Garment manufacturers’ revenues to increase 9-11% this fiscal: CRISIL

Revenues of garment manufacturers could increase 9-11 per cent this fiscal to 1.25 times of the levels seen in 2020, says the SME Report 2022 by CRISIL. EBITDA margins of these manufacturers is likely to remain in the range 5 to 5.5 per cent. Over 25 per cent of micro, small and medium enterprises (MSMEs) operating in India lost 3 per cent market share due to the pandemic, while the earnings before interest, tax, depreciation and amortization (EBITDA) margins of over 50 per cent declined due to a sharp rise in commodity prices last fiscal compared to the pre-pandemic level.

The share of MSMEs in several sectors has erorded by 3 per cent while EBITDA margin erosion was equal to fiscal 2020. Despite a rise in freight rates, Ebitda margin of small fleet transport operators was impacted by 50 bps in fiscal 2022, over fiscal 2020, due to limited cost pass-through of rising fuel cost that forms about half of the total cost.

Sectors such as textiles offered a ray of hope for exports. Cotton yarn exports benefited from the US ban on Xinjiang, China-made items, besides the China+1 policy. Having 70 per cent share, the RMG industry gained from supply constraints in China, and from emerging global opportunities. Going forward, Tirupur-based garment manufacturers are likely to benefit from export orders diverted from an economically floundering Sri Lanka, says Elizabeth Master, Associate Director, CRISIL Research.

The CRISIL report covers 69 sectors and 147 clusters that achieved an aggregate revenue of Rs 47 lakh crore, representing 20-25 per cent of the GDP.