Home textile exports set to fall 16-18% in FY23: Report
1 min read . Updated: 09 Feb 2023, 01:13 PM IST
PremiumAfter hitting the peak in Q2 FY22, exports started plateauing with a sharp surge in commodity inflation and a global recessionary trend disrupting growth
New Delhi: Home textile exports from India are expected to fall 16-18% year-on-year in FY23 with a slowdown in demand, especially from the US and Europe, and increase in material and logistic costs, according to a report by Care Edge Ratings.
After a boom seen in FY21 and FY22, the overall textile exports from India contracted by 13.4% y-o-y at $23.1 billion during the April-November 2022 period, according to the brokerage report.
In contrast, FY22 witnessed exports of $44.4 billion, helped by the pandemic-induced demand and the China+1 strategy of importing nations.
After ready-made garments, home textile is the largest export contributor in the textile industry. The sub-segment reported growth in export of around 34% in FY21 and further growth of 12.6% in FY22.
“CareEdge expects a 16-18% degrowth in home textile export in FY23, impacted by the recessionary trend in Europe and cut down on non-essential expenses in the US amid high inflation. While the depreciating rupee against the dollar and China+1 policy across the globe restricts turnover fall for Indian home textile players, margins would contract by 400-500 bps due to lower operating leverage given lower capacity utilization,“ said Arti Roy, Associate Director.
Demand momentum should witness gradual recovery from Q1FY24 as freight and cotton costs show moderation and inventory exhausts with retailers, she added.
After hitting the peak in Q2 FY22, exports started plateauing with a sharp surge in commodity inflation and a global recessionary trend disrupting growth.
“The Indian home textiles exports grew from $5.3 billion in CY17 to USD 8.0 billion in CY22, recording a compounded annual growth rate (CAGR) of 7.1%. After peak growth in Q3FY22, home textile exports started moderating Q-o-Q due to continuous rising cost of cotton, inflation plaguing the US; and recessionary pressure in Europe," Care Edge said.
The US and Europe are the major market for home textile constituting approximately 68-70% of the home textiles imports.
The operating margins for the top four listed home textile companies (comprising 30% to 35% market share in Indian home textile export) have been moderating on a quarterly basis and are expected to weaken by 400-500bps for FY23.
Lower demand and higher operating costs due to lower capacity utilisation are denting the margins despite the reduction in cotton prices.
