‘Home textile exporters stare at fall in profitability’

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Chennai | Published: February 22, 2018 3:17:07 AM

The operating profit margins of home textiles exporters is seen falling 300 basis points (bps) from this fiscal following pressure on export realisations stemming from a shift in the dynamics of US retail and a reduction in incentives after the implementation of the GST.

textile exporters, GST, EBITDA, US, US imports of cotton bedsheets , Domestic home textile firms, Indian exportersDebt being raised for capacity expansion (net of repayments) and lower EBITDA margins are expected to result in aggregate debt to EBITDA ratio increasing to 3 times in the near term from 2.5 times in fiscal 2017. (Reuters)

The operating profit margins of home textiles exporters is seen falling 300 basis points (bps) from this fiscal following pressure on export realisations stemming from a shift in the dynamics of US retail and a reduction in incentives after the implementation of the GST. This fiscal, the landscape is undergoing a sea-change. Many brick & mortal retailers in the US have pruned inventories and downsized stores to offset profitability pressures caused by the e-tail boom.  That, along with pricing pressure, is expected to crunch EBITDA, or operating margins, to 16% starting fiscal 2018 from 19% last fiscal.

Debt being raised for capacity expansion (net of repayments) and lower EBITDA margins are expected to result in aggregate debt to EBITDA ratio increasing to 3 times in the near term from 2.5 times in fiscal 2017. However, Indian exporters have been enhancing their share of the business with US e-retailers but at lower realisations, said Crisil in a note. Domestic home textile firms have had a good run since fiscal 2012 with India’s share of the US imports of cotton bedsheets and terry towels increasing from 34% to about 40% in fiscal 2017.

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