Readymade garment manufacturers' revenue is likely to fall by 25 to 30 per cent

Mumbai, Ta. 31 July 2020, Friday

In the current financial year, the income of readymade garment manufacturers is likely to decline by 5 to 20 per cent. Lockdowns and declining demand are having an impact on revenue, according to a Crisil report.

With a sharp decline in demand for garments in the domestic and export markets, the income of garment manufacturers will fall by 5 to 20 per cent. Exports will be impacted by cuts in excessive spending in the US and European markets. About 60 per cent of India's readymade garments exports go to the US and Europe. Garment manufacturers' working capital cycles are prolonged due to high inventory and delays in receiving payments, which could lead to a deterioration in their credit profile, the report said. Due to the spread of coronavirus and lockdown, the level of inventory held by producers was 20 to 5 per cent higher at the end of last financial year. In the first six months of the current financial year, demand remains sluggish and inventories will remain high, raising concerns among exporters.

The growth rate of readymade garment manufacturers over the last five financial years has driven up domestic demand, while export demand has remained stable. Despite lower cotton prices and cost-cutting measures, producers' margins will fall by 2.5 to 3 per cent.

Due to the decline in margins, manufacturers will not have enough cash flow to repay the loans, the report said. However, they have received some relief due to the existing moratorium.

With the increase in demand, cash flow is expected to increase in the last six months of the current financial year.