Home / Knowledge / News / Textiles / Cotton textile exporters could face another challenging year
Cotton textile exporters could face another challenging year
18
Feb '10
Fitch Ratings has said, in a just published Special Report, that the 2010 Outlook for the Indian textile sector remains Negative to Stable. The agency notes that there are clear signs pointing towards a recovery in India's textile industry in 2010, following the dismal operating environment that the sector grappled with for two consecutive years. The recovery will be supported by a pick-up in export demand, government stimulus, improved liquidity, and a stable-to-growing domestic demand for textile products.

Fitch expects an improvement in the credit quality of domestically-focused and synthetic textile companies given the stable demand, whereas cotton textile exporters could face another challenging year, as their credit quality has been more severely impacted by recession and may take longer to recover. However, the agency expects that there will be greater stability in textile ratings in 2010 since leverage metrics for most Indian textile companies have improved from peak levels seen in 2009. The trend is completely driven by recouping margins, as absolute debt levels have not come down significantly. Furthermore, Fitch expects liquidity pressures to ease during 2010, although the cost of liquidity remains a concern.

Demand fundamentals remain strong in the domestic textiles sector but the spending appetite of consumers will likely remain value-driven, leading to pressures on the margins. However, export revenues in 2010 should improve from the lows in 2009, and Fitch expects export demand to fully recover to pre-recession level by early 2011. That said, the appreciation of the Indian rupee since October 2009, remains a challenge for Indian exporters since it lowers their competitive advantage against their Asian peers in Vietnam, China, and Bangladesh. Should the rupee continue to strengthen, textile exports may register a sharp decline in the short-term, hitting revenues and cash flows of exporters.

The synthetic textile segment has seen an early earnings recovery since the beginning of H209, benefitted by the substitution effect as cotton prices rise - a trend that the agency expects to continue. Cotton and cotton yarn prices have risen since October 2009, and while fabric players have been able to pass on raw material price hikes to customers, garment players have not been able to do so. Margins recovery has been patchy across the value chain, with large and integrated players being the first to recover. These players are reaping the benefits of timely completion of capex, increasing vendor consolidation in the market, and the "preferred vendor" status with large retailers.

It is expected that capex spending will be subdued in the near-term, as companies focus on the consolidation and the streamlining of their capacities and processes, while improving their heavily-geared balance sheets. Depending on the pace of improvement in market conditions, new capex programmes may emerge in the medium-term; most of which may be for backward integration into spinning and weaving, and expansion into newer segments, such as technical textiles (e.g. textiles for automobiles).

Fitch Ratings Ltd

Must ReadView All

Textiles | On 20th Jan 2017

TEA expects budget to upscale textile skill industry

The Tiruppur Exporters’ Association (TEA) has requested the Central...

Textiles | On 20th Jan 2017

Bangladesh could earn $60 billion in exports by 2021

Bangladesh is expected to earn over $60 billion in exports by the...

Courtesy: PIB

Textiles | On 20th Jan 2017

Govt to help Tangaliya weavers purchase looms: Irani

Government of India will facilitate Tangaliya weavers in purchase of...

Interviews View All

Abhimanyu Singh Rathore & Barbara Anna Kosiorek
Kannbar

‘Blending cultures is the true beauty of fashion, where one’s imagination...

Sonia Agarwal
Whitenife

‘The terms eco-friendly and organic are common but everyone perceives them ...

Binoy Ravjani
Hero's Fashion

‘One of the recent trends in hand block printing is the indigo process,...

Kevin Nelson
TissueGen

Kevin Nelson, Chief Scientific Officer, TissueGen discusses the growing...

Ashok Desai
Bombay Textile Research Association

Bombay Textile Research Association (BTRA) is a leading name in textile...

Silke Brand-Kirsch
Schlegel und Partner

Silke Brand-Kirsch, executive partner of Schlegel und Partner, a leading...

Tony Ward
Tony Ward

"You have to truly understand what your client wants, know her needs, what ...

Judy Frater
Somaiya Kala Vidya

Among the many honours showered on Frater, including Fulbright and Ford...

Pranav Mishra
Huemn

Designers Pranav Mishra and Shyma Shetty’s Huemn is known for its...

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
January 2017

January 2017

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

SUBSCRIBE


Browse Our Archives

GO


eNEWS
Insights
Subscribe today and get the latest News update in your mail box.
Advanced Search