Affected by low exports and a sharp increase in raw materials and transportation costs, the operating profitability of India’s home textile makers has moderated by 150-200 basis points to 13 per cent during this financial year 2022-23, says financial research and rating agency CRISIL. The agency, however, expects, credit outlook for the sector to remain stable. It will be supported by balance sheets strengthened by healthy cash generation and debt reduction over the past two fiscals will lend support, the agency says in its report.
It further adds, demand for home textiles will be impacted in the near term by inflationary pressures as big retailers cut down on inventory and consumers curb discretionary spending. Rising prices of raw cotton are adding to the challenges faced by the industry. Supply-chain disruptions leading to volatility in ocean freight costs are also impacting profitability, the report adds.
Demand will gradually be restored in the second half of this fiscal as freight and raw cotton costs moderate, and ease pressure on profitability, says Mohit Makhija, Senior Director, CRISIL. Revenues of the Indian home textile industry are expected to grow 11-12 per cent this financial year, primarily due to higher price realizations. Domestic demand for home textile is expected to grow at a healthy 13 per cent, driven by sharp demand recovery in the domestic hospitality industry and continued focus on health and hygiene, the report says.
Finally, the report predicts, growth in export demand will moderate to 10 per cent this year as against 25 per cent last financial year due to slow recovery in international travel and hospitality segments globally.