The profit hike of Indian yarn spinners is expected to come under pressure due to a number of circumstances including increasing price of raw cotton, at the time when the cotton yarn demand is expected to remain moderate. In such situations, the spinners may pay attention to reduce the utilization of capacity. Thus, the profitability is likely to remain under pressure in the future as well.
Apart from profitability pressure, higher cotton prices will also lead to the higher working capital requirement and in turn higher borrowing. According to the news resources, the cotton prices remained high due to low domestic availability in the first half of 2016-17 and also because of the higher volume of exports. However, in the last quarter of 2016-17 the domestic cotton prices averaged at Rs 120/kg up, 29% a year of year. Further, it was also said that competitiveness of the polyester fiber enhanced as against that of cotton fiber, resulting in 5%, year over year growth in synthetic yarn production in the year 2017.
