India's apparel and fabric industry continues to remain under pressure due to temporary disruptions caused by demonetisation and transition to GST regime, says a report by Icra.
The highly fragmented fabric segment in the country saw the production declining by 1 per cent in Q1 FY 2018 and a de-growth of 2 per cent in FY 2017, as per the report.
Besides, the report said India's apparel exports continue to remain volatile with the global trade not showing any signs of improvement amid subdued demand trends in the key importing countries.
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"De-growth in fabric sales volumes in Q1 FY 2018 was higher than the aggregate nation-wide production de-growth, due to the clearance of channel inventory by intermediaries prior to GST implementation, Icra Senior VP and Group Head, Corporate Sector Ratings Jayanta Roy said.
Apart from the demand pressures, high raw material prices and currency movements also continue to weigh on the industry's performance, which has been visible in the profitability of manufacturers over the past three quarters, according to the report.
Stating that debt levels are expected to lower down with the industry focusing on sweating the existing assets more and undertake limited debt funded capacity additions, Icra said it expects the financial risk profiles of Indian exporters as well as domestic-focused apparel manufacturers to remain steady in the near term.
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