India's cotton yarn business is likely to see a 7-9 percent growth in revenues this year, fueled by a pick-up in exports and robust domestic demand, as per a report from Crisil published on Monday. This is a huge uptick compared with the 2-4 percent growth recorded in the previous year.
The rise in revenues will be driven mainly by volumes, aided by a slight increase in the price of yarn, the report added.
Operating margins, which had recovered in the previous fiscal, are likely to gain another 50-100 basis points this year with stable cotton yarn spreads and improved cotton availability from the Cotton Corporation of India (CCI).
The Crisil report, based on a study of 70 cotton yarn spinners with revenue share of 35-40 percent of the industry, says yarn exports to China will be the key spur to growth in fiscal 2026. Exports provide revenues of around 30 percent of the industry, and of this, China contributes 14 percent.
During fiscal 2025, India experienced a fall in yarn exports to China as China recorded an unusually high production of cotton. This caused a 5-7 percent decline in the overall cotton yarn exports by India. But the trend is anticipated to change this year with China's cotton production anticipated to normalize and its exports growing by 9-11 percent.
Gautam Shahi, Director, Crisil Ratings, said that this recovery in exports will favor Indian spinners, who will be in a position to leverage consistent domestic cotton output this year and recover market share. He also pointed out that India's textile exports to the US continue to remain competitive owing to China's higher tariffs, which should help 6-8 percent revenue growth in the home textiles and ready-made garments segments.
On the raw material side, the report said that CCI's substantial cotton buying for the 2025 cotton season will provide a stable supply, cutting inventory losses and increasing spinner profitability by 50-100 basis points during the current fiscal year, after a 100-150 basis points recovery in fiscal 2025.
Spinners' interest coverage is likely to rise to 4.5-5 times this fiscal year, from 4-4.5 times in fiscal 2025.
Nonetheless, the report also mentioned some risks that might influence the outlook, such as possible adjustments in tariffs levied on India and competing nations, inflationary pressures, slowing down demand because of US economic conditions, and any unfavorable swings in domestic cotton prices against global prices. These aspects will need to be watched carefully in the future.
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