A good yarn: Gokaldas Exports’ story of success likely to continue

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26 Aug, 2025 12:21

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If you're donning a famous apparel brand such as GAP, H&M, Adidas, Puma, or Zara, there's a good chance the cloth was manufactured by Gokaldas Exports.

Founded in 1979, the company has evolved into a one-stop shop for some of the world's most recognised apparel giants. With an annual turnover of $250 million, Gokaldas is the country’s largest exporter and manufacturer of branded clothing.

What's fueling growth?

Brokerage firm Sharekhan, in its June note, has said that the company's decision to invest Rs 370 crore to increase capacity in existing facilities, upgrade machinery, for productivity, and ensure optimal capacity utilisation will help it garner incremental revenues of Rs 1,100-1,300 crore. Furthermore, a new facility in Madhya Pradesh would add Rs. 50 crore to revenues in FY23-24, while three new units in Karnataka and Tamil Nadu would add Rs 300 crore to revenues in 2025.

According to analysts, Gokaldas Exports has added several new clients in the last five years. Further, around 85 percent of the company’s revenue is generated from the US market.

According to Emkay, a wealth management firm, the possible free trade agreement (FTA) with the UK can help Indian players compete with China on cost, while having a shorter lead time and with Bangladesh on shipping time.

China plus one, a boon for India

In the last couple of years, companies across the globe have increasingly adopted a strategy called China-plus-one. Simply put, it refers to setting up manufacturing facilities outside of China to reduce dependence on the country in the face of geopolitical tensions. China is the world’s biggest exporter of finished goods.

This provides Indian textile manufacturers an excellent opportunity to expand their business.

"When big brands look beyond China, India is the most attractive destination as we are the largest producer of cotton,’’ Awanish Chandra, executive director at SMIFS, a brokerage firm, told Moneycontrol. "Companies such as Gokaldas are direct beneficiaries of the strategy as they have the ability to scale," he added.

Gokaldas is known for delivering goods on time. That, coupled with competitive pricing and economies of scale, bodes well for the company in such a situation, said an analyst on condition of anonymity.

In 2021, the United States blacklisted 87 percent of China’s cotton crop, approximately one-fifth of the world's supply citing human rights violations against Muslim Uighurs in the country's northwest Xinjiang region.

As for major competitors such as Vietnam and Bangladesh, analysts tracking the sector are of the view that the increased cost of power and political uncertainty in these countries are helping India become the preferred destination.

The analysts also added that Bangladesh and Vietnam don't have the same government backing that Indian companies have. India also has a Production-Linked Incentive (PLI) Scheme for Textiles,  which focuses on manmade fibre (MMF) apparel, MMF fabrics, and products of technical textiles to enhance India's manufacturing capabilities and exports.

Sharekhan has forecast that Gokaldas will sustain its double-digit earnings growth trajectory, which will help improve its cash flows and return profile over the next three to four years. The stock is trading at an attractive valuation of 19 times its FY2024 and 14 times its FY2025 EPS (earnings per share).

Thus, the broking firms expect the double-digit earnings growth trajectory to sustain, which will help in improving cash flows and return profile over the next three to four years.

"Investment in capex, improved product mix, and a sustained addition of new clients will help the company to post double-digit earnings growth (profit before tax CAGR of 21 percent), riding on favourable industry tailwinds in the medium to long run.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.