In the current fiscal year, Indian textile exporters are expected to expand by 20-25 percent, according to ICRA

In the current fiscal year, Indian textile exporters are expected to expand by 20-25 percent, according to ICRA

18th August 2021, Mumbai:

According to research by rating agency ICRA, India's textile exporters are expected to expand by 20-25 percent this fiscal year. The reasons that have fueled a strong increase in demand for home renovation items over the last year are projected to continue in the remaining quarters of FY 2022, following the trend of the previous three.

The solid order book position of Indian home textile exporters reflects predictions of high holiday demand this year, underpinned by favorable immunization coverage across major markets.

According to the research, ICRA's sample set of firms (big and listed enterprises that account for 35-40% of India's home textile exports) are expected to expand at a solid double-digit rate of 20-25% in FY 2022. “Sale of the sample set has been 25-40% greater for the past three quarters than the three-year average for the pre-Covid period. Home textile export was one of the first textile categories to rebound from the pandemic's impact last fiscal, with firms reporting three consecutive quarters of double-digit growth after that,” said Pavethra Ponniah, Senior Vice President and Co-Group Head, Corporate Sector Ratings, ICRA.

The largest market, the United States, drove export demand, accounting for 60% of India's domestic textile exports. Exports to the US grew by 14 percent in FY 2021, compared to a 9% growth in India's home textile product exports of US $ 5.7 billion in FY 2021, while exports to the other main markets of the UK and the EU declined Y-o-Y. Apart from the faster opening up, the growth in shipments to the United States is partially due to the distribution model for these items, with a significant percentage accounted for by major departmental chains that stayed open even throughout the lockdown period, Ponniah noted.

According to ICRA's channel inspections, the bigger exporters have a healthy order backlog and are more likely to rely on job work/outsourcing to meet delivery obligations in the coming quarters. In terms of financial performance, the firms in the sample reported increased operating margins in FY 2021, thanks to greater economies of scale and lower input costs.

While the benefits of operating leverage are expected to continue in FY 2022, cost pressures have increased due to forecasts of a robust sales turnover. Cotton yarn, a crucial basic ingredient for making made-ups, has been trading at roughly 40-50 percent higher prices, according to the study.

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