In a thrilling turn of events, India’s home textile industry is gearing up for a spectacular fiscal year, with experts predicting a robust 7-9% increase in revenue. This remarkable resurgence comes on the heels of a challenging year, which saw a staggering 15% drop in revenue.
The driving forces behind this impressive comeback are twofold. Firstly, a substantial drop in domestic cotton prices has invigorated the industry. From ₹1 lakh per candy in May 2022, cotton prices have plummeted to around ₹55,000, offering a much-needed respite to manufacturers and producers.
Secondly, the industry is receiving a boost from increased orders pouring in from US retailers. The United States, being the industry’s largest market, has witnessed significant restocking activity, signaling a return to robust demand levels.
Perhaps the most exciting aspect of this resurgence is the expected improvement in operating profitability. Analysts project an increase of 150-200 basis points, catapulting operating profitability to an impressive range of 14.0-14.5%. While this might not quite reach pre-pandemic levels, it marks a significant leap forward.
Mohit Makhija, senior director at CRISIL Ratings, credits this uptick to enhanced competitiveness in raw material prices and the continued adoption of the “China+1 policy” by global buyers.
Nevertheless, the journey ahead presents some challenges. Capacity utilization is anticipated to rise gradually, primarily due to recent substantial capacity additions amidst moderate demand. This, in turn, is likely to keep operating margins below pre-pandemic levels, according to Gautam Shahi, director at CRISIL Ratings.
Despite these challenges, the industry is on the cusp of concluding a massive ₹4,000 crore capital expenditure (capex) cycle planned between fiscal years 2022 and 2024. Encouragingly, debt metrics are expected to remain stable, buoyed by healthy cash accruals driven by the anticipated growth in revenue and profitability.
Nonetheless, it’s important to keep an eye on potential risks. A slowdown in the US market or an unexpected surge in domestic cotton prices could pose challenges down the road.
In conclusion, the Indian home textile industry is poised for a triumphant revival, driven by favorable market conditions, competitive pricing, and a renewed sense of optimism. This is undoubtedly a narrative of resilience and recovery, signaling brighter days ahead for the industry and its stakeholders.