The domestic textile sector in India is anticipated to increase by 6–8% this fiscal year after rebounding by 9–10% in the previous fiscal year, according to CRISIL Ratings research. The development in the home market and strong demand from the US, the main export destination, will fuel the boom, it stated, despite some persistent logistical issues.
To make the findings public, CRISIL Ratings examined 40 businesses that accounted for 40–45% of the industry’s revenue. It stated that thanks to sound cash accrual moderate capital expenditure (capex) plans, and deleveraged balance sheets, the credit profiles of domestic textile industries will continue to be stable.
Seventy to seventy-five percent of the domestic textile industry’s income comes from exports, mostly from the United States, with the remaining 25 to 30 percent coming from the domestic market.
Due to a spike in cotton supply from Brazil and the US, international cotton prices fell below domestic prices between June and September 2024. But once India’s cotton season gets underway, it is anticipated that the difference between domestic and foreign cotton prices will close, preserving India’s export competitiveness.
CRISIL also insisted that the operating margin is probably going to stay steady at 14–15 percent this fiscal year, in line with last fiscal year, since domestic raw material prices are still close to global pricing. Since the majority of exports are free-on-board, the margin will continue to be protected from the recent fluctuations in freight costs, it continued.
About Rs 8,500 crore was spent by domestic textile industries on capital expenditures to increase capacity during the fiscal years 2019 and 2024. The industry’s capacity utilization is anticipated to stay between 60 and 70 percent this fiscal year as revenues gradually increase.
A few major corporations are planning capital expenditures (capex) on deleveraged balance sheets, but the majority are now trying to maximize utilization this fiscal year. Nevertheless, CRISIL concluded that any notable slowdown in the US or an increase in local cotton prices relative to global prices would be trackable.
