Domestic D&P industry faces challenges amid demand decline and input cost fluctuations: Report

livemint.com:

New Delhi: The domestic dye, dye intermediates, and pigment (D&P) industry witnessed a challenging FY23 as it grappled with a decline in demand from its primary end-user, the textile industry, according to a report by CareEdge Ratings. The industry also faced significant hurdles due to volatile input costs, including raw materials, fuel, and freight, resulting in major players experiencing a moderation in total operating income (TOI) by over 5% and a contraction in operating profitability of around 400 basis points. A multitude of factors contributed to this downturn, including high inflation across major economies, disruptions stemming from the Russia-Ukraine war, and stiff competition from low-cost Chinese products.

These elements collectively impacted the industry’s performance, leading to a challenging fiscal year for major players. Looking ahead to H1FY24, CareEdge Ratings expects that headwinds will persist, with subdued performance expected. However, a glimmer of hope shines on the horizon for H2FY24 as an anticipated revival in demand from the textile industry and stabilization of input prices could bolster the industry’s performance.

CareEdge Ratings envisions a volume-driven recovery in TOI, approaching FY22 levels, coupled with a 100 to 150 basis points expansion in operating profitability compared to FY23. Despite the subdued performance, the solvency position of major players in the D&P industry is expected to remain relatively comfortable in FY24. This observation bodes well for their ability to manage capital expenditure and incremental working capital requirements.