ICRA: Cotton spinners eye recovery from six-year lows

ANI | Updated: Dec 29, 2017 20:06 IST

New Delhi [India], Dec 29 (ANI): Domestic spinners are likely to witness a gradual recovery in performance from Q4 FY 2018 onwards owing to hopes of healthy cotton crop and demand restoration.

Spinners have been facing multiple headwinds over the past several quarters which resulted in their profitability touching six-year lows in the second and third quarters of the current fiscal year.

"The improvement in performance of domestic spinners is likely to be aided by a downward bias in cotton prices amid healthy cotton crop and an upward bias in yarn realisations due to demand restoration," Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA said.

Roy pointed out saying that there has been an uptick in cotton prices in the recent weeks and ICRA believes that this is an aberration in light of slower-than-usual arrivals from Gujarat.

The reason of slower arrivals from Gujarat, the leading cotton producing state was the state elections and concerns emanating from reports of pest attacks.

ICRA believes that the crop quantity and quality is unlikely to be impacted considerably because of the aforesaid concerns and the arrivals are likely to pick up in Q4 FY2018.

"The scenario on demand front is also likely to be more conducive, supported by improved clarity on export incentives for textile goods during recent weeks, which in-turn is likely to support India's overall textile exports from Q4 FY2018 onwards," Roy added.

ICRA report also emphasised that the clarity on export incentives, which had been revised downwards post-GST implementation, augurs well for cotton yarn demand from export-oriented textile players in the downstream segments and hence is likely to support demand restoration to an extent. (ANI)

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