According to a report by credit rating agency Icra, Indian textile companies may see healthy growth in turnover in the 2022-23 financial year, despite macroeconomic headwinds impacting performance in the second quarter. While cotton spinners saw a 4% decline in revenue on a year-on-year basis and a moderation in margins by 950 basis points, apparel exporters experienced a 4.5% increase in revenue. Operating margins for apparel exporters remained flat with a 180-basis point moderation in the second quarter of 2022-23.
Icra noted that the impact was steeper for smaller players, as large-scale companies benefited from cost savings on bulk purchases of raw materials. Inventory levels for most players declined in the first half of 2022-23, with cotton prices affecting the buying power of spinners. However, apparel exporters saw a decline in inventory levels as large retailers focused on reducing inventory due to weak demand in key exporting regions.
According to Sahil Udani, Assistant Vice-President and Sector Head at Icra, “The revenue and margins of Indian cotton spinners dipped in the second quarter of FY 23 due to macro headwinds. The revenue and margins remained flat for the apparel segment with recessionary conditions in key markets.” Despite this, Icra expects Indian cotton spinners to experience some moderation in performance in 2022-23, while Indian apparel exporters are likely to see healthy growth in revenues for the year.
