The ongoing second wave of the COVID-19 pandemic in the country may slightly impact the textile sector's demand and supply in the first quarter of the current financial year, according to rating agency Indian ratings and Research (Ind-Ra). The supply chain is impacted by local lockdown restrictions across many parts of the country, especially at major textile hubs including Ludhiana, Tirupur, Bhilwara, and Surat. The lockdown has resulted in restricted movement of goods, which means non-availability of inputs such as fabric, yarns etc. This may cause a short-term impact on the finished output in the sector.
According to the ratings agency, a sustained export demand coupled with learnings from the first COVID-19 wave, a stronger balance sheet as well as liquidity compared to the fourth quarter of fiscal 2020-21, will allow the sector credit profile to remain stable in the current financial year.
In the current circumstances of the second wave, the labour availability in the textile sector is also affected but moderately, and at much lesser severity than that during the first COVID-19 wave. The shop floors are likely to remain operational at a few plant sites but at a restricted occupancy level. Ind-Ra states that due to strong export markets, the first quarter of the current financial year may not be a 'lost quarter' for the textile sector.
Additionally, most of the cotton textile players will have an adequate inventory given the second wave hit in April and May this year, and also because the fresh inventory is available between November-March. The supply chain disruption can lead to 20 - 30 per cent year-on-year decline in toplines during the first quarter of this fiscal (April-June). The recovery expectation varies depending upon the sub-sector.