The second wave of COVID-19 disrupted the recovery in demand for the ready-to-wear sector (RMG) in India, with growth of 15 to 20% expected this fiscal year by the CRISIL agency. Domestic demand, which accounts for nearly three-quarters of aggregate demand, is severely affected by new state regulations imposed to contain the pandemic.

As a result, restoring demand to pre-pandemic levels is expected to be delayed, at least by public finances. CRISIL states in a press release.

However, this quarter’s revenue growth, supported by strong export demand, improved profitability and better working capital management, will benefit credit profiles. More than 140 CRISIL with a total turnover close to 200 billion rand. An analysis of RMG rated companies shows.

It is important to note that this revenue growth will reach a low level after declining 23-25% in the previous fiscal year.

Domestic demand began to recover in the second half of last year, after lockdowns and other restrictions, and first half revenues declined. However, since the arrival of the violent second wave in the first quarter of the current fiscal year, regulation has resumed and the recovery in demand has slowed.

At the same time, export demand, which accounts for 26% of revenue, remains healthy and is expected to grow 18-22% from the 16% contraction last year. The United States and Europe account for almost 60% of Indian RMG exports.

Therefore, industry revenue growth is expected to be 15-20% in this fiscal year, which will support operating leverage. CRISIL Ratings expects the operating margin to improve 75-100 basis points (bps) year-over-year to 5.5-6% this year. This remains below the 8-9% observed between fiscal years 2015-16 and 2018-19.

During the first wave, the makers of RMG drastically cut promotion and travel expenses.

RMG manufacturers’ working capital is also expected to return to near pre-pandemic levels during the year, supported by careful inventory control and normalization of the debt cycle. Total current assets could drop to nearly 180-190 days before the pandemic after an increase of 15-20 days in the last fiscal year, when the working capital cycle was extended due to the extension of the pandemic. credit to customers.

Extensions beyond the first quarter will affect domestic sales of RMG, while recurrent infections in major export markets need to be monitored, the rating agency added.

Fiber2Fashion Press Office (DS)

According to the assessment agency CRISIL, the second wave of COVID-19 has disrupted the recovery in demand in the Indian ready-to-wear sector, which is expected to grow by 15 to 20% this fiscal year. He recently said the recovery in demand to pre-pandemic levels should be postponed, at least by public finances.

For RMG players in India, the second wave will trigger a recovery in income: CRISIL

Source link For RMG players in India, the second wave will trigger a recovery in income: CRISIL



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