With the second wave of the COVID-19 pandemic derailing demand recovery in India's readymade garments industry, the sector is expected to grow by 15-20 percent this financial year, according to a report.
"We see India's ready-made garments (RMG) sector growing at 15-20 percent in this fiscal, almost half the 28-33 percent expected earlier," Crisil Research said in a report.
Domestic demand, which accounts for almost three-quarters of overall demand, has been severely affected by fresh curbs imposed in states to contain the pandemic, it stated.
Consequently, demand recovery to pre-pandemic levels is expected to be pushed back by at least a fiscal year, it noted.
But higher revenues this fiscal, supported by buoyant export demand, higher profitability, and improving working capital management is likely to benefit credit profiles of the companies, it said.
The report noted that this revenue growth would come on a low base – after an expected tumble of 23-25 percent last fiscal.
Further, the report said that the domestic demand, which accounts for 74 percent of overall demand, had started recovering in the second half of last fiscal after lockdowns and other restrictions, which crimped first-half revenue.
However, since the fierce second wave landed in the first quarter of this fiscal, curbs have been re-imposed, slowing the demand recovery, it added.
"The first quarter of this fiscal will be a near-washout, with most domestic brick-and-mortar stores shut, and sales through e-commerce channels curbed. The second wave has also hit the hinterland, affecting sales of 'value' or affordable garments, which is the fastest-growing segment," Hetal Gandhi, Director, Crisil Research said.
Thankfully, with vaccinations accelerating and case-loads decelerating, a gradual recovery is likely from the second quarter, she said.