A report by Systematix Institutional Equities said that India’s textile industry is expected to experience a notable surge in growth in the latter part of FY ’25.
The research also stated that better demand momentum and volume growth—which is anticipated to progressively surpass inventory levels—are the main drivers of the growth. This favourable forecast is a result of decreasing inflation, channel inventories returning to normal, supply chain dynamics getting better, and projected interest rate reductions.
“We expect the demand momentum to improve in 2H FY ’25 and volume growth to gradually outpace inventory on easing inflation, normalised channel inventory, improving supply chain trends and expected cuts in interest rates,” the report noted.
According to the survey, worldwide changes in supply chain strategies have further supported the sector’s recovery, especially in light of the China +1 policy and Bangladesh’s ongoing political issue.
These elements have made multinational brand owners reevaluate their dependency on Bangladesh and investigate sourcing alternatives in nations like India, Vietnam, Cambodia, and Sri Lanka.
The research also noted that there are indications of a moderate rebound in both local and foreign demand, which bodes well for the spinning business. However, the Red Sea region’s interruptions have posed issues for the business, especially with regard to exports, as they have significantly disrupted supply chains and raised logistics costs.
Notwithstanding these obstacles, there has been a minor uptick in the demand for yarn in the domestic and foreign markets, especially in industries like denim and weaving. A higher demand environment is anticipated by industry management for the second half of the fiscal year due to the positive retail demand.
Positive indicators were exhibited in the financial performance of textile companies during the first quarter of FY ’25. The companies demonstrated strong yearly growth in critical financial indicators, including revenue growth of 18 per cent, EBITDA growth of 32 per cent, and PAT increase of 41 per cent.
Reduced costs for raw materials and increased volumes were the main drivers of the rise. Despite reduced realisations, double-digit volume growth helped to underpin particularly robust topline growth.
The report also stated that steady yarn pricing and soft cotton prices, which fell by 1 per cent and 4 per cent annually and quarterly respectively, helped spinning companies’ gross margins.
But as the harvesting season came to an end and the Minimum Support Price (MSP) went up by 7 per cent, the domestic cotton market became more expensive, posing challenges to the Indian textile industry. As a result, candy prices ranged from Rs 58,000 to Rs 60,000.
Given that worldwide cotton prices have dropped to between Rs. 54,000 and Rs. 55,000 per candy, this increase in cotton pricing has made the Indian industry less competitive on the world market.
Despite these obstacles, the first quarter of FY ’25 showed an 11 per cent year-over-year gain in garment sales volumes as worldwide retailers saw a resurgence in demand, helped by the liquidation of a sizable percentage of their inventory.
The overall picture for India’s textile industry is still promising, and as domestic and international demand improves over the next several quarters, growth and recovery are anticipated.
