US and EU demand recovery to boost apparel exports in H2 FY2024: ICRA
ICRA has published a research note on the Indian apparel export industry.
It expects its sample companies to report a mild 2-3% YoY increase in revenues to Rs. 27,255 crore for FY2024.
Despite a tepid demand environment in H1 FY2024, ICRA expects the end demand to improve in H2 FY2024, boosting revenues.
The retail apparel brands in the US and the EU, which together account for close to 55% of global apparel trade, are expected to liquidate the high inventory build-up of FY2023 and book their orders for the Spring/Summer 2024 season in H2 FY2024.
ICRA’s outlook for the apparel industry remains Stable.
Kaushik Das, Vice President & Co-Group Head, Corporate Sector Ratings, ICRA said, in a statement, “ICRA expects the apparel-exporting companies to report a nominal increase in revenues in FY2024 with a recovery in growth rate in FY2025. Despite a rationalisation in raw material costs in H1 FY2024, the benefit is expected to be passed on to the orders executed, considering a weak operating environment at present.
The long-term growth prospects however look encouraging, with the Government of India’s various promotional steps, including the PLI schemes, the PM Mitra parks, the proposed FTAs with the UK and the EU and the longer-term benefit of China Plus One shift in apparel sourcing”.
For FY2024, ICRA expects the sample set to report ~2-3% revenue growth, led by an expected recovery in demand conditions in the international markets during H2 FY2024. The operating margins may slightly moderate to 9.0-9.5% in FY2024 (10.9% in FY2023), on a relatively weaker operating environment in H1 FY2024, steeper raw material prices, and higher employee expenses.
