India’s home textile industry is set to stitch a 6-8% growth this fiscal year following a 9-10% rebound in revenue growth last fiscal year, a CRISIL Ratings analysis of 40 companies has indicated.
These companies account for 40-45% of the industry revenue. Such a growth is anticipated on the back of resilient demand from the US and expansion in the domestic market. The credit profiles of home textile companies will remain stable, supported by healthy cash accrual and moderate capital expenditure (capex) plans on the back of deleveraged balance sheets, the analysis stated.
The home textile industry derives 70-75% of its revenue from exports — the US alone accounts for 60% — and the remaining 25-30% from the domestic market.
Gautam Shahi, Director, CRISIL Ratings, says that other than the US, the European Union (EU) forms 15-16% of the import share of the industry. This market could see a muted growth in the current fiscal year given the economic situation in the region as well as the EU’s preferential trade tariffs for exports from Pakistan. “The domestic Indian market forms the remaining 25-30% of the overall industry’s revenue. The Indian home textiles market is largely unorganised and the organised players are making continuous efforts to expand their market share in India,” he says.
International cotton prices had fallen below the domestic prices between June and September 2024, driven by a surge in cotton supply from Brazil and the US. However, with the commencement of India’s cotton season, the gap between domestic and international cotton prices is expected to narrow, protecting India’s export competitiveness.
With domestic raw material prices remaining close to international prices, the operating margin is likely to remain stable at 14-15% this fiscal year. The margin will remain insulated from the recent volatility in freight cost as most exports are on a free-on-board basis.
Shahi adds that some of the major categories exported from home textile products from India in FY24 included furnishing articles and bed sheets (38-40%), carpets (30-32%) and terry towels (17-18%), which together form 85-90% of the home textile exports (in value terms). “For 5 months fiscal 2025 (April to Aug 2024), the carpet segment has recorded the highest YoY value growth (14%), vs a lower growth in the other categories. The other categories (curtains, ropes etc.) are relatively miniscule and will not meaningfully contribute to the overall home textile growth,” he states.
On the capex front, the home textile companies had invested Rs 8,500 crore to add capacity over fiscal years 2019-2024. With revenues scaling up gradually, the industry’s capacity utilisation is expected to remain at 60-70% this financial year.
Pranav Shandil, Associate Director, CRISIL Ratings, highlights that with steady operating performance and moderate capex in fiscal year 2025, the interest coverage for home textile companies should remain stable at 5-6 times. “Healthy cash accrual is likely to reduce dependence on external debt for working capital, which will keep the total outside liabilities to tangible net worth ratio low at 0.6-0.7 times this fiscal,” he states.
That said, any significant slowdown in the US or a surge in domestic cotton prices compared with international prices will be monitorable.
