India's Textile Sector Set for Resurgence Amid Global Supply Chain Shifts: Systematix Report

Systematix Institutional Equities reports a positive outlook for India's textile sector in the second half of FY25, driven by improved demand, easing inflation, and global supply chain shifts. Despite some challenges, the sector shows promising growth in revenue, EBITDA, and PAT, supported by lower raw material costs.

India's textile sector is poised for a significant upswing during the second half of FY25, according to a report by Systematix Institutional Equities. The growth is attributed to improved demand momentum and volume growth, which is expected to outpace inventory levels. Positive factors include easing inflation, normalized channel inventory, improving supply chain dynamics, and anticipated interest rate cuts.

The report highlighted that global shifts in supply chain strategies, particularly due to the China +1 policy and the political crisis in Bangladesh, are influencing global brand owners to re-evaluate their reliance on Bangladesh and consider alternative sourcing options such as India, Vietnam, Cambodia, and Sri Lanka.

Despite facing challenges in exports due to disruptions in the Red Sea region, the spinning industry is showing signs of recovery with moderate improvement in both domestic and export demand. Retail demand has also been strong, leading to expectations of a robust demand environment in the second half of the fiscal year. Financial performance metrics for textile companies in Q1 FY25 indicated significant year-on-year growth in revenue, EBITDA, and PAT driven by higher volumes and lower raw material costs.

Nonetheless, the Indian textile industry faces headwinds with rising domestic cotton prices, which reached Rs 58,000-60,000 per candy. This has made the industry less competitive globally, as international cotton prices have fallen. Despite these challenges, garment sales volumes saw an 11% year-on-year increase in Q1 FY25 as global retailers experienced a demand recovery aided by inventory liquidation.

Overall, the outlook for India's textile sector remains positive with expectations of continued growth and recovery in the coming quarters both domestically and internationally.

(With inputs from agencies.)