Despite a predicted decline in price realisation of 3-5%, operating profitability for producers of polyester yarn will increase by 100 basis points (bps) year over year. A CRISIL analysis states that this will be fueled by fewer imports from China, cheaper raw material costs, enhanced pricing discipline brought on by industry consolidation, as well as strong domestic demand. After a steep fall of 400 basis points, or 7.5%, predicted for the current fiscal, profitability has improved.
“China’s domestic consumption will return to normal in the upcoming fiscal, reducing the danger of lower-cost imports from that nation. So, we anticipate an increase in operational profitability of 100 bps (on-year) to 8–8.5% for Indian polyester yarn makers in the upcoming fiscal year, according to Gautam Shahi, Director, CRISIL Ratings. An The credit profiles of producers of polyester yarn will remain steady in the upcoming fiscal year thanks to improved profitability and low capital expenditure, according to CRISIL’s research of 20 firms in the sector.
Also, the cost of mono-ethylene glycol (MEG) and purified terephthalic acid (PTA), which together make up 80% of the raw materials used to make polyester yarn, is anticipated to decline over the course of the upcoming fiscal year. Not only are prices predicted to moderate, but PTA capacities are anticipated to grow by 15-20% over the upcoming year. This will increase the availability of raw materials while also controlling pricing. Moreover, pricing discipline has become more important as a result of industry consolidation, with many significant companies emerging and acquiring up to 20% of the total capacity. in the industry has increase
Also, local demand for polyester yarn will be strong, according to Sushant Sarode, Director, CRISIL Ratings. “With a growth estimate of 8-10% for the domestic ready-made garments category and a projected recovery in demand for home textiles next fiscal,” he added. He stated that as polyester yarn is a less expensive alternative to cotton yarn, the demand for polyester yarn producers will continue to be strong.
The sector is anticipated to add just a little amount of capacity (about 6% to capacity) the following fiscal year, while working capital is anticipated to stay stable despite a fall in realisation. Yet, the business will need to closely monitor changes in crude oil prices and any new Chinese government restrictions that could have an impact on the sector