Revenue of Indian cotton spinners are likely to decline 25-30 per cent year-on-year in 2020-21 due to COVID-19 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.

The report says, 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.

Even though the nationwide lockdown, implemented from March 25 onwards to contain the spread of the virus, was officially lifted from the second week of June 2020, spinners were not able to fully ramp their operations. Their capacity utilization averaged at 30-40 per cent in the first quarter of FY21.

Apart from COVID-19 related concerns, another cause for worry for the Indian spinning sector has been the flare-up witnessed in geo-political tensions between India and China in recent months. While the tensions have since de-escalated to an extent, it remains a key monitorable for the sector, as China has been one of the major export destinations for Indian cotton yarn over the past one decade, accounting for as much as 45 per cent of India’s exports at its peak level (in FY16).