India's home textile industry to see 6-8% FY25 revenue growth: CRISIL
ndia’s home textile industry is set to see 6-8 per cent growth this fiscal (FY25) riding on resilient demand from the United States and expansion in the domestic market, notwithstanding some lingering logistical challenges, according to CRISIL Ratings.
The credit profiles of Indian home textile companies will remain stable, supported by healthy cash accrual and moderate capital expenditure (capex) plans on the back of deleveraged balance sheets, it said in a release.
A CRISIL Ratings analysis of 40 companies, accounting for 40-45 per cent of the industry revenue, indicates as much.
The Indian home textile industry derives 70-75 per cent of its revenue from exports—the United States alone accounts for 60 per cent—and the remaining 25-30 per cent from the domestic market.
Three factors will drive growth of the Indian home textiles industry this fiscal, according to Mohit Makhija, senior director at CRISIL Ratings. First, resilient consumer spending and normalised inventory levels at major US retailers will spur exports, though container availability bears watching.
Second, the industry’s continued focus on expanding domestic presence will aid growth. Third, the domestic prices of cotton, the key raw material, are likely to remain close to international levels, resultantly retaining the competitiveness of domestic companies, he said.
International cotton prices had plummeted below the domestic prices between June and September, driven by a surge in cotton supply from Brazil and the United States.
However, with commencement of India’s cotton season, the gap between domestic and international cotton prices is expected to narrow, protecting India’s export competitiveness, CRISIL Ratings said in a release.
With domestic raw material prices remaining close to international prices, the operating margin is likely to remain stable at 14-15 per cent this fiscal, in line with last fiscal. The margin will remain insulated from the recent volatility in freight cost as most exports are on a free-on-board basis.
On the capex front, the home textile companies had invested ~?8,500 crore to add capacity over fiscals . With revenues scaling up gradually, the industry’s capacity utilisation is expected to remain at 60-70 per cent in this fiscal.
While most companies are now looking to optimise utilisation this fiscal, a few large ones are planning capex, but on deleveraged balance sheets.
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