The revenue of the leather apparel and accessories industry, which includes bags, belts, and harnesses, is expected to fall 7-8 per cent in fiscal year 2024, according to Crisil Ratings in a news release on Wednesday.
Revenue is likely to fall due to a downturn in consumer demand in Europe and the United States, two major markets for Indian exporters.
85-90 percent of India’s USD 2.25 billion in leather garments and accessories are exported, with Europe and North America accounting for 75 per cent of orders.
According to Rahul Guha, Director, CRISIL Ratings, demand for discretionary items in important export markets, mostly advanced Western nations, has been falling due to squeezing inflation and mounting recession worries.
Though domestic demand for leather garments and accessories remains strong, he expects total industry income to fall in the medium term.
As costs remain high, firms’ operating margins are anticipated to contract by 150 basis points this fiscal year and stay range bound at 6-6.5 per cent in the medium term, according to Crisil.
According to the rating firm, inventory keeping has gotten more expensive as raw material costs have risen. Furthermore, due to weaker cash generation, the sector’s working capital demand would be 15-20 per cent higher in the near future.
