Global home textile industry envisaged to reach $134 billion

India’s exports surged to $7.1 billion due to sudden increase in demand from the US and Europe, driven by heightened hygiene concerns, enhanced stocking by retailers to guard against any supply disruptions due to the pandemic and the China+1 strategy.

The global home textile industry was valued at $122 billion in CY2023 and is projected to reach $134 billion by the end of 2024, representing 7-8 of the overall textile industry. This sector is expected to grow at a CAGR of 5-5.5 per cent up to 2030. China has solidified its position as the leading exporter with approximately $23 billion in exports in 2023, followed by India with $5.7 billion and Turkey in the third place with $4.2 billion of exports. During the COVID-19 pandemic, India’s exports surged to $7.1 billion due to sudden increase in demand from the US and Europe, driven by heightened hygiene concerns, enhanced stocking by retailers to guard against any supply disruptions due to the pandemic and the China+1 strategy.

On the import side, the USA stands out as a very significant player, accounting for about 30 per cent of global home textile imports, with European countries like Germany, the UK, and France importing approximately 8 per cent, 6 per cent, and 5 per cent, respectively. For USA, China remains the dominant supplier, providing around 35 per cent of home textiles, while India holds the second spot with approximately 29 per cent. Over the period of CY19 to CY23, India’s exports have grown by 12.27 per cent, while China has declined by 13.2 per cent, indicating a shift from China to India. In the UK market, India faces more competition, with China leading at 23 per cent of imports, followed by Pakistan at 20 per cent, and India at 10 per cent.

Weaving steady growth

The Indian home textile industry, accounting for nearly 7-8 per cent of the global market, ranks among the top suppliers to the US. With its quality offerings, Indian home textile companies have established themselves as prominent suppliers to both the US and UK markets. Carpets, rugs, and furnishing articles make up approximately 30-32% of total home textile exports, followed closely by bed linen and kitchen/table linen.

From FY16 to FY20, the home textile industry experienced steady export growth. However, during COVID-19 the sector truly thrived. While many industries struggled, home textiles saw unprecedented growth starting from FY21, wherein the sector achieved a 13 per cent year-over-year (Y-o-Y) growth. The peak came in FY22, with a dramatic 26 per cent Y-o-Y increase. This surge was driven by pandemic-induced demand and the China+1 strategy.

Following a peak in demand during the second and third quarters of FY22, the home textile industry faced significant challenges. The surge in demand from Western countries led to a sharp increase in raw material prices, especially cotton, and higher freight costs due to prolonged pandemic lockdowns.

Additionally, economic scenario in USA and UK, rising energy costs in the EU, exacerbated by the Russia-Ukraine conflict, reduced discretionary spending in these markets. These factors caused exports to plateau in Q3 FY22 and decline from Q4 FY22 onwards. Home textile exports consistently decreased each quarter, culminating in a 12% y- o-y decline in FY23. From a peak of Rs 14,200 crore in Q2 FY22, exports fell to Rs 11,200 crore by Q4 FY23. However, the story changed as exports picked up from Q1FY24 and continued its growth momentum showing an improving trend. The global market saw a significant boost, driven primarily by the US market, leading to notable recovery after several quarters of decline.

Raw material price trends: Added to the woes

Cotton, the primary material for bed linen, is crucial for the profitability of home textile companies. In June 2022, cotton prices soared to around ₹1,00,000 per candy (₹272 per kg) due to low-yield crops in several states. However, as the global economy slowed and demand weakened, it caused a sharp price correction in cotton prices starting in December 2022. Since then, cotton prices have stabilized between ₹160-₹164 per kg.

In addition to cotton prices, higher freight costs significantly impact profitability. Historically volatile, these costs surged following the Russia-Ukraine war, with oil prices exceeding $110 per barrel in May 2022. Having significantly fallen thereafter, the ongoing Red Sea crisis from the start of 2024 has again increased shipping costs for Indian exporters, as approximately 95 per cent of vessels now re-route around the Cape of Good Hope, extending transit times by 14-20 days and increasing logistics cost by nearly 4-5 times.

Indian home textile industry on recovery path

In FY22, the select set of home textile manufacturers saw significant growth, with total operating income (TOI) increasing by over 37 per cent year-on-year. This growth was primarily driven by higher exports to the US and EU, along with increased price realizations for home textile products. Operating margins peaked at 17 per cent in FY22. However, post-FY22, the industry faced a substantial decline in total sales due to reduced demand from Western economies, particularly as the US grappled with inflation and the UK with deflation.

This reduced demand, coupled with higher cost cotton inventory, elevated freight costs, and inventory write-offs, led to a 491-basis point decline in operating margins, bottoming out at 9 per cent in Q2 FY23, exactly one year after their peak in Q2 FY22. Despite this downturn, the industry gradually started to show signs of recovery from Q3 FY23 onwards, driven by increased domestic demand and a gradual recovery in exports.

CareEdge view

“The global home textile industry is set to grow at an annual rate of 5-5.5 per cent by CY30, driven by higher disposable income, mushrooming real estate market, and a greater focus on hygiene post-COVID. There’s also a notable shift towards sustainable and eco-friendly products, which is expected to significantly influence the industry’s development. Indian home textile industry after experiencing difficulties in FY23, led by demand slowdown from key importing countries, increased raw material prices and high freight costs, has recovered sharply in FY24. Going forward the industry is anticipated to grow by 8-10 per cent in FY25, bolstered by stable raw material prices and improved demand from key importing countries. Despite challenges such as elevated freight costs and geopolitical tensions, the industry is expected to maintain operating margins in the range of 14-15 per cent in FY25,” said Arti Roy, Associate Director, CareEdge Ratings.