India’s Home Textiles Sector Set For 6-8% Revenue Growth This Fiscal: Crisil Ratings Report

India's home textile industry is expecting 6-8% revenue growth this financial year driven by resilient demand from the key export destination like the US and expansion in the domestic market, a report said on Tuesday.

Following a 9-10% rebound in revenue growth last fiscal, India's home textile industry is set to stitch 6-8% growth this fiscal riding on resilient demand from the US and expansion in the domestic market - and notwithstanding some lingering logistical challenges, Crisil Ratings said in a report.

The credit profiles of home textile companies will remain stable, supported by healthy cash accrual and moderate capital expenditure (capex) plans on the back of deleverage balance sheets.

The home textile industry derives 70-75% of its revenue from exports, of which the US alone accounts for 60%, and the remaining from the domestic market.

"Three factors will drive growth of the home textiles industry this fiscal. One, resilient consumer spending and normalised inventory levels at major retailers in the US will spur exports, though container availability bears watching. Two, the industry's continued focus on expanding domestic presence will aid growth," Crisil Ratings Senior Director Mohit Makhija said.

Third, he said, the domestic prices of cotton, the key raw material, are likely to remain close to international levels, resultantly retaining the competitiveness of domestic companies.

"Therefore, for the home textiles exported by India, the country's share in US imports will remain steady this fiscal - in January-August 2024, it was 30%, same as in calendar year 2023," he added.

International cotton prices had plummeted below the domestic prices between June and September 2024, driven by a surge in cotton supply from Brazil and the US, the report said.

However, with commencement of India's cotton season, the gap between domestic and international cotton prices is expected to narrow, protecting India's export competitiveness.

With domestic raw material prices remaining close to international prices, the operating margin is likely to remain stable at 14-15% this fiscal, in line with last fiscal.

On the capex front, the home textile companies had invested Rs 8,500 crore to add capacity over fiscals 2019 to 2024.

With revenues scaling up gradually, the industry's capacity utilisation is expected to remain at 60-70% this fiscal.

While most companies are now looking to optimise utilisation this fiscal, a few large ones are planning capex, but on deleverage balance sheets, the report added.

"With steady operating performance and moderate capex in fiscal 2025, the interest coverage for home textile companies should remain stable at 5-6 times. Healthy cash accrual is likely to reduce dependence on external debt for working capital, which will keep the total outside liabilities to tangible net worth ratio low at 0.6-0.7 times this fiscal (0.7 time last fiscal)," Crisil Ratings Associate Director Pranav Shandil.

However, any significant slowdown in the US or a surge in domestic cotton prices compared with international prices needs to be monitored.