Indian dye industry poised for revival in H2 FY24: CareEdge Ratings

Input prices for the industry are also expected to stablise in H2 FY24.

“This anticipated rebound should result in moderate volume growth and a slight improvement in profitability as input costs stabilise. Further, the major players in the industry are likely to maintain comfortable debt protection metrics with controlled leverage and stable interest rates. This positions them well to handle any capital expenditure or incremental working capital requirements,” the report said.

The industry also faced significant hurdles due to volatile input costs, including raw materials, fuel and freight, resulting in major players seeing a moderation in total operating income (TOI) by over 5 per cent and a contraction in operating profitability of around 400 basis points.

Several factors, including high inflation across major economies, disruptions resulting from the Russia-Ukraine war and stiff competition from low-cost Chinese products, contributed to the downturn.

CareEdge Ratings foresees a volume-driven recovery in TOI, approaching FY22 levels, coupled with a 100 to 150 basis points expansion in operating profitability compared to FY23.

Despite subdued performance, the solvency position of major players in the Indian D&P industry is expected to remain relatively comfortable in FY24, indicating that they can manage well capital expenditure and incremental working capital requirements, the ratings agency said.

The credit risk profile of major players is, however, expected to remain stable in the near-to-medium term, thanks to the expected improvement in the current fiscal.

Despite this positive outlook, smaller and mid-sized industry players with a more leveraged capital structure may continue to face vulnerability amid the ongoing headwinds, the report added.

Fibre2Fashion News Desk (DS)