The impact of the COVID second wave is less severe on the textile industry as compared to the first wave. The major disruption is seen in the supply chain as there were partial lockdowns imposed in major textile hubs which are Surat, Ludhiana, Tirupur, and Bhilwara. This led to a shortage of raw material inputs which are yarn and fabric. Even though the price of raw material increased, the final product rice didn’t rise sharply. This supply chain disruption may lead to a 20%-30% YoY of reduction in top lines in 1QFY22.
Product pricing is now beginning to catch up across upstream, midstream, and downstream segments, leading to a margin expansion in FY22. However, the first quarter of FY 22 cannot be termed as a lost quarter because of strong export markets.
Labor availability was moderately impacted as they feared National lockdown and rushed back to their villages. The shop floor remained partially functional at few plant sites.
Export-focused garments and home textiles are likely to remain resilient compared to the spinning and fabric segment. Although shipments will defer to the second quarter of 2022 because of high shipping cost and availability of containers. This will impact the profitability of the companies.
The third wave is expected to impact export and domestic demand. Also, high volatility in crude oil & foreign currency rates, reduction in export incentives, cotton crop failing, among other things, will be treated as events and are not Ind-Ra’s base case expectations.
The statistics below are taken from Industry data available pre-Corona virus impact.