Home textile industry to rebound with 7-9% growth this fiscal: Crisil
- This comes on the heels of a sharp 15% decline in the previous fiscal year and signals a recovery for an industry that faced considerable challenges
New Delhi: The Indian home textile industry is poised for a notable resurgence, with revenue expected to surge 7-9% in the current financial year, Crisil Ratings said in a report.
This comes on the heels of a sharp 15% decline in the previous fiscal and signals a recovery for an industry that faced considerable challenges.
The revival of the home textile industry is underpinned by several crucial factors, including the correction in domestic cotton prices, which had soared to unprecedented levels, reaching ₹1 lakh per candy in May 2022. However, they have since retreated to approximately ₹55,000, aligning more closely with international prices. This correction has significantly bolstered India's competitiveness in the global market.
Furthermore, major retailers in international markets are increasing their orders from Indian home textile manufacturers. This uptick in demand is driven by the need to replenish inventory following supply chain disruptions and a gradual recovery in sales over recent 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.
This positive outlook is substantiated by recent data showing India's share in home textile imports by the United States, which has climbed to 47% during the first half of this year, up from 44% in 2022 and 48% in 2021.
Despite these positive developments, the industry is expected to experience a gradual improvement in capacity utilization due to recent significant capacity additions amid moderate demand growth. As a result, operating margins are projected to remain below pre-pandemic levels.
The home textile industry has been in the midst of significant capital expenditure (capex), totaling approximately ₹4,000 crore, with completion planned between the fiscal years 2022 and 2024. Gautam Shahi, Director at CRISIL Ratings, emphasized that this capex is not expected to substantially increase 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 industry remains vigilant regarding potential challenges, including any significant slowdown in the key export market of the United States and a surge in domestic cotton prices relative to international rates. These factors will be closely monitored as the industry navigates its path to recovery.
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Business NewsIndustryManufacturingHome textile industry to rebound with 7-9% growth this fiscal: Crisil
First Published:30 Aug 2023, 01:31 PM IST
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