Homing in on growth amid pandemic

In the recent years, India has emerged as
one of the major players in the global home textiles market. Factors like
traditional craftsmanship, local availability of raw materials, investments by
companies in high-tech textile machinery, etc have helped India to become a
preferred sourcing destination for home textiles.

With focus on hygiene, the market
for products related to staying home (known as homebody economy) exploded
globally in 2020. This provided necessary cushion for
Indian home textile manufacturers who were facing challenges in domestic market
due to Covid led slowdown. Home textile makers derive approximately 60-70% of the
revenues through exports which recovered quickly, aiding faster recovery in
fiscal 2021. As a result, they performed better than
their peers in the other segments of the textile industry. Majority were able
to sustain growth in 2020-21, while a few recorded strong performances in a
market hampered by Covid 19 pandemic. For example, Indo
Count Industries reported 241% increase in PAT in 2020-21 to Rs 2490
million from Rs 730 million in 2019-20.

No
wonder, out of the Top
25 Indian Textile Companies (having market capitalisation of
above Rs 5,000 million) listed in the Annual Edition 2021 of The Indian Textile
Journal (ITJ) publication, 10 belonged to home textiles segment.

Covid 19 has triggered changes in the
consumer behaviour. with respect to home textiles. Now people prefer more
simpler fabrics like plains, textures, etc than rich designs or jacquards for
upholstery, which were in demand before the pandemic.

With cases of
Covid starting to rise again, many state governments have enforced state wide
lockdowns. This may impact home textiles production to a moderate extent. Some experts see second Covid wave as a short-term disruption and will
have less impact than the first wave because retailers
in US & Europe (which account for 80% of India’s
home textile exports) have not been impacted this time around and continue
to place orders.

However, there
are a few impediments. Imposition of 5% customs duty on imported cotton and
high cotton prices are leading to increase in raw material costs, especially
for exporters of premium home textiles. Also, the industry is still waiting for
details on RoDTEP (Remission of Duties or Taxes on
Export Products) rates which replaced ROSL (Rebate of State Levies) and MEIS
(Merchandise Export from India Scheme). Early resolution of these issues will
benefit the industry.

Globally, amid
Covid pandemic and US-China trade war, multinational companies (MNCs) are
looking to diversify sourcing and move manufacturing to other competitive
nations. Besides, the US has imposed sanctions on Xinjiang cotton
(which accounts for 80% of China’s cotton production) during the second half of
fiscal 2021 forcing global textile brands to look for an alternative. Indian
home textile industry stands to gain from these moves because of the country’s
inherent advantages such as abundance of raw material, cheap labour and
integrated operations. Of course, provided we play our cards right.