According to data from the Indian Ratings and Research Agency (Ind-Ra), the second wave of the COVID-19 epidemic may have a slight impact on the supply and demand dynamics of the Indian textile industry in the first quarter of the 2021/22 fiscal year. Sustained export demand, lessons learned from the first wave of COVID-19, and strong balance sheets and cash flows will keep the industry’s credit profile stable in the 2021/22 financial year.
The blockade of major textile centers in India such as Tiruppur, Ludhiana, Surat, and Bhilwara has disrupted the textile and garment supply chain. Ind-Ra said the restricted movement of goods meant that raw materials such as yarn and fabric were unavailable, which would have an impact on finished product output in the short term. Labor supply will also be affected, and some factory production lines may still be able to operate normally, but at limited operating rates.
However, Ind-Ra reported that due to strong overseas demand in the export market in the first quarter of the 2021/22 fiscal year and due to new inventories between November and March, Most cotton spinning companies probably have sufficient inventory.
Supply chain disruptions may cause revenue in the first quarter of the 2021/22 fiscal year to decrease by 20-30% compared with the same period last year. Compared with the spinning and weaving industry, exports of clothing and home textiles, which are mainly exported to foreign markets, are likely to remain resilient. According to reports, as of the end of March 2021, Indian garment industry export orders have increased compared with the same period last year. Since the third quarter of the 2020/21 fiscal year, container shortages and rising transportation costs have been affecting corporate profitability and may continue to do so in the short term.
Ind-Ra stated in the report that after the first quarter of the 2021/22 fiscal year, the second half of the 2021/22 fiscal year will be driven by the release of pent-up demand. , demand in various secondary industries will recover, and the growth rate will also increase significantly due to the low base.
Export demand will remain favorable due to geopolitical tensions and the Sino-US trade war stalemate. Export market demand continues to recover, and the export market accounts for at least 30% of India’s total textile output.
Although raw material prices increased in the second half of the 2020/21 fiscal year, product prices in the upstream, midstream, and downstream markets have just begun to rise, resulting in profits for the 2021/22 fiscal year rate increased.
The report added that capital investment in the industry has been driven by uncertainty over export incentives over the past two years and the unresolved details of production-related incentives in recent months. be inhibited. However, the textile industry performed well in the third and fourth quarters of the 2020/21 fiscal year as debt moratoriums and credit guarantee schemes helped the industry manage liquidity.
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