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COVID resurgence to delay apparel sector recovery: ICRA


Investment information firm ICRA expects the resurgence of COVID cases in India and some of its key export markets to delay full recovery for Indian apparel players to FY2023. However, business performance of apparel players in FY2022 is expected to be better than FY2021. The business is expected to be supported by continued favorable progress on the vaccination rollout and a material shift witnessed towards online shopping.

Most Indian apparel companies will report double digit growth in FY2022, says ICRA. They will achieve around 85 to 95 per cent of their pre-COVID turnover levels, broadly maintaining the level of recovery achieved in H2 FY2021. Besides pent-up and festive demand, which temporarily supported demand during Q3 FY2021, increased mobility amid the easing of the lockdowns increased consumer confidence in H2 FY2021.

This encouraged higher footfalls in marketplaces and drove discretionary consumer spending. For FY2022, ICRA expects top-line growth of 15 to 20 per cent for apparel exporters with range-bound margins amid continued discounting requirements, volatile demand patterns and intense competition in the global apparel markets.

Apparel retailers are expected to report a 35 to 40 per cent turnover growth in FY2022 with partial recovery in operating margins. However, margins are expected to remain lower than the pre-COVID levels by 200 to 300 bps. Apart from these continued pressures, increased raw material costs are likely to limit improvement in margins for apparel players.