Hosiery manufacturers in India are likely to see annual revenue growth of 10-12% this fiscal year following revival in rural demand and price support from the export market, a report said on Thursday.
The industry’s operating margin is expected to improve by 150-200 basis points (bps) this fiscal, due to softer input prices and improved capacity utilization, aided by higher volume growth, Crisil Ratings said in a statement.
“Income growth of 10-12 percent will be accompanied by a higher contribution from rural sales, which make up almost half of household income. Increased agricultural yields following above-normal storms, increased support prices and increased government spending. Rural infrastructure will support rural spending.
“Increasing exports to the Middle East and North Africa and expected growth in urban demand led by modern trade growth will also boost volume growth,” said Crisil Ratings Director Argha Chanda.
The report further stated that the hosiery industry usually sees an increase in volume at the end of the year as channel partners start selling to meet the high demand during the summer season.
Meanwhile, stability in cable prices in this currency and a 1-2 percent decrease in sales prices have led to a rise in demand from channel partners. In addition, efficiency will increase amid high energy consumption, it added.
It said, the operating margin of hosiery manufacturers should expand by 150-200 bps to 11.5-12 per cent in this fiscal, furthering capital accumulation.
Higher cash flow and reduced inventory holding times are expected to reduce working capital requirement and strengthen the resilience of hosiery players.
Also, energy consumption continues to be moderate and no significant increase is expected, which should limit long-term borrowing and financing costs, the Crisil Ratings report said.
“Inventory holdings are expected to decrease to a low level of 90-100 days in this currency from 150 days in fiscal 2024. Therefore, the balance of the working capital requirement and no major debt-financed expenses should keep the debt levels at a level. the total external debt of the net worth is predicted to remain below 1 period, in line with the final currency.
“Improved performance of hosiery manufacturers will boost interest to 6.5 times on this fund from last 4.5 times,” said Crisil Ratings Team Leader Vishnu Sinha.
However, the impact of inflation and the sustainability of farm income are key factors in the rural economy that will face scrutiny, the report said, adding that the growth of exports and the dynamics of the modern trade sector will also need to be monitored as they play an important role. in achieving higher-than-expected volume and margin growth.
