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

27 Jul '23
2 min read
Pic: Shutterstock
Pic: Shutterstock

Insights

  • After a challenging fiscal 2022-23 grappling with a decline in demand from the textile industry, the Indian dye, dye intermediates and pigment industry is poised for a recovery in the second half (H2) of this fiscal, CareEdge Ratings recently said.
  • The textile industry's demand is expected to improve in H2 FY24, though the first half may remain subdued.
After a challenging fiscal 2022-23 (FY23) grappling with a decline in demand from its primary end-user, the textile industry, the Indian dye, dye intermediates and pigment (D&P) industry is poised for a recovery as the demand from the textile industry is expected to improve in the second half (H2) of this fiscal, though the first half may remain subdued, according to a report by 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)

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