Readymade garment manufacturers are likely to post an 8-10 per cent increase in revenue on the back of growing domestic demand and revival of exports, a report said on Friday. Domestic demand and revival in exports have been driven by lower cotton prices and easing supply-chain disruptions, the report by Crisil Ratings said.
Volume growth will be higher at 6-8 per cent this fiscal, compared with 3-5 per cent last fiscal, it said.
Despite this, revenue will grow slower than the 14 per cent in the last fiscal as realisations moderate due to easing raw material prices.
The Crisil Ratings report further said prices of cotton and man-made fibre are expected to fall 15-17 per cent and 8-10 per cent, respectively, this fiscal.
Consequently, growth in realisations will be a meagre 1-3 per cent this fiscal, as against 10 per cent last year, the rating agency said.
“Readymade garment manufacturer makers will rely on domestic consumption (75 per cent of the overall demand), which is expected to grow 6-8 per cent in volume terms this fiscal.
“The volume of exports (25 per cent) will grow 4-6 per cent this fiscal year-on-year on a low base, led by re-stocking by global retailers, softer prices of cotton (the key raw material) and a slow but gradual pick-up in consumption in overseas markets,” Crisil Ratings Director Gautam Shahi said.
Meanwhile, the report said the credit outlook for readymade garment manufacturers remains stable, driven by steady operating performance and healthier balance sheets amid low capital expenditure and stable working capital requirement.
The report further said volume of exports fell 7 per cent year-on-year last fiscal following a sharp rise in domestic cotton prices and moderation in demand from the US and the European Union, which account for 60 per cent of shipments.
This fiscal, higher domestic and export volume and lower cotton prices will help expand operating margins by 50 basis points (bps) year-on-year to 9.5 per cent.
In contrast, operating margin had shrunk 150 bps last fiscal due to elevated cotton prices, delayed price hikes in the domestic market, and lower offtake by global retailers amid inventory pile-up, the report added.
