Revenue of the Indian leather apparel and accessories sector is expected to decline 7-8 per cent during the financial year 2023-24 (April-March), attributable to a slowdown in consumer demand in Europe and the US, said Crisil Ratings.
As much as 85-90 per cent of the production by the Indian leather apparel and accessories industry is exported. Europe and North America account for 75 per cent of this.
According to the rating agency, the expected fall in revenue is seen despite benefits that may emanate from a depreciating rupee. The depreciating rupee typically helps the export-oriented industry in getting higher realisation.
"Revenue is expected to be flattish in the current fiscal (2022-23), after the robust performance last fiscal, riding on strong demand-rebound, which had taken it beyond the pre-pandemic level," Crisil Ratings said in a report earlier this week.
"Credit profiles of the rated companies will, however, be stable on low debt levels and limited expansion plans," said the rating agency after analysing 23 companies, which account for 11 per cent of industry revenue.
According to Rahul Guha, Director, CRISIL Ratings, demand for discretionary goods in key export markets -- essentially the advanced western economies -- has been shrinking because of pinching inflation and rising recession fears.
"Though domestic demand for the leather apparels and accessories segment remains resilient, the overall sectoral revenue is seen declining in the medium term," Guha added.
Moreover, operating margins for the industry are expected to fall 150 basis points (1.5 percentage points) this financial year 2022-23 and will remain at 6-6.5 per cent over the medium term.
Going ahead, any adverse currency fluctuation and further geopolitical escalation are among the key monitorable for the industry, the rating agency said.
( With inputs from ANI )
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