The Indian cotton spinning industry has been severely constrained in the current fiscal, being adversely impacted by the demand slowdown, unfavorable raw material prices and rising funding requirements.

Higher domestic raw material costs, with Indian cotton prices trading at a premium to international cotton, have also contributed to the loss of export competitiveness. While export volumes have seen some uptick in recent months, they remain lower than the levels seen in the preceding fiscal. Revenues are expected to fall by more than five per cent and operating profitability to contract by around three per cent for the fiscal. Cotton prices are likely to remain below the minimum support price level till March 2020 on expectations of a bumper crop production for cotton year 2020. Yarn prices and contribution levels are continuing to tread lower than the 2018-19 levels even though yarn prices have started moving up. There has been an increase in working capital debt levels by 15 per cent year on year, reflecting the inventory build-up amid a shortfall in earnings and limited capacity additions envisaged over the next 12 months.

Spinners are expected to register a revenue de-growth of around six per cent, with both volumes and realisations having come under pressure in the first half of fiscal 2020.