New Delhi [India]: A recent report by Systematix Institutional Equities Research suggests that Indian textile companies are poised for profitability growth despite domestic cotton prices being higher than international rates. The demand outlook remains strong due to several global factors.
Key Growth Drivers for the Indian Textile Sector:
✅ Normalizing Global Retail Inventories: Demand is expected to rise as retailers replenish their inventories.
✅ US Tariff Hike on China: A potential increase in tariffs on Chinese textile imports could benefit Indian exporters.
✅ Labour Cost Rise in Vietnam: Higher wages in Vietnam may shift global sourcing to India.
✅ Political Instability in Bangladesh: Supply chain disruptions in Bangladesh could further increase demand for Indian textiles.
Profitability and Growth Outlook
📈 Indian textile companies reported 11% YoY revenue growth, 11% EBITDA growth, and 28% PAT growth in the latest quarter.
📉 Cotton prices declined 10% YoY, while yarn prices remained stable, improving margins for textile spinners.
💰 The Union Budget 2025-26 has increased textile sector allocation from ₹44.2 billion to ₹52.7 billion, supporting growth initiatives.
Challenges for Indian Textile Manufacturers
🚧 Capacity Constraints: Indian garment manufacturers may struggle to meet rising global demand due to production limitations.
🚧 Cotton Supply Concerns:
- Cotton Association of India (CAI): Lowered the 2024-25 production forecast by 7.8% to 30.17 million bales.
- ICAR-Central Institute of Cotton Research (CICR): Estimates production at 32.0 million bales, exceeding earlier forecasts.
Cotton Price Trends
📉 International Cotton Prices: $0.67-0.68 per pound, down from $0.70 in 2QFY25.
📈 Indian Cotton Prices: ₹54,000-55,000/candy ($0.80 per pound), slightly up from ₹52,000-53,000/candy in 2QFY25.
Despite Indian cotton prices remaining higher than global rates, a stable crop outlook is expected to keep costs predictable in the coming months.
Government Support & Industry Outlook
✅ PLI Scheme & Duty Restructuring: Incentivizing domestic textile production.
✅ Boost to Technical Textiles: Higher customs duty on fabric imports to promote local manufacturers.
✅ Sustainable Cotton Farming Initiatives: Long-term focus on improving cotton productivity and efficiency.
With global supply chain shifts favoring India and government support, the Indian textile sector is positioned for steady growth in the coming quarters.