India’s Textile Sector Set For Boost: Festive Demand, Bangladesh Crisis, And China+1 Policy Driving Growth In 2H FY25

India’s textile sector is poised for a significant upswing during the second half of FY25, highlighted a report by Systematix Institutional Equities.

Positive Outlook Driven by Multiple Factors

The report added that the growth is driven by improved demand momentum and volume growth, which is expected to gradually outpace inventory levels. This positive outlook is attributed to easing inflation, normalized channel inventory, improving supply chain dynamics, and anticipated cuts in interest rates.

“We expect the demand momentum to improve in 2H FY25 and volume growth to gradually outpace inventory on easing inflation, normalized channel inventory, improving supply chain trends and expected cuts in interest rates,” the report noted.

Global Supply Chain Shifts and Alternative Sourcing

The sector’s resurgence as per the report is further bolstered by global shifts in supply chain strategies, particularly in light of the China +1 policy and the ongoing political crisis in Bangladesh.

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“Due to the China +1 policy and ongoing Bangladesh political crisis, global brand owners are re-evaluating their reliance on Bangladesh and are looking at other countries such as India,” said the report.

These factors have prompted global brand owners to reconsider their reliance on Bangladesh, leading them to explore alternative sourcing options in countries such as India, Vietnam, Cambodia, and Sri Lanka.

Recovery Signs in the Spinning Industry

The report also mentioned that in the spinning industry, there are signs of recovery as both domestic and export demand show moderate improvement.

However, the industry has faced challenges, particularly in exports, due to disruptions in the Red Sea region, which have caused significant supply chain disruptions and increased logistics costs.

Despite these challenges, demand for yarn has seen a slight improvement in both the export and domestic markets, particularly in segments such as weaving and denim. Retail demand has also been encouraging, leading industry management to anticipate a stronger demand environment in the second half of the fiscal year.

Financial Performance and Market Trends

The financial performance of textile companies in the first quarter of FY25 reflected the positive signs. The companies reported robust year-on-year growth in key financial metrics, with revenue increasing by 18 percent, EBITDA by 32 percent, and PAT by 41 percent.

The growth was largely driven by higher volumes and lower raw material costs. Topline growth was particularly strong, supported by double-digit volume growth, even though realizations remained muted.

The report added that the gross margins of spinning companies benefited from soft cotton prices, which declined by 4 percent year-on-year and 1 percent quarter-on-quarter, as well as stable yarn prices.

Challenges Facing the Industry

However, the Indian textile industry is facing some headwinds due to rising domestic cotton prices, which have become more expensive, reaching Rs 58,000-60,000 per candy as the harvesting season concluded and the Minimum Support Price (MSP) increased by 7 percent.

This rise in cotton prices has rendered the Indian industry less competitive on the global stage, especially as international cotton prices have fallen to Rs 54,000-55,000 per candy.

Despite these challenges, garment sales volumes saw an 11 percent year-on-year increase in the first quarter of FY25, as global retailers experienced a recovery in demand, aided by the liquidation of a significant portion of their inventory.

Overall Outlook

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

(Except for the headline, this story has not been edited by Newsx staff and is published from a syndicated feed.)

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