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Textile businesses see the impact of inflation pressures, uncompetitive prices in the second quarter of fiscal year 2023: ICRA

New Delhi: India’s performance cotton Cinematographers of different sizes are moderated for the second quarter of fiscal year 2023 due to inflation pressure and no competition priceaccording to credit rating agency ICRA.

Sales for ICRA’s sample spinning kit were down nearly 4% on a year-over-year basis while margins moderated at 950 basis points. With pressure on profitability of companies of different sizes, interest payments for sample companies were also adjusted during this period.

Stronger impact on smaller players as large scale companies benefit from cost savings across Buy in bulk of raw materials. In the first half of fiscal year 2023, the inventory level for most businesses has decreased as the stock of cotton from the previous harvest season has been exhausted and the volatile cotton price has affected the purchasing power of businesses. yarns.

Unlike the cotton spinners in India, skin Exporters have shown resilience to macro headwinds. Sales of ICRA’s sample garment exporters set improved 4.5% on a year-over-year basis. Healthy revenue growth continued in Q1 FY 2023, followed by an all-time high revenue recorded in FY 2022.

With the deteriorating environment in the main export markets affecting consumer discretionary spending leading to a drop in export sales, most of the companies in the sample reported consecutive declines in the second quarter of the year. fiscal 2023. And with higher raw material prices pressuring costs, operating margin remained flat at 180 bps in Q2 FY 2023 compared to FY 2023 Q2 levels. 2022 for samples of different sizes.

With the adjustment in the profitability of companies of different sizes, interest paid to the sample companies also decreased in the second quarter of fiscal 2023. The decline was also partly due to interest expenses. increased with the cost of capital investments financed by most players in the first half of fiscal 2023. During the first half of fiscal 2023, the inventory levels of most players decreased. This is in line with major retailers’ focus on reducing inventories due to weak demand and recessionary pressures in key export regions.

about this, Sahil UdaniAssistant Vice President and Industry Director, Industry Ratings, ICRA, said: “We expect textile companies to report healthy revenue growth in 2023 while profit margins are projected. expected to decrease due to cost pressures.”

He added: “During the second quarter of fiscal 2023, the revenue and profit margin of Indian spinning companies decreased due to macro difficulties, while for the apparel segment, sales and margins remained flat due to recessionary conditions in key markets, with most companies (of varying sizes) reporting reduced sales in the second quarter of the following fiscal year 2023 when cotton stocks from the previous harvest began to decline and cotton prices fluctuated, leading buyers to become cautious when buying.”

ICRA expects its sample spinning group to report some performance throttling in 2023 compared to 2022 levels, while OPM is expected to be 10-11% in 2023. However, absolute profits are forecast to remain stable, supported by a higher scale of operations, albeit below 2022 levels. While for the sample of garment exporters, the agency Ratings expects revenue to grow well in 2023, albeit with a moderate margin of 100-300 basis points in 2023 compared to levels reported in 2022. Industry outlook continues to hold. stability.

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