A latest report by CRISIL Ratings has stated that owing to the extended lockdown as well as reduced discretionary spending, India’s readymade garment manufacturers are likely to witness a 25-30 per cent decline in revenue in the current financial year.
The analytical company underlined that the COVID-19 pandemic has led to a massive decline in both domestic and export demand, resulting in a challenging situation for RMG makers.
Apparel exporters will feel all the more heat due to the tumbling discretionary spending in the US and the EU, accounting for 60 per cent of the country’s readymade garment exports.
“Over the past five fiscals, revenue growth of RMG makers was supported by domestic demand even as exports were muted,” said Gautam Shahi, Director, CRISIL Ratings, adding, “This fiscal, with domestic demand also falling significantly, revenues are expected to be materially impacted.”
Kiran Kavala, Associate Director, CRISIL Ratings, on her part, highlighted that the huge decline in profits will leave the readymade garment makers with insufficient cash accruals to meet repayment obligations in the first half of the ongoing fiscal.
However, cash flows will start noticing some improvement during the second half of this fiscal, as demand is likely to get better from the third quarter when the festive season will begin in India.