Lower exports causes jute industry to see revenue fall: Crisil

India’s jute industry is on track to see its revenue decrease by between 5% and 6% this financial year due to lower exports. However, domestic demand looks more promising and is expected to remain stable, according to ratings agency Crisil. 

“Weak export demand will reduce capacity utilisation of specialised looms and weigh on sales of specialised jute products such as hessian, gift articles, and decorative fabrics,” said Crisil Ratings’ director Nitin Kansal, ET Bureau reported. “Hence, companies may defer capacity addition and only undertake minor maintenance capex. At the same time, companies may woo overseas customers through longer credit period, which may lengthen working capital cycles from 100 days to 140 days, on average, leading to higher reliance on working capital debt.” 
 
Exports account for around one third of the Indian jute industry’s revenue thus a reduction in exports has a significant effect on the industry. This financial year, exports at at around 15% lower than last fiscal, which also saw a decline. 

“Despite lower cash accruals and a likely increase in working capital borrowings, healthy balance sheets should keep debt metrics comfortable,” said Crisil Ratings’ associate director Argha Chanda, ET Bureau reported. “Moreover, the capex outlay will be minimal and will be funded through cash accrual. Hence, credit profiles of jute companies will remain stable.”