Foreign news on July 13, a research report released by ICRA shows that in fiscal year 2024, demand in the Indian cotton spinning industry is expected to increase by nearly 10% year-on-year. This is due to the shift in preference for Chinese cotton and the expected growth in spring/summer demand in the United States and the European Union.
However, ICRA also said that the fall in cotton prices will lead to lower realization, and revenue may drop 7% year-on-year to 340 billion rupees.
While cash accumulation by players is expected to slow down slightly, ICRA expects borrowings by cotton mills to also fall in FY24. In the absence of any major capital expenditure plans and softening cotton prices reducing working capital requirements, this may reduce the company’s debt levels and improve the company’s capital structure.
In the first half of 2022, domestic cotton prices were at historically high levels, but prices fell steadily in the second half of the year. As new crop cotton rises, cotton prices have fallen further from May 2023, falling approximately 20% compared with December last year.
The Commissioner of the Textile Office predicts that domestic cotton production will increase by nearly 10% in fiscal year 2023 due to an expected increase in the planting area in Mabang and Kupang. However, ICRA noted that cotton sowing progress was slow in Maharashtra and southern states due to delayed monsoon rains. However, with the sowing season extended to July in these regions, ICRA expects sowing to pick up as monsoon rainfall normalizes. This planting has improved from a lag of 14% at the end of June to a lag of about 11% on July 7.
Cotton yarn prices have been falling since June 2022 due to falling cotton prices and sluggish demand from downstream apparel companies. ICRA predicts that cotton yarn prices will remain stable in the near future, and as demand from downstream companies rebounds, cotton yarn prices will rise slightly in the second half of fiscal 2024.
