Home / Knowledge / News / Industrial / Stable outlook rating for 88% of cotton textile mills
Stable outlook rating for 88% of cotton textile mills
25
Jan '13
India Ratings’ outlook for cotton textiles remains negative to stable for 2013 on account of subdued demand, although margins are expected to benefit from softening raw material prices. The outlook for synthetic textiles remains negative for 2013 due to reversal of substitution demand and oversupply in domestic partially oriented yarn, pressurizing selling prices and margins of synthetic textile companies.

Stable Cotton Prices: Muted international demand of cotton and surplus production are likely to keep cotton prices stable and range-bound during 2013. India Ratings expects cotton yarn manufacturers to benefit from slow but steady pick-up in domestic demand, the likely higher demand of cotton yarn from China and improving margins on account of low cotton prices and firm cotton yarn prices.

Stability in cotton prices will enable spinning mills to better plan the inventory buying. However, spinners in Southern India and Gujarat continue to underutilize capacity due to power shortage or incur high cost of self-generated power. 

Exports Demand Sluggish: India Ratings expects garment exporters’ revenues to remain subdued on the back of the persistent economic slowdown in key export destinations of US and Europe and continuous deterioration in India’s competitiveness in apparel exports.

However, to offset the impact, Indian exporters are diversifying into other geographies. Selling prices are likely to remain lower depending on companies’ bargaining power which is very low for small exporters or for low value added products (such as Rangoli International ‘IND BB+’). 

Existing Ratings Factor Risks: Around 88% of India Ratings-rated cotton textile companies have a Stable Outlook despite the industry outlook being negative to stable. This is because the agency has already factored into the ratings the weak credit quality marked by higher instances of near-full utilization of working capital limits and negative operating cash flows.  The same is true for 73% India Ratings-rated cotton textile companies with sub-investment grade ratings.

Liquidity Concerns in Small Companies: Timing/efficiency of cotton buying, receivables and inventory management would continue to be key liquidity determinants in 2013. In 2012, India Ratings took negative rating actions on companies that overused their working-capital limits and/or delayed debt servicing due to liquidity stress. Leverage indicators are weak, yet better than 2008-2009 slowdown, when companies were in midst of capex cycle and high on debt. 

What Could Change the Outlook?

Continued Stability: A stable outlook on cotton and synthetic textiles would require favorable policy environment, improvements in demand-supply position, continued stability in input costs and consequent improvement in margins/liquidity. It is unlikely that the sector’s outlook will turn positive until fundamental issues such as power shortage, lack of technology and modern machinery and demand slowdown are resolved. However, foreign direct investment (FDI) in retail is an opportunity that would unleash demand in the long run and offset any slowdown in exports. 


Must ReadView All

Pic: Shutterstock

Textiles | On 5th Mar 2021

US suspends tariffs on UK fashion-textile exports in trade dispute

The United States and the United Kingdom have released a joint...

Pic: Shutterstock

Retail | On 5th Mar 2021

German retail sales fall in Jan due to lockdown

Retail sales in Germany fell more than expected in January this year...

Pic: Target

Retail | On 5th Mar 2021

US retailer Target announces 2021 strategic investments

Target Corporation recently announced its plan to invest $4 billion...

Interviews View All

Top executives, Textile industry, India

Top executives
Textile industry, India

Such fairs are a must for industry to showcase new innovations

Anshul Sood, Oceedee

Anshul Sood
Oceedee

‘Indian footwear market is nascent and largely a trend follower’

Textile Industry, Head honchos

Textile Industry
Head honchos

Value of 'Made in India' should get more importance

Akshat Chaudhary,

Akshat Chaudhary

Aizome, Asia's first Fairtrade denim brand, is all set to launch next...

Sham Shah,

Sham Shah

Shamal and Shamal Pvt Ltd is into manufacturing and sales of textile...

Harssh Chheda,

Harssh Chheda

Mumbai-based Corporate Collars provides bespoke tailoring services for...

Daniel Odermatt, Ventile

Daniel Odermatt
Ventile

Ventile is a registered trademark used to brand a special high-quality...

Luis Quijano, Liberty University

Luis Quijano
Liberty University

Focusing on bold patterns and colour palettes, Luis Quijano, a student at...

Kazuaki Yazawa, Purdue University

Kazuaki Yazawa
Purdue University

Scientist <b>Kazuaki Yazawa</b> has developed thermoelectric semiconductor ...

Varsha Wadhwa, VW

Varsha Wadhwa
VW

Coming from a family that ran a business of jute and linen mills since...

Priya Somaiya, Usha Social Services

Priya Somaiya
Usha Social Services

The Usha Silai label from Usha International is all set for a retail...

Ruma Devi, Gramin Vikas Evam Chetna Sansthan

Ruma Devi
Gramin Vikas Evam Chetna Sansthan

Ruma Devi is a jet-setting promoter of artisans who has empowered...

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

Leave your Comments


March 2021

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


Advanced Search