Why Indian spinning stocks could feel the heat from US tariff relief for Bangladesh

Bangladesh tariff cut sends ripples through Indian textile stocks

• Textile spinning stocks fell up to 8 percent after US cut tariffs for Bangladesh
• Indian cotton exporters face medium-term risks as Bangladesh opts for US cotton.
• Experts predict a 10-15% drop in export volumes and margin contraction for mills.

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Textile stocks focused on spinning such as KPR Mill, Ambika Cotton Mills, Nitin Spinners and Trident declined up to 8 percent so far this week after the US lowered tariff rates for Bangladesh to 19 percent and even agreed to cut them to zero if Bangladeshi textile producers switch to US cotton or manmade fibre. The development unsettled Dalal Street as Bangladesh traditionally imports large volumes of cotton and yarn from India, and analysts fear this could weigh on export volumes and earnings for spinning stocks over the medium term.

In the near term, however, the impact on earnings is expected to remain limited due to logistical and operational constraints, said experts.

Market veteran Sunil Subramaniam pointed that cotton shipments from the US take over 40 days to reach Chittagong, compared with just 4–7 days from India via land routes, which makes any rapid shift in sourcing difficult. Additionally, Bangladesh’s spinning sector is not yet large enough to process all that US cotton domestically. They still need to import yarn, and India remains the most logical source for that.

Kashyap Javeri, Co-Fund Manager & Head of Research at Emkay Global agreed and said that Bangladesh’s spinning industry continues to face challenges such as inconsistent power supply, higher operating costs and longer lead times for US cotton imports, which could slow the transition.

But the medium-term risks remain meaningful.

Medium-term risks loom for Indian cotton exporters

For Indian cotton exporters and spinning mills that rely on Bangladesh for nearly 70 percent of their exports, this trade shift represents a significant long-term headwind, added Subramaniam.

He believes spinning companies face the highest risk as they stand to lose Bangladesh as a key customer for yarn and cotton, while also dealing with stiffer competition in the US from cheaper Bangladeshi finished goods.

A Moneycontrol analysis indicated that nearly $1.5 billion worth of India’s cotton trade could face increased competition if Bangladesh secures preferential access to the US market tied to the use of American cotton inputs. The biggest exposure lies in raw cotton that is neither carded nor combed, where more than 70 percent of India’s exports are directed to Bangladesh.

Other vulnerable segments include cotton yarn and woven cotton fabrics, where India holds a dominant share in Bangladesh’s imports. In several dyed and denim fabric categories, India accounts for nearly 90 percent of inbound shipments.

Recently, Bangladesh’s interim government has already signalled a move to replace Indian cotton with US-origin fibre, calling the trade deal as a "big boost" for Bangladesh's textile sector. To this, Subramaniam said that he expects a 10–15 percent drop in export volumes to Bangladesh and a 100–150 basis point contraction in EBITDA margins for spinning companies after two quarters, a risk that markets appear to be pricing in.