Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Weak overseas demand to snip 5-6% off jute revenue this fiscal - CRISIL

Posted On: 2023-08-16 18:15:27 (Time Zone: IST)


Operating profitability to decline, but low leverage and nominal capex to keep credit profiles stable

India's jute industry is set to see revenue fall 5-6% this fiscal because of lower exports, marking the second consecutive year of decline. However, domestic demand is expected to be stable.

Operating margin is seen down 200-250 basis points to ~5% as exports, which are more profitable, would be lower. Credit profiles are seen stable on healthy balance sheets, and negligible capital expenditure (capex).

An analysis of jute companies rated by CRISIL Ratings, accounting for ~30% of the sector's revenue, indicates as much.

Exports, which form a third of the sector's revenue of Rs 12,000 crore, are seen 15% lower this fiscal, after falling 8% last fiscal as overseas channel partners continue to destock amid slowdown worries in the US and Europe (key markets accounting for over 60% of the total exports from India). The end-use of jute in these markets is largely discretionary.

In contrast, domestic demand is expected to be stable because of steady orders for storage and transportation bags (made of jute) owing to higher grain procurement by the government.

The domestic market, which accounts for the balance two-third of the sector's revenue, depends on government demand as it procures almost 80% of the jute produced through its nodal agencies. To add, mandatory norms under the Jute Packaging Materials Act 1987, provides 100% reservation for packaging of food grains and 20% reservation for packaging of sugar in jute bags.

This lends stability to demand for jute bags domestically and this trend is unlikely to change over the medium term. But the revenue comes at lower operating margin compared with exports.

Says Nitin Kansal, Director, CRISIL Ratings, "Weak export demand will reduce capacity utilisation of specialised looms and weigh on sales of specialised jute products such as hessian, gift articles and decorative fabrics. Hence, companies may defer capacity addition and only undertake minor maintenance capex. At the same time, companies may woo overseas customers through longer credit period, which may lengthen working capital cycles from 100 days to 140 days, on average, leading to higher reliance on working capital debt."

But healthy balance sheets will ensure comfortable debt metrics, lending stability to credit profiles. Jute companies had used cash accruals from strong operating performance in fiscal 2022 to deleverage their balance sheets.

Adds Argha Chanda, Associate Director, CRISIL Ratings, "Despite lower cash accruals and a likely increase in working capital borrowings, healthy balance sheets should keep debt metrics comfortable. Moreover, the capex outlay will be minimal and will be funded through cash accrual. Hence, credit profiles of jute companies will remain stable."


Click here to send ur comments or to feedback@equitybulls.com

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

CRISIL Ratings: Complex fertilisers volume to grow 4-5% next fiscal

Issuances of securitised debt instruments (SDI) by corporate entities to rise to Rs 100 crore in FY2024: ICRA

Godrej Interio's 'HomeScapes' Study reveals Indians want ‘Me-Time’ at home

GDP growth to moderate to 6.0% in Q3 FY2024, led by agriculture and industry: ICRA

Indian stock exchanges rank first in the world in terms of the number of IPOs in 2023

CRISIL Ratings: After soaring this fiscal, airlines to land >20% operating profit growth next fiscal

Rising frauds propel demand for AI/ML strategies: Experian Study

Cement makers to add 150-160 MTPA capacity by fiscal 2028 - CRISIL

Investor exuberance propelling broking industry performance, MTF achieves a new high: ICRA

CRISIL Ratings: Securitisation volume up ~20% in first nine months of this fiscal

India is fastest growing large economy globally in CY2023-CY 2024 - Pantomath Report

CRISIL Ratings: Market share of gold-loan NBFCs steady despite bank competition

CRISIL Ratings: Vehicle loan AUM to vroom past Rs 8 lakh crore next fiscal

45% of Newbie traders claim that 'not knowing enough' is the primary reason for losses incurred in Futures & Options trading - Sharekhan's survey reveals

CRISIL Ratings: Agri pump makers to see 7-9% revenue growth next fiscal

Indian mutual fund industry likely to sustain its strong inflows in 2024: ICRA Analytics

CRISIL Ratings: Operating profit of offshore rig operators to swell 30% next fiscal

CRISIL Ratings: Organised F&G retailer revenue to grow in mid-teens next fiscal

CRISIL Ratings: Shippers see a further revenue dip of 5-7% next fiscal as charter rates course correct

82% of professionals are concerned about job redundancy due to emerging technologies: Hero Vired Report

UPI transactions witnesses 118% rise at retail stores in 2023: PayNearby Report

Happy Forgings Limited - IPO - A trusted supplier for several Indian and Global OEMs - Reliance Securities

CRISIL Ratings: Penetration of electric buses set to double next fiscal

India's refined copper consumption to grow by 11% in FY2024, despite global headwinds: ICRA

CRISIL Market Intelligence and Analytics - Curb on cane juice for ethanol - Sugar output lift

Stable Repo Rates to Keep the Momentum Going for the Housing Market - Anuj Puri, Chairman - ANAROCK Group

Payback period for investment in sustainable warehouses come down to three years in India: A JLL - IndoSpace report

CRISIL Ratings - Profit margins of cotton yarn spinners to plunge 250-350 bps to decadal lows of 7-8% this fiscal

Government, PSUs, and Defence sector experience 14% upsurge in hiring: foundit Insights Tracker

CRISIL Ratings: Spirits high for organised liquor makers, revenues seen up 13%

Corporate bond market to more than double by fiscal 2030 - CRISIL

Gas Utilities : Gas consumption at record highs, growth now to trickle - Kotak Institutional Equities

Emkay and Geojit increase target prices of LIC, expect over 20% upside

CRISIL Ratings: Mall area to rise by 35% over the medium term on retail surge

Crop & Chemical Dashboard: Bottom is near, recovery unclear - Kotak Institutional Equities

Loan sell-downs of personal loan pools may see a temporary pause following the RBI's decision to increase risk weights: ICRA

India Surges Ahead in 5G Deployment, Paving the Way for a High-Tech Future!

CRISIL Ratings: Construction equipment revenue to grow 14-15% this fiscal

India to contribute 22% to the Global ER&D sourcing market by FY30: BCG-nasscom Report

CRISIL Ratings: In a decadal first, revenue of agrochemicals makers to slip ~3% on tepid demand this fiscal

CRISIL Ratings: Flexible packaging industry stares at decadal low profitability as oversupply stings

CRISIL Ratings: Domestic demand, softer cotton prices to sustain RMG growth

CRISIL Ratings: Higher workplace occupancy to light up cigarette volume 7-9%

CRISIL Ratings: Apparel retailers to grow 7-8% this fiscal via expansion, festival spur

CRISIL Ratings: For tea companies, ~8% revenue degrowth brewing this fiscal

CRISIL Ratings: Revenue of paper makers to crumple 8-10% this fiscal

ICRA expects banking sector to stay resilient, outlook remains Positive

CRISIL MI&A: Red-hot domestic demand to stave off steel price melt this fiscal

CRISIL Ratings: Replacement demand to drive tyre volume up 6-8% this fiscal

CRISIL Ratings: Home textiles makers to weave revenue, profitability rebound this fiscal


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020