Home furnishing units will recover faster than garments: CRISIL SME Tracker

With over 250,000 cases and counting in India, and 6.9 million-plus cases worldwide, the Covid-19 pandemic is expected to result in the worst global depression since the 1930s, according to the International Monetary Fund.

The lockdown in India and reduced buying by the world’s largest textile importers, such as the European Union and the United
States, have resulted in textile exports declining 30-40 per cent year-on-year in March, and 80-90 per cent in April. Overall, we expect textile exports, which contribute about 25 per cent of total demand, to decline 30-40 per cent this fiscal owing to the global economic slowdown.

Domestic demand for readymade garments is also unlikely to pick up any time soon, on account of lower income levels, postponement of weddings and personal events, and reduced festive activities this fiscal year. Small and medium enterprises (SMEs) command a 30-40 per cent share in the total readymade garment market of about Rs 4.8 trillion. While demand for the home furnishings segment (SME share is 70-80 per cent of Rs 700 billion) is expected to decline as well, we expect the segment to pick up sooner than garments, on account of the upcoming monsoon and winter seasons.

In home furnishings, the demand for products such as bedsheets, blankets, and towels will be relatively better, compared with discretionary items such as curtains and home decor. In addition, historically better financials (operating margins, gearing and interest coverage ratios) of home furnishing companies, as against other segments of the textile value chain, will also provide relief in these tough times.