NEW DELHI: Large and mid-scale spinning companies are set to report a robust double-digit growth in revenues and all-time high profits in FY22, with 400-600 basis points improvement in operating margins, according to ratings agency ICRA.
Indian cotton spinners are riding high on strong demand and realisations and have reported multi-year high operating profits in the past four quarters, even as cotton fibre prices increased parallelly.
Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA, says, companies which had higher stocks of lower cost cotton from the previous season benefitted more in terms of profitability in first half of FY 2021-22.
"This apart, inclusion of all cotton yarn exports under Remission of Duties and Taxes on Exported Products (RoDTEP) scheme from January 2021 onwards (as notified in August 2021) has also supported margins as well as price competitiveness of domestic spinners in international markets," Roy said.
"The slight decline in December 2021 aside, cotton yarn prices remained on a rising trend in the current fiscal, touching all-time highs in recent months. Even though cotton prices also increased during nine months of FY22, continued increase in realisations led average spot contribution margins for 9M FY2022 to decadal highs," said the ratings agency.
On the exports front, it said, following a 5 per cent growth in FY21 despite the pandemic impact, India’s cotton yarn exports surged 47 per cent Y-o-Y in H1 FY22 led by 130 per cent Y-o-Y increase in exports to Bangladesh.