Indian Textile Industry Is Showing Strong Recovery After Pandemic
The Indian textile sector is demonstrating signs of recovery, with the latest report from Avendus Spark indicating that the industry's revenue grew by approximately 8% in the last quarter of the fiscal year 2024 (4QFY24) compared to the previous year. Despite a 5% drop in yarn prices, which limited overall growth, stabilising cotton prices are expected to align value growth with volume growth soon.
The report also highlighted that Indian cotton prices are currently lower than global prices, aiding cotton spinners in increasing their volumes. This competitive pricing has led to robust margin expansion for cotton spinners due to higher utilisation rates and stable cotton prices.
Global retailers and brands have reported that their inventory levels have returned to pre-COVID standards, contributing to the sector's positive outlook. However, the report cautions that demand remains uncertain as garment companies await a boost in order book momentum, suggesting that the order cycle may remain shorter than usual for the foreseeable future.
Home textile companies experienced a particularly strong quarter, with a 16% growth in value as Indian exporters gained market share. Garment manufacturers also reported a 4% revenue growth despite the challenges of price fluctuations.
The report observed that cotton-related exports increased by 20% sequentially and 18% year-over-year (yoy). Although Indian cotton prices were briefly lower than global prices, boosting demand, they are currently about 13% higher than global prices.
In 4QFY24, EBITDA margins for garment manufacturers improved by 177 basis points, primarily due to lower input costs. Vertically integrated players reported better margin growth compared to their peers.
Among various textile segments, home textiles continued to excel, with a 15% yoy revenue growth driven by strong demand and increased exports. India's market share in US cotton sheet imports reached an all-time high of 62%, according to Avendus Spark.
However, EBITDA margins fell by 80 basis points, indicating a potential slowdown in volume demand. Man-Made Staple Fibers (MMSF) saw a 5% yoy revenue growth, but cheaper imports from countries like China and Bangladesh led to pricing pressures. Capacity constraints also limited volume growth opportunities for MMSF players. Several companies plan to increase capacity in the coming quarters, potentially driving growth. The Production Linked Incentive (PLI) scheme is expected to encourage further investments in MMSF yarn production, the report noted.
"The top layer of exporters has started getting booked. The next couple of layers of exporters in most of the big hubs are getting many enquiries, and everyone is hopeful that these enquiries will result in an order book that would be better than last year," said Pawan Gupta, CEO and Co-founder of Fashinza, reacting to the report.
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