Polyester yarn makers set for profit recovery

India's polyester yarn industry is poised for a turnaround. After two years of struggling with low profits due to cheap imports, primarily from China, the sector is expected to see a significant boost in profitability this fiscal year.

Government interventions have been key. Import curbs, including a quality control order and a minimum import price on polyester yarn and fabric, have significantly reduced the influx of cheaper products. As a result, domestic yarn manufacturers are witnessing a surge in demand and improved pricing power.

CRISIL Ratings forecasts a 100-150 basis point increase in operating profits to 7-8 per cent this year. This, coupled with a projected 3-5 per cent revenue growth, will lead to a substantial improvement in cash flow. The industry's financial health is expected to strengthen as debt levels decline due to better cash generation and reduced capital expenditure needs. However, challenges remain. A slowdown in downstream sectors, fluctuations in crude oil prices, and potential regulatory changes could impact the industry's recovery.