The Indian cotton textile sector that has not been faring quite well for the past few years could see some stability in the current financial year, India Ratings and Research said in a report today.
The sector would maintain an overall steady outlook led by stable spinning margins in the cotton yarn segment, range-bound cotton prices and favourable domestic and export demand. “However, the outlook for cotton yarn exporters is negative due to a slowdown in demand for yarn particularly from China, leading to softer yarn realisations and lower capacity utilization,” the report said.
Last year the EBITDA margins for the textile firms were affected after a 20 per cent decline in cotton prices. As a result, inventory held by the textile firms too saw lower profit margins. In the current financial year the margins could recover in the range of 10-13 per cent.
Currently India has a small share in the global textile trade. Pakistan and Bangladesh are one of the biggest players in the textile sectors. Industry trackers said that India is well positioned to gain from weak input prices and growing demand for apparels. “India Ratings has revised the outlook for the synthetic textile sector to negative for FY16 from ‘negative to stable’. Unfavourable, cotton-polyester staple fibre spreads have hurt substitution demand for synthetic fibres and synthetic yarn. Lower export competitiveness of Indian synthetic yarn also contributes to the subdued outlook as import and central excise duty continues on man-made fibres,” the report added.
