India's cotton yarn industry set for 7-9% revenue growth this fiscal: Report
By yash chouhan 2025-05-06 10:54:18
India's Cotton Yarn Revenue to Grow 7-9% This Fiscal: Report
In India, the cotton textile industry is not just a sector - it is the lifeline for nearly 60 million people. From the 6.5 million hardworking cotton farmers who grow their crops in the sun, to the countless hands involved in processing, trading and crafting the garments, the industry ties together the livelihoods of millions.
While the sector is grappling with a number of challenges - including climate change, slow economic growth and trade uncertainties - there is finally a reason for cautious optimism. India's cotton yarn industry is projected to achieve a revenue growth of 7-9% this fiscal, a significant improvement from the modest 2-4% growth recorded last year.
According to rating agency Crisil Ratings, this improvement will be driven primarily by a surge in export demand and stable domestic consumption. Volume growth will be the primary driver, supported by a modest increase in yarn prices, the agency said in a report released on Monday.
Operating margins, which recovered last year, are expected to improve further by 50-100 basis points (bps) this fiscal. This will be aided by stable cotton yarn price differentials and improved cotton availability through procurement by the Cotton Corporation of India (CCI).
This outlook is based on an analysis of 70 major cotton yarn spinning companies, which together account for 35-40% of the industry revenues, the agency said.
Improvement in exports, especially to China, a key growth driver
The main reason for this expected revenue growth in FY26 is improvement in yarn exports to China. Exports make up nearly 30% of the industry's total revenues, with China contributing about 14%. Last year, India's yarn exports to China declined due to abnormally high cotton production in China, leading to a 5-7% decline in India's total yarn exports. However, this trend is expected to reverse this year, as China's cotton production normalises and exports are estimated to grow by 9-11%.
Goutam Shahi, director, Crisil Ratings, points out, "This recovery will benefit Indian spinners, who can leverage stable domestic cotton production and gain market share. Also, India's competitiveness in textile exports to the US remains strong, especially with the high tariffs imposed on Chinese exports. This will support 6-8% revenue growth in downstream segments such as home textiles and readymade garments."
Strong cotton supply to boost profits
On the raw material front, CCI's significant cotton procurement during the 2025 cotton season will help ensure stable supplies. This will reduce inventory losses and support a 50-100 bps increase in profitability for spinners, after a 100-150 bps improvement last year.
Pranav Shandil, Associate Director, Crisil Ratings, said, "Improved operational performance this fiscal should help keep the credit profile stable. Most spinners are expected to maintain moderate capital expenditure, thereby limiting the need for fresh debt. Improved cotton availability will also reduce the need for high inventory levels, thereby reducing demand for additional working capital."
As a result, the interest coverage ratio for spinners is expected to improve to 4.5-5 times from around 4-4.5 times last year. Gearing is expected to remain stable at around 0.55-0.6 times.
Risks to watch
However, the rating agency cautions that certain risks remain. Any change in global tariffs, higher inflation, a slowdown in economic growth in key markets such as the US, or significant fluctuations in domestic cotton prices compared to international prices could impact the outlook.
