New Delhi, December 8
Indian hosiery makers are expected to log 10-12 per cent increase in revenue in 2024-25, asserted CRISIL Ratings.
The rating agency's assertion is based on the revival in rural demand, volume support from the export market and robust modern trade sales.
The volume growth will more than offset a 1-2 per cent year-on-year decline in average sales because of a drop in selling prices to clear year-end inventory after demand from slackened, Crisil said in the report this week.
The industry's operating margin is expected to improve 150-200 basis points (bps) this fiscal, owing to softer input prices and improved capacity utilisation, aided by higher volume growth.
Argha Chanda, Director, CRISIL Ratings said that the increase in agricultural yield following an above-normal monsoon, hike in the minimum support price and higher government spending on rural infrastructure will support rural spending.
"Increase in exports to the Middle East and North Africa along with expected growth in urban demand led by growing modern trade will also improve volume growth," said Chanda.
The hosiery industry typically sees a spike in volume by year-end as channel partners start stocking to meet high demand during the summer season. However, year-end sales last fiscal were impacted by lower stocking in anticipation of a fall in average product prices amid consistently falling yarn prices.
That said, stability in yarn prices this fiscal and 1-2 per cent dip in selling prices have led to a resurgence in demand from channel partners.
Amid strong demand from channel partners, hosiery manufacturers will curtail their spending on advertising and marketing. Also, operating leverage will increase amid higher capacity utilization, the rating agency added.
Higher cash accruals and reduced inventory holding periods are expected to lower the working capital requirement of hosiery makers and strengthen the liquidity profile of players.