• <object id="mfqpr"></object>
      1. <p id="mfqpr"></p>
        <pre id="mfqpr"></pre>

          <p id="mfqpr"><strong id="mfqpr"><small id="mfqpr"></small></strong></p>
        1. <object id="mfqpr"><strong id="mfqpr"></strong></object>
        2. Home / Knowledge / News / Yarn / Credit quality of cotton spinners to moderate: CRISIL

          Credit quality of cotton spinners to moderate: CRISIL

          Aug '20
          Pic: Shutterstock
          Pic: Shutterstock
          Revenues of cotton spinners are set to decline 30-35 per cent in the current fiscal, a six-year low, because of tepid domestic and export demand following the Covid-19 pandemic. This along with inventory losses and lower profitability is expected to result in moderation in credit quality of cotton spinners this fiscal, a study of 150 CRISIL rated firms shows.

          Domestic demand for cotton yarn, which accounts for over 70 per cent of overall demand, has been impacted because of slack in end-user segments such as readymade garments (RMG) and home textiles, said a latest report by CRISIL, an Indian analytical company providing ratings, research, and risk and policy advisory services.

          Cotton yarn exports, too, have been materially affected because of fewer orders from China and Bangladesh, which account for over half of India’s exports. Revenue from exports had already wound back by a third last fiscal, with China increasing procurement from other countries, predominantly Vietnam.

          The decline in yarn offtake since Covid-19 afflictions began in February 2020 has meant the current fiscal began with higher inventories of 4-4.5 months compared with 3-3.5 months on average in the past two fiscals. "With demand likely to revive only from the second half of this fiscal, inventories will remain high in the first half," the report said.

          “Cotton spinners are facing a double whammy of sharp erosion in revenue and inventory losses. Revenues of the domestic industry, which had fallen last fiscal, is set to slip again and touch a six-year low. Additionally, inventory losses loom because cotton prices have declined 10-15 per cent on a sequential basis in the first quarter of the current fiscal,” said CRISIL Research director Hetal Gandhi.

          With yarn prices falling more than cotton prices, cotton-yarn spread is seen narrowing down to ₹75-80 per kg this fiscal versus ₹80-85 per kg last fiscal, which will contract operating margins by 350-400 bps.

          Further, the working capital cycle has got elongated because of a stretch in receivables following steep business pressure on key end-users such as RMG makers. Consequently, spinners have been depending more on bank borrowings, leading to high utilisation of working capital limits. "Net-net, we expect credit outlook for cotton spinners to remain negative this fiscal," the report said.

          “Already the credit ratio (ratio of upgrades to downgrades) for CRISIL rated cotton spinners has deteriorated between April-July 2020, after hovering around 1 time in the previous three fiscals. Tepid business performance and consequent, low cash flows from operations is aggravating liquidity pressures, in the first half of the current fiscal. Interest coverage ratio (adjusted earnings before interest, tax, depreciation and amortisation divided by total finance costs) for CRISIL rated players is expected to slide to below 1.6 times this fiscal versus 2.7 times last fiscal,” said CRISIL Ratings associate director Krishna Ambadasu.

          "Most firms are managing the situation by availing of moratorium on debt servicing, additional Covid-19 related bank lines, and government measures such as the relief package to micro, small and medium enterprises. Additionally, one-time restructuring of loans announced by RBI will be a viable option amidst tightness in accruals to repayments in current fiscal.

          "That said, the benefit of continuing soft cotton prices and liquidation of high-cost inventories from the past fiscal should help cotton spinners perform better in the second half of the current fiscal, provided demand limps back," Ambadasu added.

          Fibre2Fashion News Desk (RKS)

          Must ReadView All

          Pic: Shutterstock

          Apparel/Garments | On 12th Sep 2020

          $2 hike in minimum wage for Cambodian garment workers

          The Cambodian government recently decided to raise the minimum wage...

          Pic: Shutterstock

          Textiles | On 12th Sep 2020

          Sri Lanka mulls raising garment production in rural areas

          Sri Lankan batik, handloom and apparel minister Dayasiri Jayasekara...

          Pic: Shutterstock

          Textiles | On 12th Sep 2020

          UNCTAD suggests reforming multinational trading system

          The COVID-19 pandemic is likely to reverse much of the economic and...

          Interviews View All

          Shawn Honeycutt, Bolger & O'Hearn

          Shawn Honeycutt
          Bolger & O'Hearn

          The Indian market is interesting and rather persistent in seeking new...

          Dinaz Madhukar, DLF Emporio and DLF Promenade

          Dinaz Madhukar
          DLF Emporio and DLF Promenade

          Each event and promotion is planned out keeping in mind the business of...

          Manuj Terapanthi, Texaura

          Manuj Terapanthi

          Transparent supply chain and fair trade will boost sustainable market

          Laksheeta Govil,

          Laksheeta Govil

          Founded in 2014, Fizzy Goblet is a Delhi / NCR based handcrafted leather...

          Franco Ravazzi,

          Franco Ravazzi

          Italy-based Tessimenti E Orditi Tinti (T.O.T SRL) specialises in stocking...

          Yogesh Kanani,

          Yogesh Kanani

          Incorporated in 1999, Purani Textiless Private Limited is a leading...

          Brad Holschuh, Wearable Technology Lab, University of Minnesota

          Brad Holschuh
          Wearable Technology Lab, University of Minnesota

          A new study led by researchers at the University of Minnesota's Design of...

          Sven Ghyselinck, Devan Chemical

          Sven Ghyselinck
          Devan Chemical

          Headquartered in Belgium and with offices in the United Kingdom, Portugal...

          Silverio Baranzano, Fitesa

          Silverio Baranzano

          Fitesa is a leader in the nonwoven fabrics industry, specialising in...

          Sweta Agarwal, A Humming Way

          Sweta Agarwal
          A Humming Way

          A Humming Way (AHW) is inspired by the old-world regalia of Rajasthan...

          Varsha Wadhwa, VW

          Varsha Wadhwa

          Coming from a family that ran a business of jute and linen mills since...

          Wendell Rodricks, Wendell Rodricks

          Wendell Rodricks
          Wendell Rodricks

          "We should not compare India and the West. There are things we do that...

          Press Release

          Press Release

          Letter to Editor

          Letter to Editor

          RSS Feed

          RSS Feed

          Submit your press release on


          Letter To Editor

          (Max. 8000 char.)

          Search Companies


          Leave your Comments

          September 2020

          Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

          Advanced Search


        3. <object id="mfqpr"></object>
            1. <p id="mfqpr"></p>
              <pre id="mfqpr"></pre>

                <p id="mfqpr"><strong id="mfqpr"><small id="mfqpr"></small></strong></p>
              1. <object id="mfqpr"><strong id="mfqpr"></strong></object>