The readymade garment (RMG) industry in Tamil Nadu is poised for a significant growth spurt, driven by rising demand and increased exports. According to a recent report by CRISIL Ratings, the revenue of RMG exporters in the state is expected to soar by 8-10% to Rs 43,000 crore this fiscal year.
This marks a significant recovery for the industry, which has faced challenges in recent years due to subdued demand and muted realisations. Tamil Nadu’s RMG sector is anticipated to outperform the national average, where revenue growth is projected to be between 3-5%. This is primarily attributed to the state’s higher share of exports, which constitutes 65-70% of its RMG output compared to the national average of 20-25%.
CRISIL Ratings highlighted that the industry’s operating profitability is expected to improve by 25-30 basis points (bps) due to better operating leverage, marginal increases in realisations, and stable yarn prices. The analysis, based on over 50 Tamil Nadu-based RMG exporters, indicates a positive outlook for the sector.
Several factors are contributing to this growth trajectory. The government’s initiatives, including various schemes and recent political developments, coupled with the ongoing gas crisis in Bangladesh, are expected to benefit the Indian RMG industry. Additionally, the resurgence in demand from key export markets, particularly the US and Europe, is providing a much-needed boost.
The report also noted that the extension of the export incentive scheme until March 31, 2026, will enhance cost competitiveness and attract more orders for Indian RMG exporters. This, combined with rising demand and marginal increases in realisations, is expected to drive up operating margins to around 10.5% this fiscal year.
While the industry is poised for growth, players are unlikely to significantly expand their capacities in the near future. CRISIL-rated companies are projected to increase their capacities by 5% and allocate Rs 400-450 crore for maintenance capital expenditure. This investment will primarily focus on meeting incremental orders and addressing the moderate rise in working capital requirements associated with the increased order flow.
