Textile companies are expecting a revival in their fortunes in July to September on a rebound in customer footfalls and restocking by traders following GST compliance. Profit margins of textile firms remained under pressure in the first quarter of the current financial year due to traders’ destocking ahead of the GST implementation effective July 1. Primary textile players had stocks returned to them amid fears of the GST’s burden on unsold inventory.
Not just small players large ones too, saw profits being squeezed in the quarter ended June. The implementation of GST has disrupted the unorganised sector, which has been demanding its removal on fabrics and resolution of the inverted duty structure. Besides, cotton prices, which remained elevated last year on low output, are expected to decline this year on expectations of a bumper crop. Adverse rupee movement against the Chinese yuan is affecting textile players. In addition, high cotton prices have posed a challenge. With supplies likely to rise in the upcoming season, cotton prices are expected to moderate by five to ten per cent.
India’s cotton output is likely to be higher in 2017-18 on an increase in acreage. Textile companies with low debt and a better product mix are likely to perform better.