Domestic Textile Giants on the Brink of Collapsing

textile industry
Summary

  • Mounting short-term debts backfired several major textile issuers. Based on D-Insights records, seven of the ten largest textile companies by assets are facing a high liquidity risk following lower cash and cash equivalents than their obligations that will soon mature.
  • Two major textile companies, Sri Rejeki Isman and Pan Brothers, currently under debt repayment postponements (PKPU), saw soaring short-term liabilities by hundreds of percent in the past five years and are now facing liquidity constraints. One of which has a larger fixed asset bearing.
  • Several domestic and foreign banks have jumbo loan portfolios to large textile issuers currently facing financial constraints. Bank Muamalat is also facing financial challenges and could also be affected. The bank has a credit portfolio worth almost half a trillion rupiah at Sritex.
  • The government prepares to expand safeguards for textile products after previously limiting cross-border sales of textile products on e-commerce platforms. The domestic market is expected to be the savior amid the pandemic. Many parties urged the government to make careful free trade agreements, tighten import conditions, and take serious action against illegal imports.

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