‘Indian Apparel Exporters Likely To Witness Robust Revenue Growth In FY23’
In FY23, Indian Apparel Exporters Are Likely To Experience Strong Revenue Growth.
According to a report by credit rating agency Icra, although macroeconomic headwinds had an impact on the performance of Indian textile players in the second quarter of 2022–2023, the businesses may have a solid turnover in the current fiscal year. According to Icra, textile companies will likely record robust turnover growth in FY23, but margins will likely narrow due to cost pressures.
The revenue and margins of Indian cotton spinners fell in the second quarter of FY 23 because of economic headwinds, according to Sahil Udani, Assistant Vice-President and Sector Head, Corporate Sector Ratings, Icra. With recessionary conditions in key areas, the apparel segment’s revenue and margins remained unchanged.
After cotton stockpiles from the previous harvest season began to diminish in the second quarter of FY 23, the majority of textile businesses reported a decrease in inventory levels. According to Udani, “Cotton prices saw a sharp volatility as a result, players become cautious on buying.”
The rating agency reported that while margins were lowered by 950 bps, spinners’ revenue fell by 4% year over year. “With pressure on businesses’ profitability across several industries,
According to Icra, the impact is more severe for smaller players because big scale businesses benefit from price breaks on buying raw materials in bulk. The research stated that “inventory levels for most players dropped in H1 FY23, with high volatility in cotton prices impacting spinners’ purchasing power.”
The revenue of Indian garment exporters, in contrast to cotton spinners, increased by 4.5% year over year. The first quarter of FY23 saw “continued solid growth trend, followed by all-time high revenues achieved in FY22,” according to Icra.
Additionally, the operating margins of apparel exporters were unchanged in the second quarter of FY23, with a 180 bps decrease from the same quarter of the previous year, according to the research, as increasing raw material prices exerted cost pressures.
According to Icra, the second quarter of FY23 saw a drop in the profitability and the interest coverage of exporters. The research stated that the reduction was caused by higher interest costs associated with the debt-financed capex that the majority of players had undertaken in H1 FY23.
Icra reports that while large retailers concentrated on lowering inventory as a result of a scenario with weak demand in important exporting regions, the inventory levels of garment exporters decreased.
While Indian garment exporters are projected to see a healthy increase in sales in 2022–23, Indian cotton spinners’ performance would moderate slightly in FY23 compared to the previous year.