According to a survey by Crisil Ratings, the revenue of the Indian home textile business is expected to rise by 7-9% this fiscal year.
The domestic cotton price adjustment is one of several crucial aspects that are essential to the revival of the home textile sector. Prior to then, these costs had skyrocketed to previously unheard-of levels, hitting Rs 1 lakh per sweet in May 2022.
However, they have since dropped to about Rs 55,000, more closely matching international costs. India’s competitiveness in the global market has significantly increased because to this modification.
Major retailers are also placing more orders from Indian producers of home textiles for markets abroad. Demand has increased due to the need to restock inventory after supply chain disruptions and a slow but steady increase in sales over the past few months.
According to Mohit Makhija, senior director at Crisil Ratings, “With domestic raw material prices now more competitive relative to international levels, coupled with the restocking efforts by major U.S. retailers and the sustained China+1 policy of global buyers, we anticipate a rebound in revenue for Indian home textile makers this fiscal year, albeit from a lower base.”
Despite these encouraging signs, the industry is anticipated to gradually increase capacity utilisation as a result of recent substantial capacity expansions and low demand growth. Operating margins are therefore anticipated to stay below pre-pandemic levels.
With completion anticipated between the fiscal years 2022 and 2024, the home textile industry has been in the midst of large capital expenditures (capex) of over Rs 4,000 crore.
It was emphasised by Gautam Shahi, director at CRISIL Ratings, that this outlay is not anticipated to significantly raise debt levels. Only roughly 25% of the capex needs to be finished for this fiscal year in order for the debt metrics to stay steady. As a result, gearing is anticipated to increase from 0.8 times as of March 31, 2023 to 0.70-0.75 times as of that date. Additionally, it is anticipated that interest coverage will increase this fiscal year from roughly four times to between 4.8 and 5.0 times.
However, the business has a watchful attitude towards potential roadblocks, such as a significant slowdown in the important United States export market & an abrupt rise in domestic cotton prices relative to worldwide rates. As the sector plots its course towards recovery, these factors will be constantly monitored.
