Textile sector's growth to continue next fiscal as well: CRISIL SME Tracker

The Indian textile industry, which has a significant presence of micro, small and medium enterprises, is expected to close the current fiscal year (FY22) on a strong note (on the pandemic-hit previous year’s low base), and continue to grow next fiscal (FY23) as well.

Demand for textile products has recovered, with economic recovery and wider coverage of vaccination in domestic and international markets alike. Additionally, Indian exports have got a boost owing to the US ban on China’s Xinjiang cotton, and are likely to continue growing in the medium term. The impact of the Russia-Ukraine crisis remains a monitorable, though.

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Within textiles, the cotton yarn market is estimated to grow 38-42 per cent this fiscal, driven by exports, which picked up rapidly from the second quarter. Next fiscal, the market is expected to increase a further 8-12 per cent year-on-year, riding on sustained recovery in both domestic and export markets. 

Readymade garments (RMG), after a significant decline last fiscal, is expected to grow 16-20 per cent this fiscal and a further 13-18 per cent in FY23, riding on the reopening of offices, commercial premises, and educational institutions. The home textiles segment will benefit from a sharper focus on health and hygiene spurred by the pandemic.

The Ebitda margin for spinners has also seen a sharp rise in the second and third quarters this fiscal year, as they were able to pass on the price rise to customers. In FY22 overall, the Ebitda margin is expected to increase 600-800 bps to 20-22 per cent, and will likely remain healthy in FY23 as well.

RMG margins, too, are estimated to improve, by 150-300 bps to about 13 per cent in FY22, due to better operating leverage. Margins will continue in the 10-12 per cent range in FY23 as well.