Revenue of cotton spinners will contract 25-30%

Mumbai: Revenue of Indian cotton spinners is likely to decline by 25-30 per cent year-on-year in 2020-21 due to Covid-19 pandemic-led disruptions in manufacturing activities and weakness in demand in global as well as domestic markets, Icra Ratings said in a report.

This will further add to the woes of the sector which saw an estimated 5-7 per cent decline in revenue and 200-250 basis points (bps) correction in operating margins in FY20, it said. The Indian cotton spinning sector is expected to log a 25-30 per cent y-o-y decline in revenue and a 300-400 bps contraction in operating margins in FY21 amid Covid-19-led disruptions in manufacturing activities, and an all-encompassing weakness in demand from the downstream segments, within as well as outside the country, Icra Ratings said.

According to the report, the business outlook appears adverse owing to an inventory pile-up being witnessed across the value chain, which is likely to keep demand from downstream segments subdued over the next few quarters, while keeping working capital requirements high.

"The main reason for the slow recovery has been the sluggishness in demand in the downstream segments of fabrics and apparels. The trend has been weaker in the domestic market, where consumer-discretionary spending and consumer footfalls in markets remains abysmal, particularly in metros and tier-I markets," Icra Ratings Senior VP and Group Head Jayanta Roy said.

"Yarn, being an intermediate product, is resultantly facing a ripple effect of the contraction in demand in the downstream segments," he added.