Lack of sufficient working capital is the single largest reason for the poor performance of majority of the textile companies. The same was proven to be true in the recent survey done on Tamil Nadu-based 300 textile companies by Coimbatore-based Indian Texpreneurs Federation (ITF).
As soon as the Ministry of Textiles (MoT) realised the gravity of the situation brought to light by the survey, it asked ITF for a similar but pan-India study report with larger sample size.
Now ITF has appointed CRISIL to conduct the study which will be completed within a month and will involve at least 1,146 spinning and 690 apparel manufacturing units covering 8 major textile and apparel producing states including Tamil Nadu, Karnataka, Gujarat, Maharashtra, Punjab and NCR region.
ITF is one of the leading associations of the Indian textile industry.
Prabhu Dhamodharan, Convenor, ITF said, “We analysed the three-year balance sheets of 300+ textile companies and found that around 45% of the spinning and apparel manufacturing companies are facing either severe or very severe status in their working capital requirements and this is why these units are in a negative cycle of performance. The new survey report will be submitted to the Ministry of Textiles and the Ministry of Finance.”
He further added that out of 753 textile companies rated by various agencies, 21% got very good ratings, 36% got moderate ratings and 43% got average or poor ratings.
Experts believe that through some specific intervention from banks such as converting the working capital loan into long-term loan and by offering on-time additional working capital loans, at least 25% of these units can bounce back to healthy performance.
CRISIL will analyse the financial performance of entities in the above-mentioned sector for four years from 2016-2019 and understand the revenue growth in these entities to identify the demand conditions in the industry.