New Delhi
India’s home textile sector is projected to grow by 6-8% in the current fiscal year, driven by strong demand from the United States and growth in the domestic market, according to a report released on Tuesday. After experiencing a revenue growth rebound of 9-10% last fiscal year, the credit outlook for home textile firms is expected to remain stable due to healthy cash flow and manageable capital expenditure plans, supported by reduced debt levels.
The industry generates 70-75% of its revenue from exports, with the US accounting for 60% of this share, while the remaining 25-30% comes from domestic sales. Mohit Makhija, Senior Director at CRISIL Ratings, identified three key factors fueling this growth.
First, strong consumer spending and normalized inventory levels among major US retailers are expected to boost exports, although container availability needs attention. Second, the industry’s focus on expanding its domestic presence will further enhance growth. Lastly, domestic cotton prices, a key raw material, are likely to remain competitive with international rates.
India’s share of US textile imports is stable at 30% as of January-August 2024, consistent with 2023. Operating margins are projected to stay steady at 14-15%, thanks to stable raw material prices and minimal impact from freight cost fluctuations. While many companies aim to optimize operations, some larger firms plan moderate capital expenditures, leading to stable interest coverage ratios of 5-6 times.
