According to Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA, apparel exporters are expected to report a moderate profit this fiscal, with pressures likely to sustain at least in the near term and the turnover growth to be subdued, except for a few larger players with an established client base.

The industry is facing challenges such as increased bargaining power of buyers amid intense competition, cost-side pressures emanating from disruptions in procurement of materials and consumables (such as colours, chemicals, accessories/ trims, etc) from China and write-backs of export incentives booked previously — all of which are expected to adversely impact profitability.

In addition to sustained pressures on liquidity owing to delays in clearance of government dues, a fall of 100150 bps in operating profit of Indian apparel exporters is expected this fiscal.

This may result in a moderation in debt coverage metrics and the impact will be more pronounced for leveraged and smaller companies, with limited bargaining power with customers, modest liquidity cushion and less financial flexibility to absorb the impact.