Indian Viscose Staple Yarn Sector Revenue To Hit All Time
Revenue of the Indian viscose staple yarn (VSY) industry will witness a growth of 10-12 percent in the current fiscal and is expected to hit US $2.5 in total revenues or all time high in the current fiscal.
A CRISIL Ratings report attributed this growth to continuing of the strong demand from the previous fiscal.
According to the report, VSY is an attractive alternative to cotton yarn because of its lower prices and comparable features and grew at CAGR of 13 percent over previous three fiscals, higher than five percent for cotton yarn.
With VSY manufacturer’s revenue improving, and spreads between VSY and VSF expanding to Rs 55-58 per kg, the operating margin is likely to improve to 11-12 percent.
“Higher viscose yarn imports from China and weaker global demand, impacted spreads, in fiscal 2023, resulting in margins shrinking 800-900 bps,” the report analysed.
As per the report, even as yarn prices decline, though at a lower rate than raw material prices, overall profitability is likely to improve 200-300 basis points (bps).
“The capital-intensive nature of the VSY segment has resulted in player’s regularly contracting debt for capacity expansion,” Jayashree Nandakumar, Director, CRISIL Ratings said.
“However, strong balance sheets have ensured credit risk profiles of players remain comfortable despite continuous capex,” he added.
