While the demand for textile in the country has taken a moderate hit, the export market like the United States (US) maybe driving demand for home textile. According to Ind-Ra, the face-off between the US and China has allowed the Indian textile industry to increase its supply to the US market.
The agency stated, “Demand for home textiles has been only moderately impacted as they are necessary products for day-to-day life. However, the US-China trade war has impacted imports from China into the US, thus giving a strong push to exports from India.” It added, the agency “expects the demand for home textile exports to sustain in 2HFY21 at healthy levels achieved over August-September 2020.”
Ind-Ra expects the Indian players to increase their already strong market share in terry towels and bed linens, led by supply chain diversification away from China.
The report on textile highlights the trends in the sub-segments of the textile sector, including cotton, man-made fibers, yarns and fabric with a focus on commodity prices, imports/exports, production, and recent rating actions.
Meanwhile, even though the domestic demand is moderate, Indian textile companies have significantly increased their plant capacity use in August 2020, after the lockdown was gradually lifted in the country.
“Textile players’ weak profitability over 1HFY21, along with supply chain disruptions has impacted cash flows; while the moratorium announced by the Reserve Bank of India under the COVID-19 relief package has provided the inevitable liquidity support,” stated the agency. However, the lifting of the moratorium from 1 September 2020 without the full recovery in cash flows would require additional caution and monitoring of cash flows.
The agency expects textile players to record 15-35 per cent year on year (yoy) decline in their top line and 20-50 per cent yoy drop in operating profits over FY21. “The prices of textile products have recovered broadly in August 2020 from the lows of April-May 2020.”
The prices of international cotton (US) are recovering steadily month on month — in August 2020 it witnessed 4 per cent rise, after dipping in April 2020.
Indian cotton prices increased about 5 per cent month on month in August last week, following a partial correction in the international prices over July 2020. “Cotton arrival is almost complete in the current season while Cotton Corporation of India (CCI) continues to procure to support cotton prices,” stated the agency.