leading to several instances of over-utilisation of working capital limits.

Some Fitch-rated textile companies defaulted in YTD FY12 due to an inability to obtain a timely increase of working capital facilities, as banks tightened lending criteria for the sector. Refinancing risks would increase for distressed textile companies in 2012 as the Reserve Bank of India and the Finance Ministry have rejected the proposal for restructuring of textile loans.

FY12 financial leverage will deteriorate for most textile companies due to their higher working-capital debt and lower EBITDA compared with previous year's; and deleveraging will remain a challenge for the sector in 2012.

Given the challenging operating environment led by the uncertainty over demand growth, volatility in raw-material prices and persistent increases in other operating costs coupled with the stress on liquidity, it is unlikely that the sector's outlook will turn positive. However, if falling cotton prices translate into a revival of demand and capacity utilisation, the outlook on cotton textiles could turn stable in the last two quarters of 2012.

The outlook on the synthetic textiles may be revised to Negative if raw-material prices increase substantially, making synthetic textiles less competitive than cotton. Downside risks to the outlook also include the adverse impact of policy changes and a prolonged demand slowdown.

Fitch-rated Indian textile companies include Rupa & Company Limited ('Fitch A-(ind)'/Stable), Balkrishna Synthetics Limited ('Fitch BBB-(ind)'/Negative), Ginni Filaments Limited ('Fitch B+(ind)'/Stable) and Eastman Exports Global Clothing Private Limited ('Fitch A-(ind)'/Stable).

Fitch Ratings

Must ReadView All

Apparel/Garments | On 28th May 2017

Over 45% US retailers to use AI in next 3 years: Report

Over 45 per cent retailers in the US plan to utilise artificial...

Neelesh Hundekari speaking at the event. Courtesy: Subir Ghosh

Textiles | On 27th May 2017

Fabric of Change initiative announces €250000 scaling fund

The Fabric of Change initiative of Ashoka and the C&A Foundation is...

Apparel/Garments | On 28th May 2017

Naked Brand, Bendon sign agreement to reorganise

Naked Brand Group, a fashion and lifestyle brand, and Bendon Limited, ...

Interviews View All

Sunil Rathore
Lacoste India

‘New vendor is welcome if he offers cost, quality and timely delivery’

Karel Williams
Dow Microbial Control

'Silvadur is most rapidly adopted in areas where hygiene-conscious and...

Pinkesh Jain
Everflow Petrofils Ltd

‘An innovative technology which India needs desperately is the...

Lynda Kelly
Suominen Corporation

Suominen Corporation is a manufacturer of nonwovens as roll goods for...

Urs Stalder
Sanitized AG

Urs Stalder, CEO, Sanitized AG, talks about the increasing use of hygiene...

Marten Alkhagen
Swerea IVF AB

Marten Alkhagen, Senior Scientist - Nonwoven and Technical Textiles of...

Silvia Venturini Fendi
Fendi s.r.l

"Yes, my confidence and positive attitude are my strengths and should be...

Prathyusha Garimella
Prathyusha Garimella

Hyderabad-based designer <b>Prathyusha Garimella</b> is known for blending ...

Karan Arora
Karan Arora

Bridal couture created with rich Indian heritage, exquisite craftsmanship...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

news category


Related Categories:
May 2017

May 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

SUBSCRIBE


Browse Our Archives

GO


E-News Insight
Subscribe Today and Get the
Latest News Update in Your Mail Box.
Advanced Search