Indian Jute Industry Faces 5-6% Revenue Decline in FY24 Due to Lower Exports, Says CRISIL Ratings

17 Aug 2023 , 11:56 AM

According to CRISIL Ratings, India’s jute industry is projected to experience a decline in revenue by 5-6% in the current fiscal year, marking the second consecutive year of such decline. While domestic demand remains stable, lower exports are expected to be the primary cause for this downturn.

The jute industry heavily relies on exports, which are anticipated to decrease by 15% compared to the previous year due to concerns surrounding the US and European economies, major markets for Indian jute exports. Consequently, the operating margin is forecasted to shrink by 200-250 basis points to 5%.

CRISIL Ratings’ analysis focuses on jute firms that contribute around 30% of the industry’s revenue. With the government’s significant purchase of over 80% of the jute production through its nodal agencies, the domestic market remains relatively stable. The Jute Packaging Materials Act of 1987 further ensures consistent domestic demand for jute bags.

Despite reduced cash accruals and potential increases in working capital borrowings, healthy balance sheets are expected to maintain comfortable debt metrics for jute companies. The upcoming fiscal year is also predicted to see low capital expenditures that can be covered by cash accruals, resulting in stable credit profiles for jute firms.

CRISIL Ratings highlights the importance of monitoring global economic conditions and potential changes in jute packaging reservation standards as factors that could impact the jute industry’s performance in the near future.

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