Home Textile Revenues Projected To Surge 7-9% In Current Fiscal Year
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Home Textile Revenues Projected To Surge 7-9% In Current Fiscal Year

Home Textile Revenues Projected To Surge 7-9% In Current Fiscal Year

The global home textile industry is on the cusp of a remarkable recovery as revenues are projected to surge between 7-9 per cent in the current fiscal year, according to a recent report by Crisil Ratings.

This positive outlook comes as a welcome relief after the sector weathered a challenging period, grappling with a steep 15 per cent decline in revenues during the previous financial year.

The recovery is underpinned by a confluence of factors, with the correction in domestic cotton prices and the strategic restocking efforts of major overseas retailers serving as pivotal drivers. The report, released on Wednesday, indicates that this resurgence is set to regain the industry’s foothold in the global market.

Operating profitability is anticipated to witness a significant upswing, with the report forecasting a 150-200 basis points improvement, placing it in the range of 14-14.5 per cent for this fiscal year. This growth is attributed to lower raw material costs and improved operating leverage. However, it is important to note that these levels are still anticipated to remain slightly below those achieved prior to the pandemic.

Despite moderate capital expenditures, the home textile industry is expected to maintain a stable credit outlook, bolstered by its enhanced operational performance. The comprehensive report draws insights from an analysis of 40 companies, collectively contributing to 40-45 per cent of the sector’s revenues.

A substantial share of the industry’s revenues—ranging from 70-75 per cent—emanates from exports, with the United States serving as the industry’s largest export market, accounting for more than half of the total exports.

The revival of the domestic home textile industry can be largely attributed to the recalibration of domestic cotton prices. After surpassing international prices and peaking at Rs 1 lakh per candy in May 2022, domestic cotton prices have now receded to Rs 55,000 per candy. This shift has significantly bolstered the industry’s competitiveness on the global stage.

Additionally, the forthcoming fiscal year holds promise due to anticipated orders from prominent US-based retailers. Inventory accumulation during the previous financial year is expected to dissipate as global supply chain challenges alleviate, and a gradual sales recovery takes hold in recent months.

Mohit Makhija, senior director at Crisil Ratings, underscored the positive factors driving this recovery. He cited the regained competitiveness of domestic raw material prices, the restocking strategies of US-based retailers, and the sustained “China plus one” policy adopted by global buyers as key contributors to the industry’s anticipated revenue rebound.

The momentum is palpable, as evidenced by the increase in India’s share of home textile imports in the US market. After a dip to 44 per cent in 2022, India’s share has rebounded to 47 per cent in the first half of 2023.

However, the report also signals a slow improvement in capacity utilisation within the industry due to recent capacity expansions alongside moderate demand growth. As a result, operating margins are expected to remain slightly below pre-pandemic levels.

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