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Indian home textile exporters see profitability dip this fiscal

The operating profit margins of home textiles exporters has fallen 300 basis points (bps) from this fiscal due to pressure on export realisations post a shift in the dynamics of US retail and a reduction in incentives after the implementation of the GST. This fiscal, the financial scenario is undergoing a dramatic change. Many brick and mortal retailers in the US have trimmed inventory and downsized stores to offset profitability pressures caused by the e-tail boom.

This, along with pricing pressure, is expected to crunch EBITDA to 16 per cent starting this fiscal 2018 as against 19 per cent last fiscal. Debt being raised for capacity expansion (net of repayments) and lower EBITDA margins are forecast to result in aggregate debt to EBITDA ratio increasing to 3 times in the near term when compared to 2.5 times in fiscal 2017. As per Crisil, a global ratings, research company, Indian exporters have been enhancing their share of the business with US e-retailers but at lower realisations. Domestic home textile firms have had a good run since fiscal 2012 with India’s share of the US imports of cotton bed sheets and terry towels increasing from 34 per cent to about 40 per cent in the fiscal 2017.

 
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