This enhancement can be attributed to reduced costs of raw materials and improved operating efficiency. However, these levels are expected to remain below those observed before the pandemic.
The home textile industry is anticipated to experience a 7-9 percent increase in revenues during this fiscal year, as stated in a report. This resurgence in global market share follows a correction in domestic cotton prices and restocking by prominent overseas retailers in major international markets.
In the preceding financial year, the industry had encountered a decline of 15 percent in their revenues. According to a report by Crisil Ratings, which was released on Wednesday, the operating profitability of the sector is projected to improve by 150-200 basis points, reaching 14-14.5 percent in this fiscal year. This enhancement can be attributed to reduced costs of raw materials and improved operating efficiency. However, these levels are expected to remain below those observed before the pandemic.
Despite moderate capital expenditure, the industry’s credit outlook is expected to remain stable due to its improved operating performance, the report noted. The analysis for this report was based on an evaluation of 40 companies, collectively contributing to 40-45 percent of the industry’s total revenues.
Approximately 70-75 percent of the industry’s revenues originate from exports, with the largest market being the United States, accounting for over half of this share. After facing considerable export challenges in the previous fiscal year, the domestic home textile industry is now on a path of recovery. This turnaround is attributed to the correction in domestic cotton prices, which had surpassed international prices, reaching Rs 1 lakh per candy in May 2022. The current price has fallen to Rs 55,000 per candy, which has reinstated the industry’s competitive edge.
Additionally, orders from major US retailers are expected to increase in this fiscal year. This shift is due to the depletion of inventory that had accumulated in the past financial year, along with the easing of global supply chain issues. Furthermore, a gradual recovery in sales over the past few months has contributed to this positive trend.
Mohit Makhija, a senior director at the rating agency, commented that the domestic raw material prices have now become more competitive. This, coupled with restocking efforts by major US retailers and the ongoing “China plus one” policy adopted by global buyers, is projected to lead to a revenue rebound for export-oriented domestic home textile manufacturers in this fiscal year.
This positive development is reflected in the recent rise of the country’s share in home textile imports by the US. It increased to 47 percent in the first half of 2023, bouncing back from 44 percent in 2022, which was a slight dip from 48 percent in 2021.
However, the report highlighted that capacity utilization is anticipated to improve gradually due to recent significant capacity expansions amidst moderate demand growth. As a result, operating margins are predicted to remain below the levels observed before the pandemic.