This fiscal, India’s domestic textile sector is expected to rise by 6–8 per cent thanks to both local market expansion and strong US demand, according to a new report.
The report by Crisil Ratings says that the credit profiles of home textile companies will stay stable after a 9–10 per cent recovery in revenue growth from the previous fiscal year. This is supported by solid cash accrual and moderate capital expenditure (capex) plans on the back of deleveraged balance sheets.
About 70–75 per cent of the domestic textile industry’s income comes from exports, of which 60 per cent come from the US alone. The remaining 25–30 per cent comes from the domestic market.
This fiscal year, the home textiles market would rise due to three causes, according to Mohit Makhija, Senior Director at CRISIL Ratings.
“First, exports will be boosted by strong consumer spending and normalised inventory levels at major US retailers, but container availability needs to be closely monitored. Second, growth will be aided by the industry’s ongoing emphasis on growing its domestic presence,” he said.
Third, according to Makhija, domestic cotton prices—the primary raw material—are probably going to stay near global levels, which will keep domestic businesses competitive.
Consequently, India’s proportion of US imports will remain the same for the domestic textiles it exports this fiscal year. It was 30 per cent from January to August of 2024, the same as in 2023.
The operating margin is probably going to stay steady at 14-15 per cent this fiscal year, in line with last fiscal year, since domestic raw material prices are still quite close to global pricing.
According to the report, since the majority of exports are free-on-board, the margin will be protected from the recent fluctuations in freight costs. A few major corporations are planning capital expenditures (capex) on deleveraged balance sheets, but the majority are now trying to maximise utilisation this fiscal year.
