Ind-Ra affirms stable outlook for textile sector for FY16
07/07/2015 15:21

India Ratings and Research (Ind-Ra), a part of Fitch Group, has maintained an overall stable outlook for the cotton textile sector for this fiscal, citing stable spinning margin in the cotton yarn segment, range-bound cotton prices and favourable domestic and export demand for downstream fabrics and apparels.

However, the outlook for cotton yarn exporters is negative due to a slowdown in demand for yarn particularly from China, leading to softer yarn realisations and lower capacity utilization, the agency said in a statement.

Ind-Ra has revised the outlook for the synthetic textile sector to negative for FY16 from ‘negative to stable’ as unfavourable cotton-polyester staple fibre spreads have hurt substitution demand for synthetic fibres and synthetic yarn. Lower export competitiveness of Indian synthetic yarn also contributes to the subdued outlook as import and central excise duty continue on man-made fibres.

Apparel exports could continue to show a positive growth trend in FY16, driven by the improving economic outlook of buyer countries, it said.

Meanwhile, growth of garment manufacturers might remain largely volume led while realisations could continue to exhibit commodity and competitive pricing pressure.

The agency has maintained a stable outlook on its rated textile companies as they are likely to show ratings stability on growing domestic demand, competitiveness in apparel exports and an overall improvement in credit profile (i.e. lower gearing and leverage). Trends for FY16 in the textile sector indicate more cautious inventory management, risk aversion towards holding higher raw material stocks and focus on efficiencies in cash conversion cycle.