After being severely battered by recession in the global markets and currency volatility in FY09, credit profiles of the textile companies are expected to improve with revival in the domestic demand and signs of improvement in the global markets. However, appreciation of rupee and significant rise in cotton prices raise concerns on the profitability.

Revival in the demand

The revival in demand is clearly visible from the production growth observed during the period April 2009-January 2010 across product lines.

Total spun yarn production grew by 5.4% during April 2009-January 2010 as against a 1.8% decline witnessed during same period earlier year. Cotton yarn, which accounts for over 70% of spun yarn production, grew by 4.2% during April 2009-January 2010. Synthetic yarn and blended yarn, recorded a smarter recovery as their production grew by 10.9% and 7.9%, respectively.

Similarly, aggregate fabric production recorded significant jump (9.7%) during April 2009-January 2010 period, as against stagnancy witnessed during the same period previous year due to the impact of the global economic crisis.

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The report is originally published by Credit Analysis & Research Ltd. (CARE Ratings), a premier rating company of India that offers a wide range of rating & grading Services across sectors.

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