The textile trading sector is projected to be worth $800 billion globally, of which $35 billion comes from exports from India. The Indian government has revealed a plan for the sector to reach $100 billion by 2030, which would entail a 19% compound annual growth rate over the following six years. This would directly employ 3 million people and require around Rs 200,000 crore investments.
The industry saw a 9% CAGR from 2001 to 2014. However, because of COVID-19, high channel inventories, and the expiration of the EU trade deal, India’s textile exports have stalled during the last ten years. Even while growth goals may seem ambitious, two important catalysts—PLI and free trade agreements with the EU and UK—could help India regain its former textile glory.
This has resulted in a possible shift in China’s exports to foreign nations. Several of the most well-known international brands have already started to limit their visibility in China. We think that India will be able to profit from the “China plus one” theme because of its proficiency in factor cost and a strong textile ecosystem (in the cotton segment).
In the textile industry, we are still more interested in clothing and household textiles than in commodity-based, cyclically volatile weaving, spinning, and yarn producers. Global retailers seeking to diversify away from China and, more recently, Bangladesh, as well as vendor consolidation, are what excite us about the apparel industry.
Given that Indian businesses are already strategically positioned with retailers, this implies that several major clothing manufacturers would receive a disproportionate percentage of contracts. Additionally, due to domestic demand and export potential, technical textiles—such as those used for ropes, industrial belting, and human protection (for doctors, firefighters, and the Army)—are expanding quickly.
Over the previous ten years, the overall EBITDA of India’s textile industry increased at a 9% CAGR. We think the industry can expand more quickly if manufacturing is prioritized, particularly in the areas of clothing, home textiles, and technical textiles.
In contrast to makers of pure yarn and fabric, we think that some areas of the textile industry will present chances for wealth creation in the next years. We also favor integrated businesses or businesses further up the value chain (garments, home textiles).
