ICRA projects India's cotton spinning recovery in FY25

ICRA predicts a strong rebound for India's cotton spinning industry in FY25, with a growth forecast of 6-8 per cent. This turnaround is driven by a rise in domestic demand from sectors like garments and home textiles, alongside a 4-6 per cent increase in production volume.

While exports are likely to stabilize after a rebound in FY24, global demand remains a concern. However, a potential shift in sourcing away from other countries could offer some relief.”

Cotton prices, which hit a record high in FY23, have been on a downward trend. But due to recovering demand and a decrease in cotton planting, a slight price increase is expected in the near future. Yarn prices are also anticipated to rise marginally in FY25, but will stay sensitive to demand fluctuations.

The industry went through a period of debt-fueled investments in FY23, leading to weaker financial metrics. However, with reduced capital expenditure plans due to weak demand, leverage is expected to improve in FY25. This will be supported by better cash flow and cost-cutting measures.

ICRA expects operating income for spinning companies to improve by 6-8 per cent in FY25, with profit margins expanding by 100-150 basis points. Debt protection metrics are also likely to see some improvement, with a projected decline in the debt to operating profit ratio. Overall, the outlook for India's cotton spinning industry appears positive, with a recovery driven by domestic demand and operational improvements.