An interim study report on the ailments that bother the textile sector, prepared by Credit Rating Information Services of India Limited (CRISIL), has highlighted the need for immediate extension of interest subvention to spinning mills in the wake of weakening financial position and reduced cash flows. The said report was submitted to Commerce Ministry this week by the Texpreneurs Forum, formed of different stakeholders in textile industry here, which engaged CRISIL for the study.
“CRISIL study took stock of the conditions of the spinning sector across the country so as to make the report comprehensive,” Prabhu Damodaran, secretary of Texpreneurs Forum, told The Hindu .
One of the major findings is that nearly 80 per cent of the 750 surveyed spinning mills in the country for the study have a low non-investment grade rating that could deny them any scope of further borrowings from banks.
“It means that the financial health of mills have been deteriorating and non-performing assets (NPA) rising,” Mr. Prabhu Damodaran pointed out.
As of December 2014, the public sector banks reported gross NPA of 10 per cent of their advances to the cotton-based textiles sector against 5 per cent registered in December 2012.
EBITDA margins
Highlighting that the profitability of the spinning mills were diminishing, the report had mentioned that the average EBITDA margins (earnings before interests, taxes, depreciation and amortization) declined sharply in the case of large mills from 14.8 per cent in 2013-14 to 11.3 per cent in 2014-15 fiscal.
Similarly, the EBITDA margins of small sized mills had declined from 7.7 per cent in 2013-14 to 4.7 per cent in 2014-15.
The report concludes stating that extension of interest subvention would be a big boost to augment the prowess of the labour-intensive spinning sector and reduce the NPAs of the public sector banks.
“Since Union Government is keen to extend the interest subvention to the labour intensive sector, it will be appropriate for the spinning sector to get the same as every additional Rs.10 lakh revenue in the spinning sector could generate employment for 16 more people,” Mr. Prabhu Damodaran pointed out.
Nearly 80 per cent of the 750 surveyed spinning mills in the country have a low non-investment grade rating that could deny them any scope of further borrowings from banks
