Analysts bet on KPR Mills, S.P Apparels as India-EU FTA opens export runway

Textile stocks to buy: Analysts say the India-EU FTA could boost Indian textile exports by cutting EU tariffs to zero. Here are key beneficiaries

Textile stocks to buy after India-EU FTA

 

The recently announced India–European Union Free Trade Agreement (FTA) could reshape the competitive landscape for India's textile and apparel industry, believe analysts, as they expect the tariff removal to provide a level playing field to Indian textile exporters vis-a-vis Bangladesh, Vietnam, and Pakistan.

 

Once operational, the agreement would eliminate import tariffs to zero on Indian textiles and apparel products, down from 10 -12 per cent duties at present, bringing them at par with Bangladesh, Turkey, Vietnam, and Pakistan that enjoy zero -tariff access.

 

"This tariff elimination is expected to drive export volume expansion and unlock economies of scale, while providing strategic diversification against ongoing US tariff uncertainty," said those at Elara Capital.

 

 

Contours of India-EU FTA

India's total textile and apparel exports were worth nearly $37 billion (FY 2024-25) with exports to the EU standing at $7-7.6 billion. However, as Indian textile exporters faced import duties up to 12 per cent in the EU, they witnessed a steady erosion of market share between 2018 and 2024.

 

As per industry data, India's market share in the EU apparel market (worth $96 billion in 2024) has declined by 92 basis points to 4.9 per cent (in 2024) from 5.8 per cent (in 2018), with Bangladesh expanding its share to 21.4 per cent from 19.4 per cent during the period.

 

Further, while China remains the leader with a share of 28.1 per cent, Pakistan has displaced Indian exporters, especially in the home textile segment.

 

That apart, in the EU towel market (worth $4.1 billion), India's share contracted by 204 bps to 6.7 per cent between 2018 and 2024, while Pakistan’s surged by 244 bps to 13.2 per cent from 10.8 per cent per cent. China, again, maintained leadership at 43.8 per cent, down 256bps from 46.4 per cent in 2018.

 

Analysts believe Bangladesh, Vietnam, Turkey, and Pakistan have enjoyed duty-free or preferential access, allowing them to undercut Indian suppliers despite India's strengths in scale, quality, and product breadth. The FTA, thus, addresses this "structural handicap" which could meaningfully lift export volumes over the medium-term.

 

"The India–EU FTA removes a structural price disadvantage versus duty-free suppliers. We think tariff elimination could materially raise EU-destined volumes with a plausible mid-case upside of 50-100 per cent over 5-7 years if rules-of-origin, capacity, and compliance constraints are addressed," noted those at JM FInancial Research.

 

Beyond volumes, analysts believe the FTA also offers strategic diversification for Indian exporters at a time when global trade remains uncertain. With the EU recently suspending Generalised System of Preferences (GSP) benefits for Indian exports in January, they think some exporters may face near-term margin pressure from higher duties till the FTA kicks in.

 

However, over time, improved scale utilisation and operating leverage may help exporters absorb costs linked to sustainability standards and traceability norms, which are becoming central to EU sourcing decisions.

 

Investment strategy for textile stocks

In this backdrop, analysts suggest investors focus on export-oriented textile companies with established EU relationships and ready capacity. Garment manufacturers and home textile players that already derive a meaningful share of revenues from Europe are best positioned to benefit early, as they can ramp up shipments without heavy upfront investments, they said.

 

Elara Capital sees S.P. Apparels and KPR Mill, deriving approximately 23 -25 per cent of revenues from the EU, as "clear winners" in the apparel space given their high regional exposure.

 

Welspun Living and Indo Count, with EU contributions of around 12 per cent and 7 per cent, respectively, can leverage existing long-standing partnerships to rapidly scale volumes without incremental capacity investments, it said.

 

"Arvind, with EU revenue share of 5.7 per cent in FY25, presents a unique opportunity in an industry with capacity constraints . The company's 37 per cent underutilized apparel capacity in FY25 plus an additional 7 per cent commissioned in Q2FY26 creates significant bandwidth to absorb incremental EU orders," the brokerage said.

 

Those at JM Financial, meanwhile, prefer KPR Mills, Welspun Living, Gokaldas exports, and Trident.

 

That said, analysts cautioned that investors should account for execution risks. The timing of tariff phase-outs, rules-of-origin compliance, and environmental benchmarks will determine how quickly benefits flow into earnings.