The full recovery for Indian apparel players is likely to be delayed to 2022-23 due to the resurgence of the COVID-19 pandemic cases, according to a report.
Icra Ratings expects the full recovery for Indian apparel players to be prolonged and pushed back to the financialyear 2023 amid rising COVID cases in India and some of thekey export markets.
Their business performance in the financial year 2022, however, is expected to be better than the financial year 2021, supported by continued favourable progress on the vaccination rollout and a material shift witnessed towards online shopping, according to the Icra report.
This will cushion the adverse impact on the brick-and-mortar outlets, helping companies report a better performance compared to last year, the report noted.
Further, it stated that lockdown restrictions are likely to be more targeted and regionally focused compared to the national lockdown implemented last year, and companies are better prepared to follow protocols, respond to restrictions and minimise loss of operations.
While the demand for apparels had improved in recent quarters, it remained below pre-COVID levels. This apart, the recent rise in COVID cases in key metros and tier-I cities is likely to keep the demand weak in the near term.”
“Even after the infections subside, the resultant higher channel inventory is expected to keep it a buyers’ market, allowing sellers limited flexibility to pass on the cost increases to the buyers. This is expected to cap the improvement in profitability during the financial year 2022, despite the year-on-year increase in turnover, Icra vice president and co-head, Corporate Sector Ratings, Nidhi Marwaha said.
Icra projects the Indian apparel companies to report double-digit growth in the financial year 2022 albeit on a low base, achieving 85-95 per cent of the pre-COVID turnover levels.
Besides pent-up and festive demand, which temporarily supported demand during the third quarter of the financial year 2021, increased mobility amidst the easing of the lockdowns increased consumer confidence in the H2 financial year 2021, the report said adding that this encouraged higher footfalls in marketplaces and drove discretionary consumer spending.
The partial recovery in sales and profitability is expected to result in some improvement in coverage metrics of apparel players during the financial year 2022, supported by limited Capex spends, even though working capital borrowings to support the elongated cycle will keep debt levels high, it added.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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