According to the Crisil Ratings report, the operating profitability of the home textiles industry will improve 150-200 basis points to 14-14.5% this fiscal, due to lower raw material costs and better operating leverage
Mumbai: Home textile industry’s revenues are expected to rise 7-9% this fiscal as the sector regains global share following a correction in domestic cotton prices and restocking by big-box retailers in major overseas markets, says a report.
In the last financial year, their revenues had declined 15%.
According to the Crisil Ratings report released on Wednesday, the operating profitability of the industry will improve 150-200 basis points to 14-14.5% this fiscal, due to lower raw material costs and better operating leverage, but will still hover below the pre-pandemic levels.
Improved operating performance will also have the industry maintaining a stable credit outlook despite moderate capex, it noted.
The report is based on an analysis of 40 companies, accounting for 40-45% of the sectoral revenues.
As much as 70-75% of the industry-wide revenues are from exports, with the US, its biggest market, accounting for more than half of it.
After strong headwinds in exports last fiscal, the domestic home textile industry is on the road to recovery on the back of domestic cotton prices, which had risen past international prices and reached Rs 1 lakh per candy in May 2022.
The same has reduced to Rs 55,000 per candy, helping the industry regain competitiveness.
Moreover, orders from big-box retailers in the US will increase this fiscal as the inventory, piled up in the last financial year, depletes on easing global supply chain challenges, and the gradual sales recovery being seen over the past few months, the report said.
Mohit Makhija, a senior director at the rating agency, said that with domestic raw material prices gaining competitiveness now, restocking by big-box US retailers, and sustained China plus one policy of global buyers, revenue will rebound for export-oriented domestic home textile makers this fiscal.
This is reflected in the recent increase in the country’s share in home textile imports by the US to 47 per cent in the first half of 2023 after falling to 44% in 2022 from 48% in 2021.
However, capacity utilisation will improve only slowly due to the recent large capacity addition amid moderate demand growth, which will have operating margins still printing below the pre-pandemic levels, the report said.