Man made fibres, yarn sector to recover due to pent up demand: Ind-Ra

Both man-made fibres and cotton segments should start benefiting from the low raw material prices in the third quarter this financial year, it added. Man-made fibres and yarn segments' volumes have improved to 50-80 per cent of the normal levels in August, led by pent-up demand and strong export order build up in all the segments, Ind-Ra said in the report.

Man-made fibres and yarn segments are expected to recover on the back of pent-up demand and strong export order build up in all the segments, India Ratings said in its report. Both man-made fibres and cotton segments should start benefiting from the low raw material prices in the third quarter this financial year, it added.

Man-made fibres and yarn segments' volumes have improved to 50-80 per cent of the normal levels in August, led by pent-up demand and strong export order build up in all the segments, Ind-Ra said in the report. Plant utilisation of pure man-made fibres and yarn manufacturers was severely impacted over the first quarter of 2020-21, amid COVID-19-led lockdown.

The volume recovery of pure man-made fibres and yarn should be quick but has started relatively late from August, while the cotton and blended spinners' volumes started recovering in June. Ind-Ra expects raw material prices to remain moderate in the second half of FY21.

Further, Ind-Ra said it expects fabric and apparel prices to decline in August, led by a quick supply restoration than demand recovery. During July-August, most players have resorted to discounts to boost sales and also generated the much required internal liquidity, it added.

Disbursement of COVID-19 bank loans and promoter-led infusions also supported liquidity and the ability of fabric and apparel players to ramp up operations quickly, the report said, adding that it expects apparel prices to remain modest in 2HFY21 to push sales. Readymade garments exports recovered significantly starting June-July and order book build up in August was strongly supported by restocking at global retailers and global sector consolidation, it said.

Large Indian players are benefitting from the shift in market share to India from China, it added. Big apparel and readymade garment manufacturers have largely been able to resolve labour mobility and availability concerns, it added.

Demand for home textiles has been only moderately impacted as they are necessary products for day-to-day life. However, the US-China trade war has impacted imports from China into the US, thus giving a strong push to exports from India.

Ind-Ra expects the demand for home textile exports to sustain in 2HFY21 at healthy levels achieved over August-September. Indian players are likely to increase their already strong market share in terry towels and bed linens, led by supply chain diversification away from China, the rating agency said.