Cotton prices will continue to stress yarn spinners’ working capital, liquidity: India Ratings

As per the report inflated prices of cotton may lead to lower capacity utilizations of small-sized spinners during 1HFY23. However, an operational recovery is expected by 2HFY2, on the back of a likely correction in cotton prices with the arrival of the new cotton season in October 2022, claimed the report. -

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June 16, 2022 Spinning units across the country are not likely to get respite till the arrival of the new cotton season in October this year, as increased cotton prices will continue to stress working capital and liquidity of yarn spinners, especially small-sized ones, said the latest report of Mumbai-headquartered credit rating agency India Ratings and Research (Ind-Ra).
As per the report, inflated prices of cotton may lead to lower capacity utilisation of small-sized spinners during 1HFY23. However, an operational recovery is expected by 2HFY23, on the back of a likely correction in cotton prices with the arrival of the new cotton season in October 2022, claimed the report. Cotton production could be higher in the new cotton season compared to the current season, says Barath Ramjee, Ind-Ra director (emerging corporate), adding, “While the duty-free import of cotton and arrival of summer cotton are likely to support the moderation in the domestic cotton prices in the short to medium term, a decline is expected in cotton yarn prices in tandem with cotton prices. This could benefit apparels and textile players, who are already facing challenges to pass on raw material price inflation to consumers.”

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