According to a survey by Crisil Ratings, the Indian home textile business is set for a significant comeback, with revenue rising by 7-9% in the current fiscal year.
This is a rebound for a sector that encountered significant difficulties and follows a severe 15% fall in the previous fiscal year.
The domestic cotton price adjustment, which had escalated to historic heights, hitting 1 lakh per candy in May 2022, is one of numerous key elements supporting the restoration of the home textile sector.
Since then, though, they have decreased to around 55,000, more in line with global costs. India’s competitiveness in the international market has been greatly increased by this adjustment.
Major retailers are also placing more orders from Indian producers of home textiles for markets abroad. Demand has increased due to the need to restock inventory after supply chain interruptions and a slow but steady increase in sales over the past few months.
“With domestic raw material prices now more competitive relative to international levels, coupled with the restocking efforts by major U.S. retailers and the sustained China+1 policy of global buyers, we anticipate a rebound in revenue for Indian home textile makers this fiscal year, albeit from a lower base,” said Mohit Makhija, senior director at Crisil Ratings.
Recent statistics show India’s proportion of US home textile imports has increased to 47% during the first half of this year from 44% in 2022 and 48% in 2021, supporting this upbeat prognosis.
Despite these encouraging signs, the sector is anticipated to gradually increase capacity utilization as a result of recent substantial capacity expansions and low demand growth. Operating margins are thus anticipated to stay below pre-pandemic levels.
With completion anticipated between the fiscal years 2022 and 2024, the home textile sector has been in the midst of a huge capital expenditure (capex) project with an estimated 4,000 crore in cost.
It was emphasized by Gautam Shahi, Director of CRISIL Ratings, that this outlay is not anticipated to significantly raise debt levels. “With only about 25% of the capex remaining to be completed this fiscal year, debt metrics are expected to remain stable. Consequently, gearing is forecasted to improve to 0.70-0.75 times as of March 31, 2024, compared to 0.8 times in the previous year. Interest coverage is also expected to improve to 4.8-5.0 times this fiscal year, as opposed to around four times in fiscal year 2023.”
However, the sector continues to be alert to possible threats, including as any sizable downturn in the United States’ principal export market and a rise in domestic cotton prices relative to rates abroad. As the sector makes its way towards recovery, these variables will be carefully watched.
