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Why Are Textile Players Seeing Decline In Growth?

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An Analytical Perspective…

The Indian textile industry, long considered a pillar of the country’s economic and export engine, is facing turbulent times. In recent quarters, stocks of several listed textile companies—ranging from spinning mills to garment exporters—have witnessed notable declines.

While global macroeconomic conditions play a role, several India-specific factors are also weighing heavily on investor sentiment.

  1. Weak Global Demand and Export Headwinds

One of the most significant factors affecting textile stocks is sluggish global demand. Key markets like the US and Europe, which account for a large share of India’s textile exports, are grappling with:

According to data from the Ministry of Commerce, textile exports from India fell by over 12% year-on-year in FY24, led by sharp declines in cotton yarn, fabrics, and ready-made garments.

  1. Raw Material Cost Volatility

The Indian textile value chain is highly sensitive to raw material costs, especially:

Spinning mills, in particular, have seen their margins squeezed, as input costs remain high while buyers demand lower prices amid global slowdowns.

  1. China’s Re-Entry and Competitive Pressures

Post-COVID, China has re-entered the global textile trade aggressively, leveraging its scale, price competitiveness, and superior infrastructure. Indian manufacturers, already struggling with higher power, labour, and logistics costs, are finding it tough to match Chinese pricing.

In contrast, Bangladesh and Vietnam have also made structural reforms and received trade benefits (like GSP+ status in the EU), putting additional pressure on Indian exports.

  1. Muted Domestic Demand Recovery

Though India’s domestic market is vast, consumption has not fully recovered, especially in the mass and value segment. Inflationary pressures and low discretionary spending among lower- and middle-income groups have hurt sales in categories like:

This has impacted listed players like Page Industries, Rupa & Co., and Welspun India, all of which have posted subdued earnings in recent quarters.

  1. High Debt and Inventory Levels

Several textile companies are still carrying high debt burdens from previous capacity expansions. Coupled with slow-moving inventory, their working capital cycles have worsened, raising red flags among institutional investors and rating agencies.

  1. Lack of New Growth Triggers

The sector lacks fresh growth catalysts. Government schemes like PLI (Production Linked Incentive) and MITRA Parks are promising but still in early stages. Execution delays and policy bottlenecks have led to lukewarm sentiment around long-term industry revival.

  1. Stock Market Rotation and Sectoral Shift

Indian markets have recently seen a shift in capital from traditional sectors like textiles and FMCG to new-age tech, defence, and infrastructure. As a result, even fundamentally sound textile companies have experienced FII and DII pullback in favour of more “future-ready” sectors.

Summary Table: Key Reasons for Textile Stock Decline

Factor Impact on Textile Stocks
Weak export demand Revenue drop, inventory build-up
Cotton price volatility Margin squeeze for mills
Competition from China, Vietnam Loss of market share
Low domestic demand Poor topline for mass-market brands
High debt, poor cash flow Rising finance costs
Delayed policy impact No near-term catalyst
Market sentiment shift Reduced investor interest

 

Conclusion

The Indian textile sector is undergoing a cyclical downturn, exacerbated by structural inefficiencies and global uncertainties. While the long-term fundamentals—like demographic advantage, skilled labour, and integrated supply chain—remain strong, investors are wary of short- to medium-term risks.

For a sustainable turnaround, companies must:

Until then, textile stocks are likely to remain under pressure, with selective opportunities only in niche or vertically integrated players showing operational agility.

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Analysis of recent financial performances of major Indian textile companies, highlighting the challenges impacting their stock prices:

  1. Arvind Limited
  1. GHCL Textiles
  1. Welspun India
  1. Rupa & Company

Summary

The recent financial performances of these leading textile companies underscore the broader challenges facing the Indian textile sector, including:

These factors collectively contribute to the declining stock prices of textile companies in India.​

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