Covid to delay recovery for apparel firms

The full recovery for Indian apparel players may be delayed to 2022-23 due to the resurgence of the pandemic cases, says a report.

Icra Ratings expects the full recovery for Indian apparel players to be prolonged and pushed back to the financial year 2023 amid rising COVID cases in India and some of the key export markets.

Their business performance in the financial year 2022, however, is expected to be better than the financial year 2021, supported by continued favourable progress on the vaccination rollout and a material shift witnessed towards online shopping, according to the Icra report.

This will cushion the adverse impact on the brickand-mortar outlets, helping companies report a better performance compared to last year, the report noted.

Further, it stated that lockdown restrictions are likely to be more targeted and regionally focused compared to the national lockdown implemented last year, and companies are better prepared to follow protocols, respond to restrictions and minimise loss of operations.

"While the demand for apparels had improved in recent quarters, it remained below pre-COVID levels. This apart, the recent rise in COVID cases in key metros and tier-I cities is likely to keep the demand weak in the near term."

"Even after the infections subside, the resultant higher channel inventory is expected to keep it a buyers' market, allowing sellers limited flexibility to pass on the cost increases to the buyers. This is expected to cap the improvement in profitability during the financial year 2022, despite the year-on-year increase in turnover," Icra vice president and co-head, Corporate Sector Ratings, Nidhi Marwaha said.

Icra projects the Indian ap