Viscose Staple Yarn industry revenues to grow 10-12% to $ 2.5bn this fiscal: CRISIL

New Delhi, Aug 2 (KNN) Continuing on the strong demand from the last fiscal, the Indian viscose staple yarn (VSY) industry’s revenue is set to witness a growth of  10-12 per cent this fiscal, said CRISIL Ratings on Tuesday.

The Revenue of the Indian viscose staple yarn (VSY) industry is expected to touch an all-time high of over USD 2.5 billion, the report pointed out.

As per the report, even as yarn prices decline, though at a lower rate than raw material prices, overall profitability is likely to improve 200-300 basis points (bps).

 “Strong balance sheets and improved cash flows will support the credit risk profiles of manufacturers, despite substantial debt-funded capital expenditure (capex),” it said. 

VSY is an attractive alternative to cotton yarn because of its lower prices and comparable features. It logged a compound annual growth rate of 13 per cent over the last three fiscals, higher than 5 per cent for cotton yarn.

Himank Sharma, Director, CRISIL Ratings Ltd said, “Viscose spinners’ volume is expected to grow 15 per cent on year this fiscal, supported by sustained domestic demand and a revival in export demand during the second half. Overall, segmental growth will be in low double digits.”

With VSY makers’ revenue improving and spreads between VSY and VSF expanding to Rs 55-58 per kg, the operating margin is likely to improve to 11-12 per cent. Higher viscose yarn imports from China and weaker global demand impacted spreads last fiscal, causing the margin to shrink 800-900 bps.

Jayashree Nandakumar, Director, CRISIL Ratings Ltd pointed out that the capital-intensive nature of the VSY segment has resulted in player’s regularly contracting debt for capacity expansion.

“However, strong balance sheets have ensured credit risk profiles of players remain comfortable despite continuous capex,” he said.  (KNN Bureau)