Investment Information and Credit Rating Agency (ICRA) shared a recent analysis of India’s clothing export sector  that predicts a modest 2-3 per cent yearly revenue increase to Rs. 27,255 crore for FY 2024. The report expects high inventory levels from FY 2023 for US and EU retail clothing brands, accounting for 55 per cent of global apparel trade, as they plan orders for the upcoming spring and summer season in H2 FY 2024.

Kaushik Das, ICRA’s Vice President and Co-group Head of Corporate Sector Ratings, highlighted potential gains in order execution due to a challenging operating environment and cost rationalisation in H1 FY 2024. He emphasised promising long-term growth prospects backed by India’s Government initiatives like the PM MITRA (Mega Integrated Textile Region and Apparel) Scheme and PLI 1.0 Scheme, set to enhance India’s global apparel trade presence. Future advancements could stem from proposed FTAs with the UK and the EU, along with the strategic shift in apparel sourcing from China.

Despite an expected rise in debt, the coverage ratios for the mentioned sample companies are likely to remain stable as earnings improve. ICRA’s sample apparel exporters are projected to maintain an interest cover of approximately 5.7-6 times and total debt to OPBDITA ratio of about 1.8-1.85 times for FY 2024 and FY 2025.

Moreover, Das emphasised the EU’s rising share, increasing from 28 per cent in FY 2022 to 32 per cent in FY 2023 in Indian apparel exports. He suggested that successfully concluding the ongoing FTA discussions with the UK and the EU, coupled with the FTA agreement activated with Australia in December 2022, could drive future growth in Indian apparel exports.

ICRA sampled 18 Apparel exporting companies of which 13 are listed, representing around 15% of Indian apparel exports.