India’s home textile sector could see revenues fall by 5–10% this fiscal year after the United States imposed 50% tariffs on 27th August, according to Crisil Ratings. Exports to the US contribute nearly three-quarters of the industry’s income, making the blow significant.
Crisil’s review of around 40 companies, which account for 40–45% of sector revenue, indicated that the impact may be partly cushioned. Frontloaded sales ahead of the tariff deadline, limited spare capacity in rival countries such as China, Pakistan and Turkey, and efforts to diversify export markets are expected to soften the decline. Companies typically front-load orders to offset anticipated tariff hikes or supply chain disruptions.
Manish Gupta, Deputy Chief Rating Officer at Crisil Ratings, said that while US exports of home textiles rose only 2–3% in the first quarter due to cautious retailer sentiment, shipments spiked ahead of the tariff increase as buyers advanced orders. He added that India was still likely to retain its competitive edge in the American market.
However, firms with more than half their revenues tied to the US are expected to be hardest hit. Exporters are now turning to Europe and the UK, which together accounted for 13% of India’s home textile exports last fiscal year. The recent free trade agreement with Britain is expected to provide relief by scrapping the 10–12% duty that had previously put Indian exporters at a disadvantage to rivals such as Cambodia, Pakistan and Bangladesh.
Crisil cautioned that scaling up in these new markets will take time. Gautam Shahi, Director at Crisil Ratings, warned that operating profitability on US exports could decline sharply as Indian suppliers absorb part of the tariff costs while grappling with weaker demand. He noted that the risk of oversupply could also pressure margins both overseas and domestically.
Crisil anticipates a 200–250 basis point decline in industry-wide operating profitability this fiscal year, which will result in smaller cash accruals and worse credit metrics. The debt-to-Ebitda ratio may worsen to 2.4–2.6 from 1.9, while the interest coverage ratio is predicted to drop to about four times from 5.4 last year.
