ICRA predicts a 7% revenue decline for Indian cotton spinners in FY2024 due to lower cotton prices. This decline will also impact cash accruals, signaling a challenging year ahead. Despite the revenue decline, there is a silver lining for spinners. ICRA expects operating margins to improve as higher volumes and reduced logistics expenses contribute to better profitability. Additionally, spinners' borrowings are forecasted to decrease, leading to improved debt coverage ratios and capital structure. 

Potential for Increased Capital Expenditure in FY2025 Looking beyond FY2024, the industry may experience a boost in capital expenditure announcements.  Factors such as machinery modernization, demand from the "China Plus One" movement, and growing interest from EU and North American consumers are expected to drive investment plans. 

Cotton prices experienced a significant decline in H2 CY2022 and continued to decrease by 20% in May 2023. Despite this, domestic cotton production is projected to increase by 10% in CY2023, although slow progress in sowing due to a delayed monsoon has been observed in Maharashtra and southern states. 

Steady Yarn Prices and Contraction in Gross Contribution Margins Yarn prices are expected to remain stable in the near term, with a slight increase anticipated in H2 FY2024 as downstream companies' demand picks up. However, despite this, spinners are likely to face a contraction of approximately 5% in gross contribution margins for FY2024 due to unfavorable movements in cotton fiber and yarn prices. 

Recovery Exports account for a significant portion of India's cotton yarn production, but FY2023 witnessed a substantial decline in exports. Although there is projected to be a 15-17% increase in cotton yarn production for FY2024, both production and exports are expected to remain below the historical highs seen in CY2022.