Cotton Yarn Industry Set for Strong Recovery in FY27, Revenue Growth Seen at 9-11%
By jayesh chouhan 2026-07-28 13:05:10
Cotton Yarn Industry Poised for Strong Recovery in FY27; Revenue Projected to Rise 9-11%
India's cotton yarn industry is expected to witness a strong recovery in the 2026-27 fiscal year (FY27). After remaining largely flat in FY26, the industry's revenue is projected to grow by 9-11%. This growth will be driven by a 6-8% improvement in yarn realizations and a 2-4% increase in volume. The industry is likely to gain momentum from improved exports and rising demand in export-oriented downstream segments such as readymade garments and home textiles.
According to CRISIL Ratings, the profitability of cotton yarn manufacturers is also expected to improve alongside revenue growth. Operating margins are projected to expand by 150-250 basis points, supported by better cotton-yarn spreads. An analysis of approximately 70 cotton spinning companies within CRISIL Ratings' portfolio indicates that improved earnings will strengthen cash flows and enhance the companies' credit profiles.
Ankush Tyagi, Director at CRISIL Ratings Limited, stated that exports would be a key growth driver for cotton yarn manufacturers in FY27. Export revenue is projected to grow by 12-14%, potentially raising the share of exports in the industry's total revenue to 30-31%, up from around 28% in the previous fiscal year.
Rising demand from key markets like China and Bangladesh is expected to support export growth. A decline in domestic cotton production in China is likely to increase the need for imports. Meanwhile, improved political stability in Bangladesh is expected to lead to a recovery in its readymade garment industry.
The domestic market, which accounts for approximately 70% of the industry's total revenue, is also projected to grow by 7-9% in FY27. Normalization in the US tariff regime and improved offtake in export-oriented downstream segments could support domestic demand.
Despite a 10–15% rise in cotton prices, the cotton-yarn spread could reach ₹108–110 per kilogram in FY2027, driven by robust demand. This is expected to strengthen operating margins to 11–12%.
According to Pranav Shandil, Associate Director at CRISIL Ratings, improved operating profits will bolster cash accruals, aiding companies in funding regular capital expenditure and strengthening their balance sheets. Gearing is projected to remain around 0.55–0.60 times, with interest coverage estimated at 4.25–4.50 times.
However, risks such as the potential impact of El Niño on cotton production, the significant gap between domestic and global cotton prices, and any future tariff revisions will need to be monitored.
