With the onset of festivals, home textile industry is expected to come back to its growth path.
The US remains the largest market for Indian home textile exports, with a 56% share in FY2023 and 58% share in 4M FY2024.
The rating agency ICRA expects its sample companies to report a 7-8% YoY increase in revenues to Rs. 215 billion for FY2024, with an expected recovery in demand conditions and restocking by big retailers from the US market to realign their inventory levels. The four listed home textile companies in ICRA’s sample are Welspun, Trident, Himatsingka, and Indo Count, accounting for about 35–40% of India’s domestic textile exports.
Commenting on this, Kaushik Das, Vice President & Co-Group Head, Corporate Sector Ratings, ICRA said:
“ICRA expects home textile exporters to be on a road to recovery, as restocking by big retailers from the US markets has started since Q1 FY2024. Further, as our channel checks indicated, with the festive orders coming in from Q2 FY2024, the order book position is estimated to have improved for home textile exporters. The long-term growth prospects of the sector are encouraging, with the Government of India’s promotional steps (including the proposed FTAs with the UK and the EU, along with the FTA agreement signed with Australia and the UAE) and the longer-term benefit of China Plus One shift in textiles sourcing by big retailers”.
India’s home textile exports reported a double-digit decline of 18% and 12% in FY2023 and 4M FY2024, respectively, amid high raw material expenses and energy inflation, coupled with a muted demand scenario in the US and the EU markets.
The US remains the largest market for Indian home textile exports, with a 56% share in FY2023 and 58% share in 4M FY2024. Given the high dependence on the US market, the strength in retail sales there remains a key demand driver for Indian exporters.
The US retail inventory levels for furniture, home furnishing, electronics, and appliance stores have come down from CY2022 levels, with destocking being almost over for the big retailers.
As a result, ICRA expects retailers to start buying in the subsequent months to restock their inventory, thereby improving the overall order book position and revenues for FY2024 of the home textile players.
The product wise breakup of the home textiles exports indicates that value-wise, bed/table/toilet/kitchen linen remains the largest product category in exports with ~32-33% share in FY2023 and 4M FY2024, followed by carpets & floor coverings with 31% share in FY2023 and 4M FY2024.
As raw material costs account for 55-60% of the total operating cost for home textile exporters, the increase in yarn prices has exerted some pressure on their profitability in FY2023.
Indian cotton yarn prices had averaged 19% higher in FY2023 compared to the past five-year average.
However, between April and September 2023, average cotton yarn prices were 25% lower than the average cotton yarn prices in FY2023. This has eased cost side pressures for home textile exporters.
Overall, ICRA expects 250-350 bps improvement in the operating margins to 14.5-15.5% of home textile exporters in FY2024 with rationalisation in raw material costs and benefits from a higher scale trickling in.