Indian Textiles Sector Check - FY25 Holds Better Prospects: Systematix

Systematix Research Report

We attended a panel discussion organised by Crisil, titled, 'Upstream textiles sector: Threads of promise'. The dialogue delved into the outlook for cotton yarn and polyester yarn segments of the upstream textiles industry. Presented are key excerpts that focus on the trends in profitability, export/import, and credit outlook for FY25 by Crisil, which expects-

1. moderate revenue growth of 4-6% YoY for the cotton yarn segment, as it anticipates downstream demand to improve, stable yarn prices and better cotton availability; the polyester yarn segment to post 2-4% YoY growth on export slowdown, partly offset by introduction of quality control order, intended to curtail the dumping of cheap polyester yarn into India, and thus benefit Indian polyester yarn players,

2. profitability to improve to 10- 10.5%/6.5-7.5% in cotton/polyester yarn, respectively, on lower raw material prices, enhancing spreads in both segments,

3. Moderate capex expected in FY25 in cotton yarn industry after major halt in FY24 and for polyester yarn no major capex is planned as the industry looks to ramp up existing capacities,

4. credit outlook to remain stable across both segments.

Key risks:

1. adverse movements between domestic and international cotton prices could impact the revenue and margins of cotton yarn players,

2. volatility in crude oil and raw material prices in addition to changes in government regulations could adversely impact polyester yarn imports,

3. increase in dumping of cheap polyester fabric in Indian markets.

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