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.
Textiles | On 5th Mar 2021
The United States and the United Kingdom have released a joint...
Retail | On 5th Mar 2021
Retail sales in Germany fell more than expected in January this year...
Target Corporation recently announced its plan to invest $4 billion...
Top executives Textile industry, India
Such fairs are a must for industry to showcase new innovations
Anshul Sood Oceedee
‘Indian footwear market is nascent and largely a trend follower’
Textile Industry Head honchos
Value of 'Made in India' should get more importance
Akshat Chaudhary
Aizome, Asia's first Fairtrade denim brand, is all set to launch next...
Sham Shah
Shamal and Shamal Pvt Ltd is into manufacturing and sales of textile...
Harssh Chheda
Mumbai-based Corporate Collars provides bespoke tailoring services for...
Daniel Odermatt Ventile
Ventile is a registered trademark used to brand a special high-quality...
Luis Quijano Liberty University
Focusing on bold patterns and colour palettes, Luis Quijano, a student at...
Kazuaki Yazawa Purdue University
Scientist <b>Kazuaki Yazawa</b> has developed thermoelectric semiconductor ...
Varsha Wadhwa VW
Coming from a family that ran a business of jute and linen mills since...
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 is a jet-setting promoter of artisans who has empowered...
Press Release
Letter to Editor
RSS Feed
Search Companies
editorial@fibre2fashion.com
Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.
Subscribe today and get the latest information on Textiles, Fashion, Apparel.